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Proc-Type: 2001,MIC-CLEAR
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 27, 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 Number: 1-13226
---------- PHOENIX RESTAURANT GROUP, INC.
----------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Georgia
58-1861457 --------------------------------
-------------------- (State or other jurisdiction of
(I.R.S. Employer incorporation or organization)
Identification No.) 7373 N. Scottsdale Road Suite D-120, Scottsdale, AZ
85253 --------------------------------------------
------------ (Address of principal executive offices)
(Zip Code) Registrant's Telephone Number, Including Area Code: (480) 905-9700
------------------ Securities Registered Pursuant to Section 12(b) of the Act: None
------- Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.10 par value
-------------------------------------- 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 is not
contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to Form 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 on April 6, 2001 was $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, and 10 percent beneficial owners of the Registrant are deemed to be affiliates.
Such determination should not be deemed an admission that such directors, executive officers, or 10 percent
beneficial owners are, in fact, affiliates of the Registrant. Number of shares of Common Stock, $.10 par value, outstanding as of April 6, 2001: 13,925,111
-------------- Documents incorporated by reference:
Phoenix Restaurant Group, Inc.
Annual Report on Form 10-K for
the fiscal year ended 12/27/00 Pursuant to General Instruction G(3) of Form 10-K and Rule 12b-15 of the Securities Exchange Act
of 1934, as amended, this Amendment (this "Amendment") to the Form 10-K of Phoenix Restaurant Group,
Inc. (the "Company"), filed with the Securities and Exchange Commission on April 11, 2001 (the "Form
10-K"), is being filed to include information with respect to Items 10, 11, 12 and 13 of Part III of the Form
10-K. Parts I, II and IV of the Form 10-K hereby are incorporated by reference in their entirety as if copied
herein verbatim. 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 markets, turnover and a variety of other similar matters. Forward-looking statements
generally can be identified by the use of forward-looking terminology such as "may," "will," "expect,"
"intend," "estimate," "could," "anticipate," "believe," "continue" (or the negative thereof) or similar
terminology. Actual results and experience could differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements as a result of a number of factors,
including but not limited to those discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations and under the caption "Special Considerations" therein. Forward-looking information provided by the Company pursuant to the safe harbor established under the Private
Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors. In addition, the
Company disclaims any intent or obligation to update these forward-looking statements. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS The following sets forth the names, ages and backgrounds of all directors of the Company. The
Company currently has eight directors, all of which will hold office until the 2001 Annual Meeting of
Stockholders and, in each case, until their respective successors have been duly elected and qualified: Robert M. Langford
Age - 49 Chairman of the Board and Chief
Director since 2000 Executive Officer Mr. Langford 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 the Year. From 1991 to 1995, he served as President and Chief
Executive Officer of RMS in Macon, Georgia, which operated 38 Shoney's restaurants, 15 Captain D's
restaurants and 62 Popeye's restaurants, with annual revenues of approximately $120 million. In 1995 he
joined Shoney's, Inc. and was 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 Year 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 1996 Mr. Cox served as President of the Company from October 1999 to October 2000 and as Chief
Operating Officer of the Company from March 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-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. Robert J. Gentz
Age - 51 Director
Director since 1999 Mr. Gentz served as the Company's Executive Vice President from January 1997 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. 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. William J. Howard
Age - 56 Director
Director since 1996 William J. Howard served as Executive Vice President of the Company since July 1996 until his
retirement on December 31, 2000. Mr. Howard served as a Vice President of the Company from March
1996 until July 1996. Mr. Howard served as President of Denwest Restaurant Corp. ("DRC") from
November 1994 until March 1996 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. Robert H. Manschot
Age - 57 Director
Director since 1999 Mr. Manschot currently serves as the Managing Director and Chairman of Manschot Investment
Group L.L.C., an investment fund that is in the business 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 Seceurop Security Services and GeldNet, which are privately held emergency
services companies operating in Europe; as Chairman of RHEM International Enterprises, Inc., which
engages in business consulting services and venture capital activities; and as Chairman of Motorsports
Promotions, Inc. Mr. Manschot 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 Hay Group, an international
consulting firm, from 1978 until October 1987, serving as Vice President and a partner from 1984, where he
led strategic consulting practices in Europe, Asia and the western United States. Mr. Manschot 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 Action Performance
