<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 29, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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.)
P.O. BOX 382460
GERMANTOWN, TN 38138-2460
(Address of principal executive offices) (Zip Code)
(901) 752-3882
(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 STOCK, 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 (Section 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 $2,587,000 as of March 20, 1997.
There are 20,664,512 shares outstanding of the Registrant's common stock at
March 20, 1997.
DOCUMENTS INCORPORATED BY REFERENCE (None)
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PART I
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . 3
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
PART III
Item 10. EXECUTIVE OFFICERS OF THE REGISTRAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . 38
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 39
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 40
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S1
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 P.O.Box 382460,
Germantown, Tennessee 38138, telephone (901) 752-3882.
SHONEY'S INC. TRANSACTION
Pursuant to the terms of the Plan of Tax-Free Reorganization Under Section
368(a)(1)(c) of the Internal Revenue Code and Agreement, dated March 15, 1996,
as amended, by and among the Company, Shoney's, Inc. ("Shoney's") and TPI
Restaurants Acquisition Corporation, a wholly-owned subsidiary of Shoney's (the
"Agreement"), the Company completed the sale of substantially all of the
Company's assets to Shoney's (the "Transaction") on September 9, 1996. In
connection with the Transaction, the Company's Board of Directors approved a
Plan of Complete Liquidation as required by the Agreement. See Notes 1 and 2 to
the Consolidated Financial Statements. The Company is not conducting any
business other than with respect to the winding-down of its operations in
connection with its dissolution and liquidation.
PRIOR TO THE SALE
Prior to the sale of substantially of all the Company's assets to Shoney's, the
Company, through TPI Restaurants, Inc. ("Restaurants"), was one of the largest
restaurant franchisees in the United States. As of September 8, 1996,
Restaurants owned and operated 255 restaurants, including 188 Shoney's and 67
Captain D's in eleven states, primarily in the southern United States.
Restaurants was 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 operated its Shoney's and Captain D's restaurants under
license agreements with Shoney's, an unaffiliated public company. "Shoney's"
and "Captain D's" are registered trademarks of Shoney's. References to the
Company include the operations of Restaurants.
EMPLOYEES
As of December 29, 1996, the Company has two remaining employees. These
employees are responsible for the administration of the Company's dissolution
and liquidation.
COMPETITION AND MARKETS
Due to the sale of the Company's assets, the Company is not conducting any
business other than with respect to the winding-down of its operations in
connection with its dissolution and liquidation.
FINANCIAL CONTROLS
The Company maintains its accounting records using a personal computer-based
general ledger software system. The officers of the Company believe that the
Company's systems are adequate to administer the dissolution and liquidation of
the Company.
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REGULATION
The Company believes it is in material compliance with the regulations to which
it is subject.
ITEM 2. PROPERTIES
As a result of the Transaction, the Company disposed of all of its properties.
ITEM 3. LEGAL PROCEEDINGS
Porpoise Asset Management and Lawrence Capital Management, Inc. v. J. Gary
Sharp, et al.; Brock Weiner. TPI Enterprises, Inc., et al. and Crandon Capital
Partners, et al. v. TPI Enterprises, Inc., et al.
During 1995, three shareholder lawsuits were filed against the Company and its
Board of Directors. The Plaintiffs alleged, among other things, that the
Company's shareholders would receive inadequate consideration in the proposed
Transaction, that the Transaction was the result of unfair dealing and economic
coercion and that the Directors breached their fiduciary duties to the Company's
shareholders to maximize shareholder value. The plaintiffs sought class action
status and to enjoin the proposed transaction and recover damages. The Company
signed a letter of understanding dated March 15, 1996 for settlement of these
three lawsuits, which was subject to several conditions, including Court
approval of the settlement and the closing of the Transaction. Pursuant to the
letter of understanding, as consideration for the consolidation and settlement
of the three above lawsuits, the Company agreed to pay the legal fees and
expenses of counsel to the plaintiffs in an amount not to exceed $250,000. On
October 29, 1996, the Superior Court of New Jersey entered an Order and Final
Judgment consolidating the three lawsuits, certifying the class and approving
the settlement. On December 17, 1996, the $250,000 amount of the settlement was
paid to counsel to the plaintiffs.
TPI Restaurants, Inc. v. Marlin Services, Inc., Marlin Electric, Inc., d/b/a
Marlin Services and the Aetna Casualty and Surety Company and Marlin Electric,
Inc. v. TPI Restaurants, Inc. and Related Matters.
On March 7, 1996, the Company filed a civil action in the Circuit Court of Palm
Beach County; captioned TPI Restaurants, Inc. v. Marlin Services, Inc., Marlin
Electric, Inc., d/b/a Marlin Services, Inc. ("Marlin") and The Aetna Casualty
and Surety Company. The Company contended, among other things, that Marlin
breached terms of a maintenance service agreement that Restaurants had entered
into with Marlin by failing to perform timely maintenance as required by the
agreement, overcharging for parts and materials, improperly billing for labor
and improperly charging for overhead. On March 7, 1996, Marlin filed a separate
action in the U.S. District Court of Virginia against Restaurants alleging among
other things that Restaurants breached its contract with Marlin by failing to
pay amounts owed under the contract. Marlin claimed damages in excess of $2.2
million through March 1996.
On June 27, 1996, the Company entered into a settlement with Marlin. The
settlement provides for the payment to Marlin of an aggregate of $1,150,000 in
cash in settlement of the civil action brought by Marlin against Restaurants.
Under the terms of the settlement agreement, Marlin shall be obligated to use
settlement proceeds to fulfill its obligations with all subcontractors hired by
Marlin to perform work under Marlin's maintenance service agreement with
Restaurants, and Marlin shall be entitled to the excess, if any, after all of
the subcontractors have been paid. No payment shall be made to any subcontractor
unless the subcontractor fully releases Restaurants from any liability and
releases all liens, if any, filed against Restaurants. As part of the
settlement, mutual releases have been exchanged among the parties and the two
civil actions will be dismissed. Based on the terms of the settlement, the
Company currently estimates that it will spend an aggregate of $1,500,000 to
settle this action, including related legal costs.
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On March 12, 1997, the Company reached an agreement with Marlin whereby the
Company agreed to pay Marlin $95,000 of the remaining settlement funds on or
before March 18, 1997. The remainder of the settlement funds in the amount of
approximately $48,000 will be held by the Company in an escrow account until
such time as the Company is satisfied that Marlin has complied with all
remaining obligations under the original settlement agreement. Marlin will not
be able to apply for these funds until February 1, 1998. The Company also has
the right to pay any subcontractors directly from this fund.
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 29, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
As a result of the Transaction and the related distribution of Shoney's common
stock to the holders of record of the Company's common stock, the Company's
common stock was delisted by the NASDAQ National Market (NASDAQ symbol: TPIE)
effective January 15, 1997. The Company's common stock is not listed on any
established stock market or exchange but is quoted on the OTC bulletin board.
The following tables set forth the high and low market prices for the Company's
common stock for each quarter during calendar year 1996 and 1995. The prices for
the fourth quarter of the 1996 take into account the distribution of the
Shoney's common stock after the consummation of the Transaction. As of March 20,
1997, there were 1881 shareholders of record of the Company's common stock.
<TABLE>
<CAPTION>
1996 1995
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HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First quarter $ 3 1/2 $ 2 3/5 $ 6 1/4 $ 3 11/16
Second quarter 4 1/5 3 1/8 6 3/8 4 1/8
Third quarter 3 2/5 2/15 5 1/16 3 7/8
Fourth quarter 1/4 1/11 4 1/4 2 9/16
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
At December 31, 1995, the Company recorded a provision of $17.0 million to
reduce the carrying value of the net assets to be exchanged to the estimated
fair value of the consideration to be received from Shoney's. During the first
quarter of 1996, the Shoney's common stock price increased, resulting in an
increase in the fair value of the consideration to be received by the Company.
As a result of the increase in the Shoney's common stock price, the Company
determined the valuation allowance was no longer required and reversed the
allowance during 1996. The Company's results of operations for 1996 also include
a gain on the Transaction of approximately $7.1 million. This gain reflects the
excess of the net proceeds and assumption of debt by Shoney's in excess of the
Company's basis in the assets sold. See Note 2 to the Consolidated Financial
Statements. Other costs for the period ended September 8, 1996 include $5.3
million of costs incurred in connection with the Transaction.
In 1995, the Company recorded a gain of $10.1 million, net of taxes, resulting
from a litigation settlement. The Company recognized a $5,273,000 gain, net of
tax, in 1993 following the sale of its remaining interest
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in Exhibition Enterprises, Inc. During 1992, the Company recorded an
extraordinary loss, net of tax, of $11,949,000 in connection with an early
extinguishment of debt.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA
FISCAL YEAR ENDED
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DECEMBER 29, DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 31,
1996 (1) 1995 1994 1993 1992
--------------- --------------- --------------- ------------- --------------
(LIQUIDATION (GOING CONCERN BASIS)
BASIS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . $ 195,219 $ 283,578 $ 287,384 $ 289,439 $ 277,39
Income (loss) from
continuing operations 4,408 (11,309) (3,717) (36,488) 66
Income(loss) before
extraordinary item and
cumulative effect of
accounting changes 4,408 (1,196) (3,717) (31,215) 66
Net income (loss) 4,408 (1,196) (3,717) (31,215) (14,125)
Income (loss) per share
from continuing
operations N/A (0.55) (0.18) (1.81) 0.04
Net income (loss) per
share N/A (0.06) (0.18) (1.55) (0.77)
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</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA
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DECEMBER 29, DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 31,
1996 (1) 1995 1994 1993 1992
--------------- --------------- --------------- ------------- --------------
(LIQUIDATION (GOING CONCERN BASIS)
BASIS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Working capital
(deficiency) N/A $ (23,065) $ (17,972) $ (10,796) $ 2,734
Total assets N/A 248,876 254,496 258,839 255,607
Short-term obligations N/A 24,231 3,725 1,728 5,278
Long-term obligations
including minority
interest N/A 81,628 107,721 106,773 110,937
</TABLE>
(1) As a result of the Transaction, the Company has adopted the liquidation
basis of accounting. Therefore, certain information required in this
schedule is not applicable. See Notes 1 and 2 to the Consolidated
Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
As a result of the sale of substantially all of the Company's assets in the
Transaction and the Company's Board's approval of the Plan of Complete
Liquidation, the Company has adopted the liquidation basis of accounting.
Accordingly, assets have been valued at their estimated net realizable value and
liabilities include the estimated costs to carry out the Plan of Complete
Liquidation. The net adjustment at September 8, 1996 required to convert from a
going concern (historical cost) basis to a liquidation basis of accounting was a
decrease in the carrying value of net assets of $1.25 million which was included
in the Consolidated Statement of Changes in Net Assets in Liquidation. This
decrease in the carrying value of net assets is principally a result of
recognizing and recording estimated costs to carry out the Plan of Complete
Liquidation. The Consolidated Balance Sheet as of December 31, 1995 and the
Consolidated Statement of Income for 1995 and 1994 have been prepared using the
historical cost (going concern) basis of accounting on which the Company has
previously reported its financial condition and its results of operations.
See Note 2 to the Consolidated Financial Statements.
RESULTS OF OPERATIONS
1996
In October 1996, the Company made an initial distribution consisting of all
shares of Shoney's common Stock received by the Company in the Transaction to
its shareholders of record and has subsequently invested its financial
resources, administered the payment of various expenses and managed the legal
proceedings against the Company.
The Company's results of operations for the period from January 1, 1996 to
September 8, 1996 are presented in the accompanying financial statements. As a
result of the Transaction, results of operations are not comparable with the
results of the preceding fiscal year. Revenues since September 8, 1996 consist
primarily of earnings on investments. General and administrative expenses since
September 8, 1996 consist primarily of the payments of obligations related to
various legal matters and severance costs.
SIGNIFICANT OR UNUSUAL ITEMS
At December 31, 1995, the Company recorded a provision of $17.0 million to
reduce the carrying value of the net assets to be exchanged to the estimated
fair value of the consideration to be received from Shoney's. During the
first quarter of 1996, the Shoney's common stock price increased, resulting in
an increase in the fair value of the consideration to be received by the
Company. As a result of the increase in the Shoney's common stock price, the
Company determined the valuation allowance was no longer required and reversed
the allowance during 1996.
The Company's results of operations for 1996 include a gain on the Transaction
of approximately $7.1 million. This gain reflects the excess of the net proceeds
and assumption of debt by Shoney's in excess of the Company's basis in the
assets sold. See Note 2 to the Consolidated Financial Statements. Other costs
for the period ended September 8, 1996 included on the Consolidated Statements
of Income(Loss) and Changes in Net Assets in Liquidation includes $5.3 million
of costs incurred in connection with the Transaction.
The adjustment to liquidation basis of accounting of $1.25 million included in
the Consolidated Statements of Income (Loss) and Changes in Net Assets in
Liquidation reflect management's best estimate of the costs to carry out its
plan of liquidation. In the event that any of these amounts are not required to
liquidate the
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Company, excess cash will be distributed to the Company's shareholders in a
final distribution. See Note 2 to the Consolidated Financial Statements.
