- --------------------------------------------------------------------------------UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K [X]10-K/AFOR ANNUAL
REPORTAND TRANSITION REPORTS PURSUANT TO SECTION 13 OR15(d)15(D) OFTHE SECURITIES EXCHANGE ACT OF 1934
For[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December
31, 199727, 2000[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the Transition Period from _____ to _____
Commission File
NumberNumber: 1-13226DENAMERICA CORP. ---------------- (Exact name----------
PHOENIX RESTAURANT GROUP, INC.
-----------------------------------------------------------------
(Exact Name of
registrantRegistrant asspecifiedSpecified in itscharter)Charter)Georgia 58-1861457
----------------------------- ---------------------------------- (State-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
of incorporation or organization)7373 N. Scottsdale Road
Suite D-120,
Scottsdale, AZ 85253
----------------------------- ------------------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
Registrant's
telephone number, including area code: (602) 483-7055Telephone Number, Including Area Code: (480) 905-9700------------------
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange on Which Registered ------------------- ------------------------------------ Common Stock, $.10 par value American Stock ExchangeNone-------
Securities Registered Pursuant to Section 12(g) of the Act:
NoneCommon Stock, $.10 par value
--------------------------------------
Indicate by check mark whether the
Registrantregistrant (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 theRegistrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X]X No_____.-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
Registrant'sthe registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment totheForm 10-K.[____][X]The aggregate market value of the 6,300,213 shares of Common Stock of the Registrant held by non-affiliates of the Registrant
(6,570,933 shares)onMarch 31, 1998April 6, 2001 was$14,373,916.$1,575,053. The aggregate market value was computed by reference to the closing price of the Common Stock on such date. For purposes of this computation, all directors, executive officers, and10%10 percent beneficial owners of theregistrantRegistrant are deemed to be affiliates. Such determination should not be deemed an admission that such directors, executive officers, or10%10 percent beneficial owners are, in fact, affiliates of theregistrant.Registrant.Number of shares of Common Stock, $.10 par value, outstanding as of
March 31, 1998: 13,447,777 shares of Common Stock, $.10 par value.April 6, 2001: 13,925,111--------------
Documents incorporated by reference:
None. - --------------------------------------------------------------------------------DENAMERICA CORP. ANNUAL REPORT ON FORMPhoenix Restaurant Group, Inc.Annual Report on Form 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997 TABLE OF CONTENTS PART I ITEM 1. BUSINESS..............................................................1 ITEM 2. PROPERTIES...........................................................22 ITEM 3. LEGAL PROCEEDINGS....................................................22 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................22 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............................................23 ITEM 6. SELECTED FINANCIAL DATA..............................................24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................25 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........32 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................32 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...............................33 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................34 ITEM 11. EXECUTIVE COMPENSATION...............................................37 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................................................43 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................44 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.....45 SIGNATURES....................................................................49 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................F-1PART I ITEM 1. BUSINESS.forthe fiscal year ended 12/27/00
Pursuant to General
The Company currently operates 208 family-oriented, full-service restaurants in 25 states, primarily in the southwestern, midwestern, western,Instruction G(3) of Form 10-K andsoutheastern United States. The Company owns and operates 104 Black-eyed Pea restaurants, primarily in Texas, Georgia, Arizona, Oklahoma, Florida, and the Washington, D.C. area, and franchises to third parties the rights to operate three Black-eyed Pea restaurants in two states. The Company also owns and operates 103 Denny's restaurants, which represents approximately 6.4%Rule 12b-15 of theDenny's system and makes the Company the largest Denny's franchisee in termsSecurities Exchange Act ofrevenue and the number of restaurants operated. The Company has sold or converted1934, as amended, this Amendment (this "Amendment") to theDenny's concept substantially allForm 10-K ofthe restaurants it previously operated under various other restaurant concepts ("non-branded restaurants"Phoenix Restaurant Group, Inc. (the "Company"). The Company currently intends to increase the number of its restaurants primarily through the development of new Black-eyed Pea restaurants and acquisitions of franchised Black-eyed Pea restaurants from the franchisees. The Company also plans to sell or close certain of its restaurants as appropriate based on performance and other considerations. In addition, the Company may expand its operations through the acquisition of one or more restaurant chains or multiple restaurant locations. Such acquisitions would be made only if they can be integrated, filed with theCompany's existing restaurant operationsSecurities andonly if they would have a meaningful impactExchange Commission onthe Company's operations. See Item 1, "Business - Strategy." As used in this Report, the term "Company" refersApril 11, 2001 (the "Form 10-K"), is being filed toDenAmerica Corp. and its subsidiaries and operating divisions. The Company's principal executive offices are located at 7373 N. Scottsdale Road, Suite D-120, Scottsdale, Arizona 85253, and its telephone number is (602) 483-7055. Development of the Company The Company began operations in 1986 through one or more predecessor entities under common control. The Company was incorporated in 1989 and initially pursued an aggressive program of growth through acquisitions of Denny's and other restaurants and through development of new Denny's restaurants. The Company resulted from the March 29, 1996, merger (the "Merger") of Denwest Restaurant Corp. ("DRC") and American Family Restaurants, Inc. ("AFR"). The Company acquired Black-eyed Pea U.S.A., Inc. ("BEP") in July 1996 (the "BEP Acquisition"). The table below sets forth information regarding the number of restaurants that the Company has acquired, developed, converted to the Denny's concept, and sold or closed in each year since the beginning of fiscal 1993, including restaurants developed, sold, or closed by BEP prior to the BEP Acquisition. Restaurants Acquired, Developed, Converted, Sold, or Closed
The forward-looking statements included in this Amendment and the Form 10-K relating to certain matters involve risks and uncertainties, including the ability of management to successfully implement its strategy for improving Black-eyed Pea Restaurants performance, the ability of management to effect asset sales consistent with projected proceeds and timing expectations, the results of pending and threatened litigation, adequacy of management personnel resources, shortages of restaurant labor, commodity price increases, product shortages, adverse general economic conditions, adverse weather conditions that may affect the Company's restaurants asmarkets, turnover and a variety of March 31, 1998 and current plans for future
restaurant activity.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
The following table sets forth certain information with respect to eachthe names, ages and backgrounds of all directors of the Company'sCompany. The Company currently has eight directors, all of which will hold office until the 2001 Annual Meeting of Stockholders and, executive officers.
