-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D3kafCmHGPYmSP9R2m6XVPWYt8q//QYT+Eww4Zx4cMV8khS9ZuSxRWikf+YuoxZw nSpxIsx92+BrDyUOknZvRA== 0000950117-95-000523.txt : 19951229 0000950117-95-000523.hdr.sgml : 19951229 ACCESSION NUMBER: 0000950117-95-000523 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951228 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARK RESTAURANTS CORP CENTRAL INDEX KEY: 0000779544 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133156768 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09453 FILM NUMBER: 95605351 BUSINESS ADDRESS: STREET 1: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 BUSINESS PHONE: 2122068800 MAIL ADDRESS: STREET 2: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 10-K405 1 ARK RESTAURANTS 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended September 30, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________ to ____________ Commission file number 0-14030 ARK RESTAURANTS CORP. ----------------------------------------------------------------- (Exact name of Registrant as specified in its charter) New York 13-3156768 - --------------------------------- -------------------------------------- (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 85 Fifth Avenue, New York, N.Y. 10003 ----------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 206-8800 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered Common Stock, $.01 par value NASDAQ/NMS Securities registered pursuant to Section 12(g) of the Act: None 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 registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X] The aggregate market value at December 18, 1995 of shares of the Registrant's Common Stock, $.01 par value (based upon the closing price per share of such stock on the NASDAQ/National Market) held by non-affiliates of the Registrant was approximately $14,455,586. Solely for the purposes of this calculation, shares held by directors and officers of the Registrant have been excluded. Such exclusion should not be deemed a determination or an admission by the Registrant that such individuals are, in fact, affiliates of the Registrant. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At December 18, 1995, there were outstanding 3,191,045 shares of the Registrant's Common Stock, $.01 par value. Document Incorporated by Reference: Certain portions of the Registrant's definitive proxy statement to be filed not later than January 29, 1996 pursuant to Regulation 14A are incorporated by reference in Items 10 through 13 of Part III of this Annual Report on Form 10-K. PART I Item 1. Business General Ark Restaurants Corp. (the "Registrant or the Company") is a holding company which, through subsidiaries, operates 29 restaurants, two bakeries and a cafeteria. Of those facilities, 23 restaurants and two bakeries are owned by the Company and six restaurants and the cafeteria are owned by others and managed by the Company. The Company was formed in 1983 to concentrate the ownership of four restaurants operated by the the Company's principals since 1975. Until 1987 all of the Company's facilities were located in the New York City metropolitan area. In 1987, three facilities were opened in Boston, Massachusetts. Since then the Company has opened five facilities in the Washington, D.C. metropolitan area, one in Islamorada, Florida, one in Oxnard, California, one in Rhinebeck, New York and one in Jersey City, New Jersey. In addition to the shift from a Manhattan-based operation, the nature of the facilities operated by the Company has shifted from smaller, neighborhood restaurants, to larger destination restaurants intended to benefit from high patron traffic attributable to the uniqueness of the restaurant's location. Most of the restaurants opened in recent years are of the latter description and the Company intends to concentrate on developing or acquiring similar facilities in the future. In fiscal 1995, the Company opened two such restaurants (B. Smith's in Washington and Bryant Park Grill and Cafe in New York). The Company contemplates the opening in late 1996 or early 1997 of a group of restaurants in the 2,100 room hotel to be known as New York, New York Hotel & Casino under construction in Las Vegas, Nevada. The names and themes of the Company's restaurants are different except for the Company's three America restaurants, two B. Smith's restaurants and two Sequoia restaurants. The menus in the Company's restaurants are extensive, offering a wide variety of high quality foods at generally moderate prices. Two of the Company's restaurants, Lutece and An American Place, may be classified as expensive. The atmosphere at many of the restaurants is lively and extremely casual. Most of the restaurants have separate bar areas utilized by diners awaiting tables. A majority of the net sales of the Company is derived from dinner as opposed to lunch service. Most of the restaurants are open seven days a week and most serve lunch as well as dinner. While decors differ from restaurant to restaurant, interiors are marked by distinctive architectural and design elements which often incorporate dramatic interior open spaces and extensive glass exteriors. The wall treatments, lighting and decorations are typically vivid, unusual and in some cases, highly theatrical. -3- The following table sets forth certain information with respect to the Company's facilities currently in operation.
Name Location Year Opened(1) Restaurant Size Seating Lease ---- -------- -------------- (Square feet) Capacity(2) Expiration(3) --------------- Indoor- ------------- (Outdoor) --------- Museum Cafe Columbus Avenue 1975 1,600 100 1998 New York, NY (at 77th Street) Perretti Columbus Avenue 1977 1,600 124 2003 New York, NY (between 72nd and 73rd Streets) Metropolitan Cafe First Avenue 1982 4,000 180-(50) 2006 New York, NY (between 52nd and 53rd Streets) Ernie's Broadway 1983 6,600 300 2008 New York, NY (between 75th and 76th Streets) America 18th Street 1984 9,600 350 2004 New York, NY (between 5th Avenue and Broadway) Woody's (4) Seventh Avenue South 1986 1,700 90 1999 New York, NY (between Charles and 10th Streets) B. Smith's (5) Eighth Avenue 1986 8,000 400 2006 New York, NY (at 47th Street) Rodeo Bar and Third Avenue 1987 4,300 120 2000 Grill New York, NY (at 27th Street) The Marketplace Faneuil Hall Market, 1987 3,000 100 2000 Cafe (4) Boston, Massachusetts El Rio Grande Third Avenue 1987 4,000 160 2014 (4)(6) New York, NY (between 38th and 39th Streets) The Brewskeller Faneuil Hall Market 1987 1,500 50 2000 (4) Boston, Massachusetts
-4-
Name Location Year Opened(1) Restaurant Size Seating Lease ---- -------- -------------- (Square feet) Capacity(2) Expiration(3) ---------------- Indoor- ------------- (Outdoor) --------- An American Park Avenue 1986 6,000 180 2005 Place New York, NY (at 32nd Street) Gonzalez y Broadway 1989 6,000 250 1999 Gonzalez New York, NY (between Houston and Bleeker Streets) America Union Station 1989 10,000 400 2009 Washington, D.C. Center Cafe Union Station 1989 4,000 200 2009 Washington, D.C. Sequoia Washington Harbour 1990 26,000 600-(400) 2005 Washington, D.C. Sequoia South Street Seaport 1991 12,000 300-(100) 2006 New York, NY Beekman 1766 Mill Street 1991 5,000 225 2001 Tavern Rhinebeck, NY Mackinac Bar & 384 Columbus Avenue 1991 3,500 130 2004 Grill (4) New York, NY (between 78th and 79th Streets) Canyon Road First Avenue 1984 2,500 130 2004 New York, NY (between 76th and 77th Streets) Louisiana Broadway 1992 4,500 130 1999 Community Bar & New York, NY Grill (between Houston & Bleeker Streets) Oar Bar & Grill Faneuil Hall Market 1987 2,500 130 2000 (4) Boston, Massachusetts Jim McMullen Third Avenue 1993 6,000 250 2002 New York, NY (between 76th and 77th Streets) Whale's Tail Channel Islands Harbor 1993 10,000 300 2028 Oxnard, California America Tyson's Corner 1994 11,000 400 2014 McLean, Virginia B. Smith's(5) Union Station 1994 8,600 280 2009 Washington, D.C.
-5-
Name Location Year Opened(1) Restaurant Size Seating Lease ---- -------- -------------- (Square feet) Capacity(2) Expiration(3) ---------------- Indoor- ------------- (Outdoor) --------- Lutece East 50th Street 1994 2,500 92 2019 New York, NY (between 2nd and 3rd Avenues) Lorelei Restaurant Islamorada, Florida 1994 10,000 400 2029 and Cabana Bar Columbus Bakery Columbus Avenue 1988 2,000 25 2002 New York, New York (between 82nd and 83rd Street) Bryant Park Grill Bryant Park 1995 [25,000] 180-(1,020) 2025 New York, New York Columbus Bakery First Avenue 1995 2000 75 2006 New York, NY (between 52nd and 53rd Streets) Market at Newport Office Tower 1995 7,500 250 2015 Newport (4) 525 Washington Blvd. Jersey City, NJ
(1) Restaurants are, from time to time, renovated and/or renamed. "Year Opened" refers to the year in which the Company or an affiliated predecessor of the Company first opened, acquired or began managing a restaurant at the applicable location, notwithstanding that the restaurant name may have changed since that date. (2) Seating capacity refers to the seating capacity of the indoor part of a restaurant, therefor available for dining in all seasons and weather conditions. Outdoor seating capacity, if applicable, is set forth in parentheses and refers to the seating capacity of terraces and sidewalk cafes which are available for dining only in the warm seasons and then only in clement weather. (3) Assumes the exercise of all available lease renewal options. (4) Restaurant owned by a third party and managed by the Company. Management fees earned by the Company are based either on a percentage of cash flow of the restaurant or a fixed amount or a combination of the two. (5) 20% of the stock of each of the corporate subsidiaries operating the two B. Smith's restaurants is owned by the manager of the restaurant. The corporate subsidiaries owning or managing all of the other facilities are wholly-owned by the Company. (6) The Company owns a 19% interest in the partnership which owns El Rio Grande. -6- Restaurant Expansion During the first quarter of fiscal 1995, the Company opened its second B. Smith's in Union Station, Washington D.C. During fiscal 1994, the Company entered into agreements to acquire Lutece in New York City and the Lorelei Restaurant and Cabana Bar in Islamorada, Florida, both of which acquisitions were completed in the first quarter of fiscal 1995. During fiscal 1995, the Company converted a restaurant on Columbus Avenue in Manhattan into the Columbus Bakery. The Columbus Bakery supplies baked goods to other facilities of the Company in Manhattan. It also sells at retail, coffee, baked goods and prepared foods on a "take out" basis or for on premise consumption. During the first quarter of fiscal 1996, the Company opened another bakery (Columbus Bakery), operating on a retail basis similar to that of the existing Columbus Bakery, in premises adjacent to the Company's Metropolitan Cafe restaurant on First Avenue in Manhattan. In the third fiscal quarter of 1995, the Company opened a major facility in Bryant Park, Manhattan. The facility includes a restaurant, the Bryant Park Grill and an outdoor cafe, the Bryant Park Cafe. The Bryant Park Grill has 180 seats indoors plus 400 additional seats on its roof and in an adjacent outdoor garden. The Bryant Park Cafe has 620 outdoor seats in the Bryant Park terrace. The Company has recently signed letters of intent with New York, New York Hotel & Casino, a joint venture between Primadonna Resorts, Inc. and MGM Grand, Inc. to design, build and operate a group of restaurants in the 2,100 room Las Vegas resort casino which is expected to open in December 1996. Under the terms of the letters of intent, the Company will build a 450-seat America restaurant, a 150-seat steakhouse and a group of small fast food restaurants in a food court with a New York theme. The steakhouse will be operated under the name "Gallaghers" under a license agreement from the owner of the New York restaurant of that name. In addition, the Company will operate the hotel's room service, its banquet facilities and its employee cafeteria. The transaction is subject to the negotiation of definitive agreements. The opening of a new restaurant is invariably accompanied by substantial pre-opening expenses and early operating losses associated with the training of personnel, excess kitchen costs and costs of supervision and other expenses during the pre-opening period and during a post-opening "shake out" period until operations can be considered to be functioning normally. The Company estimates that such pre-opening expenses and early operating losses were approximately $950,000 in connection with the opening of B. Smith's in Washington, the Columbus Avenue Bakery and the Company's Bryant Park facilities. The amount of such pre-opening expense and early operating loss can generally be expected to depend upon the size and complexity of the facility being opened. Accordingly, the Company expects to incur extensive pre-opening expenses and early operating losses in connection with the opening of the planned Las Vegas operations. The Company intends to direct its restaurant expertise and financial resources in developing larger restaurants benefitting from the high patron traffic of unique locations, such as Sequoia in New York and Washington, America in Washington, B. Smith's in Washington, Bryant Park and the planned Las Vegas facility. Nevertheless, the Company also intends to take advantage of other opportunities considered to be favorable when they occur, such as the acquisition of the highly regarded restaurant Lutece in the last fiscal year. Restaurant Management Each restaurant is managed by its own manager and has its own chef. Food products and other supplies -7- are purchased from various unaffiliated suppliers in most cases by the Company's headquarters personnel. The Company's restaurants have two or more assistant managers and assistant chefs. The executive chef department designs menus and supervises the kitchens. Financial and management control is maintained at the corporate level through the use of an automated data processing system that includes centralized accounting and reporting. The Company has developed its own proprietary software which processes information input daily at the Company's restaurants. The Company believes that the information generated by this process enables it to monitor closely the activities at each restaurant and enhances the Company's ability to effectively manage its restaurants. Employees At December 9, 1995, the Company employed 1,949 persons (including employees at managed facilities), 36 of whom were headquarters personnel, 124 of whom were restaurant management personnel, 551 of whom were kitchen personnel and 1,238 of whom were restaurant service personnel. A number of the Company's restaurant service personnel are employed on a part-time basis. Changes in minimum wage levels may affect the labor costs of the Company and the restaurant industry generally because a large percentage of restaurant personnel are paid at or slightly above the minimum wage. With the