1995 COMPARED TO 1994
REVENUES
Revenues for 1995 which included 53 weeks versus 52 weeks in 1994 decreased 1.3%
or $3.8 million to $283.6 million. Excluding an increase in revenue of $5.0
million attributable to the additional week in 1995, same store sales for the
Shoney's concept declined 3.9% or $9.1 million and same store sales for the
Captain D's concept increased 1.2% or $.6 million. Comparable store sales
exclude the first twelve weeks of a new restaurant's operations which accounts
for $.5 million in revenues in 1995. New stores accounted for $1.0 million of
1995 revenues. Revenues for 1994 include $1.8 million for units closed during
1994. Revenues of $3.0 and expenses of $2.8 million related to units provided
for in the 1993 reserve for restructuring have been excluded from the 1995
statement of operations.
The Company was the largest franchisee of Shoney's. As a franchisee, the Company
was highly dependent upon the franchisor for marketing, training, product
development and restaurant procedures in order to be successful. During 1995,
the Shoney's concept, and therefore the Company's Shoney's restaurants, had
faced problems which led to declines in comparable store sales. Management
believes that this decline in comparable store sales was the result of numerous
factors including a more competitive environment and a decline in operational
performance. In addition to these factors, comparable store sales were also
affected in the fourth quarter by negative publicity on food handling
procedures. Shoney's was included, along with restaurants of several other
national restaurant chains, in a national television "news magazine" program on
restaurant industry cleanliness and food handling practices. Following the
airing of this program, the Company's Shoney's concept experienced declines in
comparable store sales. During the fourth quarter, the Company received the
results of a Food and Drug Administration (FDA) evaluation of sanitation and
safety of foods of the Shoney's concept. The evaluation included Shoney's
restaurants as well as some of the Company's restaurants. The Shoney's system
received a marginal rating on the evaluation.
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
1995 and 1994 is shown below:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Food, supplies and uniforms 36.6 % 35.8 %
Restaurant labor and benefits 30.3 % 30.5 %
Restaurant depreciation and amortization 4.3 % 4.9 %
Other restaurant operating expenses 19.3 % 18.3 %
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90.5 % 89.5 %
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</TABLE>
The Company's food costs suffered from price increases in several high volume
commodities during 1995, including seafood, poultry and pork. These increases
along with relatively fixed costs for supplies and uniforms resulted in
increased food costs as a percentage of revenues. The decrease in labor costs
during the current year at the Company's restaurants was due to a decline in
workers' compensation. This decline in workers' compensation expense was due to
a $3.5 million adjustment to workers' compensation in the fourth quarter of 1995
to decrease the Company's reserves to more accurately reflect its liabilities.
If such adjustment had not occurred, restaurant labor and benefits costs would
have been 31.5% of revenues or up
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1% from 1994. This increase was a result of lower sales volumes pushing up the
average labor costs for restaurant staff as well as additional labor being added
at the restaurant level to improve customer service. Restaurant depreciation and
amortization decreased in relation to the prior year due to the Shoney's South
assets acquired by the Company in 1988 becoming fully depreciated in 1995. Other
restaurant operating expenses increased as a percentage of revenues primarily
due to increased repairs and maintenance expenses along with increased
advertising costs. The increase in repairs and maintenance expenses in 1995 was
primarily due to the increased aging of the buildings and equipment, as well as
costs related to the implementation of a preventive maintenance program and
start-up costs associated with a preventive maintenance contract. Subsequent to
year-end, disputes have arisen under this contract relating to billing issues
for the work performed. The Company terminated the contract in 1996 and
subsequently settled litigation with the other party (See Item 3 and Note 9 to
the Company's consolidated financial statements). The increase in advertising
costs was primarily due to an increase in radio and television promotion begun
during 1995.
General and administrative costs for 1995 declined by 8% or approximately $1.9
million from 1994. This decrease was the result of cost cutting efforts and
savings associated with the physical consolidation of the Company's corporate
headquarters.
The Company recorded a provision of $17.0 million for asset valuation in
connection with the Transaction (See Item 1 and Note 2 to the Company's
consolidated financial statements).
During 1995, the Company recorded a decrease in its restructuring reserve of
approximately $5.9 million. This decrease principally resulted from the
Company's decision to leave three restaurants open that had been provided for in
the Company's restructuring reserve. (See "Restructuring Charges" below and Note
4 to the Company's consolidated financial statements).
Operating income for 1995 declined 30.0% or $1.6 million excluding the provision
for asset valuation in 1995 and restructuring charges in 1995 and 1994. This
decrease was primarily driven by a 1.0% increase in food costs and a 3.8%
increase in other restaurant operating expense, somewhat offset by lower general
and administrative costs.
OTHER INCOME AND EXPENSES
Interest income decreased ninety thousand dollars primarily due to a reduction
in the investment balance held during the current year. Interest expense
increased three hundred thousand dollars primarily due to a higher weighted
average interest rate during 1995 as compared to 1994
DISCONTINUED OPERATIONS
Discontinued operations for 1995 include a gain of $10.1 million, net of income
taxes of $6.4 million, in connection with the settlement of litigation.
1994 COMPARED TO 1993
REVENUES
Revenues for 1994 decreased .7% or $2.0 million to $287.4 million due primarily
to softness in same store sales at the Shoney's concept. New restaurants
accounted for $7.3 million of 1994 revenues, while comparable stores sales
declined $9.3 million, or 4.3%, in the Shoney's concept and increased $2.6
million or 6.0% in the Captain D's concept. The first twelve weeks of a new
restaurants' operations are excluded from the comparable store sales
computation. Revenues for 1993 include $19.9 million relating primarily to
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<PAGE> 10
27 under-performing units, which were either closed subsequent to the second
quarter of 1993 or scheduled to be closed in accordance with the Company's
restructuring plan adopted in 1993. Revenues and expenses related to units
provided for in the reserve for restructuring have been excluded from the 1994
statement of operations.
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
1994 and 1993 is shown below:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Food, supplies and uniforms 35.8 % 35.2 %
Restaurant labor and benefits 30.5 % 31.2 %
Restaurant depreciation and amortization 4.9 % 4.7 %
Other restaurant operating expenses 18.3 % 17.7 %
------ ------
89.5 % 88.8 %
====== ======
</TABLE>
The Company's food costs suffered from price increases in several high volume
commodities during 1994, including shrimp and cooking oil. These increases along
with relatively fixed costs for supplies and uniforms resulted in increased food
costs as a percentage of revenues. The decrease in labor costs during the
current year at the restaurants was due to a decline in workers' compensation.
This decline in workers' compensation expense was primarily due to a $4.5
million adjustment to workers' compensation in the fourth quarter of 1993 to
increase the Company's reserves to better reflect the likely outcome of its
liabilities. Restaurant depreciation and amortization increased in relation to
the prior year due to the full year depreciation expense related to the 18 newly
constructed units during 1993. Other restaurant operating expenses increased as
a percentage of revenues primarily due to increased repairs and maintenance
expenses along with increased advertising costs. The increase in repairs and
maintenance expenses in 1994 was primarily due to the increased aging of the
buildings, cleaning and repair costs of the carpets installed in various store
locations during 1993, and increased restocking of small wares. The increase in
advertising was primarily due to promotional outdoor advertising begun during
1994.
General and administrative expenses for 1994 decreased $4.7 million in relation
to 1993 due to decreased workers' compensation and general liability expense for
the Company and decreased salary expense associated with a reduction in
corporate staff along with a decrease in executive compensation. The decrease in
workers' compensation and general liability expense was primarily due to an
increase in the reserves at the end of 1993 to better reflect the likely outcome
of its liabilities.
Operating income for 1994 rose 84.8% or $2.4 million excluding the restructuring
charges in 1994 and 1993. This increase was primarily driven by a 16.5% decrease
in general and administrative expenses which was somewhat offset by slightly
higher food costs and other restaurant operating expenses.
OTHER INCOME AND EXPENSES
Interest income decreased $.26 million primarily due to a reduction in the
investment balance held during the current year. Interest expense declined $.3
million primarily due to a lower weighted average interest rate during 1994 as
compared to 1993.
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RESTRUCTURING CHARGES
The Company adopted a restructuring plan as of the end of the fourth quarter of
1993 which included closing or relocating 31 of its restaurants by the end of
1994, not exercising options to renew leases with respect to an additional 19 of
its restaurants upon expiration of their current lease terms, and restructuring
divisional management as well as consolidating the Company's two corporate
offices. With respect to the restaurants to be closed or relocated, 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. Prior to the consummation of the
Transaction, the Company had closed 23 restaurants and had determined that eight
restaurants should stay open. During 1995, the Company reduced its restructuring
reserve by $5.1 million due to a change in estimate as a result of management's
decision to leave three restaurants open and due to management being able to
buyout of certain leases at more favorable terms than originally estimated. The
Company was also able to dispose of some locations for amounts in excess of the
original estimates and had lower than expected costs at other locations.
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 had been permanently impaired and, accordingly,
provided $4.5 million for the write-down of assets at the end of 1993. The
Company had closed three of these units prior to or upon the expiration of their
current lease terms. The Company's restructuring plan also called for two
additional units to be closed by December 31, 1995. Due to the consummation of
the Transaction, Shoney's now has responsibility for evaluating the timing of
closing of these two restaurants (See Note 2 to the Company's consolidated
financial statements).
With respect to the Company's restructuring of its divisional management and
consolidation of the Company's corporate offices, the Company paid out
approximately $2.3 million related to the restructuring reserve of which $1.0
million was for severance.
In addition to these reserves, the Company also had a reserve related to units
that were closed prior to 1993 and for the sale of vacant properties. During
1995, the restructuring reserve was reduced by approximately $1.1 million
resulting from expenditures and asset write-downs and by $.8 million for changes
in original estimates for the costs of disposal.
The reserve for restructuring included management's best estimates of the
remaining liabilities associated with its restructuring and the net realizable
value of property. Revenues of $3.0 million and expenses of $2.8 million related
to units provided for in the restructuring reserve were excluded from the 1995
statement of operations.
As a result of the Transaction, Shoney's purchased Restaurants and assumed all
of its assets and liabilities; therefore, there are no restructuring reserves
or property allowances recorded in the Company's consolidated financial
statements as of December 29, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has no short-term or long-term debt facilities available. The
Company believes that its present cash and cash equivalents and short-term
investments will allow it to implement the Plan of Complete Liquidation. The
Company made its initial distribution under its Plan of Complete Liquidation on
October 1, 1996 by distributing all of the Shoney's common stock received in the
Transaction to its shareholders of record at September 24, 1996. As of December
29, 1996, the Company had approximately $4.7 million in assets in excess of its
liabilities. The Company does not currently intend to make any cash
distributions to its shareholders until such time as the period for creditors of
the Company to present written proof of their claims, if any, shall have
expired, which period terminates on August 26, 1997. At such time, the Company's
Board intends to review the assets and liabilities of the Company and consider
the effect of all then known or anticipated liabilities and, after paying or
making provision for all then known or anticipated liabilities. After such
review, the Company's Board intends to declare a distribution consisting
-9-
<PAGE> 12
of all of the then remaining cash other than cash in escrow or cash required to
be retained for holders of certain of Shoney's stock options (see Item 3 and
Note 9 to the Company's consolidated financial statements). It is expected that
such distribution will be made on or prior to September 8, 1997.
-10-
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of TPI The Company, Inc.:
We have audited the accompanying consolidated statement of net assets in
liquidation of TPI Enterprises, Inc. and its subsidiaries as of December 29,
1996, and the related consolidated statements of changes in net assets in
liquidation and cash flows for the year then ended. In addition, we have audited
the accompanying consolidated balance sheet of TPI Enterprises, Inc. and its
subsidiaries as of December 31, 1995, and the related consolidated statements of
income (loss) and shareholders' equity and cash flows for each of the two years
then ended. 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.
As discussed in Notes 1 and 2 to the consolidated financial statements, the
Company consummated the sale of substantially all of its assets and commenced
liquidation shortly thereafter. As a result, the Company changed its basis of
accounting from the going concern basis to the liquidation basis.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the net assets in liquidation of TPI Enterprises, Inc. and
its subsidiaries as of December 29, 1996, the changes in their net assets in
liquidation and cash flows for the year then ended, their financial position at
December 31, 1995 and the results of their operations and their cash flows for
the two years then ended, in conformity with generally accepted accounting
principles on the basis described in the preceding paragraph. 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.
/s/ Deloitte & Touche LLP
March 26, 1997
Memphis, Tennessee
-11-
<PAGE> 14
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF DECEMBER 29, 1996
(LIQUIDATION BASIS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 29,
1996
(DOLLARS IN THOUSANDS)
<S> <C>
ASSETS
- ------
Cash and cash equivalents $ 1,190
Investments 5,078
-------
Total assets 6,268
LIABILITIES
- -----------
Reserve for estimated costs during the period of liquidation 1,053
Accrued expenses 480
-------
Total liabilities 1,533
-------
NET ASSETS IN LIQUIDATION $ 4,735
=======
</TABLE>
See notes to consolidated financial statements.