Chairman of the Board of the Companyand Chief Director since July 9, 1996 and as President, Chief 2000
Executive Officer and a director of the
Company since March 29, 1996.
Mr. Lloyd served asLangford was elected Chairman of the Board and Chief Executive Officer in October 2000. He began his restaurant career as a Shoney's restaurant franchisee in Lafayette, Indiana and received numerous awards, including Franchise Operator of DRC from 1987 until March 1996 andthe Year. From 1991 to 1995, he served as President and Chief Executive Officer of DRC from 1987 until November 1994. Mr. Lloyd engagedRMS in commercialMacon, Georgia, which operated 38 Shoney's restaurants, 15 Captain D's restaurants and residential real estate development and property management as President62 Popeye's restaurants, with annual revenues of First Federated Investment Corporation during the early and mid-1980s. Mr. Lloyd
also currently serves as a director of Action Performance Companies,approximately $120 million. In 1995 he joined Shoney's, Inc. and Star Buffet, Inc., which are publicly held companies, and Masterview Window
Company, a privately held company.
William J. Howard has served aswas promoted to Senior Executive Vice President and Chief Operating Officer in 1996. Mr. Langford's responsibilities included overseeing all restaurant operations (1,350 restaurants in 34 states), marketing and training for the $1.1 billion restaurant company.
W. Craig Barber Age - 45
President and Director Director since 2000
Mr. Barber was elected President and Director in October 2000. He was formerly Chief Administrative Officer and Chief Financial Officer of Shoney's, Inc. He reported to the Chief Executive Officer and had responsibility for all corporate staff and administrative functions. Specific responsibilities included accounting, treasury, legal, strategic planning, public relations, information system, human resources and food distribution. He originally joined Shoney's, Inc. in 1983 as Assistant Treasurer and left the company in 1997 to pursue other interests, including consulting and leadership in non-profit entities. Prior to his tenure with Shoney's, Inc., Mr. Barber worked for Ernst & Young, LLP for six years supervising audits of large public entities, including restaurant companies.
Fred Akers Age - 63
Director Director since 2001
Mr. Akers is Chief Executive Officer of Akers Performance Group, a motivational seminar presentation company whose clients have included executives of Fortune 500 companies across the country. He has held that capacity for the past eight years. Prior to that time he had an illustrious career as a football coach during which his teams played in many bowl games and twice contended for national championships and whose players won numerous awards and recognition. Mr. Akers won many coaching honors such as Coach of the CompanyYear and is a member of both the Arkansas Sports Hall of Fame and the University of Arkansas Sports Hall of Honor.
William G. Cox Age - 52
Director Director since July 9, 1996 and as Secretary and a director of the Company since March
29, 1996.
Mr. HowardCox served as a Vice President of the Company from March 29,
1996 until July 9, 1996. Mr. Howard served as President of DRC from November
1994 until March 1996October 1999 to October 2000 and as a director of DRC from 1990 until March 1996. Mr.
Howard served as Vice President of DRC from 1990 until November 1994 and as
Chief Financial Officer of DRC from 1990 until August 1994. Prior to joining
DRC, Mr. Howard held numerous senior management positions with Citicorp and
Citibank, including Senior Vice President and Senior Credit Officer with
Citicorp Mortgage, Inc.
William G. Cox has served as Chief Operating Officer and a director of the Company sincefrom March 29, 1996.1996 until January 26, 2001 when the Company completed the sale of 23 Denny's restaurants to Mountain Range Restaurants, LLC, an entity partially owned by Mr. Cox. Mr. Cox served as Vice President - OperationsPresident-Operations for Denny's, Inc. from June 1993 until November 1995, with responsibility for approximately 590 company-owned and franchised Denny's restaurants located throughout the United States. Mr. Cox served as a Senior Vice President of Flagstar and as Chief Operating Officer of Flagstar's "Quincy's" restaurant chain from May 1992 to June 1993. Mr. Cox served as Vice President of Eastern Operations of Denny's, Inc. from March 1991 to May 1992 and as a Regional Manager and Division Leader for Denny's, Inc. from 1981 to March 1991. Mr. Cox joined Denny's, Inc. as a Manager-in-Training in September 1977 and had advanced to the position of Regional Manager by 1981.
34
Robert J. Gentz hasAge - 51
Director Director since 1999
Mr. Gentz served as the Company's Executive Vice President - Franchising and
Development offrom January 1997 until January 26, 2001 when the Company since January 1997.completed the sale of 23 Denny's restaurants to Mountain Range Restaurants, LLC, an entity partially owned by Mr. Gentz oversees restaurant
acquisitions and sales, franchise operations, new restaurant development
activities, and related financings.Gentz. Prior to joining the Company, Mr. Gentz spent nine years as Executive Vice President for CNL Group, Inc., a diversified investment company that specializes in providing financing to the restaurant industry. Mr. Gentz also served as Director of Development for Wendy's International, Inc. from 1982 through 1987, where he was responsible for development of company-owned and franchised restaurants in various regions.
Todd S. Brown has
William J. Howard Age - 56
Director Director since 1996
William J. Howard served as SeniorExecutive Vice President of the Company since July 1996 until his retirement on December 1997 and as Chief Financial Officer, Treasurer, and a director of the
Company since March 29, 1996.31, 2000. Mr. BrownHoward served as a Vice President of the Company from March 1996 to December 1997.until July 1996. Mr. BrownHoward served as Vice President Chief Financial Officer, and a director of DRCDenwest Restaurant Corp. ("DRC") from SeptemberNovember 1994 until March 1996. Mr. Brown was employed by Deloitte & Touche LLP from 1980 to September
1994, most recently as a Senior Manager. Mr. Brown is a Certified Public
Accountant in the state of Arizona.
Michael Larsen has served as a Vice President of the Company since March
29, 1996. From 1993 until March 1996 Mr. Larsen served as Vice President of
Real Estate and Development of DRC. Mr. Larsen directs the due diligence of site
and building acquisitions and coordinates the construction of new restaurants.
From April 1984 to April 1993, Mr. Larsen was the Operations Manager for B&B
Properties, an advisor to several publicly traded real estate investment trusts.