exception of the employees at Lutece in New York, the Company's employees are not covered by a collective bargaining agreement. The Company believes its employee relations are satisfactory. Competition The restaurant and bar business is intensely competitive and involves a high degree of risk. The Company believes that a large number of new restaurants and bars open each year, a significant number of which do not succeed. Even successful restaurants and bars can rapidly lose popularity due to changes in consumer tastes, economic conditions and population and traffic patterns. There is active competition for competent chefs and management personnel and intense competition among major restaurateurs and food service companies for the larger, unique sites suitable for restaurants. Government Regulation The Company is subject to various federal, state and local laws and regulations affecting its business, including a variety of regulatory provisions relating to wholesomeness of food, sanitation, health, safety and licensing in the sale of alcoholic beverages. A number of the Company's restaurants have open or enclosed outdoor cafes which require the approval of, or licensing by, a number of governmental agencies. The suspension by any regulatory agency of the food service or liquor license of any of the Company's bars or restaurants would have a material adverse effect upon the affected bar or restaurant and may adversely affect the Company as a whole. The New York State Liquor Authority must approve any transaction in which a shareholder of the Company increases his holdings to 10% or more of the outstanding capital stock of the Company and any transaction involving 10% or more of the outstanding capital stock of the Company. Seasonal Nature of Business The Company's business is highly seasonal. The second quarter, consisting of the non-holiday portion of the cold weather season in New York, Boston and Washington (January, February and March), is the poorest performing quarter. The Company achieves its best results during the warm weather, attributable -8- to the Company's extensive outdoor dining availability, particularly at Bryant Park and Sequoia in Washington (the Company's largest restaurants) and the Company's numerous outdoor cafes. The Company anticipates that the planned facility in Las Vegas will operate on a more level basis through the year and, accordingly, may have the effect of reducing the seasonal nature of the Company's business as it currently exists. -9- Item 2. Properties The Company's facilities and executive offices are occupied under leases. Most of the Company's restaurant and bar leases provide for the payment of base rents plus real estate taxes, insurance and other expenses and, in certain instances, for the payment of a percentage of the Company's sales at such facility. These leases (including leases for managed restaurants) have initial terms expiring as follows:
Years Lease Number of Term Expire Facilities ----------- ---------- 1995-2000 13 2001-2005 8 2006-2010 8 2011-2015 4 2016-2020 0 2021-2025 0 2026-2030 1
The Company's executive, administrative and clerical offices, located in approximately 8,500 square feet of office space at 85 Fifth Avenue, New York, New York, are occupied under a lease which expires in October 2008, which includes one five year renewal option. The Company maintains an office in Washington, D.C. for its catering operations, the lease for which expires in December 1997. For information concerning the Company's future minimum rental commitments under non-cancelable operating leases, see Note 6 of Notes to Consolidated Financial Statements. Item 3. Legal Proceedings In the ordinary course of its business, the Company is a party to various lawsuits arising from accidents at its restaurants and workmen's compensation claims, which are generally handled by the Company's insurance carriers. The employment by the Company of management personnel, waiters, waitresses and kitchen staff at a number of different restaurants has resulted in the institution, from time to time, of litigation alleging violation by the Company of employment discrimination laws. Various discrimination suits are currently pending, some of which involve substantial claims for compensatory and punitive damages. The Company does not believe that any of such suits will have a materially adverse effect upon the Company, its financial condition or operations. In the third quarter of fiscal 1995, the Company settled an action brought by employees at one of the Company's restaurants which alleged violations of federal and state wage and hour laws. The circumstances that gave rise to this claim existed at this restaurant only and have since been remedied. Pursuant to the terms of the settlement the Company paid approximately $375,000 to the plaintiffs (including their legal fees). -10- Item 4. Submission of Matters to a Vote of Security Holders Not applicable. -11- Executive Officers of the Company The following table sets forth the names and ages of executive officers of the Company and all offices held by each person:
Name Age Positions and Offices ---- --- --------------------- Michael Weinstein 52 President Vincent Pascal 52 Vice President and Secretary Robert Towers 48 Vice President and Treasurer Andrew Kuruc 37 Vice President and Controller
Each executive officer of the Company serves at the pleasure of the Board of Directors and until his successor is duly elected and qualifies. Michael Weinstein has been President and a director of the Company since its inception in January 1983. Since 1978, Mr. Weinstein has been an officer, director and 25% shareholder of Easy Diners, Inc., a restaurant management company which operates two restaurants in New York City. Since 1976, Mr. Weinstein has been an officer, director and shareholder of Teacher's Restaurant Limited, which owns and operates another restaurant in New York City. Neither Easy Diners, Inc. nor Teachers Restaurant Limited is a parent, subsidiary or other affiliate of the Company. Mr. Weinstein spends substantially all of his business time on Company-related matters. Vincent Pascal was elected Vice President, Assistant Secretary and a director of the Company in October 1985. Mr. Pascal became Secretary of the Company in January 1994. Robert Towers has been employed by the Company since November 1983 and was elected Vice President, Treasurer and a director in March 1987. Andrew Kuruc has been employed as Controller of the Company since April 1987 and was elected as a director of the Company in November 1989. -12- PART II Item 5. Market for the Company's Common Stock and Related Security Holder Matters Market Information Effective December 14, 1994, the Company's Common Stock, $.01 par value, began trading in the over-the-counter market on the NASDAQ National Market ("NASDAQ") under the symbol "ARKR." For more than the two-year period prior thereto, the Company's Common Stock was traded on the American Stock Exchange ("AMEX"). The high and low sale prices for the Common Stock from October 2, 1993 through September 30, 1995 are as follows: Calendar 1993 Fourth Quarter 11 1/4 9 1/4 Calendar 1994 First Quarter 11 1/4 8 7/8 Second Quarter 9 1/8 6 3/8 Third Quarter 7 5/8 6 1/2 Fourth Quarter October 1 - December 13 (AMEX) 8 3/8 7 December 14 - December 31 (NASDAQ) 8 1/2 7 Calendar 1995 First Quarter 10 1/4 7 5/8 Second Quarter 10 1/2 8 1/4 Third Quarter 10 1/4 8
Dividends The Company has not paid cash dividends since its inception and does not intend to pay dividends in the foreseeable future. Under the terms of the Revolving Credit and Term Loan Agreement between the Company and its main lender, the Company may pay cash dividends and redeem shares of Common Stock in any fiscal year only to the extent of an amount equal to 20% of operating cash flow for such fiscal year. Number of Shareholders As of December 18, 1995, there were 95 holders of record of the Company's Common Stock. -13- ARK RESTAURANTS CORP. AND SUBSIDIARIES Item 6. Selected Consolidated Financial Data The following table sets forth certain financial data for the fiscal years ended 1991 through 1995. This information should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto appearing at page F-1.
Year Ended ------------------------------------------------------------------------------- September 30, October 1, October 2, October 3, September 28, 1995 1994 1993 1992 1991 OPERATING DATA: Net sales $73,026,907 $60,404,339 $55,973,227 $49,283,481 $41,555,383 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Gross restaurant profit $53,001,963 $43,562,653 $40,364,491 $35,406,559 $29,900,170 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Operating income (1) $ 960,794 $ 840,452 $ 3,384,230 $ 2,671,891 $ 2,138,583 Other income, net 937,763 507,200 268,606 250,558 110,439 ----------- ----------- ----------- ----------- ----------- Income before provision for income taxes and extraordinary item $ 1,898,557 $ 1,347,652 $ 3,652,836 $ 2,922,449 $ 2,249,022 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income (loss) before extraordinary item $ 1,121,126 $ 643,032 $ 1,817,637 $ 1,473,133 $ 1,078,396 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ 1,121,126 $ 1,150,802 $ 1,936,737 $ 1,546,033 $ 1,120,896 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income (loss) per share before extraordinary item and cumulative effect of accounting change $.34 $.20 $.57 $.48 $.37 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- NET INCOME (LOSS) PER SHARE $.34 $.36 $.61 $.50 $.38 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted average number of shares used in computation 3,251,336 3,225,680 3,198,429 3,101,719 2,952,595 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- BALANCE SHEET DATA (end of period): Total assets $28,541,920 $21,768,747 $19,037,744 $17,579,531 $16,350,325 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Working capital (deficit) $ 40,996 $ 1,517,601 $ 490,956 $ (151,773) $(1,482,527) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Long-term debt $ 4,014,162 $ 761,386 $ 165,728 $ 1,537,243 $ 2,141,531 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shareholders' equity $16,706,301 $15,210,202 $13,908,116 $11,444,566 $ 9,898,532 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Shareholders' equity per share $5.24 $4.88 $4.51 $3.88 $3.35 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Restaurants in operation at end of year, including restaurants managed 32 27 26 24 23 -- -- -- -- -- -- -- -- -- --
(1) Operating income includes charges incurred in restaurant closed of $106,586 in the year ended, October 3, 1992. -14- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Accounting period The Company's fiscal year ends on the Saturday nearest September 30. The fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993 included 52 weeks. Net Sales Net sales at restaurants and bars owned by the Company increased by 20.9% from fiscal 1994 to fiscal 1995 and by 7.9% from fiscal 1993 to fiscal 1994. The increase in fiscal 1995 was due primarily to sales from restaurants acquired or opened in fiscal 1995 (Bryant Park Grill & Cafe, B. Smith's in Washington, D.C., Lorelei Restaurant and Cabana Bar and Lutece) and the first full operating year of a restaurant opened in fiscal 1994 (America in McLean, Virginia). Same store sales in fiscal 1995 decreased by 0.8%. The increase in fiscal 1994 was primarily due to sales from the first full operating year of restaurants acquired in fiscal 1993 (Jim McMullen and Whale's Tail) along with sales from a new restaurant opened in fiscal 1994 (America in Tyson's Corner, Virginia). Same store sales in fiscal 1994 increased by 2.5% principally due to increased customer counts. Costs and Expenses The Company's cost of sales consists principally of food and beverage costs at restaurants and bars owned by the Company. Cost of sales as a percentage of net sales was 27.4% in fiscal 1995 and 27.9% in both fiscal 1994 and fiscal 1993. The Company believes its sophisticated centralized purchasing system has enabled it to efficiently utilize its purchasing power by upgrading product quality while controlling costs. Operating expenses of the Company, consisting of restaurant payroll, occupancy and other expenses at restaurants and bars owned by the Company, as a percentage of net sales, were 66.7% in fiscal 1995, 64.2% in fiscal 1994 and 61.6% in fiscal 1993. Restaurant payroll as a percentage of net sales was 35.9% in fiscal 1995, 34.9% in fiscal 1994 and 33.7% in fiscal 1993. This increase in payroll expenses was principally due to costs associated with new restaurant openings in fiscal 1995 and to a special charge related to the settlement of a claim brought by the employees of one of the Company's New York restaurants alleging violations of federal and state wage and hour laws. Occupancy expenses (consisting of rent, rent taxes, real estate taxes, insurance and utility costs) were approximately 12.5% in both fiscal 1995 and fiscal 1994 and were 11.7% in fiscal 1993. The Company incurred approximately $950,000 of pre-opening and early operating losses at newly opened restaurants in fiscal 1995, $430,000 in fiscal 1994 and $160,000 in fiscal 1993. The Company typically incurs significant pre-opening expenses in connection with its new restaurants which are expended as incurred. Furthermore, it is not uncommon that such restaurants experience operating losses during the early months of operation. General and administrative expenses, as a percentage of net sales, decreased to 5.8% in fiscal 1995 from 6.6% in fiscal 1994 and were 5.8% in fiscal 1993. The decrease in fiscal 1995 was primarily due -15- to the fact that the Company was able to manage the 20.9% increase in net sales with only a nominal increase in general and administrative expenses. In fiscal 1994 the Company had increased development staff in expectation of the fiscal 1995 new restaurants and acquisitions. If net sales at managed restaurants were included in consolidated net sales, general and administrative expenses as a percentage of net sales would have been 5.0% in fiscal 1995, 5.6% in fiscal 1994 and 4.8% in fiscal 1993. As of September 30, 1995 the Company managed seven facilities owned by others (El Rio Grande, Mackinac Bar and Grill, and Woody's in Manhattan, The Market at Newport in Jersey City, New Jersey, the Marketplace Cafe, Oar Bar & Grill, and the Brewskeller Pub in Boston, Massachusetts). Net sales of these restaurants, which were $10,839,000 during fiscal 1995, $10,643,000 during fiscal 1994 and $10,973,000 during fiscal 1993, are not included in consolidated net sales. Management fee income in fiscal 1994 is net of charges totaling $719,000 from the write-off of unrecoverable advances to a managed restaurant in Miami, Florida, which the Company no longer manages, and from the write-off of a discontinued New York catering operation. Interest expense was $359,000 in fiscal 1995, $143,000 in fiscal 1994, and $106,000 in fiscal 1993. The increase in fiscal 1995 from 1994 is principally due to borrowings to finance