-12-
<PAGE> 15
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995
(GOING CONCERN BASIS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1995
(DOLLARS IN THOUSANDS)
<S> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 8,744
Accounts receivable-trade (net of allowance for doubtful accounts of $125) 1,248
Litigation settlement receivable 30,000
Inventories 13,020
Deferred tax benefit 5,728
Other current assets 3,237
---------
Total current assets 61,977
PROPERTY AND EQUIPMENT (At cost) 236,969
Less accumulated depreciation and amortization 79,637
Less allowance for restructuring 8,752
---------
Property and equipment, net 148,580
OTHER ASSETS:
Goodwill (net of accumulated amortization of $9,431) 36,396
Less valuation allowance 17,000
---------
Total other assets 19,396
OTHER INTANGIBLE ASSETS (Net of accumulated amortization of $6,504) 18,298
OTHER 625
---------
TOTAL ASSETS $ 248,876
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES:
Current liabilities:
Current portion of long-term debt $ 24,231
Accounts payable-trade 16,052
Accrued expenses and other current liabilities 30,604
Accrued costs of litigation settlement 13,537
Income taxes currently payable 618
---------
Total current liabilities 85,042
Long-term debt 81,628
Reserve for restructuring 8,162
Deferred income taxes 5,537
Other liabilities 1,641
---------
Total liabilities $ 182,010
=========
</TABLE>
-13-
<PAGE> 16
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 (CONTINUED)
(GOING CONCERN BASIS)
<TABLE>
<CAPTION>
DECEMBER 31,
1995
(DOLLARS IN THOUSANDS)
<S> <C>
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;
issued - 33,402,553 shares $ 334
Additional paid-in capital 226,454
Deficit (90,157)
----------
Total 136,631
Less treasury stock, at cost, 12,805,266 common shares 69,765
----------
Total shareholders' equity 66,866
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 248,876
==========
</TABLE>
See notes to consolidated financial statements.
-14-
<PAGE> 17
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND CHANGES IN NET ASSETS IN
LIQUIDATION
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31, DECEMBER 25,
1996 1995 1994
<S> <C> <C> <C>
RESTAURANT REVENUES $ 195,219 $ 283,578 $ 287,384
COSTS AND EXPENSES:
Food, supplies, and uniforms 71,020 103,874 102,831
Restaurant labor and benefits 61,761 85,889 87,644
Restaurant depreciation and amortization 8,076 12,252 14,138
Other restaurant operating expenses 38,851 54,705 52,727
General and administrative expenses 16,464 21,993 23,906
Provision for asset valuation (17,000) 17,000
Closed unit reserve 4,809
Restructuring charges, net (69) (5,929) (986)
Other, net 7,088 1,167 940
----------- ------------ ----------
191,000 290,951 281,200
----------- ------------ ----------
OPERATING INCOME (LOSS) 4,219 (7,373) 6,184
OTHER INCOME AND EXPENSES:
Interest income (661) 243 337
Interest expense 7,596 (10,529) (10,238)
Gain on Shoney's Sale Transaction (7,124) 0
----------- ------------- ----------
(189) (10,286) (9,901)
----------- ------------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 4,408 (17,659) (3,717)
INCOME TAX EXPENSE (BENEFIT) 0 (6,350) 0
----------- ------------- ----------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 4,408 (11,309) (3,717)
DISCONTINUED OPERATIONS:
Litigation Settlement Income, Net 10,113
NET INCOME (LOSS) 4,408 $ (1,196) $ (3,717)
============= ==========
NET ASSETS, AS OF SEPTEMBER 8, 1996 66,866
ADJUSTMENT TO LIQUIDATION BASIS (1,250)
OTHER 175
CHANGES IN NET ASSETS IN LIQUIDATION:
DISTRIBUTION OF SHONEY'S, INC. STOCK
TO SHAREHOLDERS (65,561)
INVESTMENT EARNINGS 97
-----------
NET ASSETS, END OF PERIOD $ 4,735
===========
</TABLE>
-15-
<PAGE> 18
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND CHANGES IN NET ASSETS IN
LIQUIDATION (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31, DECEMBER 25,
1996 1995 1994
<S> <C> <C> <C> <C> <C>
PRIMARY INCOME (LOSS) PER COMMON SHARE:
Continuing Operations NA $ (0.55) $ (0.18)
Discontinued Operations NA 0.49 0
---- ---------------- ----------------
Net Loss per Common Share NA $ (0.06) $ (0.18)
Weighted average number of common and common
equivalent shares outstanding NA 20,526 20,415
==== ================ ================
</TABLE>
See notes to consolidated financial statements.
-16-
<PAGE> 19
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON SHARE ISSUED
------------------- ADDITIONAL
NUMBER OF PAID-IN TREASURY
SHARES AMOUNT CAPITAL DEFICIT STOCK TOTAL
---------- -------- --------- --------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance December 26, 1993 $33,118,614 $ 331 $225,417 $ (85,244) $ (69,945) $70,559
Issue of shares pursuant to employee
stock plans 97,582 1 575 576
Conversion of subordinated debentures 24,922 152 152
Net loss (3,717) (3,717)
----------- ----- -------- --------- --------- -------
Balance, December 25, 1994 33,241,118 332 226,144 (88,961) (69,945) 67,570
Issue of shares pursuant to employee
stock plans 160,235 2 304 180 486
Other 1,200 6 6
Net loss (1,196) (1,196)
----------- ----- -------- --------- --------- -------
Balance, December 31,1995 33,402,55 $ 334 $226,454 $ (90,157) $ (69,765) $66,866
=========== ===== ======== ========= ========= =======
</TABLE>
In connection with the Transaction, the Company changed to the
liquidation basis of accounting as explained in Notes 1 and 2.
The presentation format used in 1994 and 1995 is, therefore, no longer
applicable. The effect of the change of adopting the liquidation
basis is reflected in the Consolidated Statement of Changes in Net
Assets in Liquidation.
-17-
<PAGE> 20
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 29, DECEMBER 31, DECEMBER 25,
1996 1995 1994
------------ ------------------------------
(LIQUIDATION (GOING CONCERN)
BASIS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,408 $(11,309) $ (3,717)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 11,335 17,280 19,216
Deferred income taxes (183) (188) (3)
Closed store reserve 4,809
Reserves for restructuring (69) (5,929) (667)
Provision for asset valuation (17,000) 17,000
Gain on Shoney's Sale Transaction (7,124)
Net adjustment to Liquidation Basis of Accounting (1,250)
Changes in assets and liabilities:
Payment to Shoney's (11,322)
Accounts receivable trade 551 (442) 178
Inventories 4,671 (1,051) (545)
Other current assets 1,324 (20) 2,258
Other assets 173 (660) 752
Accounts payable trade 1,066 486 (4,345)
Accrued expenses and other current liabilities (14,344) (3,687) 3,365
Closed store reserve (2,736)
Reserves for restructuring (900) (4,625) (3,370)
Income taxes currently payable (120) (6,450) 69
Other liabilities (185) (269) (517)
Estimated costs of liquidation (1,480)
Other (1,090) 0 0
------- -------- ---------
Total adjustments (33,874) 11,445 16,391
------- -------- ---------
DISCONTINUED OPERATIONS:
Gain on disposal discontinued operations 10,113
Accounts receivable litigation settlement 30,000 (30,000)
Accrued costs litigation settlement 13,537
Income taxes 6,350
------- -------- ---------
Net cash provided by discontinued operations 30,000 0 0
------- -------- ---------
Net cash provided by operating activities 534 11,445 16,391
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (7,554) (6,795) (19,402)
Disposition of property and equipment 356 5,054
Proceeds from sale-leaseback transactions 0 2,219 5,054
Other 39 (16)
-------- -------- ---------
Net cash used in investing activities $ (7,198) $ (4,537) $ (14,364)
-------- -------- ---------
</TABLE>
-18-
<PAGE> 21
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------
DECEMBER 29, DECEMBER 31, DECEMBER 25,
1996 1995 1994
----------------------------------------------------
(LIQUIDATION (GOING CONCERN)
BASIS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on)Credit Facilities $ 5,000 $ (1,000) $ 3,400
Common shares issued 91 312 576
Other long-term debt payments (1,176) (3,395) (1,722)
-------- -------- --------
Net cash provided by (used in)financing activities 3,915 (4,083) 2,254
-------- -------- --------
NET INCREASE (DECREASE)IN CASH AND
CASH EQUIVALENTS (2,476) (8,484) 564
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 8,744 17,228 16,664
-------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 6,268 $ 8,744 $ 17,228
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Non-cash transactions:
Shoney's stock received $ 65,561
Net assets transferred to Shoney's 51,753
Capitalized lease obligations entered into $ 1,430
Conversion of 8 1/4% subordinated debentures 162
CASH PAYMENTS (REFUNDS)DURING THE
YEAR FOR:
Interest $ 6,094 $ 9,183 $ 9,226
Interest capitalized 77
Income taxes, net 294 158 (2,164)
</TABLE>
-19-
<PAGE> 22
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - Pursuant to the terms of the Plan of Tax-Free
Reorganization under Section 368(a)(1)(C) of the Internal Revenue Code and
Agreement, dated March 15, 1996, as amended, by and among TPI Enterprises,
Inc. (the "Company"), Shoney's, Inc. ("Shoney's") and TPI Restaurants
Acquisition Corporation, a wholly-owned subsidiary of Shoney's (the
"Agreement"), the Company completed the sale of substantially all of the
Company's assets to Shoney's (the "Transaction") on September 9, 1996. In
connection with the Transaction, the Company's Board of Directors approved
a Plan of Complete Liquidation as required by the Agreement. Under the
Plan of Complete Liquidation, the Company is required to wind-down its
operations and distribute its assets after paying or making provision for
its liabilities. On October 1, 1996, the Company distributed 6,785,114
shares of Shoney's common stock, $1.00 par value ("Shoney's Common
Stock"), representing the total number of shares of Shoney's Common Stock
received pursuant to the Transaction, to its shareholders of record as of
September 24, 1996.
As a result of the Transaction, the Company adopted the liquidation basis
of accounting for all periods subsequent to September 9, 1996. Under the
liquidation basis of accounting, assets are stated at their estimated
realizable value and liabilities, including a provision for the estimated
costs of liquidation, are stated at their anticipated settlement amounts.
The valuations of assets and liabilities are based on management estimates
and assumptions as of the date of the financial statements; actual
realization of assets and settlement of liabilities could be higher or
lower than amounts indicated.
PRINCIPLES OF CONSOLIDATION - Subsequent to the Transaction, the
consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Maxcell Telecom, Inc. and Telecom Plus
Shared Tenants Services, Inc. Prior to the Transaction, the consolidated
financial statements included the accounts of the Company and its wholly
owned subsidiaries including TPI Restaurants, Inc. ("Restaurants"), TPI
Entertainment, Inc. and TPI Insurance Corporation. 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.
NET INCOME (LOSS) PER COMMON SHARE - As explained above in "Basis of
Presentation", effective September 9, 1996, the Company adopted the
liquidation basis of accounting, which reports an excess of assets over
liabilities. Accordingly, the presentation of per common share information
on a liquidation basis is not considered meaningful and has been omitted
for 1996.
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 -0- and
80,000 shares in 1995 and 1994, respectively.
Fully diluted earnings per share are similarly computed, but also include
the effect, when dilutive, of the Company's 8 1/4% Convertible
Subordinated Debentures issued in July 1992 and August 1992 and 5%
Convertible Senior Subordinated Debentures issued March 1993, after the
elimination of the related interest
-20-
<PAGE> 23
requirements, net of income taxes. The Company's convertible debentures
are excluded from the fiscal 1995 and 1994 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 1995 and 1994.
INVESTMENT - The Company's $5,000,000 investment at December 29, 1996
represents U.S. Treasury bills due March 20, 1997. At December 29, 1996,
cost approximates net realizable value.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from the
estimates.
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.
Prior to the consummation of the Transaction, the Company utilized a cash
management system under which cash overdrafts existed in the book balances
of its primary disbursing accounts. These overdrafts represented the
uncleared checks in the disbursing accounts. The cash amounts presented in
the consolidated financial statements represented balances on deposit at
other locations prior to their transfer to the primary disbursing
accounts. Uncleared checks of $6,752,000 were included in accounts payable
at December 31, 1995.
INVENTORIES - Inventories, consisting of food items, beverages and
supplies, were 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 were capitalized and amortized over the restaurants' first
year of operation.
DEPRECIATION AND AMORTIZATION - Depreciation and amortization of property
and equipment was 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 was amortized on a
straight-line basis over a thirty-six year period. The costs of franchise
license agreements which governed the individual Shoney's and Captain D's
restaurants and reserved area agreements were amortized on a straight-line
basis over the lives of the related franchise license agreements, up to 40
years. The Company historically evaluated goodwill impairment based upon
future undiscounted cash flows. The Company recorded a valuation allowance
based upon the difference in the carrying value of the net assets and the
estimated fair value of consideration to be received from Shoney's as of
December 31, 1995.
INCOME TAXES - The Company accounted for income taxes under Financial
Accounting Standard No. 109, "Accounting for Income Taxes", which required
an asset and liabilities approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities were computed
annually for differences between the financial statement and tax basis of
assets and liabilities that would 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 were established when necessary to reduce deferred
-21-
<PAGE> 24
tax assets to the amount expected to be realized. Income tax expense was
the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
NOTE 2 - SHONEY'S, INC. TRANSACTION
GENERAL - On September 9, 1996, the Company consummated the sale of
substantially all of its assets to Shoney's pursuant to the terms of the
Agreement.