John M. ("Jock") Holliman, III has served as a director of the Company
since March 29, 1996. Mr. Holliman served as a director of DRC from January 19951990 until March 1996. Mr. Holliman is the sole general partner of AGP Management,
L.P., which is the managing general partner of Valley Ventures, L.P., a limited
partnership formed in 1993 to purchase the venture capital portfolio of Valley
National Bank of Arizona. From 1985 to 1993, Mr. HollimanHoward served as Vice President of DRC from 1990 until November 1994 and as Chief Financial Officer of DRC from 1990 until August 1994. Prior to joining DRC, Mr. Howard held numerous senior management positions with Citicorp and Citibank, including Senior Managing Vice President and Senior Credit Officer with Citicorp Mortgage, Inc.
Robert H. Manschot Age - 57
Director of Valley National Investors, Inc., a wholly owned Small
Business Investment Corporation subsidiary of Valley National Bank of Arizona.Director since 1999
Mr. Holliman alsoManschot currently serves as a director of Voxel, OrthoLogic Corp.,the Managing Director and
Pilgrim America Capital Corp., each of which are publicly held corporations, and
several other privately held corporations. Mr. Holliman also serves as a
director of several non-profit organizations.
C. Alan MacDonald has served as a director of the Company since July
1993. Mr. MacDonald currently is a General Partner of the Marketing Partnership
Inc., a packaged goods marketing consulting firm. From 1992 through 1994, Mr.
MacDonald was Chairman of Manschot Investment Group L.L.C., an investment fund that is in the Boardbusiness of identifying and investing in companies that have significant potential for growth; as Chairman of Silicon Entertainment, Inc., which develops entertainment centers that employ interactive virtual-reality technology for simulated stock car racing; as Chairman and Chief Executive Officer of Lincoln
Snacks CompanySeceurop Security Services and continues to serve on that company's BoardGeldNet, which are privately held emergency services companies operating in Europe; as Chairman of Directors. From
1983 to 1995,RHEM International Enterprises, Inc., which engages in business consulting services and venture capital activities; and as Chairman of Motorsports Promotions, Inc. Mr. MacDonaldManschot served as President and Chief Executive Officer of Rural/Metro Corporation ("Rural/Metro"), a publicly held provider of ambulance and fire protection services, from October 1988 until March 1995. Mr. Manschot joined Rural/Metro in October 1987 as Executive Vice President, Chief Operating Officer and director. Mr. Manschot was with the Nestle Foods Corporation. From 1955 through 1982, Mr. MacDonald was employed
by the Stouffers Corporation,Hay Group, an international consulting firm, from 1978 until October 1987, serving as Vice President of The Stouffer Frozen Food
Companyand a partner from 1971 through 1982.1984, where he led strategic consulting practices in Europe, Asia and the western United States. Mr. MacDonaldManschot spent 10 years with several leading international hotel chains in senior operating positions in Europe, the Middle East, Africa and the United States. Mr. Manschot currently serves as a director of several privately held corporations.
Fred W. Martin has servedAction Performance Companies, Inc., a publicly traded company, and as a director of the CompanyThomas Pride Development, Inc., First Wave, Inc., TouchScape Corporation, WAM Interactive UK and Sport Southwest, Inc., all of which are privately held companies.
Fred Martin Age - 70
Director Director since March 29,
1996.1996
Mr. Martin served as a director of DRC from November 1994 until March 1996. Mr. Martin served as Western Regional Director of Franchise Development with Denny's, Inc. from 1985 to 1994, during which time he approved and developed 400 franchise and company locations for Denny's, Inc. throughout the western United States. Mr. Martin served as the Western Real Estate Representative with Denny's, Inc. from 1979 until 1985.
All directors
EXECUTIVE OFFICERS
The information set forth under Item 4A. "Executive Officers of the Company hold office until the Company's next annual
meeting of shareholders or the election and qualification of their successors.
The former shareholders of DRC collectively own a sufficient number of sharesRegistrant" in Part I of the Company's Common Stock to elect all of the members of the Board of
Directors. ThereForm 10-K is no agreement or understanding between the Company and any of
the persons who constitute the Company's Board of Directorsincorporated herein by this reference as to their serving
on the Company's Board of Directors in the future.
The Company's Board of Directors maintains an Audit Committee, a
Compensation Committee, a 1992 Stock Option Plan Committee, and a 1995
Directors' Stock Option Plan Committee. Messrs. Holliman and
35
MacDonald constitute the Audit Committee; Messrs. Holliman, MacDonald, and
Martin constitute the Compensation and 1992 Stock Option Plan Committees; and
Messrs. Lloyd and Howard constitute the 1995 Directors' Stock Option Plan
Committee.
Section 16(a) Beneficial Ownership Reporting Complianceif set forth herein verbatim.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's directors, executive officers and persons who own more than 10 percent of a registered class of the Company's equity securities to file reports of ownership and changes in ownership of the Company's common stock with the Securities and Exchange Commission (the "SEC").Commission. Directors, executive officers and greater than 10 percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely upon the Company'sa review of the copies of such forms received by it
duringthese reports furnished to the fiscal year ended January 1, 1997, andCompany or written representations that no other reports were required, the Company believes that each person who, at
any time during such fiscal year, was a director, officer, or beneficial ownerall of morethe directors, executive officers and greater than 10 percent of the Company's Common Stockbeneficial owners complied with all Section
16(a) filingthese requirements during suchthe 2000 fiscal year except that (i) William G. Cox
filed a late report on Form 4 covering two transactions, and (ii) Robert J.
Gentz filed a late report on Form 5 with respect to his ownership of the
Company's securities as of the date on which he became an executive officer of
the Company.
36
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION OF MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation of each ofall persons who served as the Company's Chief Executive OfficersOfficer during fiscal 2000 and each of the fourthree other most highly compensated executive officers whose cash salary and bonusesbonus exceeded $100,000 during the fiscal year ended December 31, 1997 (the "Named Executive Officers").