the new restaurant openings and acquisitions in fiscal 1995. Interest income was $78,000 in fiscal 1995, $93,000 in fiscal 1994, and $130,000 in fiscal 1993. The decrease in fiscal 1995 was due to continued repayment of long-term receivables and lower interest rates. Other income, which generally consists of purchasing service fees, and the sale of logo T-shirts at various restaurants, was $1,219,000 in fiscal 1995, $557,000 in fiscal 1994 and $245,000 in fiscal 1993. The significant increases in fiscal 1995 and fiscal 1994 were principally due to amounts the Company received from a third party due to the temporary closing in fiscal 1994 of a restaurant (Ernie's). Income Taxes The provision for income taxes reflects Federal income taxes calculated on a consolidated basis and state and local income taxes calculated by each New York subsidiary on a non-consolidated basis. Most of the restaurants owned or managed by the Company are owned or managed by a separate subsidiary. For state and local income tax purposes, the losses incurred by a subsidiary may only be used to offset that subsidiary's income with the exception of the restaurants which operate in the District of Columbia. Accordingly, the Company's overall effective tax rate has varied depending on the level of losses incurred at individual subsidiaries. The Company's overall effective tax rate was 40% in fiscal 1995, 52% in fiscal 1994 and 47% in fiscal 1993. The Company's effective rate in fiscal 1995 benefited significantly from the first full fiscal year of tax credits available to the Company for FICA taxes paid by the Company with respect to tip income of service personnel. The effective tax rate in fiscal 1994 was negatively impacted by the charges to management fee income totaling $719,000 from the write-off of unrecoverable advances to a managed restaurant in Miami, Florida, which the Company no longer manages, and from the write-off of a discontinued New York catering operation. The Company's overall effective tax rate in the future will be affected by factors such as the level of losses incurred at the Company's New York facilities (which cannot be consolidated for state and local tax purposes), pre-tax income earned outside of New York City (where income tax rates are substantially lower in comparison to New York income tax rates) and the utilization of state and local net operating loss carry forwards. In order to more effectively utilize tax loss carry forwards at restaurants that were -16- unprofitable, the Company has merged certain profitable subsidiaries with certain loss subsidiaries. As a result of the enactment of the Revenue Reconciliation Act of 1993, the Company is entitled, commencing January 1, 1994, to a tax credit based on the amount of FICA taxes paid by the Company with respect to the tip income of restaurant service personnel. The net benefit to the Company was $299,000 in fiscal 1995 and $173,000 in fiscal 1994. The Company adopted the Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes" (SFAS No. 109), as of the beginning of fiscal 1994. This statement supersedes Accounting Principles Board Opinion No. 11 and requires an asset and liability approach for financial accounting and reporting of income taxes. The cumulative effect of this adoption was to increase net income by $508,000 in fiscal 1994. Liquidity and Sources of Capital The Company's source of capital is cash provided by operations and funds available from the $4,250,000 revolving credit agreement with its main bank. The Company utilizes capital primarily to fund the cost of developing and opening new restaurants and acquiring existing restaurants. The net cash used in investing activities in fiscal 1995 ($9,096,000), fiscal 1994 ($3,008,000) and fiscal 1993 ($1,790,000) was principally from the Company's continued investment in fixed assets associated with constructing new restaurants and acquiring existing restaurants. In fiscal 1995 the Company opened a 1,200-seat restaurant in Bryant Park, a nine-acre park behind the New York City Public Library (Bryant Park Grill & Cafe) and opened another restaurant in Union Station in Washington, DC (B.Smith's, the Company's second such restaurant). The Company also acquired two restaurants - a renowned French restaurant in New York City (Lutece) and a casual restaurant and bar in the Florida Keys (Lorelei Restaurant and Cabana Bar). In fiscal 1994 the Company opened a 400-seat restaurant (America in Tyson's Corner Shopping Complex in McLean, Virginia) and completed the acquisition of a restaurant in Oxnard, California (Whale's Tail). In fiscal 1993, the Company renovated an existing restaurant which the Company has operated since 1977 (Perretti Italian Cafe) and the Company spent amounts on design and engineering services for the restaurant the Company opened in fiscal 1994 (America in McLean, Virginia). The net cash provided by financing activities in fiscal 1995 was principally from the Company's borrowings on its main credit facility exceeding repayments on such facility and proceeds from the sale leaseback of various kitchen equipment in a restaurant opened in New York City (Bryant Park Grill & Cafe). In fiscal 1994 the Company received proceeds from the sale leaseback of various kitchen equipment in the restaurant opened in McLean, Virginia (America). In fiscal 1993 net cash used in financing activities was principally for the continued repayment of indebtedness incurred to repurchase the Company's Common Stock ($661,000) and to a lesser extent the repayment of bank debt ($544,000). At September 30, 1995 and October 1, 1994 the Company had working capital of $41,000 and -17- $1,518,000, respectively. The significant decrease in working capital in fiscal 1995 from fiscal 1994 was principally due to cash expended for the restaurant openings and acquisitions incurred in fiscal 1995. The restaurant business does not require the maintenance of significant inventories or the financing of receivables, thus the Company is able to operate with minimal and even negative working capital. In August 1994 the Company and its main bank agreed to an extension and increase of the existing Revolving Credit and Term Loan Facility. The agreement enables the Company to borrow up to $4,250,000 until December 31, 1996, at which time outstanding loans may be converted into term loans payable in 36 monthly installments through December 31, 1999. At September 30, 1995 the Company had $3,000,000 outstanding under this agreement. In connection with this agreement, the Company also has a $1,750,000 Letter of Credit Facility. At September 30, 1995 the Company had delivered $1,131,000 in irrevocable letters of credit in lieu of lease security deposits. Certain provisions of the revolving credit facility limit permitted capital expenditures. During fiscal 1995, the Company exceeded the capital expenditure limitation covenant due to its significant investments in acquiring new restaurants and the construction costs for newly opened restaurants. The limitation was waived by the bank. The Company recently signed letters of intent with respect to extensive restaurant facilities to be operated by the Company in a new resort casino under construction in Las Vegas, Nevada. See "Restaurant Expansion" above. The Company expects that its capital commitments for these facilities will be between $8,000,000 and $9,000,000 which the Company intends to finance principally through a new financing facility with its main bank and, to a lesser extent, through cash from operations. The Company recently received a commitment letter from the bank which would amend the Company's existing revolving credit facility to provide for an increase in the amount the Company may borrow on a revolving credit basis to $11,000,000. The proposed revolving credit facility includes a $5,000,000 facility for working capital purposes at the Company's existing restaurants. Approximately $3,000,000 is outstanding under the current facility described above. Accordingly, approximately $2,000,000 in additional financing will be available for the restaurants currently in operation. The proposed revolving credit facility also includes a $6,000,000 facility for use in the construction of and as working capital for the Las Vegas restaurants. The two working capital facilities will each have two year terms at the end of which they will convert into two year term loans. The $5,000,000 facility will convert into a two year self-amortizing term loan. The $6,000,000 facility will convert into a two year term loan amortizing $5,000,000 over the two year period with the balance of $1,000,000 paid at maturity. The commitment of the bank is subject to the negotiation of definitive agreements and other conditions customary to a transaction of this nature. Although the Company is not currently committed to any other projects, the Company is exploring additional opportunities for expansion of its business. Additional expansion may require additional external financing. Recent Developments The preliminary results of operations for the first two months of the first quarter of fiscal 1996 reflect a decline in same store sales of approximately 5% as compared to the first quarter of fiscal 1995. While the Company currently operates four more restaurants than it did at the beginning of the first quarter of fiscal 1995 certain of these new restaurants, particularly Bryant Park facilities, are seasonal in nature and will not contribute significantly to earnings in the first quarter of fiscal 1996. -18- As a result, the Company expects to report less net income in the first quarter of fiscal 1996 than it did in the comparable period in 1995. Item 8. Financial Statements and Supplementary Data See page F-1. Item 9. Disagreements on Accounting and Financial Disclosure None. -19- PART III Item 10. Directors and Executive Officers of the Company See Part I, Item 4. "Executive Officers of the Company." Other information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than January 29, 1996 pursuant to Regulation 14A of the General Rules and Regulations ("Regulation 14A") under the Securities Exchange Act of 1934, as amended. Item 11. Executive Compensation The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than January 29, 1996 pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than January 29, 1996 pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than January 29, 1996 pursuant to Regulation 14A. Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) (1) Financial Statements: Page Report of Independent Certified Public Accountants F-1 Consolidated Balance Sheets -- at September 30, 1995 and October 1, 1994 F-2 Consolidated Statements of Operations -- For each of the three fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993 F-3 Consolidated Statements of Shareholders' Equity -- For each of the three fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993 F-4 Consolidated Statements of Cash Flows -- For each of the three fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993 F-5 Notes to Consolidated Financial Statements F-6 -20- (2) Exhibits: 3.1 Certificate of Incorporation of the Registrant, filed on January 4, 1983, incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 1994 (the "1994 10-K"). 3.2 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on October 11, 1985, incorporated by reference to Exhibit 3.2 to the 1994 10-K. 3.3 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on July 21, 1988, incorporated by reference to Exhibit 3.3 to the 1994 10-K. 3.4 By-Laws of the Registrant, incorporated by reference to Exhibit 3.4 to the 1994 10-K. 10.1 Amended and Restated Redemption Agreement dated June 29, 1993 between the Registrant and Michael Weinstein, incorporated by reference to Exhibit 10.1 to the 1994 10-K. 10.2 Form of Indemnification Agreement entered into between the Registrant and each of Michael Weinstein, Ernest Bogen, Vincent Pascal, Robert Towers, Jay Galin, Andrew Kuruc and Donald D. Shack, incorporated by reference to Exhibit 10.2 to the 1994 10-K. 10.3 Ark Restaurants Corp. Amended Stock Option Plan, incorporated by reference to Exhibit 10.3 to the 1994 10-K. 10.4 Lease Agreement dated June 9, 1982, between Rebak Realty Co., as lessor, and MEB Emporium Corp., as lessee, incorporated by reference to Exhibit 10.4 to the 1994 10-K. 10.5 Lease Agreement dated October 27, 1982, between Majestic Towers Co., as lessor, and MEB Emporium Corp., as lessee, incorporated by reference to Exhibit 10.5 to the 1994 10-K. 10.6 Lease Agreement dated June 1, 1983, between 101 West 77th Street Corp., as lessor, and MEB On Columbus, Inc., as lessee, as assignee of DPK Restaurants, Inc., incorporated by reference to Exhibit 10.6 to the 1994 10-K. 10.7 Lease Agreement dated November 10, 1983, between BJW Associates, as lessor, and MEB Dining 18 Inc., as lessee, incorporated by reference to Exhibit 10.7 to the 1994 10-K. 10.8 Lease Agreement dated August 9, 1984, between G.P. Associates, as lessor, and MEB On First, Inc., as lessee, incorporated by reference to Exhibit 10.8 to the 1994 10-K. 10.9 Agreement of Lease dated April 26, 1985, between 2 Park Avenue Associates and The Ritz Cafe, Inc., incorporated by reference to Exhibit 10.9 to the 1994 10-K. 10.10 Assumption Agreement dated June 27, 1985, between Future Brothers, Inc., as assignee of Alfred Steiner, as sublessor, and Father Brad's Broadway Dining, Inc., as sublessee, incorporated by reference to Exhibit 10.10 to the 1994 10-K. -21- 10.11 Lease Agreement dated August 1, 1985, between Livingstone Management Co., Inc., as lessor, and Conis Realty Corp., as lessee, incorporated by reference to Exhibit 10.11 to the 1994 10-K. 10.12 Lease Agreement dated August 1, 1985, between Soledad Place Corp., as lessor, and La Femme Noire, Inc., as lessee, incorporated by reference to Exhibit 10.12 to the 1994 10-K. 10.13 Indenture of Lease dated as of January 1, 1986, between Buchbinders Restaurant, Inc. and Ark 27th St., Inc., incorporated by reference to Exhibit 10.13 to the 1994 10-K. 10.14 Agreement of Lease dated as of April 1, 1986, between 377 Third Avenue Co. and Ark 27th St., Inc., incorporated by reference to Exhibit 10.14 to the 1994 10-K. 10.15 Management Agreement dated September 10, 1986 by and between Amphitryon, Inc. and Standish Group Inc. and Ark Seventh Avenue South Corp., incorporated by reference to Exhibit 10.15 to the 1994 10-K. 10.16 Agreement dated as of November 11, 1986 among the Registrant, La Femme Noire, Inc. and Barbara Smith, incorporated by reference to Exhibit 10.16 to the 1994 10-K. 10.17 Management Agreement dated June 1987 between Ark Operating Corp. and Rio Restaurant Associates, incorporated by reference to Exhibit 10.17 to the 1994 10-K. 10.18 Agreement of Lease dated June 29, 1987 between the Registrant and Bruce and Carol Haley, incorporated by reference to Exhibit 10.18 to the 1994 10-K. 10.19 Lease Agreement dated as of May 2, 1988, between Union Station Venture, Ltd., as lessor, and Ark Union Station, Inc., as lessee, incorporated by reference to Exhibit 10.19 to the 1994 10-K. 10.20 