The Company's results of operations for 1996 include a gain on the
Transaction of approximately $7.1 million. This gain reflects the excess
of the net proceeds and assumption of debt by Shoney's in excess of the
Company's basis in the assets sold. At December 31, 1995, the Company
recorded a provision of $17.0 million to reduce the carrying value of the
net assets to be exchanged to the estimated fair value of the
consideration to be received from Shoney's. During the first quarter of
1996, the Shoney's common stock price increased, resulting in an increase
in the fair value of the consideration to be received by the Company. As
a result of the increase in the Shoney's common stock price, the Company
determined the valuation allowance was no longer required and reversed
the allowance during 1996.
CONSIDERATION - In exchange for substantially all of the assets of the
Company, including the shares of capital stock of Restaurants, TPI
Entertainment, Inc., and TPI Insurance Corporation, at the closing of the
Transaction (the "Closing"), the Company received from Shoney's an
aggregate of 6,785,114 shares of Shoney's Common Stock and was permitted
to retain approximately $4,650,000 in cash, plus certain additional cash
to pay the Company's remaining Specified Wind-up Expenses (as defined in
the Agreement). As noted under the caption "Initial Distribution" below,
on October 1, 1996, the 6,785,114 shares of Shoney's Common Stock were
distributed to the Company's shareholders of record as of September 24,
1996.
The Agreement entitled the Company to retain up to $7,500,000 in cash
("Retained Cash") and up to $7,350,000 to pay Specified Wind-up Expenses,
in each case subject to certain adjustments. Approximately $1,150,000 in
Retained Cash was exchanged for additional shares of Shoney's Common Stock
pursuant to the Agreement, thereby reducing the amount of Retained Cash to
approximately $6,350,000. Specified Wind-up Expenses are currently
estimated to be approximately $1,615,000 in excess of the $7,350,000
allotment. Such excess included a payment of approximately $1,300,000 to
Shoney's at the Closing in settlement of certain liabilities or contingent
liabilities which exceeded the liabilities agreed to be assumed by
Shoney's in the Agreement. The $1,300,000 payment included approximately
$550,000 for Excess Repair and Maintenance Expenses (as defined in the
Agreement).
Current estimates indicate that Retained Cash will be $4,735,000, or
$0.209 per share of the Company's Common Stock. This assumes that
no liabilities of the Company, other than those presently known, arise
prior to its liquidation. This amount also assumes that the Company's
actual liabilities are the same in amount as its budgeted liabilities;
such actual liabilities may be higher or lower. Of the $4,735,000, a
maximum of approximately $400,000 will be required to be retained by the
Company for the benefit of holders of the stock options of the Company
which were assumed by Shoney's in the Transaction ("Shoney's Options"),
until such time as such options are exercised, are terminated, or expire.
Under the Company's Plan of Complete Liquidation, if Shoney's Options are
not exercised prior to the final liquidating distribution record date,
such cash, after providing for the expenses of the distribution thereof,
will be distributed to the Company's shareholders. The final liquidating
distribution record date will occur no earlier than December 31, 1998.
INITIAL DISTRIBUTION - On October 1, 1996, the Board of Directors of the
Company (the "Company's Board") made an initial distribution to its
shareholders of all of the shares of Shoney's Common Stock received by the
Company in the Transaction (the "Initial Distribution") to holders of
record of the Company's Common Stock on September 24, 1996.
RESIGNATION OF OFFICERS AND BOARD MEMBERS-Effective as of September 9,
1996, all of the officers of the Company resigned, except for Frederick W.
Burford, who was elected as the Company's President, Chief Financial
Officer and Secretary, and Paul J. Siu, who was elected as Assistant
Secretary. Effective as of October 10, 1996, all of the members of the
Company's Board resigned, except for Mr. Burford and Mr. Siu.
-22-
<PAGE> 25
PLAN OF DISSOLUTION - The Company's Board intends to dissolve the Company
in accordance with the provisions of the New Jersey Business Corporation
Act (the "NJBCA") by obtaining tax clearance and by causing a certificate
of dissolution to be filed in the office of the Secretary of State of the
State of New Jersey. The application for tax clearance was approved on
December 31, 1996, at which time a certificate of dissolution was filed.
On each of February 3, 10 and 17, 1997, the Company gave notice requiring
all then-known creditors of the Company to present their claims in writing
on or prior to August 26, 1997, which notice was published in newspapers
of general circulation as provided in the NJBCA. Generally, any creditor
who does not file a claim as provided in the notice, and all those
claiming through and under such creditor, would be forever barred from
suing on such claim or otherwise realizing upon or enforcing it.
The Company's Board does not currently intend to make any cash
distributions to its shareholders until such time as the period for
creditors of the Company to present written proof of their claims shall
have expired, which period terminates on August 26, 1997. At such time,
the Company's Board intends to review the assets and liabilities of the
Company and consider the effect of all then known or anticipated
liabilities. After such review, the Company's Board intends to declare a
distribution consisting of all of the then remaining cash other than cash
in escrow or cash required to be retained for holders of Shoney's Options
(See Note 9). It is expected that such distribution will be made on or
prior to September 8, 1997.
NOTE 3- RESTAURANT CLOSINGS
During the second quarter of 1996, the Company closed 10 of its Shoney's
restaurants and one of its Captain D's restaurants.These underperforming
restaurants were closed to reduce overhead and the impact of the projected
cash flows.In connection with these closings, the Company recorded a
provision of $4,657,000 to write-down the related assets of these
restaurants to $5,050,000 which is their estimated fair value at July 14,
1996 and to record liabilities associated with the closing of these
locations.These liabilities include the cost of future lease payments and
other expenses.The reserve for closed stores and the estimated fair value
of the remaining assets of these stores was based on management's best
estimates.
NOTE 4- RESTRUCTURING CHARGES
The Company adopted a restructuring plan as of the end of the fourth
quarter of 1993 which included closing or relocating 31 of its restaurants
by the end of 1994, not exercising options to renew leases with respect to
an additional 19 of its restaurants upon expiration of their current lease
terms, and restructuring divisional management as well as consolidating
the Company's two corporate offices. With respect to the restaurants to be
closed or relocated, 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. Prior to the consummation of the Transaction, the Company had
closed 23 restaurants and had determined that eight restaurants should
stay open.
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, provided $4,500,000 for the write-down of assets at the end
of 1993. The Company had closed three of these units prior to or upon the
expiration of their current lease terms. The Company's restructuring plan
also called for two additional units to be closed by December 31, 1995.
Due to the Transaction, Shoney's now has responsibility for evaluating the
timing of the closing of these two restaurants.
-23-
<PAGE> 26
In addition to these reserves, the Company also had a reserve related to
units that were closed prior to 1993 and for the sale of vacant
properties. During 1995, the restructuring reserve was reduced by
approximately $1.1 million resulting from expenditures and asset
write-downs and by $.8 million for changes in original estimates for the
costs of disposal.
As a result of the Transaction, Shoney's purchased Restaurants and assumed
all of its assets and liabilities; therefore, there are no restructuring
reserves or property allowances recorded in the Company's consolidated
financial statements as of December 29, 1996.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
1995
(DOLLARS IN THOUSANDS)
<S> <C>
Owned:
Land $ 35,201
Buildings 52,699
Leasehold improvements and buildings on leased land 50,759
Equipment and furnishings 74,640
---------
213,299
Leased:
Buildings 23,074
Equipment 596
---------
23,670
Property and equipment (at cost) 236,969
---------
Less accumulated depreciation and amortization 79,637
Less allowance for restructuring 8,752
---------
Total property and equipment $ 148,580
=========
</TABLE>
Property and equipment with a net book value of approximately $21,565,000
was pledged as collateral for the Company's debt facilities as of December
31, 1995.
Depreciation and amortization were calculated using the straight-line
method and were 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, totaled
approximately $10,738,000, $13,948,000 and $14,985,000 during 1996, 1995
and 1994, respectively. The expense during 1996 occurred prior to
September 8, 1996, the last day prior to the consummation of the
Transaction. In connection with the Transaction, substantially all
property and equipment of the Company was acquired by Shoney's. Property
and equipment includes capitalized interest on construction of $425,000 at
December 31, 1995.
-24-
<PAGE> 27
NOTE 6 - OTHER INTANGIBLE ASSETS
Other intangible assets consisted of the following:
<TABLE>
<CAPTION>
1995
(DOLLARS IN THOUSANDS)
<S> <C>
Franchise and reserved area rights $ 17,710
Deferred debt costs 6,724
Unamortized pre-opening expense 310
Other deferred charges 58
----------
24,802
Less accumulated amortization 6,504
----------
$ 18,298
==========
</TABLE>
NOTE 7 - LONG-TERM DEBT
In connection with the Transaction, all debt of the Company and its
subsidiaries was assumed by Shoney's or was paid at Closing.
Long-term debt consisted of the following at December 31, 1995:
<TABLE>
<CAPTION>
1995
(DOLLARS IN THOUSANDS)
<S> <C>
8 1/4% Convertible Subordinated Debentures, due 2002 $ 51,563
5% Senior Convertible Subordinated Debentures, due 2003 15,000
Credit Facilities 21,400
Notes payable, interest rates of 7.75% to 10%, due through 2007 2,608
Obligations under capital leases 15,228
---------
105,859
Less amounts due within one year 24,231
---------
$ 81,628
=========
</TABLE>
Interest expense from continuing operations for 1995 and 1994 included
interest on obligations under capital leases of $1,776,000 and $1,952,000,
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 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 were senior to the 8 1/4% Convertible
Subordinated Debentures (the "Debentures"). The Senior Debentures were
convertible at the option of the holder into common shares of the Company
at any time prior to maturity at $11 per share, subject to adjustment in
certain events. The Senior Debentures were to mature on April 15, 2003 and
were redeemable, in whole or in part, at the option of the
-25-
<PAGE> 28
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 Senior Debenture holders had the option to 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 "Debenture Agreement").
However, a change in control, as defined in the Debenture Agreement, would
have created an event of default under Restaurants' Second Amended and
Restated Credit Facility (the "Credit Facility") 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 the Company and senior indebtedness of Restaurants with
respect to which there is a payment default) had been repaid in full. The
Senior Debentures were unconditionally guaranteed on a subordinated basis
by Restaurants. They were subordinated to all existing and future senior
indebtedness of the Company and Restaurants, excluding the Debentures. As
a condition to closing of the Transaction, the liabilities associated with
or arising out of the Senior Debentures were satisfied.
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, were 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 would have matured on July 15, 2002, and were redeemable at the
option of the Company at any time on or after July 15, 1995, at a premium
which declined as the Debentures approached maturity. The Debenture
holders also had the option to 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, would have created an event of default under the Credit
Facility and, as a result, any repurchase would, absent a waiver, have
been 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 was a
payment default) had been repaid in full. The Debentures were
unconditionally guaranteed on a subordinated basis by Restaurants. They
were subordinated to all existing and future senior indebtedness of the
Company and Restaurants. As a condition to closing of the Transaction, the
obligations of the Company under the Debentures were assumed by Shoney's,
with the Company being released from all obligations under the Debentures.
CREDIT FACILITY - Restaurants' Credit Facility with a syndicate of banks
(the "Banks") was amended and restated as of January 31, 1995. The Credit
Facility as amended, restricted total borrowings available under the
Credit Facility to $40,000,000 and revised certain financial covenant
ratios and required the collateralization of additional properties. On
February 29, 1996, in connection with the Transaction, the Credit Facility
was amended to revise certain financial covenants to allow for a charge of
up to $25,000,000 to be taken by the Company to write-down the carrying
value of assets as discussed in Note 2 to the consolidated financial
statements.
Borrowings under the Credit Facility, at Restaurants' option, bore
interest at either a defined base rate or a rate based on the London
Interbank Offered Rate. The weighted average interest rate on the amount
outstanding was 8.5% for 1995. Restaurants 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,
totaled approximately $2,000,000 and also agreed to indemnify the Banks
against certain liabilities. Restaurants also paid an amendment fee of
$80,000 and costs of $470,000 for its Second Amended and Restated Credit
Agreement dated January 31, 1995. Restaurants also paid a fee based on the
Eurodollar rate, 2.5% at December 31, 1995, 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. The terms of the Credit
Facility required that the fee paid on borrowings and letters of credit be
increased by .50% effective January 31, 1995.
-26-
<PAGE> 29
Borrowings under the Credit Facility were 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 was currently leased but the building
located thereon was owned by Restaurants. In addition, the Banks exercised
their rights to obtain, as security, assignments of other leases and/or
mortgages on real property currently owned or subsequently acquired.
However, Restaurants had rights to finance certain of these properties and
obtain a release of the collateral under certain conditions. The Credit
Facility limited the amount of additional indebtedness which Restaurants,
the Company and their subsidiaries could incur and the aggregate annual
amount to be spent on capital expenditures. In addition, the Credit
Facility limited, among other things, the ability of Restaurants, the
Company and their subsidiaries to pay dividends, create liens, sell
assets, engage in mergers or acquisitions and make investments in
subsidiaries. Restaurants could 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 existed either immediately before
or after the transfer. Restaurants was also required to maintain certain
financial ratios and defined levels of net worth.
At December 31, 1995, $21,400,000 was drawn on the Credit Facility and
letters of credit in the amount of $10,592,790 were outstanding, resulting
in a remaining available balance of $8,007,210 under the revised Credit
Facility. On September 9, 1996, the Credit Facility was repaid in full and
terminated.