Companies, Inc., a publicly traded company, and as a director of Thomas 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 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. EXECUTIVE OFFICERS The information set forth under Item 4A. "Executive Officers of the Registrant" in Part I of the Form
10-K is incorporated herein by this reference as if set forth herein verbatim. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, 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. 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 a review of the copies of these reports furnished to the Company or written
representations that no other reports were required, the Company believes that all of the directors, executive
officers and greater than 10 percent beneficial owners complied with these requirements during the 2000
fiscal year. ITEM 11. EXECUTIVE COMPENSATION. COMPENSATION OF MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS The following table sets forth information concerning the compensation of all persons who served as
the Company's Chief Executive Officer during fiscal 2000 and each of the three other most highly
compensated executive officers whose cash salary and bonus exceeded $100,000 during the fiscal year
ended December 27, 2000: SUMMARY COMPENSATION TABLE ------------------------------- --------------------------------- Principal Position ---------------------- ----- ------------ ------------ Options (#) -------------- 1999 1998 520,000 520,000 -- - - - Chairman of the Board and Chief
Executive Officer (3) 1999 1998 -- -- -- - -- - President and Chief Operating
Officer (4) 1999 1998 220,000 220,000 -- 50,000 -- -- 1999 1998 175,000 175,000 -- 50,000 -- -- 1999 1998 260,000 260,000 -- -- -- --
Annual Compensation (1)
Long-Term Compensation
Name and
Fiscal
Year
Salary ($)
Bonus ($)
Securities Underlying
Jack M. Lloyd, former Chairman
of the Board and Chief Executive
Officer (2)
2000
324,000
--
-
Robert M. Langford,
2000
50,000
--
200,000
William G. Cox,
2000
220,000
--
--
Robert J. Gentz, Executive Vice
President (5)
2000
175,000
--
--
William J. Howard, Executive
Vice President and Secretary (6)
2000
260,000
--
--
(1) Each of the officers listed received certain perquisites, the aggregate value of which did not exceed the lesser of $50,000 or 10 percent of their salary and bonus during fiscal 2000.
(2) Mr. Lloyd resigned as Chairman of the Board and Chief Executive Officer of the Company in August 2000.
(3) Mr. Langford was elected Chairman of the Board and Chief Executive Officer of the Company in October 2000. All amounts represent partial year compensation.
(4) Mr. Cox resigned as President and Chief Operating Officer of the Company on January 26, 2001.
(5) Mr. Gentz resigned as Executive Vice President of the Company on January 26, 2001.
(6) Mr. Howard resigned as Executive Vice President and Secretary of the Company in December 2000. Mr. Howard also served as interim Chairman and Chief Executive Officer of the Company from August 2000 until October 2000.
Option Grants
The following table sets forth certain information with respect to stock options granted to the named executive officers during the fiscal year ended December 27, 2000:
OPTION GRANTS IN LAST FISCAL YEAR
Name ------- |
Number of Securities Underlying Options Granted (#) ------------- |
Percentage
of Total
Options
Granted to
Employees
in Fiscal
Year
------ |
Exercise Price ($)/Share (1) ---- |
Exercise Price at Date of Grant ($) ----------- |
Expiration Date ------ |
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (2) ----------- |
0% | 5% | 10% | ||||||
Robert Langford |
200,000 |
50% |
0.38 |
0.38 |
10/10/2010 |
$ - |
$47,796 |
$121,124 |
(1) For purposes of this disclosure, it is assumed that one hundred percent of the options were vested and exercisable on the date of grant.
(2) Potential gains are net of the exercise price but before taxes associated with the exercise. Amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. The assumed 5 percent and 10 percent rate of stock price appreciation are provided in accordance with the rules of the SEC and do not represent the Company's estimate or projection of the future price of the Company's common stock. Actual gains, if any, on stock option exercises will depend on the future market prices of the Company's common stock.
Option Holdings
The following table sets forth information concerning the number and value of all options held at December 27, 2000, by the named executive officers. None of the named executive officers exercised any options during fiscal 2000:
YEAR-END OPTION VALUES
Number of Securities Underlying
Unexercised Options at Fiscal Year-End (#)
------------------------------------------------ |
Value of Unexercised In-the-Money
Options at Fiscal Year-End ($)
------------------------------------- |
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) Options previously held by Messrs. Cox and Gentz were canceled by mutual agreement during fiscal 2000.
401(k) Plan
In April 1998, the Company established a defined contribution plan, or 401(k) Plan, that qualifies as a cash or deferred profit sharing plan under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. Under the 401(k) Plan, participating employees may defer from 1 - 15 percent of their pre-tax compensation, subject to the maximum dollar amount allowed under the Internal Revenue Code. In addition, the 401(k) Plan provides that the Company may make discretionary contributions to participating employees in such amounts as may be determined by the Board of Directors. Highly compensated employees of the Company, including 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 MRR was executed in February 2001. The operating agreement, which provides for a quarterly fee of $100,000 and terminates on May 8, 2001, provides for the continued professional advice and managerial oversight by Messrs. Cox and Gentz with respect to the Company's 72 remaining Denny's restaurants.