Agreement dated December 9, 1988 among 625 Property Associates and Ark Sub-One Corp., incorporated by reference to Exhibit 10.20 to the 1994 10-K. 10.21 Lease Agreement dated as of January 5, 1989 by and between Union Station Venture, Ltd. and Ark D.C. Kiosk, Inc., incorporated by reference to Exhibit 10.21 to the 1994 10-K. 10.22 Agreement dated February 22, 1989 by and among Lawrence P. Forgione, Ark Restaurants Corp. and Ark Columbus Corp., incorporated by reference to Exhibit 10.22 to the 1994 10-K. 10.23 Restaurant Lease Agreement dated August 22, 1989 by and between Potomac River Front Limited Partnership and Ark Potomac Corporation, incorporated by reference to Exhibit 10.23 to the 1994 10-K. 10.24 Lease dated January 1, 1990 between George H. Beane and Encarnita V. Quinlan, as lessors, and Columbus Cafe Corp., as lessee, incorporated by reference to Exhibit 10.24 to the 1994 10-K. 10.25 First Amendment to Lease dated January 1990 between Potomac River Front Limited -22- Partnership ("Landlord") and Ark Potomac Corporation ("Tenant"), incorporated by reference to Exhibit 10.25 to the 1994 10-K. 10.26 Second Amendment to Lease dated June 11, 1990 between Potomac River Front Limited Partnership ("Landlord") and Ark Potomac Corporation ("Tenant"), incorporated by reference to Exhibit 10.26 to the 1994 10-K. 10.27 Amended and Restated Management Agreement dated December 4, 1990 between AROC and Ark Corporation and DBS Restaurant Group, Inc., incorporated by reference to Exhibit 10.27 to the 1994 10-K. 10.28 Lease dated January 25, 1991 between Wayfarer Inns of New York, Inc., as lessor, and SSWB Restaurants, Inc., as lessee, incorporated by reference to Exhibit 10.28 to the 1994 10-K. 10.29 Lease dated April 18, 1991 between South Street Seaport Limited Partnership, as lessor, and Ark of the Seaport, Inc., as lessee, incorporated by reference to Exhibit 10.29 to the 1994 10-K. 10.30 Management Agreement dated June 1, 1991 between Ark Boston Corp. and Flower Market Restaurant, Inc., incorporated by reference to Exhibit 10.30 to the 1994 10-K. 10.31 Third Amendment to Lease dated January 28, 1992 between Potomac River Front Limited Partnership ("Landlord") and Ark Potomac Corporation ("Tenant"), incorporated by reference to Exhibit 10.31 to the 1994 10-K. 10.32 Lease dated August 5, 1992 between Lehndorff Tysons Joint Venture, as Landlord, and Tysons America Corp., as Tenant, incorporated by reference to Exhibit 10.32 to the 1994 10-K. 10.33 Letter Agreement dated December 4, 1992 among the Registrant, La Femme Noire, Inc. and Barbara Smith, incorporated by reference to Exhibit 10.33 to the 1994 10-K. 10.34 Amended and Restated Credit Agreement dated December 30, 1992 between the Registrant and Bank Leumi Trust Company of New York, incorporated by reference to Exhibit 10.34 to the 1994 10-K. 10.35 Modification of Lease dated December 31, 1992 between Moklam Enterprises, Inc. ("Landlord") and Father Brad's Broadway Dining, Inc. ("Tenant"), incorporated by reference to Exhibit 10.35 to the 1994 10-K. 10.36 Operating Agreement, dated March 3, 1993 between Ark JMR Corp. and Jim McMullen Restaurant, Inc., incorporated by reference to Exhibit 10.36 to the 1994 10-K. 10.37 Restated Indenture of Lease dated August 1, 1993 between Bryant Park Restoration Corporation, as Landlord, and Ark Bryant Park, as Tenant, as amended by an Amendment dated December 1, 1993, incorporated by reference to Exhibit 10.37 to the 1994 10-K. 10.38 Amendment dated August 5, 1993 to the Lease dated January 1, 1990 between George H. Beane and Encarnita V. Quinlan, as lessors, and Columbus Cafe Corp., as lessee, -23- incorporated by reference to Exhibit 10.38 to the 1994 10-K. 10.39 Sublease Agreement dated October 13, 1993 between Frank Catania, as Lessor and Ark Fifth Avenue Corp., as Lessee, incorporated by reference to Exhibit 10.39 to the 1994 10-K. 10.40 Sublease dated November 15, 1993 between Ark Oxnard Corp., as subtenant, and Michael Koutnik, as sublandlord, incorporated by reference to Exhibit 10.40 to the 1994 10-K. 10.41 First Amendment to Lease dated January 15, 1994 between Lehndorff Tysons Joint Venture ("Landlord") and Tysons America Corp., incorporated by reference to Exhibit 10.41 to the 1994 10-K. 10.42 Lease Agreement dated February 4, 1994 between Union Station Venture, Ltd. and La Femme Noire D.C. Incorporated, incorporated by reference to Exhibit 10.42 to the 1994 10-K. 10.43 Agreement dated July 15, 1994 between Avis Rent A Car System, Inc. and MEB Emporium Corp., incorporated by reference to Exhibit 10.43 to the 1994 10-K. 10.44 Letter Agreement dated August 10, 1994 between the Registrant and Bank Leumi Trust Company of New York, incorporated by reference to Exhibit 10.44 to the 1994 10-K. 10.45 Letter Agreement dated September 27, 1994 among Barbara Smith, the Registrant, La Femme Noire, Inc. and La Femme Noire D.C. Incorporated, incorporated by reference to Exhibit 10.45 to the 1994 10-K. 10.46 Lease dated November 2, 1994 between Andre Soltner and Simone Soltner d/b/a ANSI Realty Company, Owner and KRA Holdings, Inc., Tenant, incorporated by reference to Exhibit 10.46 to the 1994 10-K. 10.47 Lease dated November 18, 1994 between Islamorada Resort, Inc., as Landlord, and Ark Islamorada Corp., as Tenant, incorporated by reference to Exhibit 10.47 to the 1994 10-K. *10.48 First Amendment of Lease dated as of the 13th day of July, 1994 by and between Mega Realty, L.L.C. and Conis Realty Corp. *10.49 Extension and Modification of Lease dated September 1995 between Rebak Realty Co. and MEB Emporium Corp. *10.50 Amendment and Modification of Leases, dated as of June 13, 1995 between Buchbinders Restaurant Inc. and Ark 27th Street, Inc. *10.51 Agreement dated December 5, 1995 between United Brody Corp. and Ark Steakhouse Corp. *21 Subsidiaries of the Registrant. *23 Consent of Deloitte & Touche LLP. *27 Financial Data Schedule pursuant to Article 5 of Regulation S-X filed with EDGAR Version only. -24- --------------------------------- *Filed Herewith (b) Reports on Form 8-K: None -25- INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Ark Restaurants Corp.: We have audited the accompanying consolidated balance sheets of Ark Restaurants Corp. and its subsidiaries as of September 30, 1995 and October 1, 1994, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended September 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Ark Restaurants Corp. and subsidiaries as of September 30, 1995 and October 1, 1994, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, effective October 3, 1993, the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. New York, New York November 30, 1995 (except for Note 13, as to which the date is December 28, 1995) ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, October 1, ASSETS 1995 1994 CURRENT ASSETS: Cash and cash equivalents $ 1,271,284 $ 2,912,913 Accounts receivable 1,273,827 1,085,176 Current portion of long-term receivables (Note 2) 163,436 139,340 Inventories (Note 3) 888,344 414,677 Deferred income taxes (Note 10) 395,539 93,000 Prepaid expenses 957,018 392,271 Other current assets 534,852 618,307 ----------- ----------- Total current assets 5,484,300 5,655,684 ----------- ----------- LONG-TERM RECEIVABLES (Note 2) 1,414,909 1,534,864 FIXED ASSETS - At cost (Notes 3 and 6): Leasehold improvements 14,421,187 9,632,792 Furniture, fixtures and equipment 12,369,017 9,086,903 Leasehold improvements in progress 133,789 801,032 ----------- ----------- 26,923,993 19,520,727 Less accumulated depreciation and amortization 10,548,687 9,025,243 ----------- ----------- 16,375,306 10,495,484 ----------- ----------- INTANGIBLE ASSETS (Note 3) 4,336,347 3,041,262 OTHER ASSETS (Note 4) 454,515 564,471 ----------- ----------- $28,541,920 $21,768,747 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 2,035,769 $ 1,805,939 Accrued expenses and other current liabilities (Notes 3 and 5) 2,849,292 2,151,764 Current maturities of capital lease obligations (Note 7) 204,042 76,893 Current maturities of long-term debt (Notes 3 and 6) 88,832 76,329 Accrued income taxes (Note 10) 265,369 27,158 ----------- ----------- Total current liabilities 5,443,304 4,138,083 ----------- ----------- OBLIGATIONS UNDER CAPITAL LEASES (Note 7) 929,985 349,405 LONG-TERM DEBT - Net of current maturities (Notes 3 and 6) 3,925,330 685,057 OPERATING LEASE DEFERRED CREDIT (Note 7) 1,537,000 1,386,000 COMMITMENTS (Notes 6 and 7) SHAREHOLDERS' EQUITY (Notes 6 and 8): Common stock, par value $.01 per share - authorized, 10,000,000 shares; issued, 4,536,382 and 4,461,832 shares, respectively 45,364 44,618 Additional paid-in capital 7,481,636 7,107,409 Retained earnings 10,426,700 9,305,574 ----------- ----------- 17,953,700 16,457,601 Less treasury stock, 1,345,337 shares 1,247,399 1,247,399 ----------- ----------- 16,706,301 15,210,202 ----------- ----------- $28,541,920 $21,768,747 =========== ===========
See notes to consolidated financial statements. F-2 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended --------------------------------------------- September 30, October 1, October 2, 1995 1994 1993 NET SALES $ 73,026,907 $ 60,404,339 $ 55,973,227 COST OF SALES 20,024,944 16,841,686 15,608,736 ------------ ------------ ------------ Gross restaurant profit 53,001,963 43,562,653 40,364,491 MANAGEMENT FEE INCOME (Note 9) 925,332 59,159 726,850 ------------ ------------ ------------ 53,927,295 43,621,812 41,091,341 ------------ ------------ ------------ OPERATING EXPENSES: Payroll and payroll benefits 26,191,191 21,092,870 18,876,132 Occupancy 9,035,078 7,554,536 6,522,016 Depreciation 2,289,211 1,694,530 1,520,554 Other 11,227,851 8,427,639 7,558,574 ------------ ------------ ------------ 48,743,331 38,769,575 34,477,276 GENERAL AND ADMINISTRATIVE EXPENSES 4,223,170 4,011,785 3,229,835 ------------ ------------ ------------ 52,966,501 42,781,360 37,707,111 ------------ ------------ ------------ OPERATING INCOME 960,794 840,452 3,384,230 ------------ ------------ ------------ OTHER EXPENSE (INCOME): Interest expense (Note 6) 359,159 143,130 106,453 Interest income (77,856) (93,347) (130,420) Other income (Note 11) (1,219,066) (556,983) (244,639) ------------ ------------ ------------ (937,763) (507,200) (268,606) ------------ ------------ ------------ INCOME BEFORE PROVISION FOR INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 1,898,557 1,347,652 3,652,836 PROVISION FOR INCOME TAXES (Note 10) 777,431 704,620 1,835,199 ------------ ------------ ------------ INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 1,121,126 643,032 1,817,637 EXTRAORDINARY ITEM - Utilization of state net operating loss carryforwards (net of Federal income tax of $61,400) - - 119,100 CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (Note 10) - 507,770 - ------------ ------------ ------------ NET INCOME $ 1,121,126 $ 1,150,802 $ 1,936,737 ============ ============ ============ INCOME PER SHARE: Income before extraordinary item and cumulative effect of a change in accounting principle $ .34 $ .20 $ .57 Extraordinary item - - .04 Cumulative effect of a change in accounting principle - .16 - ----- ------ ------ NET INCOME $ .34 $ .36 $ .61 ===== ====== ====== WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATIONS 3,251,336 3,225,680 3,198,429 ============ ============ ============
See notes to consolidated financial statements. F-3 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED SEPTEMBER 30, 1995, OCTOBER 1, 1994 AND OCTOBER 2, 1993
Common Stock Additional Total ------------------------ Paid-In Retained Treasury Shareholders' Shares Amount Capital Earnings Stock Equity BALANCE, OCTOBER 3, 1992 4,297,932 $ 42,979 $ 6,430,950 $ 6,218,035 $(1,247,399) $11,444,565 Exercise of stock options 132,650 1,327 287,274 - - 288,601 Tax benefit on exercise of options - - 238,213 - - 238,213 Net income - - - 1,936,737 - 1,936,737 ----------- ----------- ----------- ----------- ----------- ----------- BALANCE, OCTOBER 2, 1993 4,430,582 44,306 6,956,437 8,154,772 (1,247,399) 13,908,116 Exercise of stock options 31,250 312 67,813 - - 68,125 Tax benefit on exercise of options - - 83,159 - - 83,159 Net income - - - 1,150,802 - 1,150,802 ----------- ----------- ----------- ----------- ----------- ----------- BALANCE, OCTOBER 1, 1994 4,461,832 44,618 7,107,409 9,305,574 (1,247,399) 15,210,202 Exercise of stock options 74,550 746 182,111 - - 182,857 Tax benefit on exercise of options - - 192,116 - - 192,116 Net income - - - 1,121,126 - 1,121,126 ----------- ----------- ----------- ----------- ----------- ----------- BALANCE, SEPTEMBER 30, 1995 4,536,382 $ 45,364 $ 7,481,636 $10,426,700 $(1,247,399) $16,706,301 =========== =========== =========== =========== =========== ===========
See notes to consolidated financial statements F-4 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended ----------------------------------------- September 30, October 1, October 2, 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Income before extraordinary item and cumulative effect of a change in accounting principle $ 1,121,126 $ 643,032 $ 1,817,637 Extraordinary item - - 119,100 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of fixed assets 1,988,968 1,508,489 1,367,509 Amortization of intangibles 450,787 264,092 200,061 Provision for uncollectible long-term receivable 100,000 200,000 - Operating lease deferred credit 151,000 220,000 194,000 Deferred income taxes (302,100) (107,005) (171,243) Changes in assets and liabilities: Increase in accounts receivable (188,651) (420,737) (69,533) (Increase) decrease in inventories (126,205) 9,450 (91,057) (Increase) decrease in prepaid expenses (564,747) 34,734 311,463 Decrease (increase) in other assets, net 223,411 647,891 (1,193,624) Increase in accounts payable - trade 229,830 315,830 541,463 Increase (decrease) in accrued income taxes 238,211 (47,819) (300,165) (Increase) decrease in accrued expenses and other current liabilities 397,528 (66,257) 102,122 ----------- ----------- ----------- Net cash provided by operating activities 3,719,158 3,201,700 2,827,733 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to fixed assets (6,610,540) (2,820,366) (1,095,831) Additions to intangible assets (145,872) (39,887) (81,458) Issuance of demand notes and long-term receivables (224,913) (206,512) (298,504) Payments received on demand notes and long-term receivables 220,772 58,940 135,673 Acquisition deposit - - (450,000) Restaurant acquisitions (2,335,712) - - ----------- ----------- ----------- Net cash used in investing activities (9,096,265) (3,007,825) (1,790,120) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payment on long-term debt (1,847,224) (2,095,342) (2,827,765) Issuance of long-term debt 4,500,000 2,250,000 1,456,250 Exercise of stock options 374,973 151,284 526,814 Principal payment on capital lease obligations (117,218) (52,144) - Proceeds from sale lease back 824,947 478,442 - ----------- ----------- ----------- Net cash provided by (used) in financing activities 3,735,478 732,240 (844,701) ----------- ----------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,641,629) 926,115 192,912 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,912,913 1,986,798 1,793,886 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,271,284 $ 2,912,913 $ 1,986,798 =========== =========== =========== SUPPLEMENTAL INFORMATION: Cash payments for the following were: Interest $ 422,159 $ 143,130 $ 106,453 =========== =========== =========== Income taxes $ 649,689 $ 776,473 $ 1,959,471 ============ ============ ============