27, 2000:
SUMMARY COMPENSATION TABLE
Annual Compensation ------------------------------- | Long-Term Compensation --------------------------------- |
Name and Principal Position ---------------------- | Fiscal Year ----- | Salary ($) ------------ | Bonus ($) ------------ | Securities Underlying Options (#) -------------- |
Jack M. Lloyd, former Chairman of the Board and Chief Executive Officer (2) | 2000 1999 1998 | 324,000 520,000 520,000 | -- -- - | - - - |
Robert M. Langford, Chairman of the Board and Chief Executive Officer (3) | 2000 1999 1998 | 50,000 -- -- | -- -- - | 200,000 -- - |
William G. Cox, President and Chief Operating Officer (4) | 2000 1999 1998 | 220,000 220,000 220,000 | -- -- 50,000 | -- -- -- |
Robert J. Gentz, Executive Vice President (5) | 2000 1999 1998 | 175,000 175,000 175,000 | -- -- 50,000 | -- -- -- |
William J. Howard, Executive Vice President and Secretary (6) | 2000 1999 1998 | 260,000 260,000 260,000 | -- -- -- | -- -- -- |
(1) Each of the Named Executive Officersofficers listed received certain perquisites, the aggregate value of which did not exceed 10%the lesser of $50,000 or 10 percent of their salary and bonus during fiscal 1997.
2000.
(2) Mr. Lloyd becameresigned as Chairman of the Company's PresidentBoard and Chief Executive Officer upon
consummation of the Merger on March 29, 1996, and became the Company'sCompany in August 2000.
(3) Mr. Langford was elected Chairman of the Board on July 9, 1996. Amounts shown for periods prior to
March 29, 1996 represent payments to Mr. Lloyd for services as an executive
officer of DRC prior to the Merger. See Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Basis of
Presentation."
(3) Each of Messrs. Howard and Brown became executive officersChief Executive Officer of the Company upon consummationin October 2000. All amounts represent partial year compensation.
(4) Mr. Cox resigned as President and Chief Operating Officer of the Merger on March 29, 1996. Amounts shown for
periods prior to March 29, 1996 represent payments to each such person for
services as an executive officer of DRC prior to the Merger. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Basis of Presentation."
(4) Represents amounts accrued or paid beginning on March 29, 1996, the date of
Mr. Cox's employment with the Company.
(5) Represents amounts accrued or paid beginningCompany on January 6, 1997,26, 2001.
(5) Mr. Gentz resigned as Executive Vice President of the dateCompany on January 26, 2001.
(6) Mr. Howard resigned as Executive Vice President and Secretary of the Company in December 2000. Mr. Gentz' employment withHoward also served as interim Chairman and Chief Executive Officer of the Company.
37
Option Grants
The following table sets forth certain information with respect to stock options granted to the Named Exectuive Officersnamed executive officers during the fiscal year ended December 31, 1997.
27, 2000:
OPTION GRANTS IN LAST FISCAL YEAR
Name ------- | Number of Securities Underlying Options Granted (#) ------------- | Percentage of Total Options Granted to Employees in Fiscal Year ------ | Exercise Price ($)/Share (1) ---- | Exercise Price at Date of Grant ($) ----------- | Expiration Date ------ | Potential Realizable Value ----------- |
0% | 5% | 10% | ||||||
Robert Langford | 200,000 | 50% | 0.38 | 0.38 | 10/10/2010 | $ - | $47,796 | $121,124 |
(1) Twenty-fiveFor purposes of this disclosure, it is assumed that one hundred percent of the options were vested and exercisable on the date of grant. The remainder of the options vest and become exercisable
in three equal annual installments beginning on the first anniversary of
the date of grant.
(2) Potential gains are net of the exercise price but before taxes associated with the exercise. Amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. The assumed 5%5 percent and 10% rates10 percent rate of stock price appreciation are provided in accordance with the rules of the Securities and Exchange
CommissionSEC and do not represent the Company's estimate or projection of the future price of the Company's Common Stock.common stock. Actual gains, if any, on stock option exercises will depend uponon the future market prices of the Company's Common Stock.
common stock.
Option Holdings
The following table sets forth information concerning the number and value of all options held at December 31, 1997,27, 2000, by the Named Executive Officers.
named executive officers. None of the named executive officers exercised any options during fiscal 2000:
YEAR-END OPTION VALUES
Number of Securities ------------------------------------------------ | Value of Unexercised In-the-Money Options at Fiscal Year-End ($) ------------------------------------- |
Name ------- | Exercisable -------------- | Unexercisable ------------------ | Exercisable --------------- | Unexercisable ------------------ |
Jack M. Lloyd | -- | -- | -- | - |
Robert M. Langford | 200,000 | -- | 0 | - |
William G. Cox (1) | -- | -- | -- | -- |
Robert J. Gentz (1) | -- | -- | -- | -- |
William J. Howard | -- | -- | -- | - |
(1) The exercise prices of all optionsOptions previously held by the Named Executive Officers
were greater than the Company's Common Stock of $1.9375 per share on
December 31, 1997.
38
Employment Agreements
General
The Company currently is a party to employment agreements with each of
William G. Cox, Robert J. Gentz, and Todd S. Brown. In addition to the
provisions of the individual employment agreements as described below, the
employment agreements generally require the Company to provide each person with
certain medical and life insurance benefits; to reimburse them for all travel,
entertainment, and other ordinary and necessary expenses incurred in connection
with the Company's business and their duties under their respective employment
agreements; and to provide such other fringe benefits that the Company makes
generally available to all of its employees on a non-discriminatory basis. The
employment agreements with Messrs. and Cox, Gentz, and Brown require the Company
to provide each such officer with an automobile for use in connection with the
Company's business. In addition, in the event of a "change of control" of the
Company, as defined in employment agreements, the Company will be required to
pay each of Messrs. Cox and Gentz and Brown a lump sum equal to their respective
fixed salaries for the greater of one year or the balance of the then-current
term of employment under the applicablewere canceled by mutual agreement and all of Messrs. Cox's,
Gentz's, and Brown's unvested stock options, if any, will immediately vest and
become exercisable in full. The agreements also contain provisions that prohibit
the respective officer from (i) competing with the business of the Company, (ii)
taking certain actions intended to solicit other persons to terminate their
business relationship with the Company or to terminate his or her employment
relationship with the Company, and (iii) making unauthorized use or disclosure
of the Company's trade names, fictitious names, or confidential information.
William G. Coxduring fiscal 2000.