NOTES PAYABLE - Notes payable as of December 31, 1995 consisted of
obligations secured by buildings, land, equipment, and cash value life
insurance policies with a net book value of $7,712,000.
NOTE 8 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The consolidated statement of net assets in liquidation reflects
$1,533,000 as the Company's estimate of the total costs to complete the
liquidation of the Company's obligations at December 29, 1996. Due to
uncertainties inherent in the estimation process, the Company's
estimates of these amounts may change in the near term.
-27-
<PAGE> 30
The following represents accrued expenses of the Company at December 31,
1995:
<TABLE>
<CAPTION>
1995
(DOLLARS IN THOUSANDS)
<S> <C>
Insurance $ 14,117
Reserve for restructuring 3,455
Taxes other than income taxes 4,590
Interest 2,331
Payroll and compensation 1,992
Other 4,119
---------
$ 30,604
=========
</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 31,
1995 were approximately $13,560,000.
During the fourth quarter of 1995, management received the 1995 actuarial
study relating to its self insurance programs for workers' compensation
and general liability. The study indicated a continued improvement in the
Company's claims development which resulted in the reduction of projected
ultimate losses. Accordingly, the Company reduced its accrual for workers'
compensation by $3,500,000 and its accrual for general liability by
$1,500,000 during 1995.
NOTE 9 - INCOME TAXES
For federal income tax purposes, the Transaction will be treated as a
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended, and accordingly, (a) no gain or
loss will be recognized by Shoney's or the Company as a result of the
Transaction; (b) the Company's shareholders will realize a gain or loss in
connection with the Transaction in an amount equal to the difference
between (i) the fair market value of the Shoney's Common Stock plus the
amount of any cash received in the exchange, and (ii) their tax basis in
the Company's Common Stock exchanged therefor, but no loss will be
recognized by the Company's shareholders in connection with the
Transaction, and any gain realized will be recognized only to the extent
of any cash received in the Transaction, (c) the tax basis of the Shoney's
Common Stock to be received by the Company's shareholders in connection
with the Reorganization will be the same as the basis in the Company's
Common Stock surrendered in exchange therefor, reduced by the amount of
any cash received in the Transaction and increased by the of any gain
recognized in the Transaction (other than any gain recognized on the
amount allocable to a fractional share of interest for which cash is
received); and (d) the holding period of the Shoney's Common Stock to be
received by the Company's shareholders in connection with the Transaction
will include the holding period of the Company's Common Stock surrendered
in exchange therefore, provided
-28-
<PAGE> 31
that the Company's Common Stock is held as a capital asset. The provision
(benefit) for income taxes on continuing operations for 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1995 1994
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current:
Federal $ (5,445) $ 3
State and local (905)
--------- ------
(6,350) 3
--------- ------
Deferred:
Federal (3)
State and local
--------- ------
$ (6,350) $ 0
========= ======
</TABLE>
-29-
<PAGE> 32
The provision (benefit) for income taxes was different from the amount
that would have been 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>
1995 1994
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Provision (benefit) at statutory rate $ (6,181) $(1,264)
Goodwill and other nondeductible items 6,442 476
Targeted jobs tax credit (134) (318)
Tip credits (351) (388)
Valuation allowance (5,679) 1,454
Other 447 40
-------- -------
Income tax provision (benefit) on continuing operations $ (6,350) $ 0
======== =======
</TABLE>
The tax effects of principal temporary differences in 1995 are shown in
the following table:
<TABLE>
<CAPTION>
ASSETS LIABILITIES TOTAL
------- ----------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Additional inventory costs for tax $ 275 $ 0 $ 275
Net operating loss and contributions 663 663
Reserves and accrued expenses 5,737 5,737
Unamortized pre-opening expenses 16 16
Other 682 (282) 400
Valuation allowance (1,363) (1,363)
------- -------- -------
Current 6,010 (282) 5,728
------- -------- -------
Unamortized intangible assets (1,230) (1,230)
Excess tax over book depreciation and 14,550) (14,550)
Deferred compensation 561 561
Reserves and accrued expenses 4,973 4,973
AMT, net operating loss and targeted job
credit carryforward 11,799 11,799
Other 433 (4,239) (3,806)
Valuation allowance (3,284) (3,283)
------- -------- -------
Total noncurrent 14,482 (20,019) (5,537)
------- -------- -------
Total $20,492 $(20,301) $ 191
======= ======== =======
</TABLE>
Other current assets included an income tax refund receivable of $600,000 in
1995.
The valuation allowance at December 31, 1995 of $4,647,000 resulted from an
increase in net operating loss carryforwards in excess of deferred liabilities.
-30-
<PAGE> 33
The Company had tax carryforwards at December 31, 1995 expiring as follows:
<TABLE>
<CAPTION>
NET TARGETED
OPERATING JOBS TAX TIP CREDIT
EXPIRATION CONTRIBUTIONS LOSS CREDIT
<S> <C> <C> <C> <C>
1996
1997 $ 415
1998 703
2003 779 $ 330
2004 403
2005 304
2006 501
2007 $ 2,818 714
2008 12,131 159
2009 363 489 $ 589
2010 206
-------- --------- ------- ------
$ 1,894 $ 15,312 $ 3,106 $1,130
======== ========= ======= ======
</TABLE>
The use of these carryforwards was limited to future taxable income. Alternative
minimum tax credits totaled $2,394,000 and could have been carried forward
indefinitely.
The provision (benefit) for income taxes during 1995 consisted of the following:
<TABLE>
<CAPTION>
STATE AND
FEDERAL LOCAL TOTAL
<S> <C> <C> <C>
Continuing operations $(5,445) $ (905) $ (6,350)
Discontinued Operations:
Gain on disposal 5,445 905 6,350
------- -------- --------
Net benefit $ - $ - $ -
======= ======== ========
</TABLE>
-31-
<PAGE> 34
NOTE 10 - LITIGATION
Porpoise Asset Management and Lawrence Capital Management, Inc. v. J.
Gary Sharp, et al.; Brock Weiner. TPI Enterprises, Inc., et al. and
Crandon Capital Partners, et al. v. TPI Enterprises, Inc., et al.
During 1995, three shareholder lawsuits were filed against the Company and
its Board of Directors. The Plaintiffs alleged, among other things, that
the Company's shareholders would receive inadequate consideration in the
proposed Transaction, that the Transaction was the result of unfair
dealing and economic coercion and that the Directors breached their
fiduciary duties to the Company's shareholders to maximize shareholder
value. The plaintiffs sought class action status and to enjoin the
proposed transaction and recover damages. The Company signed a letter of
understanding dated March 15, 1996 for settlement of these three lawsuits,
which was subject to several conditions, including Court approval of the
settlement and the closing of the Transaction. Pursuant to the letter of
understanding, as consideration for the consolidation and settlement of
the three above lawsuits, TPI agreed to pay the legal fees and expenses of
counsel to the plaintiffs in an amount not to exceed $250,000. On October
29, 1996, the Superior Court of New Jersey entered an Order and Final
Judgment consolidating the three lawsuits, certifying the class and
approving the settlement. On December 17, 1996, the $250,000 amount of the
settlement was paid to the counsel to the plaintiffs.
TPI Restaurants, Inc. v. Marlin Services, Inc., Marlin Electric, Inc.,
d/b/a Marlin Services and the Aetna Casualty and Surety Company and
Marlin Electric, Inc. v. TPI Restaurants, Inc. and Related Matters.
On March 7, 1996, the Company filed a civil action in the Circuit Court of
Palm Beach County; captioned TPI Restaurants, Inc. v. Marlin Services,
Inc., Marlin Electric, Inc., d/b/a Marlin Services, Inc. ("Marlin") and
The Aetna Casualty and Surety Company. The Company contended, among other
things, that Marlin breached terms of a maintenance service agreement that
Restaurants had entered into with Marlin by failing to perform timely
maintenance as required by the agreement, overcharging for parts and
materials, improperly billing for labor and improperly charging for
overhead. On March 7, 1996, Marlin filed a separate action in the U.S.
District Court of Virginia against Restaurants alleging among other things
that Restaurants breached its contract with Marlin by failing to pay
amounts owed under the contract. Marlin claimed damages in excess of $2.2
million through March 1996.
On June 27, 1996, the Company entered into a settlement with Marlin. The
settlement provides for the payment to Marlin of an aggregate of
$1,150,000 in cash in settlement of the civil action brought by Marlin
against Restaurants. Under the terms of the settlement agreement, Marlin
shall be obligated to use settlement proceeds to fulfill its obligations
with all subcontractors hired by Marlin to perform work under Marlin's
maintenance service agreement with Restaurants, and Marlin shall be
entitled to the excess, if any, after all of the subcontractors have been
paid. No payment shall be made to any subcontractor unless the
subcontractor fully releases Restaurants from any liability and releases
all liens, if any, filed against Restaurants. As part of the settlement,
mutual releases have been exchanged among the parties and the two civil
actions will be dismissed. Based on the terms of the settlement, the
Company currently estimates that it will spend an aggregate of $1,500,000
to settle this action, including related legal costs. As of December 29,
1996, approximately $963,000 of the $1,150,000 had been paid related to
this settlement.
On March 12, 1997, the Company reached an agreement with Marlin whereby
the Company agreed to pay Marlin $95,000 of the remaining settlement funds
on or before March 18, 1997. The remainder of the settlement funds in the
amount of approximately $48,000 will be held by the Company in an escrow
account
-32-
<PAGE> 35
until such time as the Company is satisfied that Marlin has complied with
all remaining obligations under the original settlement agreement. Marlin
will not be able to apply for these funds until February 1, 1998. The
Company also has the right to pay any subcontractors directly from this
fund.
OTHER PROCEEDINGS
To the Company's knowledge, the Company and its subsidiaries are not
party to any other outstanding lawsuits.
NOTE 11 - SHAREHOLDERS' EQUITY
Stock Option Plans - Officers and other key employees had been granted
options to purchase common shares under nonqualified stock option plans
adopted in 1982, 1983, 1984 and 1992. In addition 165,000 shares of the
Company's common stock were reserved under the 1992 stock option plan for
non-employee directors. Options were generally granted at the market
price on the date of grant and generally became exercisable in 20%
increments over a five-year period and expired ten years from the date of
grant. At September 8, 1996 an aggregate of 1,873,707 common shares
were reserved under these plans. Of the $4,735,000 in Retained Cash (Note
2), a maximum of approximately $400,000 will be required to be retained
by the Company for the benefit of holders of the stock options of the
Company which were assumed by Shoney's in the Transaction ("Shoney's
Options"), until such time as such options are exercised, are terminated,
or expire. Under the Company's Plan of Complete Liquidation, if Shoney's
Options are not exercised prior to the final liquidating distribution
record date, such cash, after providing for the expenses of the
distribution thereof, will be distributed to the Company's shareholders.
The Company's stock option transactions are summarized as follows:
Number of Exercise Price
Options per Option
--------- --------------
Outstanding at December 26, 1993 2,144,260 $5.00 - $10.88
Granted 117,500 $9.18 - $ 9.75
Exercised (6,650) $6.25 - $ 7.00
Cancelled or lapsed (17,750) $6.25 - $ 8.38
---------
Outstanding at December 25, 1994 2,237,360 $5.00 - $10.88
Granted 52,500 $3.88 - $ 5.69
Cancelled or lapsed (215,550) $5.75 - $ 8.38
---------
Outstanding at December 31, 1995 2,074,310 $3.88 - $10.88
Granted 7,497 $2.50 - $ 2.50
Cancelled or lapsed (208,100) $6.25 - $ 8.38
---------
Outstanding at September 8, 1996 1,873,707 $2.50 - $10.88
=========
Employee Stock Purchase Plan - On December 16, 1994, the Company and
certain subsidiaries adopted the 1995 Employee Stock Purchase Plan, (the
"1995 Employee Plan") pursuant to which 1,000,000 shares of the Company's
common stock could have been purchased at 85% of the fair market value of
the Company's common stock on the first or last day of each of thirteen
purchase periods. The 1995 Employee Plan was open to all active adult
employees of the Company and Restaurants who had been employed for at
least six months, customarily worked more than 20 hours per week and had
more than five months per year, and were not directors or 5% shareholders
of the Company or any subsidiary, as defined in the Employee Plan.
Employees could have designated up to 10% of their compensation for the
purchase of shares, which was consistent with the prior period. During
1996, 1995 and 1994, 36,879, 82,239 and 90,932 shares, respectively, were
issued under the Employee Plan at prices ranging from $2.13 to $3.13 per
share in 1996, $2.92 to $4.57 per share in 1995 and $3.77 to $8.29 per
share in 1994. Aggregate purchases were approximately $91,000, $305,000
and $532,000 in 1996, 1995 and 1994, respectively. On August 12, 1996, the
1995 Employee Plan was terminated.
NOTE 12 - EMPLOYMENT AGREEMENTS, DEFERRED COMPENSATION AND RETIREMENT PLAN
EMPLOYMENT AGREEMENTS - The employment agreements of J. Gary Sharp, who
until the consummation of the Transaction was the President, Chief
Executive Officer and a director of the Company, and Frederick W. Burford,
who until the consummation of the Transaction was the Executive Vice
President, Chief Financial Officer, Secretary and a director of the
Company, were with both the Company and Restaurants, and the severance
provisions therein were triggered by the Transaction. Mr. Sharp and Mr.