See notes to consolidated financial statements. F-5 ARK RESTAURANTS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1995, OCTOBER 1, 1994 AND OCTOBER 2, 1993 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ark Restaurants Corp. and subsidiaries (the "Company") own and operate 25 restaurants, and manage 7 restaurants in New York City (20), Washington, D.C. (4), Boston (3), Rhinebeck, New York, Oxnard, California, McLean, Virginia, Islamorada, Florida and Jersey City, New Jersey. The Company also operates catering businesses in New York City and Washington, D.C. and wholesale and retail bakeries in New York City. Accounting Period - The Company's fiscal year ends on the Saturday nearest September 30. The fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993, included 52 weeks. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in affiliated companies where the Company is able to exercise significant influence over operating and financial policies even though the Company holds 50% or less of the voting stock, are accounted for under the equity method. Cash Equivalents - Cash equivalents include instruments with original maturities of three months or less. Inventories - Inventories are stated at the lower of cost (first-in, first-out) or market, and consist of food and beverages. Fixed Assets - Leasehold improvements and furniture, fixtures and equipment are stated at cost. Depreciation of furniture, fixtures and equipment (including equipment under capital leases) is computed using the straight-line method over the estimated useful lives of the respective assets (7 years). Amortization of improvements to leased properties is computed using the straight-line method based upon the initial term of the applicable lease or the estimated useful life of the improvements, whichever is less, and ranges from 5 to 35 years. Certain costs incurred during the construction period of restaurants, including rental of premises, training and payroll, are expensed as incurred. Intangible and Other Assets - Costs associated with acquiring leases and subleases, principally purchased leasehold rights, have been capitalized and are being amortized on the straight-line method based upon the initial terms of the applicable lease agreements, which range from 10 to 21 years. Goodwill recorded in connection with the acquisition of shares of the Company's common stock from a former shareholder, as discussed in Note 3, is being amortized over a period of 40 years. Goodwill arising from restaurant acquisitions is being amortized over a period of 15 years. Legal and other costs incurred to organize restaurant corporations are capitalized as organization costs and are amortized over a period of 5 years. F-6 Covenants not to compete arising from restaurant acquisitions are amortized over the contractual period of 5 years. Operating Lease Deferred Credit - Several of the Company's operating leases contain predetermined increases in the rentals payable during the term of such leases. For these leases, the aggregate rental expense over the lease term is recognized on a straight line basis over the lease term. The difference between the expense charged to operations in any year and amounts payable under the leases during that year are recorded as a deferred credit. The deferred credit subsequently reverses over the lease term (Note 7). Occupancy Expenses - Occupancy expenses include rent, rent taxes, real estate taxes, insurance and utility costs. Income Taxes - In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Statement 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes enactment date. Effective October 3, 1993, the Company adopted Statement 109 and has reported the cumulative effect of that change in the method of accounting for income taxes in the 1994 statement of operations. Prior years' financial statements have not been restated. Income Per Share of Common Stock - Per share data is based upon the weighted average number of shares of common stock and common stock equivalents outstanding during each year. Common stock equivalents consist of dilutive stock options. Fully dilutive income per share of common stock is not shown for the effect is not material. Future Impact of Recently Issued Accounting Standards - In May of 1993, the Financial Accounting Standards Board issued Statement No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114"), which requires impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. This Statement will be adopted by the Company as of October 1, 1995. The effect of the adoption of SFAS 114 on the Company's consolidated financial statements is not expected to be material. The Financial Accounting Standards Board has also issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for the Impairment of Long-Lived Assets to Be Disposed Of" ("SFAS 121"), which requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This Statement will be adopted by the Company as of September 29, 1996. The effect of the adoption of SFAS 121 on the Company's consolidated financial statements is not expected to be material. Reclassifications - Certain reclassifications have been made to the 1994 and 1993 financial statements to conform to the 1995 presentation. F-7 2. LONG-TERM RECEIVABLES Long-term receivables consist of the following:
September 30, October 1, 1995 1994 Advances for construction, working capital and certain bankruptcy claims, at one of the Company's managed locations, at prime interest rate plus 2% (a) $ 860,131 $ 900,563 Advances for construction and working capital, at one of the Company's managed locations, at 15% interest; due in monthly installments through December 2000 311,674 349,784 Advances for construction, at one of the Company's managed locations, at prime plus 1%; due in monthly installments through December 1999 99,244 - Note receivable, at 8% interest, due in monthly installments, through August 2001 (b) 186,612 168,752 Note receivable, secured by personal guarantees of officers of a managed restaurant and fixed assets at that location, at 15% interest; due in monthly installments, through September 2000 115,287 129,708 Note receivable, unsecured at prime plus 1%; due in six annual installments commencing April 1995 (c) - 120,000 Other 5,397 5,397 ---------- ---------- 1,578,345 1,674,204 Less current portion 163,436 139,340 ---------- ---------- $1,414,909 $1,534,864 ========== ==========
(a) The Company entered into an agreement in December 1990 to manage a restaurant located in New York City owned by a corporation which emerged from bankruptcy in accordance with a court-approved plan of reorganization. The Company has made advances for working capital and to pay certain bankruptcy claims. The advances bear interest at prime plus 2% and are generally repayable from excess cash flow after the payment of interest on the advances and the management fee. $595,974 of the advances are secured by the restaurant's assets. Interest has been recorded only to the extent it is considered to be collectible. Advances are generally payable from excess cash flow of the restaurant. However, in fiscal 1995 the restaurant cash flow was severely impacted by a 17.3% decrease in sales. Management believes that this sales decline is temporary and was principally due to a major street reconstruction project undertaken by the City of New York on the main avenue directly in front of the restaurant. The project occurred throughout a major portion of the fiscal year and is scheduled for completion shortly. Although in fiscal 1996, certain advances will be in default, the Company F-8 intends to renegotiate all advances. The Company continues to expect to recover the carrying value of these advances. (b) The Company has subleased since fiscal 1989 a restaurant site to a third party who is also operating a restaurant at such site. The sublease period was through March 1995 at an annual rate of $70,000. The Company agreed in July 1993 to extend and reschedule the amount due under the sublease and was issued a note to be paid in monthly installments through August 2001. The Company was given a limited personal guarantee by officers of the sublessee. (c) The Company lent $120,000 in June 1993 to an individual who is a manager and minority stockholder at one of the Company's restaurants. Such amount was fully repaid in fiscal 1995. 3. INTANGIBLE ASSETS Intangible assets consist of the following:
September 30, October 1, 1995 1994 Goodwill (a) $3,812,877 $3,002,877 Purchased leasehold rights (b) 1,277,740 1,274,540 Noncompete agreements and other (a) 1,158,000 368,000 Organization costs 575,949 433,277 ---------- ---------- 6,824,566 5,078,694 Less accumulated amortization 2,488,219 2,037,432 ---------- ---------- $4,336,347 $3,041,262 ========== ==========
(a) In August 1985, certain subsidiaries of the Company acquired approximately one-third of the then outstanding shares of common stock (964,599 shares), from a former officer and director of the Company for a purchase price of $3,000,000. The consolidated balance sheets reflect the allocation of $2,946,000 to goodwill. During fiscal 1995, the Company acquired two restaurants for approximately $2,336,000 in cash plus the assumption of $900,000 in liabilities. These acquisitions were accounted for as purchase transactions with the purchase prices allocated as follows: inventories, $348,000; other assets, $30,000; leasehold improvements, $865,000; furniture, fixtures and equipment, $393,000; and intangible assets, $1,600,000. (b) Purchased leasehold rights arise from acquiring leases and subleases of various restaurants. F-9 4. OTHER ASSETS Other assets consist of the following:
September 30, October 1, 1995 1994 Deposits $392,018 $317,698 Investments in and advances to affiliates (a) 62,497 96,773 Other advances (b) - 150,000 -------- -------- $454,515 $564,471 ======== ========
(a) The Company, through a wholly owned subsidiary, became a general partner with a 19% interest in a partnership which acquired on July 1, 1987 an existing Mexican food restaurant, El Rio Grande, in New York City. Several related parties also participate as limited partners in the partnership. The Company's equity in earnings of the limited partnership was $60,000, $75,000 and $92,000 for the years ended September 30, 1995, October 1, 1994 and October 2, 1993, respectively. The Company also manages El Rio Grande through another wholly owned subsidiary on behalf of the partnership. Management fee income relating to these services was $519,000, $383,000, and $368,000 for the years ended September 30, 1995, October 1, 1994 and October 2, 1993, respectively (Note 8). The Company acquired a 50% interest in a catering business in December 1992 for approximately $121,000. In February 1994, the Company terminated its interest in such business and wrote-off its equity investment. Management fee income for the years ended October 1, 1994 and October 2, 1993 is net of losses of $212,000 and $152,000, respectively, from such investment. (b) The Company entered into an agreement in March 1993 to operate an existing restaurant in New York City. The owner of the restaurant leased the furniture, fixtures and leasehold improvements to the Company along with a license to use the restaurant's name. The Company agreed to pay the owner an annual share of defined cash flow and advanced $900,000 in March 1993 to the owner with such amount to be applied against the owner's share of cash flow payable during the initial three year term of the agreement. As of September 30, 1995, the balance of $150,000 is classified in other current assets on the consolidated balance sheet. 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following:
September 30, October 1, 1995 1994 Sales tax payable $ 667,399 $ 509,981 Accrued wages and payroll related costs 636,734 673,114 Other current liabilities 1,545,159 968,669 ---------- ---------- $2,849,292 $2,151,764 ========== ==========
F-10 6. LONG-TERM DEBT Long-term debt consists of the following:
September 30, October 1, 1995 1994 Note, issued in connection with acquisition of restaurant site, at prime plus 2.5%, payable in monthly installments through February 1997 (a) $ 412,382 $ 421,408 Revolving Credit and Term Loan Facility with interest at the prime rate, plus 1%; payable on December 31, 1996 (b) (Note 13) 3,000,000 250,000 Promissory note payable to a landlord of a restaurant site, payable in monthly installments through May 1996 (c) 29,717 89,978 Note issued in connection with acquisition of restaurant site, at 7.25%, payable in monthly installments through January 1, 2000 (d) 572,063 - ---------- ---------- 4,014,162 761,386 Less current maturities 88,832 76,329 ---------- ---------- $3,925,330 $ 685,057 ========== ==========
(a) In November 1993, the Company completed the purchase of a restaurant in Oxnard, California and issued a note for $441,000. The Company is obligated to remit monthly payments of $4,830 inclusive of interest until February 1997, at which time the remaining balance outstanding is due. The debt is secured by the leasehold improvements and tangible personal property of the restaurant. (b) In August 1994 the Company and its main bank agreed to an extension and increase of the existing revolving credit and term loan facility. The agreement enables the Company to borrow up to $4,250,000 until December 31, 1996, at which time outstanding loans may be converted into term loans payable in 36 monthly installments through December 31, 1999. Outstanding loans bear interest at the bank's prime rate plus 1% until December 31, 1996 and at the bank's prime rate plus 1 1/2% thereafter. The Company is required to pay a commitment fee of 1/2 of 1% per annum on the average daily unborrowed amounts. The Company also obtained a $1,750,000 Letter of Credit Facility. The Company pays commissions ranging from 1 1/2% to 2% per annum on outstanding letters of credit. The Bank's obligation to issue letters of credit terminates on December 31, 1999. The Company's subsidiaries each guaranteed the obligations of the Company under the foregoing facilities and granted security interests in their respective assets as collateral for such guarantees. In addition, the Company pledged stock of such subsidiaries as security for obligations of the Company under such facilities. F-11 The agreement includes restrictions relating to, among other things, indebtedness for borrowed money, capital expenditures, advances to managed businesses, acquisitions of, or investments in, other than restaurant related businesses, and the ability of the Company to guarantee the indebtedness of others. Under the agreement, the Company may pay cash dividends and redeem stock only to the extent of 20% of operating cash flow as defined in the agreement for such fiscal year. The agreement also contains certain financial covenants such as minimum cash flow in relation to the Company's debt service requirements and the maintenance of minimum shareholders' equity (no less than $12,000,000). During Fiscal 1995, the Company exceeded the capital expenditure limitation covenant due to its significant investments in acquiring new restaurants and the construction costs for newly opened restaurants, which limitation was waived by the bank. (c) The Company is indebted to a landlord at one of its Washington, D.C. restaurant sites for amounts loaned by the landlord to fund leasehold improvements. The loan is payable in monthly installments through May 1996 with interest at a rate of 8% per annum. The obligation of the Company is secured by the leasehold improvements and other tangible property at the restaurant. (d) In November 1994, the Company issued a $600,000 note in connection with the acquisition of a restaurant in the Florida Keys. The Company remits monthly payments of $7,044 inclusive of interest until January 1, 2000, at which time the outstanding balance of $358,511 is due. The debt is secured by the leasehold improvements and tangible personal property at the restaurant. Required principal payments on long-term debt are as follows:
Year Amount 1996 $ 88,832 1997 1,195,630 1998 1,051,437 1999 1,055,292 2000 622,971 Thereafter - ---------- $4,014,162 ==========
During the fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993, interest expense was $422,159, $143,130 and $106,453, respectively, of which $63,000 was capitalized during the fiscal year ended September 30, 1995. 7. LEASES The Company leases its restaurants, bar facilities, and administrative headquarters through its subsidiaries under terms expiring at various dates through 2029. Most of the leases provide for the payment of base rents plus real estate taxes, insurance and other expenses and, in certain instances, for the payment of a percentage of the restaurants' sales in excess of stipulated amounts at such facility. F-12 As of September 30, 1995, future minimum lease payments, net of sublease rentals, under noncancellable leases are as follows:
Operating Capital Year Leases Leases 1996 $ 5,811,257 $ 311,590 1997 6,149,340 321,235 1998 6,136,089 321,235 1999 5,732,928 263,365 2000 5,265,817 154,118 Thereafter 38,060,894 - ----------- ----------- Total minimum payments $67,156,325 1,371,543 =========== Less amount representing interest 237,516 ------------ Present value of net minimum lease payments $ 1,134,027 ============
In connection with the leases included in the table above, the Company obtained and delivered irrevocable letters of credit in the aggregate amount of $1,131,130 as security deposits under such leases. Rent expense (net of sublease rental income of $124,025, $182,800 and $200,299 for the fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993, respectively) was $5,633,662, $4,558,202 and $3,885,884, during the fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993, respectively. Rent expense for the fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993 includes approximately $151,000, $220,000 and $194,000 of operating lease deferred credits, representing the difference between rent expense recognized on a straight-line basis and actual amounts currently payable. Contingent rentals, included in rent expense, were $405,399, $253,725 and $219,825 for the fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993, respectively. 8. STOCK OPTIONS On October 15, 1985, the Company adopted a Stock Option Plan (the "Plan") pursuant to which the Company reserved for issuance an aggregate of 175,000 shares of common stock. In May 1991 and March 1994, the Company amended such Plan to increase the number of shares issuable under the Plan to 350,000 and 447,650, respectively. Options granted under the Plan to key employees and directors are exercisable at prices at least equal to the fair market value of such stock on the dates the options were granted. The options expire five years after the date of grant and are generally exercisable as to 25% of the shares commencing on the first anniversary of the date of grant and as to an additional 25% commencing on each of the second, third and fourth anniversaries of the date of grant. F-13 Additional information follows:
1995 1994 1993 Shares under option, beginning of year 183,800 195,050 327,700 Options: Granted 81,000 20,000 - Exercised (74,550) (31,250) (132,650) Canceled or expired (1,125) - - -------- -------- -------- Shares under option, end of year (a) 189,125 183,800 195,050 ======== ======== ======== Shares available for future grant 20,075 99,950 22,300 ======== ======== ======== Options exercisable (a) 88,125 162,550 183,050 ======== ======== ======== Price range of outstanding options (b) $2.25-$8.00 $2.125-$6.50 $2.125-$4.375 =========== ============ =============
(a) Options become exercisable at various times until expiration dates ranging from March 1995 through October 1999. (b) Prices reflect the fair market value on the dates of grant. The exercise of nonqualified stock options in the fiscal years ended September 30, 1995, October 1, 1994 and October 2, 1993 resulted in income tax benefits of $192,116, $83,159 and $238,213, respectively, which were credited to additional paid-in capital. The income tax benefits result from the difference between the market price on the exercise date and the option price. 9. MANAGEMENT FEE INCOME As of September 30, 1995, the Company provides management services to six restaurants and a cafeteria owned by outside parties. In accordance with the contractual arrangements, the Company earns fixed fees and management fees based on restaurant sales and operating profits as defined by the various management agreements. The Company terminated a management agreement for a restaurant located in Miami, Florida in April 1994. During 1994, the Company had advanced approximately $507,000 for working capital and restaurant supplies at such location. In connection with the termination, the owner of the restaurant agreed to pay $200,000 of such advances and issued a note to the Company for such amount. The Company wrote off as uncollectible and charged to management fee income $307,000 of advances. Additionally, the Company provided an allowance by charging management fee income of $200,000 against the note due to the uncertainty of the note's collectibility. Restaurants managed had net sales of $10,838,664, $10,642,895 and $10,973,081 during the management periods within the years ended September 30, 1995, October 1, 1994, October 2, 1993, respectively, which are not included in consolidated net sales of the Company. F-14 10. INCOME TAXES As discussed in Note 1, the Company adopted Statement 109 as of October 3, 1993. The cumulative effect of this change in accounting for income taxes of $507,770 is determined as of October 3, 1993 and is reported separately in the statement of operations for the year ended October 1, 1994. The provision for income taxes reflects Federal income taxes calculated on a consolidated basis and state and local income taxes calculated by each subsidiary on a nonconsolidated basis. For New York State and City income tax purposes, the losses incurred by a subsidiary may only be used to offset that subsidiary's income. The provision for income taxes consists of the following:
Year Ended ------------------------------------------ September 30, October 1, October 2, 1995 1994 1993 Current provision: Federal $ 532,947 $ 365,464 $ 1,188,281 State and local 475,062 446,161 818,161 ----------- ----------- ----------- 1,008,009 811,625 2,006,442 ----------- ----------- ----------- Deferred provision (credit): Federal (314,745) (206,955) (127,315) State and local 84,167 99,950 (43,928) ----------- ----------- ----------- (230,578) (107,005) (171,243) ----------- ----------- ----------- 777,431 704,620 1,835,199 Utilization of net operating loss carryforward - - (119,100) ----------- ----------- ----------- $ 777,431 $ 704,620 $ 1,716,099 =========== =========== ===========
The provision for deferred income taxes as of October 2, 1993 consists of the following: Excess (book) tax depreciation and amortization $ (105,283) Operating lease deferred credit (65,960) ------------ $ (171,243) ============
F-15 The provision for income taxes differs from the amount computed by applying the Federal statutory rate due to the following:
Year Ended ------------------------------------------ September 30, October 1, October 2, 1995 1994 1993 Provision for Federal income taxes (34%) $ 646,000 $ 458,000 $ 1,242,000 State and local income taxes net of Federal tax benefit 369,000 360,000 511,000 Amortization of goodwill 26,000 26,000 26,000 Tax credits (299,000) (173,000) - Effect of net operating loss carryforward - (119,100) Nondeductible losses - 51,680 Other 35,431 33,620 4,519 ----------- ----------- ----------- $ 777,431 $ 704,620 $ 1,716,099 =========== =========== ===========
Deferred tax assets or liabilities are established for (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss carryforwards. The tax effects of items comprising the Company's net deferred tax asset are as follows:
September 30, October 1, 1995 1994 Deferred Tax Assets: Operating loss carryforwards $ 639,096 $ 647,622 Operating lease deferred credits 673,530 607,124 Carryforward tax credits 361,539 - Provision for uncollectible long-term receivable 34,000 68,000 Valuation allowance (690,204) (574,357) ----------- ----------- 1,017,961 748,389 Deferred Tax Liabilities: Depreciation and amortization 145,879 178,407 ----------- ----------- Net deferred tax asset $ 872,082 $ 569,982 =========== ===========
F-16 A valuation allowance for deferred taxes is required if, based on the evidence, it is more likely than not that some of the deferred tax assets will not be realized. The Company believes that uncertainty exists with respect to future realization of certain operating loss carryforwards and operating lease deferred credits. Therefore, the Company provided a valuation allowance of $690,204 at September 30, 1995 and $574,357 at October 1, 1994. The Company has state operating loss carryforwards of $6,646,056 and local operating loss carryforwards $4,857,850, which expire in the years 2000 through 2010. 11. OTHER INCOME Other income consists of the following:
Year Ended ----------------------------------------------- September 30, October 1, October 2, 1995 1994 1993 Purchasing service fees $ 67,367 $ 126,780 $ 97,433 Insurance proceeds (a) 914,475 242,666 - Sales of logo T-shirts and hats 180,364 67,455 68,006 Other 56,860 120,082 79,200 ------------ ---------- ---------- $ 1,219,066 $ 556,983 $ 244,639 ============ ========== ==========
(a) In July 1994, the Company was required to close a restaurant in Manhattan (Ernie's) on a temporary basis to enable structural repairs to be made to the ceiling of the restaurant. The cost of such repairs, other ongoing restaurant operating expenses and a guaranteed profit were borne by a third party. The restaurant reopened in February 1995 and the agreement provides that the third party continue to guarantee some level of operating profits through January 1998. During the fiscal years ended September 30, 1995 and October 1, 1994, the Company received $914,475 and $242,666, respectively, in excess of the continuing restaurant operating expenses. 12. QUARTERLY INFORMATION (UNAUDITED) The following table sets forth certain quarterly operating data.
Fiscal Quarter Ended ------------------------------------------------------------ December 31, April 1, July 1, September 30, 1994 1995 1995 1995 1995 Net sales $ 16,357,705 $ 14,759,085 $ 21,046,818 $ 20,863,299 Gross restaurant profit 11,837,623 10,584,425 15,359,109 15,220,807 Net income (loss) 291,213 (482,122) 635,834 676,200 Net income (loss) per share $.09 $(.15) $.20 $.20
F-17
Fiscal Quarter Ended --------------------------------------------------------- January 1, April 2, July 2, October 1, 1994 1994 1994 1994 1994 Net sales $ 15,202,498 $ 11,582,738 $ 17,792,902 $ 15,826,701 Gross restaurant profit 11,073,152 7,981,649 13,083,359 11,929,706 Income (loss) before cumulative effect of accounting change 445,088 (1,037,407) 771,034 454,318 Net income (loss) 957,088 (1,037,407) 771,034 454,318 Income (loss) per share before cumulative effect of accounting change $.14 $(.32) $.24 $.14 Net income (loss) per share $.30 $(.32) $.24 $.14
13. SUBSEQUENT EVENT In September 1995, the Company signed letters of intent with a third party to design, build and operate a group of restaurants in a 2,100-room Las Vegas resort/casino (''Las Vegas Project'') which is expected to open in December 1996. The Company plans to spend approximately $8-$9 million on these restaurants. In December 1995, the Company received a commitment letter from its main bank which would amend the Company's existing credit facility. The new agreement would enable the company to borrow $5,000,000 for working capital for the existing Company restaurants and $6,000,000 for the construction of and working capital for the Las Vegas Project. After 2 years the revolving loans will be converted into term loans payable over 24 months. Outstanding revolving loans bear interest at 1% above the bank's prime rate until converted to term loans at which time the interest rate will become 1 1/2% above the bank's prime rate. The Company is required to pay a commitment fee of $150,000 at closing, and a facility fee on any unused portion of the revolving credit facility. The commitment letter includes a four year $2,000,000 Letter of Credit Facility for use for the Company's existing restaurants, and a one year (with a six month extension available at the Company option) $3,000,000 Letter of Credit Facility for the Las Vegas Project. The Company is required to pay commissions ranging from 1 1/2% to 2% per annum on outstanding letters of credit. The existing revolving credit facility is, and the amended facility will be guaranteed by each of the Company's subsidiaries, and secured by security interests in their respective assets and by a pledge by the Company of the stock of such subsidiaries. The new agreement includes restrictions relating to, among other things, indebtedness for borrowed money, capital expenditures, advances and investments, mergers, sale of assets, dividends, and liens on the property of the Company. The agreement will also contain financial covenants, requiring the Company to maintain a minimum ratio of debt to net worth, minimum shareholders equity, and a minimum ratio of cash flow to prior debt service. * * * * * * F-18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 28th day of December, 1995. ARK RESTAURANTS CORP. By: /s/ Michael Weinstein -------------------------------- MICHAEL WEINSTEIN, President Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been duly signed by the following persons in the capacities and on the date indicated.