401(k) Plan
In December 1995, the Company entered into an employment agreement with
William G. Cox, which became effective upon consummation of the Merger. Pursuant
to his agreement with the Company, Mr. Cox serves as the Chief Operating Officer
of the Company at a base salary of $220,000 per year. The agreement also
provides that Mr. Cox will be eligible to receive an annual bonus of up to 50%
of his annual base salary pursuant to a bonus pool plan to be established by and
administered in the sole discretion of the Company. Pursuant to the agreement,
the Company granted to Mr. Cox options to purchase 300,000 shares of the
Company's Common Stock. Mr. Cox's agreement provides for his employment until
March 29, 1999, subject to extension for additional one-year periods under
mutually agreeable terms and conditions. The Company may terminate the agreement
only for cause, as defined in the agreement.
Robert J. Gentz
In January 1997, the Company entered into an employment agreement with
Robert J. Gentz pursuant to which Mr. Gentz serves as Executive Vice President -
Franchising and Development of the Company. The employment agreement provides
for a base salary of $175,000 per year. In addition, the agreement provides that
Mr. Gentz will be eligible to receive an annual bonus of up to $50,000 per year
based upon standards to be agreed upon between the Company and Mr. Gentz.
Pursuant to the agreement, the Company reimbursed Mr. Gentz for certain
relocation expenses and granted to Mr. Gentz options to purchase 100,000 shares
of the Company's Common Stock. Mr. Gentz' agreement provides for an initial
employment term of three years, subject to extension for additional one-year
periods under mutually agreeable terms and conditions.
Todd S. Brown
In December 1997, the Company entered into an employment agreement with
Todd S. Brown pursuant to which Mr. Brown serves as Senior Vice President,
Treasurer, and Chief Financial Officer of the Company. The employment agreement
provides for a base salary of $160,000, $175,000, and $190,000 in calendar 1998,
1999, and 2000, respectively. In addition, the agreement provides that Mr. Brown
will be eligible to receive an annual bonus in an amount to be determined by the
Company's Board of Directors, in its sole discretion. Mr. Brown's employment
agreement continues until December 31, 2000 and will renew automatically from
year to year thereafter, unless and until either party terminates by giving the
other party written notice not less than 60 days
39
prior to the end of the then-current term. In the event that the Company
terminates Mr. Brown's employment without cause, Mr. Brown will continue to
receive his base salary for a period of 12 months following the date of such
termination.
Stock Option Plans
1996 Stock Option Plan
On December 10, 1996, the Company's Board of Directors adopted the
Company's 1996 Stock Option Plan (the "1996 Plan"). The Company's shareholders
approved the 1996 Plan on June 26, 1997. A total of 500,000 shares of the
Company's Common Stock has been reserved for issuance under the 1996 Plan. The
1996 Plan is intended to promote the interests of the Company by encouraging key
persons associated with the Company to acquire, or otherwise increase, their
proprietary interest in the Company and an increased personal interest in its
continued success and progress. The 1996 Plan provides for the grant of options
to acquire Common Stock of the Company ("Options"), the direct grant of Common
Stock ("Stock Awards"), the grant of stock appreciation rights ("SARs"), and the
grant of other cash awards ("Cash Awards") (Stock Awards, SARs, and Cash Awards
are collectively referred to herein as "Awards"). If any Option or SAR
terminates or expires without having been exercised in full, stock not issued
under such Option or SAR will again be available for the purposes of the 1996
Plan. The 1996 Plan is intended to comply with Rule 16b-3 as promulgated under
the Exchange Act with respect to persons subject to Section 16 of the Exchange
Act. As of March 31,April 1998, the Company has not granted any Optionsestablished a defined contribution plan, or 401(k) Plan, that qualifies as a cash or deferred profit sharing plan under the
1996 Plan. The 1996 Plan will remain in effect until December 9, 2006.
OptionsSections 401(a) and Awards may be granted pursuant to the 1996 Plan only to
persons ("Eligible Persons") who at the time401(k) of grant are either (i) key
personnel (including officers and directors) of the Company, or (ii) consultants
or independent contractors who provide valuable services to the Company. Options
granted pursuant to the 1996 Plan may be incentive stock options or
non-qualified stock options. Options that are incentive stock options may be
granted only to key personnel of the Company who are also employees of the
Company. To the extent that granted Options are incentive stock options, the
terms and conditions of those Options must be consistent with the qualification
requirements set forth in the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"). The maximum number of shares of stock with respect to
which Options or Awardsamended. Under the 401(k) Plan, participating employees may be granted to any employee during the term of the
1996 Plan may not exceed 50defer from 1 - 15 percent of their pre-tax compensation, subject to the shares of Common Stock covered bymaximum dollar amount allowed under the 1996 Plan.
The exercise price of any Option intendedInternal Revenue Code. In addition, the 401(k) Plan provides that the Company may make discretionary contributions to be an incentive stock option
may not be less than 100 percent of the fair market value of the Common Stock at
the time of the grant (110 percent if the Option is granted to a person who at
the time the Option is granted owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the Company). Options may
be granted for terms of up to 10 years and will vest and become exercisableparticipating employees in whole or in one or more installmentssuch amounts as may be determined atby the time the
Options are granted. To exercise an Option, the optionholder will be required to
deliver to the Company full paymentBoard of the exercise price for the shares as to
which the Option is being exercised. Generally, Options can be exercised by
delivery of cash, check, or shares of Common Stock of the Company.
SARs will entitle the recipient to receive a payment equal to the
appreciation in market value of a stated number of shares of Common Stock from
the price on the date the SAR was granted or became effective to the market
value of the Common Stock on the date the SARs are exercised or surrendered.
Stock Awards will entitle the recipient to receive shares of the Company's
Common Stock directly. Cash Awards will entitle the recipient to receive direct
payments of cash depending on the market value or the appreciation of the Common
Stock or other securities of the Company. The plan administrators may determine
such other terms, conditions, or limitations, if any, on any Awards granted
pursuant to the 1996 Plan.
Amended and Restated 1992 Stock Option Plan
A total of 1,000,000 shares of the Company's Common Stock have been
reserved for issuance under the Company's Amended and Restated 1992 Stock Option
Plan (the "1992 Plan"). The 1992 Plan limits the persons
40
eligible to receive options to directors, consultants, and keyDirectors. Highly compensated employees
including officers, of the Company, or a subsidiaryincluding executive officers, are not eligible to participate in the 401(k) Plan.