Burford received severance payments, which were paid out of the cash
allocated the Company for Specified Wind-up Expenses. The amounts paid to
Messrs. Sharp and Burford were approximately $802,000 and $345,000,
respectively. The terms of the employment agreements of Messrs. Sharp and
Burford provided that each will be deemed to be an "employee" of
Restaurants for a period of one year following the termination of his
employment agreement solely for purposes of retaining the exerciseability
of his stock options assumed by Shoney's during that period.
Pursuant to an agreement dated as of September 9, 1996, Mr. Burford agreed
to serve as the President, Chief Financial Officer and Secretary of the
Company from and after the consummation of the Transaction until the later
of (i) six months following publication of the notice of dissolution of
the Company or (ii) the second distribution to the shareholders of the
Company (the "Resignation Date"). This date is expected to occur in early
September, 1996. Mr. Burford shall be primarily responsible for performing
administrative functions in connection with the dissolution and
liquidation of the Company. For his services through the Resignation Date,
Mr. Burford will receive a payment of $170,000, less applicable
withholding, which amount includes reimbursement of Mr. Burford's
reasonable out-of-pocket expenses. Expenses will be reimbursed as
incurred,
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<PAGE> 36
subject to prior approval of the Company's Board of Directors, and the
remaining portion of the $170,000, less applicable withholding will be
payable in a lump sum on the Resignation Date.
At December 31, 1995, the Company had various employment agreements with a
former executive which stipulated that the Company would pay the executive
upon a favorable outcome of the courts, 1% of the gross proceeds relating
to a specified lawsuit. The Company recorded a provision of $300,000 for
the settlement of this obligation. The payment of this amount in 1996
released the Company from further obligations under the executive's
employment contracts except for his 1994 Agreement which stipulated that
he was to receive three (3) years' salary at his present rate in the event
of a change in control of the Company. The aggregate maximum commitment
for future salaries under this agreement was $675,000. During 1996, the
executive resigned and the Company entered into a settlement agreement
with him for $250,000. The Company paid this amount during the first
quarter of 1996. In addition, the 1994 results of operations included a
provision of $1,600,000 resulting from the retirement of the Company's
then Chairman of the Board, effective January 31, 1995. The provision
included all amounts due under his current employment contracts. The
agreement also stipulated that the Company will pay the former Chairman of
the Board, upon a favorable outcome of the courts, 5% of the gross
proceeds relating to a specified lawsuit. The Company provided $1,500,000
in 1995 to pay this obligation. The amount was paid during the first
quarter of 1996.
The Company was also committed to certain individuals to pay them one
year's salary in the event that their employment was terminated without
cause within two years of their move to Florida in connection with the
Company's relocation of its corporate offices during 1995. The Company
paid approximately $600,000 to employees during the fourth quarter of 1996
as a result of the Transaction.
DEFERRED COMPENSATION AGREEMENTS - Deferred compensation of $1,596,000
included in other liabilities at December 31, 1995 related to agreements
with two former officers of Restaurants. Due to interest rate fluctuations
occurring at the measurement date, the Company recorded a $179,000 charge
to operations and a $562,000 increase in operations during the fourth
quarter of 1995 and 1994, respectively.
401(K) RETIREMENT PLAN - The Company established the TPI Enterprises,
Inc. 401(k) Retirement Savings Plan (the "Plan") effective January 1,
1995. The Plan was a deferred contribution plan which is administered by
NationsBank and participates in the NationsBank Defined contribution
Master Plan. Employees become eligible to participate after 1,000 hours of
service. The Company was required to match employee contributions at 25%,
up to a maximum of 6% of a participant's eligible salary. The Company's
contribution to the Plan was in the form of shares of the Company's common
stock. The Company made contributions to the Plan aggregating
approximately $94,000 and $181,000 during 1996 and 1995, respectively. In
connection with the Transaction, the Board of Directors approved the
termination of this Plan and the Company is in the process of filing the
proper notifications with the Department of Labor. All contributions to
the Plan ceased in September 1996.
NOTE 13 - DISCONTINUED OPERATIONS
Discontinued operations for 1995 included a gain of $10,113,000, net of
income taxes of $6,350,000 relating to the settlement of litigation.
-34-
<PAGE> 37
NOTE 14- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
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. During the fourth quarter of 1995, the
Company recorded a $17,000,000 allowance for asset valuation (Note 2), a
$10,113,000 gain, net of income taxes, from a litigation settlement
(Note 13), $5,000,000 reduction of insurance reserves and a $2,880,000
reduction of restructure reserves.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Quarter ended - 1996
(1) (1)
Net sales $84,934 $66,356 $43,929 NA
Gross profit 6,440 5,726 3,345 NA
Net income (loss) 10,615 (10,189) 3,982 NA
Primary earning per share 0.51 (0.49) NA NA
Quarter ended - 1995
Net sales $83,744 $67,241 $65,492 $67,101
Gross profit 8,362 7,040 3,884 7,572
Net income (loss from
continuing operations (1,505) (759) (947) (8,098)
Net income (loss) (1,505) (759) (947) 2,015
Primary earnings per share:
Continuing operations (0.07) (0.04) (0.05) (.39)
Net income (loss) (0.07) (0.04) (0.05) .10
</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 all 1995 and 1994 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.
(1) Due to the Transaction with Shoney's during the third quarter of
1996, certain amounts are not applicable.
-35-
<PAGE> 38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with, accountants during
1996.
PART III
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information regarding the Company's executive
officers as of March 20, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD WITH THE COMPANY
<S> <C> <C>
Frederick W. Burford 46 President, Chief Financial Officer and Secretary
Paul J. Siu 62 Assistant Secretary
</TABLE>
Frederick W. Burford joined 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 of the Promus Companies. Mr. Burford was elected Vice
President, Chief Financial Officer, Treasurer and a Director of Restaurants in
November 1991. He was named Executive Vice President, Chief Financial Officer,
and a Director of the Company in March 1993. Effective September 9, 1996, Mr.
Burford was elected as the Company's President, Chief Financial Officer and
Secretary.
Paul J. Siu joined the Board of Directors of the Company in September 1986 and
served in that capacity until September 9, 1996 at which time he was also
elected Assistant Secretary.
-36-
<PAGE> 39
ITEM 11. EXECUTIVE COMPENSATION
The Summary Compensation Table set forth below shows the compensation for the
past three years for Frederick W. Burford, the Company's President, Chief
Financial Officer and Secretary, J. Gary Sharp, the Company's President and
Chief Executive Officer until September 9, 1996, and Haney A. Long, Jr.
Restaurants' Vice President of Procurement and Distribution (the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ ---------------------------
OTHER
NAME AND PRINCIPAL ANNUAL AWARDS OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION ($) OPTIONS(#) COMPENSATION ($)
------------------------------ ---- --------- -------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frederick W. Burford(1) 1996 $169,021 $ 355,901 (5)
President, Chief Financial 1995 234,084 $ 30,000 30,000 (4) 24,171 (6)
Officer and Secretary 1994 197,953 30,000 $50,774 55,206 (7)
J. Gary Sharp (2) 1996 242,721 814,437 (8)
President and Chief Executive 1995 319,065
Officer Prior to September 9, 1994 303,594 100,000 (4)
1996
Haney A. Long, Jr. (3) 1996 162,924
Vice President of Procurement 1995 253,211 124,284 6,405 (9)
and Distribution Prior to 1994 217,440 142,977 84,684 105,388 (10)
September 9, 1996
-------------------------
</TABLE>
(1) Mr. Burford was named as President, Chief Financial Officer
and Secretary effective September 9, 1996 in connection with
the Transaction
(2) Mr. Sharp resigned from the Company on September 9, 1996 in
connection with the Transaction.
(3) Mr. Long took a position with Shoney's in September 1996.
(4) Options with respect to the 100,000 and 30,000 of common stock for
Mr. Sharp and Mr. Burford, respectively, became exercisable in 10%
increments tied to increases in the trading prices of the Company's
Common Stock. Such options were assumed by Shoney's in the
transaction.
(5) Represents amounts received by Mr. Burford as a severance payment in
connection with the Transaction.
See "Employment Contracts, Termination of Employment and Change
in Control Arrangements."
(6) Represents $24,171 in moving expenses paid to Mr. Burford in 1995.
(7) Represents $55,206 in moving expenses paid to Mr. Burford in 1994.
(8) Represents amounts received by Mr. Sharp as a severance payment in
connection with the Transaction.
See "Employment Contracts, Termination of Employment and Change
in Control Arrangements."
(9) Represents $6,406 in moving expenses paid to Mr. Long in 1995.
(10) Represents $105,388 in moving expenses to Mr. Long in 1994.
-37-
<PAGE> 40
No Named Executive Officer was granted or exercised stock options in 1996. In
connection with the Transaction, all of the Company's stock options were assumed
by Shoney's. Therefore, no Named Executive Officer holds stock options to
purchase shares of the Company's Common Stock.
The additional information required per Item 10 including Board Compensation
Committee Report on Executive Compensation and a Performance Graph are not
considered necessary due to the Company's liquidation status.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS.
The employment agreement of J. Gary Sharp, who until the comsummation of the
Transaction was the President, Chief Executive Officer and a director of the
Company, and Frederick W. Burford, who until the consummation of the Transaction
was the Executive Vice President, Chief Financial Officer and a director of the
Company, were with both the Company and Restaurants, and the severance
provisions therein were triggered by the Transaction. Mr. Sharp and Mr. Burford
received severance payments, which were paid out of the cash allocated to the
Company for Specified Wind-up Expenses. The amounts paid to Messrs. Sharp and
Burford were approximately $815,000 and $356,000, respectively. The terms of the
employment agreements of Messrs Sharp and Burford provided that each will be
deemed to be an "employee" of Restaurants for a period of one year following the
termination of his employment agreement solely for purposes of retaining the
exerciseability of his stock options assumed by Shoney's during that period.
Pursuant to an agreement dated as of September 9, 1996, Mr. Burford agreed to
serve as the President, Chief Financial Officer and Secretary of the Company
from and after the consummation of the Transaction until the later to occur of
(i) six months following publication of the notice of dissolution of the Company
and (ii) the second distribution to the shareholders of the Company (the
"Resignation Date"). This date is expected to occur in early September, 1996.
Mr. Burford shall be primarily responsible for performing administrative
functions in connection with the dissolution and liquidation of the Company.
For his services through the Resignation Date, Mr. Burford will receive a
payment of $170,000, less applicable withholding, which amount includes
reimbursement of Mr. Burford's reasonable out-of-pocket expenses. Expenses will
be reimbursed as incurred, subject to prior approval of the Company's Board,
and the remaining portion of the $170,000, less applicable withholding will be
payable in a lump sum on the Resignation Date.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of March 24, 1997, the number and percentage
of outstanding shares of Common Stock beneficially owned by beneficial holders
of 5% or more of the Company's Common Stock, directors, each of the Named
Executive Officers, and directors and executive officers as a group. The number
of shares owned are those "beneficially owned," as determined under Rule 13d-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and the information set forth herein is not
necessarily indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which a person, directly
or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has sole or shared voting power or investment power, and also any
shares that the person has the right to acquire within 60 days of March 24, 1997
through the exercise of any option, warrant or right, through conversion of any
security, or pursuant to the automatic termination or power of revocation of a
trust, discretionary account or similar arrangement. In connection with the
Transaction, all of the Company's stock options and 8 1/4% debentures were
assumed
-38-
<PAGE> 41
by Shoney's and the ownership of such securities are not deemed to be beneficial
ownership of shares of the Company's Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
AND APPROXIMATE
PERCENTAGE OF CLASS
NAME AS OF MARCH 24, 1997
---------------------
<S> <C> <C> <C>
Frederick W. Burford 2,827 *
J. Gary Sharp 45,955 (1) *
Paul J. Siu 1,800 *
Osvaldo Cisneros 2,490,000 (2) 12.0 %
The Airlie Group L.P. 1,589,703 (3) 7.7 %
Haney A. Long, Jr. 1,648 (4) *
All executive officers and directors as a group (two persons) 4,627 *
</TABLE>
* Less than one percent (1%).
(1) Mr. Sharp's address is 113 Ridge Drive, Linville, North
Carolina 28646. Mr. Sharp resigned from the Company in connection
with the Transaction.
(2) Mr. Cisneros' address is Aptd. 70519, Los Ruices, Caracas, Venezuela.
Includes 1,500,000 shares of Common Stock owned by Balanchine
Corporation over which Mr. Cisneros has the right to provide
instructions as to voting, disposition and receipt of dividends and
thus may be deemed to have shared voting and shared dispositive power
over such shares. Also includes 990,000 shares of Common Shares
beneficially owned by Inversiones Macuto S.A. of which Mr. Cisneros is
the sole shareholder, and thus he may be deemed to beneficially own
any shares of Common Stock beneficially owned by Inversiones Macuto
S.A. Mr. Cisneros may be deemed to have sole voting power over and
sole dispositive power over all such shares of Common Stock.
(3) The address of The Airlie Group L.P. is 220 Main Street, Fort Worth,
Texas 76102-3131.