Severance Agreements
In October 2000, the Board of Directors approved a severance agreement for Mr. William J. Howard for a one-year period commencing January 1, 2001 at a rate and on payment terms equal to Mr. Howard's fiscal 2000 base salary.
Director Compensation
Employees of the Company do not receive compensation for serving as members of the Board of Directors. Non-employee members of the Board of Directors receive cash compensation in the amount of $25,000 per year. Options to purchase 10,000 shares of common stock are automatically granted to each of the Company'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 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 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 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 the remainder vest and become exercisable after two years of continuous service on the Board of Directors.
Compensation Committee Interlocks and Insider Participation
Fred W. Martin and Robert H. Manschot served as members of the Compensation Committee of the Board of Directors during fiscal 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 2000 except as directors.
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 stock beneficially owned as of April 6, 2001 by each of the directors and named executive officers, all current directors and executive officers of the Company as a group and each person known by the Company to be the beneficial owner of 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 percent of the outstanding shares of common stock.
(1) Except as otherwise indicated, each person named in the table has sole voting and investment power with respect to all common stock beneficially owned by him, subject to applicable community property law. Except as otherwise indicated, such persons may be reached through the Company at 7373 N. Scottsdale Road, Suite D-120, Scottsdale, Arizona 85253.
(2) The numbers and percentages shown include the shares of common stock actually owned as of April 6, 2001 and the shares of common 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 stock which the identified person or group had the right to acquire within 60 days of April 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 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 stock owned by any other person.
(3) Represents 200,000 shares of common stock issuable upon exercise of vested options.
(4) Represents 200,000 shares of common stock issuable upon exercise of vested options.
(5) Represents 10,000 shares of common stock issuable upon the exercise of vested options.
(6) Represents 7,000 shares of common stock held by Mr. Martin and his spouse and 100,000 shares issuable upon the exercise of vested options.
(7) Represents 83,068 shares of common stock issuable upon the exercise of vested options.
(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 3,469,727 shares of common stock held by Mr. Lloyd and his spouse.
(10) BancBoston Ventures Inc. is a subsidiary of FleetBoston Financial Corporation, which may be deemed to be the beneficial owner of such shares. The address of BancBoston Ventures Inc. and FleetBoston Financial Corporation is 100 Federal Street, Boston, Massachusetts 02110. The information regarding this share ownership is based on the schedule 13G filed by FleetBoston Financial Corporation with the SEC on February 14, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as disclosed under Part III hereof and except as set forth below, the Company's executive officers and directors did not have significant business relationships with the Company that would require disclosure under applicable SEC regulations and no such transactions are anticipated during the 2001 fiscal year.
In connection with the financing of the 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 $14.3 million the equipment located at 62 Black-eyed Pea restaurants leased by Black-eyed Pea USA, Inc., a wholly-owned subsidiary of the Company, or Texas BEP, L.P., a limited partnership in which Black-eyed Pea USA, Inc. is the general partner and in which a wholly-owned subsidiary of Black-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 Black-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 Black-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. Mr. 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 $14.3 million from 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 each have personally guaranteed certain of the Company's indebtedness and other 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 ("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, 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 exercised the warrants associated with their Series B Notes and purchased 146,611 and 293,223 shares of common stock, respectively, at an exercise price of $.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 more than 25 percent of the Series B Notes and purports to accelerate the payment of all 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 March 29, 1996 (the "Intercreditor Agreement"), among Banque Paribas, as Agent under the Credit Agreement (as defined therein), certain holders of 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 1998 and 2000, the Company made various advances to Jack M. Lloyd. Such advances totaled approximately $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 23 Denny's restaurants to Mountain Range Restaurants, LLC ("MRR") for $20.3 million consisting of $17.3 million in cash and a 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 building. Mr. Langford's interest has been disclosed to the Company's Board of Directors.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, and Rule 12b-15 promulgated thereunder, Phoenix Restaurant Group, Inc. has duly caused this Amendment 1 to Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on this 26th day of April, 2001.
PHOENIX RESTAURANT GROUP, INC.
By: /s/ Jeffrey M. Pate
-----------------------------------------------
Name: Jeffrey M. Pate
-------------------------------------------
Title: Chief Financial Officer, Secretary and Senior Vice President
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