Employment and Operating Agreements
Employment and Operating Agreements
The Company was party to employment agreements with William G. Cox and Robert J. Gentz during fiscal 2000. Both employment agreements terminated January 26, 2001 when the Company consummated the sale of 23 Denny's restaurants to Mountain Range Restaurants, LLC ("MRR"). An operating agreement between the Company and "key
persons" who are not employees but have provided valuable services, have
incurred financial riskMRR was executed in February 2001. The operating agreement, which provides for a quarterly fee of $100,000 and terminates on behalf ofMay 8, 2001, provides for the Company, or have extended credit to the
Company or its subsidiaries. The 1992 Plan provides that options granted to
employees may be incentive stock options or non-qualified options pursuant to
the Internal Revenue Code. Key persons who are not employees are eligible to
receive only non-qualified options. The 1992 Plan is intended to comply with
Rule 16b-3 as promulgated under the Exchange Actcontinued professional advice and managerial oversight by Messrs. Cox and Gentz with respect to persons subject
to Section 16 of the Exchange Act. As of March 31, 1998, there were outstanding
options to acquire a total of 728,000 shares of Common Stock under the 1992
Plan. The 1992 Plan terminates on April 1, 2002.
Incentive stock options may not have an exercise price less than the fair
market value of the Common Stock on the grant date, except that, in the case of
an incentive stock option granted to any participant who owns more than 10% of
the Company's outstanding voting shares, the exercise price must be at least
110% of the fair market value of the Common Stock on the date of grant and the
term of the option may be no longer than five years. Options that are not
incentive stock options may not have an exercise price less than the greater of
the minimum price required by applicable state law, by the Company's Restated
Articles of Incorporation, or the par value of the Common Stock. Options
generally may be exercised by delivery of any combination of cash, shares of
Common Stock, or by delivering to the Company a promissory note upon such terms
and conditions as72 remaining Denny's restaurants.
Severance Agreements
In October 2000, the Board of Directors may determine.
1995 Directors Stock Option Plan
A total of 300,000 shares of Common Stock have been reservedapproved a severance agreement for issuance
under the Company's 1995 Directors Stock Option Plan (the "1995 Plan"). The
purpose of the 1995 Plan isMr. William J. Howard for a one-year period commencing January 1, 2001 at a rate and on payment terms equal to promote the interestsMr. Howard's fiscal 2000 base salary.
Director Compensation
Employees of the Company and its
shareholders by strengtheningdo not receive compensation for serving as members of the Company's ability to attract and retainBoard of Directors. Non-employee members of the servicesBoard of experienced and knowledgeable non-employee directors and by
encouraging such directors to acquire an increased proprietary interestDirectors receive cash compensation in the Company. Asamount of March 31, 1998, there were outstanding options to acquire a total
of 70,000 shares of Common Stock under the 1995 Plan. The 1995 Plan terminates
on January 16, 2005.$25,000 per year. Options to purchase 10,000 shares of Common Stockcommon stock are automatically granted to each non-employee director of the CompanyCompany's non-employee directors on the date of his or her initial election to the Board of Directors or re-election at an annual meeting of the Company's shareholders. During fiscal 2000, the Board of Directors approved a one-time 50,000 option grant to all independent directors. Directors who are first elected or appointed to the Board of Directors on a date other than an annual meeting date are automatically granted options to purchase the number of shares of Common Stockcommon stock equal to the product of 10,000 multiplied by a fraction, the numerator of which is the number of days during the period beginning on such grant date and ending on the date of the next annual meeting, and the denominator of which is 365. If no meeting is scheduled at a time a director is first elected or appointed to the Board of Directors, the date of the next annual meeting is deemed to be the 120th day of the fiscal year next following the interim grant date. The exercise price of each option is the fair market value of the Company's Common Stockcommon stock on the business day preceding the date of grant and the term of each option may not exceed ten years. One-half of the options granted vest and become exercisable after the first year of continuous service as a director following the automatic grant date and 100%the remainder vest and become exercisable after two years of continuous service on the Board of Directors.
Director Compensation
Employees of the Company do not receive compensation for serving as
members of the Company's Board of Directors. Non-employee members of the Board
of Directors receive cash compensation in the amount of $10,000 per annum.
Non-employee directors receive automatic grants of stock options under the 1995
Directors Stock Option Plan. See Item 11, "Executive Compensation - Stock Option
Plans."
41
Compensation Committee Interlocks and Insider Participation
C. Alan MacDonald,
Fred W. Martin and John M. Holliman, IIIRobert H. Manschot served as members of the Compensation Committee of the Board of Directors during fiscal 1997.2000. None of such individuals were, or formerly were, an officer or employee of the Company or any of its subsidiaries or had any contractual or other relationships with the Company during fiscal 19972000 except as directors.
Indemnification and Limitation of Personal Liability of Directors
The Company's Amended and Restated Bylaws require the Company to
indemnify its directors and officers against liabilities that they may incur
while serving in such capacities, to the full extent permitted and in the manner
required by the Georgia Business Corporation Code (the "GBCC"). Pursuant to
these provisions, the Company will indemnify its directors and officers against
any losses incurred in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or
officer of the Company or served with another corporation, partnership, joint
venture, trust or other enterprise at the request of the Company. In addition,
the Company will provide advances for expenses incurred in defending any such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such advances if it is ultimately determined
that he or she is not entitled to indemnification by the Company. The Company
has entered into indemnification agreements with certain of its directors and
executive officers pursuant to the foregoing provisions of its Amended and
Restated Bylaws.
As permitted by the GBCC, the Company's Restated Articles of
Incorporation contain provisions that eliminate the personal liability of
directors for monetary damages to the Company or its shareholders for breach of
their fiduciary duties as directors. In accordance with the GBCC, these
provisions do not limit the liability of a director for (i) any appropriation of
a business opportunity of the Company in violation of the director's duty, (ii)
acts or omissions that involve intentional misconduct or a knowing violation of
law, (iii) any dividend payment, stock repurchase, stock redemption or
distribution in liquidation that is prohibited under Georgia law, or (iv) any
merger from which the director derived an improper personal benefit. These
provisions do not limit or eliminate the rights of the Company or any
shareholder to seek an injunction or any other non-monetary relief in the event
of a breach of a director's fiduciary duty. In addition, these provisions apply
only to claims against a director arising out of his or her role as a director
and do not relieve a director from liability for violations of statutory law,
such as certain liabilities imposed on a director under the federal securities
laws.