(4) Mr. Long's address is c/o Shoney's, Inc., 1727 Elm Hill Pike,
Nashville, Tennessee 37210. Mr. Long took a position with Shoney's in
September 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(N\A)
-39-
<PAGE> 42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(A) FINANCIAL STATEMENTS/SCHEDULES PAGE
<S> <C>
1. The following financial statements of the Company have been filed under
Item 8 hereto:
Independent Auditor's Report 11
Consolidated Statement of Net Assets in Liquidation as of December 29,
1996 12
Consolidated Balance Sheet as of December 31, 1995 13
Consolidated Statement of Income (Loss) and Changes in Net Assets in
Liquidation for the Fiscal Year Ended December 29, 1996 and Consolidated
Statements of Operations for the Two Fiscal Years in the Period Ended
December 31, 1995 15
Consolidated Statements of Shareholders' Equity for the Two
Fiscal Years in the Period Ended December 31, 1995 17
Consolidated Statements of Cash Flows for each of the Three Fiscal Years
in the Period Ended December 29, 1996 18
Notes to Consolidated Financial Statements 20
2. The following financial statement schedule for the three years ended
December 29, 1996 is filed herewith at the page indicated:
Schedule II - Reserves S-1
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.
(B) 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.
(C) 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.
(D) EXHIBITS
All exhibits required by Item 601 of Regulation S-K are listed on the
accompanying "Exhibit Index" described in (b) above.
</TABLE>
-40-
<PAGE> 43
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.
<TABLE>
<S> <C> <C>
TPI ENTERPRISES, INC.
--------------------------
Registrant
Date: March 28, 1997
By: /s/ Frederick W. Burford
----------------------------------------
Frederick W. Burford
President, Chief Financial Officer and
Secretary
</TABLE>
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/ Frederick W. Burford President, Chief Financial Officer, Secretary
------------------------- and Director (Principal Financial and Accounting March 28, 1997
Frederick W. Burford Officer)
/s/ Paul James Siu Assistant Secretary and Director March 28, 1997
------------------
Paul James Siu
</TABLE>
-41-
<PAGE> 44
EXHIBIT
NO. DESCRIPTION
3.1(P) Restated Certificate of Incorporation and Certificate of Amendment
dated March 25, 1987 (2); Certificate of Amendment dated November 10,
1988 (2)
3.2(P) By-laws as amended through December 18, 1987 (5), Amendment thereto
dated November 9, 1988 (7), Amendment thereto dated May 15, 1989 (8),
Amendment thereto dated April 27, 1990 (6), Amendment thereto dated
March 9, 1992 (5), and Amendment thereto dated March 19, 1993 (4)
3.3 Certificate of Dissolution filed December 31, 1996
10.1(P) Plan of Tax-Free Reorganization under Section 368(a)(1)(C) of the
Internal Revenue Code and Agreement dated as of March 15, 1996 among
Shoney's, Inc., TPI Restaurants Acquisition Corporation and Registrant
(11) and Amendment No. 1 thereto dated June 14, 1996 (12)
10.2 Plan of Complete Liquidation
10.3(P) TPI Enterprises, Inc. 1995 Employee Stock Purchase Plan (2)
10.4(P) Amended and Restated TPI Enterprises, Inc. Employee Stock Purchase Plan
Trust Agreement (2)
10.5(P) NationsBank Defined Contribution Master Plan and Trust Agreement (2)
10.6(P) Termination Agreement dated November 19, 1992 between Registrant and
Robert A. Kennedy (2), Amendment to Termination Agreement dated
December 31, 1993 (3); Agreement dated February 20, 1995 (2); and
letter dated March 19, 1996 (1)
10.7(P) Termination Agreement, Receipt and Release dated as of January 31, 1995
between Registrant, Maxcell Telecom Plus, Inc., and Stephen R. Cohen
(10)
10.8(P) Employment Agreement dated as of January 13, 1994, between Registrant
and J. Gary Sharp (3)*
10.9(P) Employment Agreement dated as of January 1, 1995, between Registrant,
Restaurants and Frederick W. Burford (2)*
10.10(P) Employment Agreement dated as of January 1, 1993 between Restaurants
and Haney A. Long, Jr. (2)*
10.11(P) 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 (4)
10.12(P) Second Amended and Restated Credit Agreement dated January 31, 1995 by
and among TPI Restaurants, Inc., the banks party thereto, The Bank of
New York as Administrative Agent and NationsBank of North Carolina,
N.A., as Collateral Agent (the "Collateral Agent")(10); and Amendment
No. 1 to the Second Amended and Restated Agreement dated as of February
29, 1996(1)
<PAGE> 45
EXHIBIT
NO. DESCRIPTION
21 Subsidiaries of Registrant
27 Financial Data Schedule (for SEC use only)
- -------
(1) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995 as amended by Form 10-K/A No. 1 and
incorporated herein by reference.
(2) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 25, 1994 as amended by Form 10-K/A No. 1 and
incorporated herein by reference.
(3) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
year ended December 26, 1993, 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, 1992, 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, 1991, and incorporated herein by reference.
(6) 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.
(7) Filed as an exhibit to Registrant's Current Report on Form 8-K dated
March 4, 1991, and incorporated herein by reference.
(8) 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.
(9) Filed as an exhibit to Restaurant's Registration Restatement on Form
S-1 (No. 2-72119), dated May 5, 1981, and incorporated herein by
reference.
(10) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
February 7, 1995, and incorporated herein be reference.
(11) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
March 19, 1996, and incorporated herein by reference.
(12) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
June 14, 1996, and incorporated herein by reference.
* Management agreement.
<PAGE> 46
SCHEDULE II
TPI RESTAURANTS, INC. AND SUBSIDIARIES
RESERVES
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT ADDITIONS CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING OF CHARGED TO OTHER FROM END OF
PERIOD OPERATIONS ACCOUNTS RESERVES PERIOD
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996 $ 125 $ - $ - $ 125 (2) $ -
Year ended December 31, 1995 $ 59 $ 66 $ - $ - $ 125
Year ended December 25, 1994 - $ 59 $ - $ - $ 59
ALLOWANCE FOR
RESTRUCTURING RESERVES:
Year ended December 31, 1996 $ 8,752 $ - $ - $ 8,752 (2) $ -
Year ended December 31, 1995 $12,430 $ - $ - $ 3,678 (1) $ 8,752
Year ended December 25, 1994 $18,695 $ - $ - $ 6,265 (1) $12,430
ALLOWANCE FOR ASSET
VALUATION:
Year ended December 31, 1996 $17,000 $ - $ - $17,000 (2)
Year ended December 31, 1995 $ - $ - $17,000 $ - $17,000
Year ended Decenber 25, 1994 $ - $ - $ - $ - $ -
</TABLE>
(1) Represents deduction for the write-off of assets and changes in assumptions
in connection with the Company's restructure plan. See Note 3.
(2) Relates to activity in reserve and Transaction with Shoney's.
<PAGE> 1
CERTIFICATE OF DISSOLUTION
OF
TPI ENTERPRISES, INC.
Pursuant to the provisions of Section 14A:12-4(6) the New Jersey
Business Corporation Act ("NJBCA"), the undersigned corporation certifies the
following:
1. The name of the corporation is TPI ENTERPRISES, INC.
2. The name of the registered agent of the corporation is United
Corporate Services, Inc.
3. The location of the registered office of the corporation is
666 Park Street, Montclair, NJ 07042.
4. The names of the directors and officers of the corporation are
as follows:
Name Offices
Frederick W. Burford President, Chief Financial Officer,
Secretary and Director
Paul J. Siu Assistant Secretary and Director
5. The text of the board resolution authorizing the dissolution
approved by the Board of Directors of the corporation on
August 21, 1996 is as follows:
RESOLVED, that the Plan of Complete Liquidation (the
"Plan") authorizing the dissolution of the Corporation after
the consummation of the transaction with Shoney's contemplated
by the Reorganization Agreement, and all actions taken and
done by the proper officers of the Corporation in furtherance
of the resolutions previously adopted by the Board of
Directors of the Corporation on February 20, 1996 with respect
to the Plan, are hereby approved, adopted and ratified,
subject to the consummation of the transactions contemplated
by the Reorganization Agreement (the "Closing").
6. The dissolution was approved by the shareholders of the
corporation on August 21, 1996 at a Special Meeting of the
Shareholders of TPI Enterprises, Inc. which was held at Palm
Beach Gardens Marriott, 4000 RCA Boulevard, Palm Beach
Gardens, Florida.
<PAGE> 2
7. The number of outstanding shares of the corporation entitled
to vote as a class on such dissolution was 20,636,198 shares
of common stock, $.01 par value (the "Common Stock").
8. The number of shares of Common Stock represented at the
meeting was 15,618,451. The number of shares of Common Stock
voted for the dissolution was 15,439,794. The number of shares
of Common Stock voted against the dissolution was 147,379. The
number of shares of Common Stock that abstained from voting
was 31,278.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Dissolution as of this 24th day of December, 1996.
TPI ENTERPRISES, INC.
By: /s/ Frederick W. Burford
------------------------------------
Frederick W. Burford
President, Chief Financial Officer
and Secretary
<PAGE> 1
TPI ENTERPRISES, INC.
PLAN OF COMPLETE LIQUIDATION
This Plan of Complete Liquidation (the "Plan") provides for the
voluntary dissolution and complete liquidation of TPI Enterprises, Inc., a New
Jersey corporation (the "Corporation"), in accordance with Chapter 12 of
Title 14A of the New Jersey Business Corporation Act (the "Act"). The
voluntary dissolution and complete liquidation shall be accomplished in
accordance with the provisions of this Plan, which is an integral aspect of,
and called for by, the Plan of Tax-Free Reorganization under Section
368(a)(1)(C) of the Internal Revenue Code and Agreement (the "Plan of
Reorganization"). Pursuant to the Plan of Reorganization, Shoney's, Inc., a
Tennessee corporation ("Shoney's"), will acquire substantially all of the
properties and assets of the Corporation.
1. Approval of Board of Directors. The board of directors of the
Corporation has determined that subject to the closing of the Plan of
Reorganization with Shoney's (the "Closing"), it is deemed desirable and for
the benefit of the Corporation and the stockholders thereof that the
Corporation be voluntarily dissolved and completely liquidated in accordance
with the provisions of this Plan.
2. Adoption of Plan by Stockholders. This Plan shall be submitted to
the stockholders of the Corporation for approval and adoption at a special
meeting of the shareholders of the Corporation called by the board of directors
for that purpose (the "Meeting"). The Plan shall be deemed adopted and shall
become effective upon its approval at the Meeting by the affirmative vote of a
majority of the votes cast by the holders of at least a majority of the
outstanding shares of common stock, par value $.01 per share (the "Common
Stock"), of the Corporation entitled to vote at the Meeting as required by
Section 14A:12-4 of the Act, subject to the Closing.
3. Issuance of Certificate of Dissolution by Secretary of State. If
the Plan is adopted and approved at the Meeting as provided in Paragraph 2
above, and the Closing thereafter occurs proper officers of the Corporation
shall file a Certificate of Dissolution as soon as practicable after, the
Meeting in the office of the Secretary of State of State of New Jersey, in
accordance with the provisions of Section 14A:12-4 of the Act. Upon the filing
of the Certificate of Dissolution, the Corporation shall be deemed dissolved
(the date of issuance of such certificate being hereafter referred to as the
"Dissolution Date").
4. Continuation of Corporate Status After Dissolution Date for Certain
Purposes. On and after the Dissolution Date, the Corporation shall continue its
corporate existence but shall carry on no business except for the purpose of
winding up its affairs by (a) collecting its assets, (b) conveying for cash or
upon deferred payment, with or without security, such of its assets are not to
be distributed in kind to its shareholders, (c) paying, satisfying and
discharging its debt and other liabilities and (d) doing all other acts
required to liquidate its business and affairs.
<PAGE> 2
5. Time for Completion of Liquidation. It is the intent of this Plan
that the complete liquidation of the Corporation shall commence on the
Dissolution Date and that such liquidation, and the distribution of the net
assets of the Corporation, shall be completed as soon as practicable thereafter
and in any event within one year after the date of the approval of this Plan by
the shareholders of the Corporation except as otherwise provided by Section 10
hereof.
6. Powers and Authority of Directors after Dissolution. (a) Upon
dissolution of the Corporation, its officers, directors and shareholders of the
Corporation shall continue to function in the same manner as if the dissolution
had not occurred. Without limiting the generality of the foregoing:
(i) The directors of the Corporation shall not be deemed to be
trustees of its assets and shall be held to no greater standard
of conduct than that prescribed by Section 14A:6-14 of the Act;
(ii) Title to the Corporation's assets shall remain in the
Corporation until transferred by it in the corporate name;
(iii) The dissolution shall not change quorum or voting requirements
for the board or shareholders, nor shall it alter provisions
regarding election, appointment, resignation or removal of, or
filling vacancies among, directors or officers, or provisions
regarding amendment or repeal of by-laws or adoption of new
by-laws;
(iv) Shares may be transferred until the Complete Liquidation Date
(as defined in Paragraph 10.1);
(v) The Corporation may sue and be sued in its corporate name and
process may issue by and against the Corporation in the same
manner as if dissolution had not occurred, subject to the
provisions of New Jersey law; and
(vi) No action brought against the Corporation prior to its
dissolution shall abate by reason of such dissolution.