Signature Title Date - --------- ----- ---- /s/ Ernest Bogen Chairman of the Board December 28, 1995 - ---------------- (Ernest Bogen) /s/ Michael Weinstein President and Director December 28, 1995 - --------------------- (Michael Weinstein) /s/ Vincent Pascal Vice President, December 28, 1995 - ------------------ Secretary and Director (Vincent Pascal) /s/ Robert Towers Vice President, Treasurer, December 28, 1995 - ----------------- Principal Financial Officer (Robert Towers) and Director /s/ Andrew Kuruc Vice President, Controller, December 28, 1995 - ---------------- Principal Accounting Officer (Andrew Kuruc) and Director /s/ Donald D. Shack Director December 28, 1995 - ------------------- (Donald D. Shack) /s/ Jay Galin Director December 28, 1995 - ------------------- (Jay Galin)
INDEX TO EXHIBITS SEQUENTIALLY - ----------------- NUMBERED PAGE ------------ 3.1 Certificate of Incorporation of the Registrant, filed on January 4, 1983, incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 1994 (the "1994 10-K"). 3.2 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on October 11, 1985, incorporated by reference to Exhibit 3.2 to the 1994 10-K. 3.3 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on July 21, 1988, incorporated by reference to Exhibit 3.3 to the 1994 10-K. 3.4 By-Laws of the Registrant, incorporated by reference to Exhibit 3.4 to the 1994 10-K. 10.1 Amended and Restated Redemption Agreement dated June 29, 1993 between the Registrant and Michael Weinstein, incorporated by reference to Exhibit 10.1 to the 1994 10-K. 10.2 Form of Indemnification Agreement entered into between the Registrant and each of Michael Weinstein, Ernest Bogen, Vincent Pascal, Robert Towers, Jay Galin, Andrew Kuruc and Donald D. Shack, incorporated by reference to Exhibit 10.2 to the 1994 10-K. 10.3 Ark Restaurants Corp. Amended Stock Option Plan, incorporated by reference to Exhibit 10.3 to the 1994 10-K. 10.4 Lease Agreement dated June 9, 1982, between Rebak Realty Co., as lessor, and MEB Emporium Corp., as lessee, incorporated by reference to Exhibit 10.4 to the 1994 10-K. 10.5 Lease Agreement dated October 27, 1982, between Majestic Towers Co., as lessor, and MEB Emporium Corp., as lessee, incorporated by reference to Exhibit 10.5 to the 1994 10-K. 10.6 Lease Agreement dated June 1, 1983, between 101 West 77th Street Corp., as lessor, and MEB On Columbus, Inc., as lessee, as assignee of DPK Restaurants, Inc., incorporated by reference to Exhibit 10.6 to the 1994 10-K. 10.7 Lease Agreement dated November 10, 1983, between BJW Associates, as lessor, and MEB Dining 18 Inc., as lessee,
incorporated by reference to Exhibit 10.7 to the 1994 10-K. 10.8 Lease Agreement dated August 9, 1984, between G.P. Associates, as lessor, and MEB On First, Inc., as lessee, incorporated by reference to Exhibit 10.8 to the 1994 10-K. 10.9 Agreement of Lease dated April 26, 1985, between 2 Park Avenue Associates and The Ritz Cafe, Inc., incorporated by reference to Exhibit 10.9 to the 1994 10-K. 10.10 Assumption Agreement dated June 27, 1985, between Future Brothers, Inc., as assignee of Alfred Steiner, as sublessor, and Father Brad's Broadway Dining, Inc., as sublessee, incorporated by reference to Exhibit 10.10 to the 1994 10-K. 10.11 Lease Agreement dated August 1, 1985, between Livingstone Management Co., Inc., as lessor, and Conis Realty Corp., as lessee, incorporated by reference to Exhibit 10.11 to the 1994 10-K. 10.12 Lease Agreement dated August 1, 1985, between Soledad Place Corp., as lessor, and La Femme Noire, Inc., as lessee, incorporated by reference to Exhibit 10.12 to the 1994 10-K. 10.13 Indenture of Lease dated as of January 1, 1986, between Buchbinders Restaurant, Inc. and Ark 27th St., Inc., incorporated by reference to Exhibit 10.13 to the 1994 10-K. 10.14 Agreement of Lease dated as of April 1, 1986, between 377 Third Avenue Co. and Ark 27th St., Inc., incorporated by reference to Exhibit 10.14 to the 1994 10-K. 10.15 Management Agreement dated September 10, 1986 by and between Amphitryon, Inc. and Standish Group Inc. and Ark Seventh Avenue South Corp., incorporated by reference to Exhibit 10.15 to the 1994 10-K. 10.16 Agreement dated as of November 11, 1986 among the Registrant, La Femme Noire, Inc. and Barbara Smith, incorporated by reference to Exhibit 10.16 to the 1994 10-K. 10.17 Management Agreement dated June 1987 between Ark Operating Corp. and Rio Restaurant Associates, incorporated by reference to Exhibit 10.17 to the 1994 10-K. 10.18 Agreement of Lease dated June 29, 1987 between the Registrant and Bruce and Carol Haley, incorporated by reference to Exhibit 10.18 to the 1994 10-K. 10.19 Lease Agreement dated as of May 2, 1988, between Union Station Venture, Ltd., as lessor, and Ark Union Station, Inc., as lessee,
incorporated by reference to Exhibit 10.19 to the 1994 10-K. 10.20 Agreement dated December 9, 1988 among 625 Property Associates and Ark Sub-One Corp., incorporated by reference to Exhibit 10.20 to the 1994 10-K. 10.21 Lease Agreement dated as of January 5, 1989 by and between Union Station Venture, Ltd. and Ark D.C. Kiosk, Inc., incorporated by reference to Exhibit 10.21 to the 1994 10-K. 10.22 Agreement dated February 22, 1989 by and among Lawrence P. Forgione, Ark Restaurants Corp. and Ark Columbus Corp., incorporated by reference to Exhibit 10.22 to the 1994 10-K. 10.23 Restaurant Lease Agreement dated August 22, 1989 by and between Potomac River Front Limited Partnership and Ark Potomac Corporation, incorporated by reference to Exhibit 10.23 to the 1994 10-K. 10.24 Lease dated January 1, 1990 between George H. Beane and Encarnita V. Quinlan, as lessors, and Columbus Cafe Corp., as lessee, incorporated by reference to Exhibit 10.24 to the 1994 10-K. 10.25 First Amendment to Lease dated January 1990 between Potomac River Front Limited Partnership ("Landlord") and Ark Potomac Corporation ("Tenant"), incorporated by reference to Exhibit 10.25 to the 1994 10-K. 10.26 Second Amendment to Lease dated June 11, 1990 between Potomac River Front Limited Partnership ("Landlord") and Ark Potomac Corporation ("Tenant"), incorporated by reference to Exhibit 10.26 to the 1994 10-K. 10.27 Amended and Restated Management Agreement dated December 4, 1990 between AROC and Ark Corporation and DBS Restaurant Group, Inc., incorporated by reference to Exhibit 10.27 to the 1994 10-K. 10.28 Lease dated January 25, 1991 between Wayfarer Inns of New York, Inc., as lessor, and SSWB Restaurants, Inc., as lessee, incorporated by reference to Exhibit 10.28 to the 1994 10-K. 10.29 Lease dated April 18, 1991 between South Street Seaport Limited Partnership, as lessor, and Ark of the Seaport, Inc., as lessee, incorporated by reference to Exhibit 10.29 to the 1994 10-K. 10.30 Management Agreement dated June 1, 1991 between Ark Boston Corp. and Flower Market Restaurant, Inc., incorporated by reference to Exhibit 10.30 to the 1994 10-K.
10.31 Third Amendment to Lease dated January 28, 1992 between Potomac River Front Limited Partnership ("Landlord") and Ark Potomac Corporation ("Tenant"), incorporated by reference to Exhibit 10.31 to the 1994 10-K. 10.32 Lease dated August 5, 1992 between Lehndorff Tysons Joint Venture, as Landlord, and Tysons America Corp., as Tenant, incorporated by reference to Exhibit 10.32 to the 1994 10-K. 10.33 Letter Agreement dated December 4, 1992 among the Registrant, La Femme Noire, Inc. and Barbara Smith, incorporated by reference to Exhibit 10.33 to the 1994 10-K. 10.34 Amended and Restated Credit Agreement dated December 30, 1992 between the Registrant and Bank Leumi Trust Company of New York, incorporated by reference to Exhibit 10.34 to the 1994 10-K. 10.35 Modification of Lease dated December 31, 1992 between Moklam Enterprises, Inc. ("Landlord") and Father Brad's Broadway Dining, Inc. ("Tenant"), incorporated by reference to Exhibit 10.35 to the 1994 10-K. 10.36 Operating Agreement, dated March 3, 1993 between Ark JMR Corp. and Jim McMullen Restaurant, Inc., incorporated by reference to Exhibit 10.36 to the 1994 10-K. 10.37 Restated Indenture of Lease dated August 1, 1993 between Bryant Park Restoration Corporation, as Landlord, and Ark Bryant Park, as Tenant, as amended by an Amendment dated December 1, 1993, incorporated by reference to Exhibit 10.37 to the 1994 10-K. 10.38 Amendment dated August 5, 1993 to the Lease dated January 1, 1990 between George H. Beane and Encarnita V. Quinlan, as lessors, and Columbus Cafe Corp., as lessee, incorporated by reference to Exhibit 10.38 to the 1994 10-K. 10.39 Sublease Agreement dated October 13, 1993 between Frank Catania, as Lessor and Ark Fifth Avenue Corp., as Lessee, incorporated by reference to Exhibit 10.39 to the 1994 10-K. 10.40 Sublease dated November 15, 1993 between Ark Oxnard Corp., as subtenant, and Michael Koutnik, as sublandlord, incorporated by reference to Exhibit 10.40 to the 1994 10-K. 10.41 First Amendment to Lease dated January 15, 1994 between Lehndorff Tysons Joint Venture ("Landlord") and Tysons America Corp., incorporated by reference to Exhibit 10.41 to the 1994 10-K.
10.42 Lease Agreement dated February 4, 1994 between Union Station Venture, Ltd. and La Femme Noire D.C. Incorporated, incorporated by reference to Exhibit 10.42 to the 1994 10-K. 10.43 Agreement dated July 15, 1994 between Avis Rent A Car System, Inc. and MEB Emporium Corp., incorporated by reference to Exhibit 10.43 to the 1994 10-K. 10.44 Letter Agreement dated August 10, 1994 between the Registrant and Bank Leumi Trust Company of New York, incorporated by reference to Exhibit 10.44 to the 1994 10-K. 10.45 Letter Agreement dated September 27, 1994 among Barbara Smith, the Registrant, La Femme Noire, Inc. and La Femme Noire D.C. Incorporated, incorporated by reference to Exhibit 10.45 to the 1994 10-K. 10.46 Lease dated November 2, 1994 between Andre Soltner and Simone Soltner d/b/a ANSI Realty Company, Owner and KRA Holdings, Inc., Tenant, incorporated by reference to Exhibit 10.46 to the 1994 10-K. 10.47 Lease dated November 18, 1994 between Islamorada Resort, Inc., as Landlord, and Ark Islamorada Corp., as Tenant, incorporated by reference to Exhibit 10.47 to the 1994 10-K. 10.48 First Amendment of Lease dated as of the 13th day of July, 1994 by and between Mega Realty, L.L.C. and Conis Realty Corp. 10.49 Extension and Modification of Lease dated September 1995 between Rebak Realty Co. and MEB Emporium Corp. 10.50 Amendment and Modification of Leases, dated as of June 13, 1995 between Buchbinders Restaurant Inc. and Ark 27th Street, Inc. 10.51 Agreement dated December 5, 1995 between United Brody Corp. and Ark Steakhouse Corp. 21 Subsidiaries of the Registrant. 23 Consent of Deloitte & Touche LLP. 27 Financial Data Schedule pursuant to Article 5 of Regulation S-X filed with EDGAR Version only.