42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the shares of the Company's Common Stockcommon stock beneficially owned as of March 31, 1998April 6, 2001 by (i) each of the Company's directors and named executive officers; (ii)officers, all current directors and executive officers of the Company as a group;group and (iii) each person known by the Company to be the beneficial owner of 5%5 percent or more of the Company's Common Stock.
Name and Address of Beneficial Holder (1) ----------------------------------------------------- | Number of Shares (2) --------------------------- | Percentage Ownership (2) -------------------------------- |
Directors and Executive Officers --------------------------------------- | ||
Robert M. Langford | 200,000(3) | 1.4% |
W. Craig Barber | 200,000(4) | 1.4% |
Fred Akers | 10,000(5) | * |
William G. Cox | 1,000 | 0 |
Robert J. Gentz | -- | -- |
William J. Howard | 1,700,363 | 12.2% |
Fred W. Martin | 107,000(6) | 0 |
Robert H. Manschot | 83,068(7) | * |
Jack M. Lloyd(8) | 3,469,727(9) | 24.9% |
All current directors and executive officers as a group (eleven persons) | 2,301,431 | 15.9% |
Non-Management 5 Percent Shareholder ------------------------------------------------- | ||
BancBoston Ventures, Inc. (10) | 2,124,352 | 15.3% |
* Less than 1.0%1.0 percent of the outstanding shares of Common Stock.
common stock.
(1) Except as otherwise indicated, each person named in the table has sole voting and investment power with respect to all Common Stockcommon stock beneficially owned by him, subject to applicable community property law. Except as otherwise indicated, each of such persons may be reached through the Company at 7373 N. Scottsdale Road, Suite C-240,D-120, Scottsdale, Arizona 85253.
(2) The numbers and percentages shown include the shares of Common Stockcommon stock actually owned as of March 31, 1998April 6, 2001 and the shares of Common Stockcommon stock which the person or group had the right to acquire within 60 days of such date. In calculating the percentage of ownership, all shares of Common Stockcommon stock which the identified person or group had the right to acquire within 60 days of March 31, 1998April 6, 2001 upon the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stockcommon stock owned by such person or group but are not deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stockcommon stock owned by any other person.
(3) Represents 1,000200,000 shares of Common Stock and 180,000common stock issuable upon exercise of vested options.
(4) Represents 200,000 shares of Common Stockcommon stock issuable upon exercise of vested options.
(5) Represents 10,000 shares of common stock issuable upon the exercise of vested options.
(4)
(6) Represents 50,0007,000 shares of Common Stock issuable upon exercise of vested
options.
(5) Represents 2,800 shares of Common Stockcommon stock held by Mr. Martin and 74,880his spouse and 100,000 shares issuable upon the exercise of vested options.
(6)
(7) Represents 60,00083,068 shares of Common Stockcommon stock issuable upon the exercise of vested options.
(7)
(8) Mr. Lloyd resigned as an executive officer of the Company prior to April 6, 2001. He was included in this table solely because he was a named executive officer for the 2000 fiscal year. Mr. Lloyd's shareholdings are not included in the shareholdings and percentage reported for all current directors and executive officers as a group. Mr. Lloyd's address is 14023 North 106th Place, Scottsdale, Arizona 85259.
(9) Represents 9,4363,469,727 shares of Common Stock and 10,000 shares issuable upon
exercise of vested optionscommon stock held by Mr. Holliman and 3,000 shares of Common
Stock beneficially owned by Mr. Holliman as trustee under a trust for the
benefit of his mother.
(8) Represents 47,500 shares of Common Stock issuable upon the exercise of
vested options.
(9) Represents 6,000 shares of Common Stock held by Mr. MartinLloyd and his spouse
and 10,000 shares issuable uponspouse.
(10) BancBoston Ventures Inc. is a subsidiary of FleetBoston Financial Corporation, which may be deemed to be the exercisebeneficial owner of vested options.
(10)such shares. The address of BancBoston Ventures Inc. and FleetBoston Financial Corporation is c/o BancBoston Capital, Inc., 100 Federal Street, Boston, Massachusetts 02110. 43
(11) Mr. MillerThe information regarding this share ownership is a former officer and director ofbased on the Company. Mr. Miller's
address is 13845 East Laurel Lane, Scottsdale, Arizona 85259.
schedule 13G filed by FleetBoston Financial Corporation with the SEC on February 14, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 1995, DRC entered into leases for two restaurant properties owned
by Lloyd/Howard L.L.C. ("Lloyd/Howard"), a limited liability company controlled
by Jack M. Lloyd (Chairman of
Except as disclosed under Part III hereof and except as set forth below, the BoardCompany's executive officers and Chief Executive Officer of DRC at
that time) and William J. Howard (President and a director of DRC at that time).
Lloyd/Howard acquired these two properties and certain other properties from
Kettle Restaurants, Inc. in consideration of the assumption by Lloyd/Howard of
environmental liabilities associateddirectors did not have significant business relationships with the two properties leased by DRC.
During 1996, Lloyd/Howard sold one ofCompany that would require disclosure under applicable SEC regulations and no such transactions are anticipated during the properties to CNL and the Company
entered into a lease with CNL for that location. The second restaurant was sold
to a third party during2001 fiscal 1997. Prior to that sale, the Company did not pay
any rent to Lloyd/Howard with respect to that restaurant during fiscal 1997.year.
In connection with the financing of the BEP Acquisition,Company's acquisition of the Black-eyed Pea restaurants, LH Leasing Company, Inc. ("LH Leasing"), a corporation owned by Jack M. Lloyd and William J. Howard, purchased from the Company for cash in the amount of $14.25$14.3 million the equipment located at 62 Black-eyed Pea restaurants leased by BEP,Black-eyed Pea USA, Inc., a wholly
ownedwholly-owned subsidiary of the Company, or Texas BEP, L.P. ("Texas BEP"), a limited partnership in which BEPBlack-eyed Pea USA, Inc. is the general partner and in which a wholly ownedwholly-owned subsidiary of BEPBlack-eyed Pea USA, Inc. is the limited partner. Concurrently with the sale of the equipment to LH Leasing, LH Leasing leased the equipment to the Company and the Company subleased the equipment to BEPBlack-eyed Pea USA, Inc. or Texas BEP. The equipment lease has a term of five years and grants the Company an option to purchase the equipment at its fair market value upon the expiration of the lease. The terms of the subleases between the Company and each of BEPBlack-eyed Pea USA, Inc. and Texas BEP are consistent with the terms set forth in the equipment lease between the Company and LH Leasing. Messrs. Lloyd and Howard formed LH Leasing as an accommodation to the Company to enable it to satisfy the requirements of the Company's senior lenders. Messrs.