(b) Specifically, but without limiting the generality of the
foregoing set forth in Section 6(a) hereof, upon dissolution of the
Corporation, the directors of the Corporation shall have the following powers
and authorities:
(i) To employ, terminate the employment of, and fix the
compensation and other terms of employment of such officers,
employees, agents, attorneys, accountants and others as in the
discretion of the directors are necessary or appropriate to
effect the purpose of the Plan;
-2-
<PAGE> 3
(ii) To fix the compensation and other terms of employment of the
directors; provided, however, that the annual compensation
(excluding expenses) of the directors shall be no greater than
the annual cash compensation of the directors immediately prior
to the Dissolution Date;
(iii) To purchase, lease, or otherwise provide such offices and
other facilities as in the discretion of the directors are
necessary or appropriate to effect the purpose of the Plan;
(iv) To (1) collect its assets, (2) convey for cash or upon
deferred payments, with or without security, such of its assets
as are not to be distributed in kind to its shareholders and
(3) pay, satisfy and discharge its debts and other liabilities;
(v) To dispose of and convey the properties and assets (on
going-concern or other bases as deemed by the directors to be
in the best interests of the shareholders of the Corporation)
and, to the extent necessary to pay expenses or satisfy
liabilities, to sell shares of Shoney's Stock (as defined in
Paragraph 8.1(a)) in open market transactions, private
transactions or otherwise, at such times, in such manner, and
upon such terms and conditions as are deemed by the directors
to be in the ultimate best interests of the shareholders of the
Corporation but in a manner consistent with the Plan of
Reorganization and the requirements to maintain a tax-free
transaction;
(vi) To do all other acts required to liquidate its business and
affairs, including to take and effect all other actions deemed
by the directors to be necessary or appropriate to effect the
purpose of the Plan.
7. Exercise of Powers and Authorities of Directors. From and after the
dissolution of the Corporation:
7.1 The powers and authorities of the directors may be exercised in
the manners and in accordance with the provisions of this Plan, the Bylaws of
the Corporation and as specifically provided by the Act.
7.2 Article Sixth of the Restated Certificate of Incorporation of the
Corporation shall at all times apply to the officers and directors of the
Corporation. Without limiting the foregoing, except as otherwise specifically
provided by the Act, no director shall be personally liable in respect of any
action taken on behalf of the Corporation.
8. Initial Liquidating Distribution.
8.1 (a) As soon as practicable after the Dissolution Date and upon
determination by the directors that adequate provision has been made for
payment of all creditors of the Corporation and
-3-
<PAGE> 4
all costs and expenses of liquidation, the Corporation shall make an initial
liquidating distribution on a pro rata basis to the holders of outstanding
shares of Common Stock. Holders of employee stock options or warrants
immediately prior to the closing of the transactions contemplated by the Plan
of Reorganization (collectively, the "Derivative Securities") shall be entitled
to a distribution only in accordance with Paragraph 8.2 hereof. The initial
liquidating distribution to holders of Common Stock shall be comprised of cash
and approximately 6,600,000 shares (or such greater number of shares as the
Corporation may then hold) of common stock, $.01 par value per share (the
"Shoney's Stock"), of Shoney's or its successor in interest, or such portions
thereof as the directors shall determine should be distributed to such holders
of Common Stock after adequate provision for payment of creditors and costs and
expenses of liquidation and a reserve for such distributions to the holders of
Derivative Securities as may be required under Paragraph 8.2.
(b) A person or entity designated by the directors of the
Corporation shall act as agent for the holders of the outstanding shares of
Common Stock for this purpose and shall accept delivery in proper form for
transfer of the Shoney's Stock on their behalf and arrange for transfer into
their names of the record ownership of the Shoney's Stock on the stock transfer
books of Shoney's.
8.2 Holders of Derivative Securities who exercise their Derivative
Securities after the closing of the transaction contemplated by the Plan of
Reorganization but before the Final Liquidating Distribution Record Date (as
defined below) and thereby acquire shares of Shoney's Stock in accordance with
the terms of the Derivative Securities existing immediately prior to the Closing
as modified by the Plan of Reorganization shall be entitled to receive, as soon
as practicable after the Corporation or the Liquidating Agent (as defined in
Paragraph 10.1) receives notice of such exercise their pro rata portion of the
cash portion of the initial liquidating distribution and of the cash portion of
any subsequent liquidating distribution to the extent of such exercise. Holders
of Derivative Securities shall not be entitled to participate in any liquidating
distribution of shares of Shoney's Stock or other non-cash consideration
received from Shoney's pursuant to the Plan of Reorganization or any proceeds
thereof. To become entitled to the liquidating distributions of cash provided
herein, holders of Derivative Securities must exercise such Derivative
Securities into shares of Shoney's Stock prior to the record date for the final
liquidating distribution pursuant to Paragraph 10.1, which in no event shall be
no earlier than December 31, 1998 (the "Final Liquidating Distribution Record
Date"); provided, however, that the Final Liquidating Distribution Record Date
shall occur no later than the third anniversary after the Complete Liquidation
Date. Until the Final Liquidating Distribution Record Date, the Corporation or
the Liquidating Agent shall retain in reserve the holder's pro rata portion of
the cash portion of the initial liquidating distribution and of any subsequent
liquidating distribution. Upon expiration or cancellation of any of a holder's
Derivative Securities, or if such Derivative Securities are not exercised on or
prior to the Final Liquidating Distribution Record Date, the cash and other
property reserved for such holder shall be available for distribution to the
holders of Common Stock, provided that the Corporation or the Liquidating Agent
shall be entitled to delay such distributions so that they may be reasonably
aggregated. Cash amounts to which holders of Derivative Securities may become
entitled from the Corporation hereunder are referred to herein as the
"Derivative Securities Entitlements."
-4-
<PAGE> 5
8.3 No fractional shares of scrip or certificates for fractional
shares will be issued in connection with any liquidating distribution of
Shoney's Stock to the holders of Common Stock. Fractional share interests with
respect to Shoney's Stock shall be settled by aggregating all fractions,
selling the number of full shares of Shoney's Stock representing such
aggregated fractions in the open market, and, after payment out of the proceeds
of such sale or sales of all expenses (including brokerage commissions)
incidental to such sale or sales, distributing the net proceeds from such sale
or sales to the respective holders of Common Stock entitled thereto in
accordance with their fractional entitlements.
8.4 In connection with all liquidating distributions prior to the
Complete Liquidation Date, the stock transfer books of the Corporation need not
be closed but, in lieu of such closing, the directors may fix a record and a
payment date for the purpose of determining the identity of holders of Common
Stock entitled to receive such liquidating distribution or distributions and
all rights of persons with respect to such liquidating distribution or
distributions shall be determined in accordance with the dates so fixed by the
directors.
9. Reserve for Liabilities and Subsequent Liquidating
Distributions. The directors shall be entitled, from time to time, to
determine and pay, or make adequate provision for the payment of, all
liabilities, known, contingent or potential, of the Corporation (including
costs and expenses incurred and anticipated to be incurred in connection with
the complete liquidation of the Corporation) and shall be entitled at all times
to retain cash and other assets determined by the directors to be adequate to
provide for the payment of all such liabilities. Subject to the foregoing, the
directors from time to time shall make distributions in such amounts or in such
property, pro rata to holders of Common Stock of record on such date or dates,
as is determined by the directors and, in accordance with Paragraph 8.2, in
satisfaction of Derivative Securities Entitlements. All such determinations
shall be made in the exercise of the absolute discretion of the directors, and
the directors shall not be required to make, or be in any manner liable for not
making, any liquidating distribution to holders of Common Stock or any payment
of Derivative Securities Entitlements except in accordance with the express
requirements of the Plan.
10. Liquidating Agent.
10.1 (a) On or before the date that is one year after the
Meeting (the "Complete Liquidation Date"), the directors of the Corporation
shall appoint one or more of the directors (unless shareholder or court
approval of other persons is obtained) to serve as the liquidating agent for
the holders of the Common Stock and Derivative Securities (herein individually
and collectively referred to as the "Liquidating Agent") pursuant to an
agreement (the "Agency Agreement") entered into between the Corporation (as
authorized by the directors) and such Liquidating Agent. On the Complete
Liquidation Date, all then remaining monies, properties and assets of the
Corporation and all interests therein, subject to any remaining claims against
and liabilities of the Corporation, shall be transferred to an account
designated by the Liquidating Agent pursuant to the Agency Agreement. The
transfer books and other records of the Corporation shall be closed on the
Complete Liquidation Date.
-5-
<PAGE> 6
(b) Promptly following the Complete Liquidation Date, the directors
shall report to the holders of Common Stock and holders of Derivative Securities
which have not been exercised or canceled and which have not expired (i) that
the transfer of the assets and liabilities of the Corporation to the Liquidating
Agent has occurred, (ii) the terms and conditions of the Agency Agreement, (iii)
the identity of the Liquidating Agent and (iv) their respective percentage
beneficial interests in the assets held by the Liquidating Agent (assuming the
exercise of all of the Derivative Securities into shares of Shoney's Stock prior
to the Final Liquidating Distribution Record Date). Notwithstanding the
foregoing, no holder of Derivative Securities shall have any rights or interest
in or entitlement to the assets held by the Liquidating Agent unless and until
such holder exercises such Derivative Securities into shares of Shoney's Stock
on or before the Final Liquidating Distribution Record Date as provided in
Paragraph 8.2.
10.2 The Agency Agreement shall provide, in substance, that the
purposes thereof shall be to determine and pay or otherwise satisfy or finally
provide for (whether by insurance or otherwise), within three years after the
Complete Liquidation Date, all then remaining claims of creditors and other
liabilities of the Corporation, including costs and expenses of the Liquidating
Agent and the Derivative Securities Entitlements, and thereupon to distribute
any remaining money, property, or assets to the holders of Common Stock as
provided below. The Agency Agreement shall also provide that, at such time as
the Liquidating Agent shall determine in the exercise of its absolute
discretion that all debts and liabilities, known, contingent and potential,
including the costs and expenses of completing the complete liquidation, of the
Corporation have been paid or provided for, the Liquidating Agent shall
thereupon fix the Final Liquidating Distribution Record Date and give the
holders of Derivative Securities 30 days' prior written notice of the Final
Liquidating Distribution Record Date as it is so established. Thereafter, on a
date (on or after the Final Liquidating Distribution Record Date) to be
determined by the Liquidating Agent, the Liquidating Agent shall satisfy the
Derivative Securities Entitlements and then distribute any funds or other
property then held by or for the account of the Corporation pro rata to holders
of Common Stock of record as of the Final Liquidating Distribution Record Date.
Subject only to the foregoing, the Agency Agreement may contain such terms and
conditions as are mutually agreeable to the directors and the Liquidating Agent
and as are necessary or convenient to the final liquidation of the assets and
liabilities of the Corporation and the distribution of the net proceeds thereof.
10.3 Upon occurrence of the events contemplated by, and compliance
with the provisions of, the foregoing Paragraphs 10.1 and 10.2 (which may be at
any time prior to the third anniversary of the complete Liquidation Date), the
Corporation shall be deemed to be completely liquidated and dissolved and the
directors shall be discharged of and released from all further powers,
authorities, duties, responsibilities, and liabilities as directors.
11. Unlocated Stockholders. Any cash or other property held by or for
the account of the Liquidating Agent for distribution to holders of Common
Stock and for payment, in accordance with Paragraph 8.2, to holders of
Derivative Securities who have not at the time been located shall, at the time
of the final liquidating distribution contemplated by Paragraph 10.1, be
transferred by the Liquidating Agent to the custodian, state official, trustee
or other person authorized by law to receive
-6-
<PAGE> 7
distributions for the benefit of such unlocated stockholders, in such manner as
may be determined by the Corporation or the Liquidating Agent, as the case may
be. Such cash or other property shall thereafter be held by such person solely
for the benefit of and ultimate distribution, without interest thereon, to such
former stockholder or stockholders entitled to receive such assets, who shall
constitute the sole equitable owners thereof, subject only to such escheat or
other laws as may be applicable to unclaimed funds or property, and thereupon
all responsibilities and liabilities of the Corporation and the Liquidating
Agent with respect thereto shall be satisfied and extinguished.
12. Share Certificates. At the time of the transfer of the assets,
subject to the liabilities, of the Corporation to the Liquidating Agent, the
Corporation will call upon the holders of Common Stock to surrender to the
Corporation the certificates that theretofore represent their shares of Common
Stock.
13. Termination. In the event the Plan of Reorganization is
terminated prior to the Closing, this Plan shall terminate and be of no force
or effect.
-7-
<PAGE> 1
EXHIBIT NO. 21
SUBSIDIARIES OF REGISTRANT
Maxcell Telecom Plus, Inc.
Telecom Plus Shared Tenants Services, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TPI ENTERPRISES, INC. FOR THE YEAR ENDED DECEMBER 29,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 1,190
<SECURITIES> 5,078
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 1,533
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,735<F2>
<SALES> 195,219<F3>
<TOTAL-REVENUES> 195,219
<CGS> 179,708
<TOTAL-COSTS> 191,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,596
<INCOME-PRETAX> 4,408
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,408
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F2>REPRESENTS NET ASSETS IN LIQUIDATION AS OF DECEMBER 29, 1996
<F3>REPRESENTS SALES THROUGH SEPTEMBER 8, 1996
</FN>
</TABLE>