Lloyd andMr. Howard received no material compensation for the transactions involving the Company and LH Leasing. Mr. Lloyd received a 100% increase in his base compensation.
In order to finance its sale and lease transaction with the Company, LH Leasing borrowed cash in the amount of $14.25$14.3 million from FFCA.Franchise Finance Corporation of America ("FFCA"). Messrs. Lloyd and
Howard jointly and severally guaranteed the repayment of the loan. In addition, Messrs. Lloyd and Howard pledged their stock in LH Leasing to FFCA as additional collateral for the loan.
In addition to the loan from FFCA to LH Leasing as described above, Jack M. Lloyd and William J. Howard hold $11,196,000each have personally guaranteed certain of the Company's indebtedness and $5,598,000other obligations under leases and franchise agreements.
Jack M. Lloyd holds $11.2 million in principal amount of the Company's Series B 13% Subordinated Notes respectively. On September 30,
1997("Series B Notes") and William J. Howard holds $5.6 in principal amount of Series B Notes. Certain holders of the Series B Notes have not received interest payments since March 31, 1998,1997. As of December 27, 2000, accrued and unpaid interest due to these holders totaled $10.6 million. As of December 27, 2000, the Company was in technical default of certain financial covenants in the Series B Notes. During March 2001, Messrs. Lloyd and Howard deferred interestexercised the warrants associated with their Series B Notes and purchased 146,611 and 293,223 shares of approximately $728,000 and $364,000,common stock, respectively, due asat an exercise price of each$.01 per share.
On March 26, 2001, the Company received a notice from Mr. Lloyd in which he stated that he is the holder of those dates
onmore than 25 percent of the Series B Notes and granted waivers with respectpurports to non-complianceaccelerate the payment of certain of the debt covenantsall principal and interest under the Series B Notes and to declare all amounts under the Series B Notes to be immediately due and payable. Notwithstanding this action on the part of Mr. Lloyd, however, the enforcement of remedies under the Series B Notes and the Indenture pursuant to which the Series B Notes were issued (the "Indenture") is limited by the terms of the Senior Subordinated Intercreditor Agreement, dated as of eachMarch 29, 1996 (the "Intercreditor Agreement"), among Banque Paribas, as Agent under the Credit Agreement (as defined therein), certain holders of those
dates.the Series B Notes (including Mr. Lloyd) and the Trustee (as defined therein). CNL APF, LP, has succeeded to the interest of Banque Paribas. Under the terms of the Intercreditor Agreement, the Company believes that both the Trustee and Mr. Lloyd are precluded from pursuing any remedies for any defaults under the Indenture or the Series B Notes (including the initiation of litigation to collect the indebtedness owing under the Series B Notes), until the expiration of thirty months after the occurrence of any default or event of default under the Company's senior indebtedness which would, pursuant to the subordination provisions of the Indenture, block payment of principal and interest on the Series B Notes. A default under the Company's senior indebtedness that has not been cured or waived or ceased to exist occurred in March 2001. Accordingly, the Company believes that, at the present time, Mr. Lloyd and the Trustee under the Indenture may not pursue remedies for defaults that exist under the Series B Notes.
During fiscal 1997,1998 and 2000, the Company made various advances to Jack M. Lloyd. Such advances totaled $378,000 asapproximately $807,000 and continue to be outstanding. In fiscal 2000, the Company reserved $520,000 against the aforementioned advance amount. Mr. Lloyd also owes the Company approximately $126,000 in connection with certain transactions entered into by JCL LLC, a company in which Mr. Lloyd has an interest.
On January 26, 2001, the Company completed the sale of December 31, 1997.
44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) Financial Statements23 Denny's restaurants to Mountain Range Restaurants, LLC ("MRR") for $20.3 million consisting of $17.3 million in cash and Financial Statement Schedules:
(1) Financial Statements are listeda note for $3.0 million. MRR is an entity that is owned by Messrs. William G. Cox and Robert J. Gentz, former officers and current directors of the Company. The Company obtained two fairness opinions from third parties to support the valuation and purchase price received from MRR.
On February 8, 2001, the Company's Board of Directors approved the closing of its office in Scottsdale, Arizona and the relocation of the corporate headquarters to Nashville, Tennessee. The corporate headquarters will be located in a building owned by a company of which Mr. Robert Langford is a principal holding a 12.6% interest. The terms of the lease were negotiated by a subcommittee of the outside directors
of the Company's Board of Directors. The lease provides for a five-year term and annual rental of approximately $190,000. The lease is renewable.
On April 10, 2001, the Company opened a new Black-eyed Pea restaurant in Hendersonville, Tennessee. The Company subleases the building in which that restaurant is located and pays annual rental of approximately $120,000. Mr. Robert Langford is a principal holding a 24.25% interest in a company that holds a leasehold interest in the Index to Consolidated
Financial Statements on page F-1 of this Report.
(2) No Financial Statement Schedules are included because they are not
applicable or are not required or the information required to be set
forth therein is included in the consolidated financial statements or
notes thereto.
(b) Reports on Form 8-K.
Not applicable.
(c) Exhibits - Index of Exhibits
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantand Rule 12b-15 promulgated thereunder, Phoenix Restaurant Group, Inc. has duly caused this ReportAmendment 1 to Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on this 14th26th day of April, 1998.
DenAmerica Corp.2001.
PHOENIX RESTAURANT GROUP, INC.
By: /s/ JackJeffrey M. Lloyd
------------------------------------
JackPate
-----------------------------------------------
Name: Jeffrey M. Lloyd
Chairman of the Board,Pate
-------------------------------------------
Title: Chief Financial Officer, Secretary and Senior Vice President
and Chief Executive Officer
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 in the capacities and on the dates indicated.