EX-10 2 EXHIBIT 10.48 FIRST AMENDMENT OF LEASE This First Amendment of Lease, dated as of the 13th day of July, 1994, by and between MEGA REALTY, L.L.C., having offices c/o CPL New York, 145 West 30th Street, New York, New York 10001 ("Landlord"), and CONIS REALTY CORP., having offices at 158 West 29th Street, New York, New York 10001 ("Tenant"). W I T N E S S E T H: WHEREAS, Landlord and Tenant are parties to a certain Lease dated August 1, 1985 (the "Lease") between Livingstone Management Co., Inc. (Landlord's predecessor-in-interest) and Tenant affecting premises known as 957-961 First Avenue, New York, New York ("Premises"); and WHEREAS, Landlord and Tenant desire to amend the Lease as set forth herein. NOW, THEREFORE, Landlord and Tenant agree as follows: 1. Schedule B of the Lease is hereby amended, so that the fixed annual rent payable for each Lease Year (as such term is defined in the Lease) from October 1, 1994 through September 30, 1997, shall be at the annual rate equal to the greater of: (a) $380,000.00 per annum (which amount is calculated to include the reduction of $2,500.00 per month referred to in Note 2 of Schedule B, and is subject to increase to $410,000.00 per annum pursuant to the terms of said Note 2); and (b) Thirteen (13%) percent of Gross Sales (hereinafter defined), but not more than $430,000.00 per annum (subject to increase to $460,000.00 per annum pursuant to the terms of said Note 2). 2. The term "Gross Sales," as used herein, shall mean and include receipts from all business conducted upon or from the Premises by Tenant and all others (including all licensees, concessionaires and tenants of Tenant), whether such sales be evidenced by check, credit, charge account, exchange or otherwise, and shall include, but not be limited to amounts received from the sales of food and other merchandise and for services performed at the Premises, together with all orders for goods or services taken or received at the Premises, whether such orders be filled at the Premises or elsewhere, and whether such sales be made by means of merchandise or other vending machines at the Premises. If one or more departments, spaces or concessions shall be sublet or conducted by any person other than Tenant, there shall be included in Gross Sales all of the gross receipts of such departments, spaces or concessions in the same manner and with the same effect as if the business or sales of such departments, spaces or concessions had been conducted by Tenant itself, provided, however, that with respect to the store presently leased by Tenant to a subtenant at 957 First Avenue, neither the rents paid by such subtenant to Tenant nor the gross receipts of such subtenant shall be included in Gross Sales. Gross Sales shall not include the amount of any sales, use or gross receipts tax imposed by any federal, state or municipal authority on sales and collected from customers, provided that the amount thereof is separately added to the selling price and actually paid by Tenant to such governmental authority, and provided, further, that no franchise, capital stock, corporation, income or similar tax imposed upon Tenant's receipts or income (whether gross income or adjusted income) shall reduce Gross Sales. Gross Sales shall also exclude gratuities paid by customers to and received by Tenant's employees. Each charge or sale upon credit shall be treated as a sale for the full price in the month during which such charge or sale shall be made, and shall be reduced by the amount of fees imposed by any third party for extending or processing such charges or credits, and irrespective of when payment is actually received by Tenant. 3. During the Lease Year commencing October 1, 1994, Tenant shall pay estimated monthly installments on account of fixed annual rent at the rate set forth in sub-paragraph 1(a) above, subject to adjustment following the end of said Lease year based upon Tenant's Gross Sales for said Lease Year, in the manner hereinafter set forth. For each subsequent Lease Year during the term of this rent adjustment, Tenant shall pay estimated monthly installments on account of fixed annual rent at the greater of the two rates set forth in sub-paragraphs 1(a) and 1(b) above as applied to the immediately preceding Lease Years, which estimated payment shall be adjust following the end of such Lease Year in the manner hereinafter set forth. 4. Gross Sales shall be determined by Tenant for each Lease Year during the term of the rent adjustment provided for herein. Within thirty days following the end of each such Lease Year, Tenant shall furnish Landlord with a statement in reasonable detail of Gross Sales for the prior Lease Year, which statement shall be certified as true and complete by an independent certified public accountant or by the chief financial officers of Tenant. Such statement shall be accompanied by payment to Landlord of the amount of fixed annual rent, if any, shown to have been underpaid to Landlord for the prior Lease Year. Tenant shall also furnish its federal income tax returns to Landlord for the entire period of this rent adjustment, within 30 days after Tenant shall file each return. If Tenant's statement for such Lease Year shall show that Tenant has overpaid fixed annual rent, then Landlord shall allow Tenant a credit against next installments of fixed annual rent in the amount so overpaid, and fixed annual rent for such then current Lease Year shall again be adjusted equal to the prior Lease Year's fixed annual rent, as so re-calculated. 5. Tenant agrees to prepare and keep on the Premises or its principal office in Manhattan for a period of not less than three (3) years following the end of each Lease Year, accurate books of account and records of daily Gross Sales, including without limitation all federal, state and local tax returns, and copies of relevant contracts, checks, vouchers, inventory records, dated cash register tapes, sales slips and such other documentations as would enable Landlord to make a full and complete audit of Gross Sales ("Books and Records"). Landlord and Landlord's authorized representatives shall have the right to examine Tenants's Books and Records during regular business hours. Tenant agrees that all Gross Sales shall be registered at the time each sale or transaction is made in cash registers containing locked-in cumulative tapes with cumulation capacity satisfactory to Landlord or by means of other devices then customarily used by similar businesses. 6. The acceptance by Landlord of payments of rent and statements of Gross Sales shall be without prejudice to Landlord's right to examine Tenant's Books and Records in order to verify the amounts thereof. 7. At its option, Landlord may conduct, at any reasonable time upon (7) days prior written notice to Tenant, a complete audit to be made of the Books and Records (including the books and records of any subtenant, operator, concessionaire or licensee) for the period covered by any statement required to be furnished by Tenant as set forth above. Any additional fixed annual rent found to be due and owing to Landlord as a result of any examination or audit shall immediately be due and payable with interest. In the event such examination or audit discloses that Tenant has understated Gross Sales by 3% or more, Tenant agrees to pay to Landlord the reasonable cost of such examination and audit, and all future statements of Gross Sales shall be certified as true and complete by an independent certified public accountant; and in the event that such examination or audit discloses that Tenant has understated Gross Sales by 5% or more, then, in addition to the foregoing, at Landlord' option, the rent reduction provided for in this First Amendment of Lease shall be null and void, and the terms of Schedule B of the Lease shall be reinstated as of October 1, 1994 and Tenant shall immediately pay any deficiency in fixed annual rent together with interest and late charges thereon at the rates specified in the Lease from the dates as of which said deficient amounts would have been payable initially, but for this First Amendment of Lease, until the date of full payment by Tenant. 8. If Tenant shall assign this Lease or sublet more than 30% of that portion of the Premises presently used for restaurant purposes, then, at Landlord's option, as of the effective date of such assignment or subletting the rent adjustments set forth in this First Amendment of Lease shall be of no further force or effect and the rents payable under Schedule B of the Lease shall be reinstated. 9. From and after October 1, 1997, Tenant shall pay fixed annual rent pursuant to the provisions of Schedule B of the Lease, without modification hereunder. 10. Except as hereby modified, the Lease remains in full force and effect in accordance with its terms. Tenant and Landlord each confirms that, to the best of its knowledge, the other party is not in default under the Lease. However, the immediately preceding sentence is not intended for the benefit of, nor as a waiver of any claims either party may have against, any prior owner, prior mortgagee or prior managing agent of the Premises. 11. This First Amendment of Lease represents the entire agreement between the parties with respect to the subject matter hereof, and it cannot be changed except by written agreement of the parties. IN WITNESS WHEREOF, Landlord and Tenant have duly executed this First Amendment of Lease as of the day and year first above written. LANDLORD: MEGA REALTY, L.L.C. By:______________________________ TENANT: CONIS REALTY CORP. By:______________________________ EX-10 3 EXHIBIT 10.49 EXTENSION AND MODIFICATION OF LEASE ----------------------------------- AGREEMENT made as of this ______ day of September, 1995. W I T N E S S E T H: WHEREAS by lease ("Lease") dated as of June 9, 1982, REBAK REALTY CO. ("Landlord"), having an office at 250 West 57th Street, Suite 1714, New York, New York 10107, did lease to MEB EMPORIUM CORP. ("Tenant") premises as described in such Lease ("Demised Premises"). WHEREAS Landlord and Tenant desire to extend and modify such Lease, it is hereby agreed as follows: 1) The term of the Lease shall be extended to November 30, 2008. 2) Commencing with January 1, 1996 Paragraph 40 of such Lease shall be deemed deleted and in lieu of the rent payable therein Tenant shall pay the following fixed minimum rent ("Fixed Minimum Rent") as same may be increased pursuant to Paragraph 3 below: a) The sum of $300,000.00 per annum for the period from January 1, 1996 to December 31, 1996 ($25,000.00 per month); b) The sum of $306,000.00 per annum for the period from January 1, 1997 to December 31, 1997 ($25,500.00 per month); c) The sum of $312,120.00 per annum for the period from January 1, 1998 to December 31, 1998 ($26,010.00 per month); d) The sum of $318,362.40 per annum for the period from January 1, 1999 to December 31, 1999 ($26,530.20 per month); e) The sum of $324,729.65 per annum for the period from January 1, 2000 to December 31, 2000 ($27,060.80 per month); f) The sum of $331,224.19 per annum for the period from January 1, 2001 to December 31, 2001 ($27,602.02 per month); g) The sum of $337,848.72 per annum for the period from January 1, 2002 to December 31,2002 ($28,154.07 per month); h) The sum of $344,605.82 per annum for the period from January 1, 2003 to December 31, 2003 ($28,717.15 per month); i) The sum of $351,497.92 per annum for the period from January 1, 2004 to December 31,2004 ($29,291.49 per month); j) The sum of $358,527.84 per annum for the period from January 1, 2005 to December 31, 2005 ($29,877.32 per month); k) The sum of $365,698.40 per annum for the period from January 1, 2006 to December 31, 2006 ($30,474.87 per month); l) The sum of $373,012.41 per annum for the period from January 1, 2007 to December 31, 2007 ($31,084.37 per month); m) The sum of $380,472.69 per annum for the period from January 1, 2008 to November 30, 2008 ($31,706.06 per month). 3) The Fixed Minimum Rent shall be a minimum as against percentage rent ("Percentage Rent") equal to eight (8%) percent of gross sales ("Gross Sales") of Tenant for the calendar year up to $4,000,000 in sales, and nine (9%) percent of gross sales above $4,000,000. During the last year of the term, such percentage rent will be prorated. a) The term Gross Sales as used herein is hereby defined to mean, except as specifically excluded below, receipts from sales of food, liquor, and all other items from business conducted upon the Demised Premises by Tenant and/or any agents, licensees, or sublessees and whether such sales be evidenced by check, credit, script or barter certificate, charge account, or cash. If any one or more departments or other divisions of Tenant's business in the Demised Premises shall be sublet by Tenant or conducted by any person, firm or corporation other than Tenant, then there shall be included in Gross Sales for the purpose of determining the Rent payable hereunder all the Gross Sales of such departments or divisions made in the Demised Premises in the same manner and with the same effect as if the business or sales of such departments and divisions of Tenant's business had been conducted by Tenant itself. Each charge or sale upon installment or credit shall be treated as a sale in the month during which such charge or sale shall be made, irrespective of the time when Tenant shall receive payment (whether full or partial) therefor. Notwithstanding anything herein to the contrary, in computing Gross Sales, the following shall be omitted: (i) the amount of any sales, use or gross receipt taxes, cabaret, amusement, excise or other similar tax or use taxes paid by Tenant's customers at the time of sale and imposed by any federal, state, municipal or other governmental authority; (ii) all sums and credits received in settlement of claims for loss or damage to merchandise; (iii) gratuities paid by customers to waiters or other employees. Anything to the contrary hereinabove notwithstanding with regard to any income received from any juke box at the premises, or cigarette machines at the premises, if such installations are operated by Tenant, the gross sales for purpose of this Agreement shall be 10% of the net profits from the operation of such installations, without giving Tenant credit for cost of installation thereof. Should any of such equipment be operated by an outside operator, the income received for purpose of this paragraph shall be the actual net income received from such operator. b) Tenant shall keep its records on a fiscal year basis ending on the Saturday closest to September 30th. Within one hundred twenty (120) days after the end of each fiscal year, the Tenant shall cause to be delivered to Landlord a statement certified by an officer of Ark Restaurant Corp., which shall set forth the Gross Sales (as defined herein) from the operation of the Demised Premises for such calendar year. Such certification shall further state that this is the same statement submitted to and accepted by Ark's auditors in connection with the preparation of Ark's certified statement. So long as Tenant is controlled by Ark Restaurant Corp., such accountant shall be the one regularly certifying the records of Ark Restaurant Corp. In addition to all other remedies of Landlord, failure to deliver such statement within the period as required above shall be deemed a substantial default by Tenant under the Lease. If such report shall disclose that overage rent is due for such preceding fiscal year, Tenant shall pay such overage rent together with such report. After the first fiscal year and during each fiscal year thereafter commencing with February 1 of the second fiscal year and February 1 of each subsequent fiscal year Tenant shall pay as Additional Rent on account of such years overage percentage of 1/12th of the annualized percentage rent of the prior fiscal year. Upon the rendering of the certified statement for such year, there shall be an adjustment by way of immediate payment of any additional sums due for such year or credit for any overpayment made on account. c) Tenant, with respect to business done on the Demised Premises, shall keep or make available at the Demised Premises or office of parent, for a period of three (3) years following the end of each Lease Year true and accurate records and accounts which shall show all sales made and all gross receipts from the business done upon and within the Demised Premises. Tenant shall provide Landlord with copies of any Tenant's auditor's reports, statements, trial balances or the like which relate to Tenant's sales in the Demised Premises. The same shall be retained by Tenant for a period of three years after the date of Tenant's receipt of such documents to the extent the same have been prepared by and for Tenant. The Tenant covenants that accurate cash registers or other commonly accepted method of recording sales will be installed and kept, or cause to be installed and kept, by the Tenant within the Demised Premises, which shall show and record each and every sale made upon and within the Demised Premises. Such registers or other method shall show the total of the daily sales of all business done upon and within the said Demised Premises by the Tenant. Such records and accounts of the said business and sales tax returns pertaining thereto shall be made available to Landlord or an accountant representing Landlord and may be audited at Tenant's office at Ark Restaurant Corp. at all reasonable times upon twenty (20) days prior written notice to Tenant, all at Landlord's expense. If Landlord desires, at its own expense, to audit Tenant's records of accounts it shall do so within one hundred eighty (180) days following its receipt of the Tenant's annual certified statement mentioned in subparagraph (b) of this paragraph. If Landlord does not so audit, then the Tenant's aforementioned annual certified statement shall be deemed to be conclusively accepted by Landlord as being correct, and Landlord shall have no right thereafter to question or examine said records of accounts, except as to errors resulting from fraud. In the event it is determined by Landlord's audit of said accounts and records that Tenant has understated its Gross Sales, whether intentionally or unintentionally, Tenant will pay the Additional Rent due plus interest on such rental from the date it should have been paid at the rate of three (3) percent over prime of Chemical Bank. If the Gross Sales have been understated by three (3%) percent or more, the cost of such audit, including all reasonable expenses pertaining thereto, shall also be paid by Tenant immediately. Any overpayment revealed by the audit shall be returned to the Tenant. Notwithstanding the foregoing, should Landlord and Tenant disagree as to any alleged discrepancy in rent, then the said accounts and records shall be audited by an independent certified public accounting firm selected by Landlord and Tenant and said firm's audit shall be deemed to be conclusive as between the parties hereto, If the parties are unable to agree upon the independent certified public accounting firm, then each of the parties will name an independent accounting firm and then by lottery determine which of the two independent accounting firms shall be utilized. "Independent" as used in the foregoing sentence shall mean a firm that is not at the time nor has not, within three (3) years prior to such time, been employed directly or indirectly by Landlord or Tenant or their respective auditors. The party not prevailing shall bear the cost of such audit. 3) Paragraph 61 of the Lease is deemed deleted and the sum of $50,000 shall be deemed deleted from Paragraph 31 and of Paragraph 61 and replaced with the sum of $100,000. In lieu of Paragraph 61 there shall be inserted the following paragraph: Should Tenant not have been declared in default under this lease it may replace the security hereunder with a clean, irrevocable letter of credit in the sum of $100,000.00 drawn on Bank Leumi or a major New York bank which is a member of the New York Regional Clearing House, which letter of credit by its terms shall be automatically annually renewable unless the bank issuing same serves written notice upon the Landlord, c/o Rebak Realty Co., 250 West 57th Street, Suite 1714, New York, New York 10107, or such other agent as to which Landlord notifies bank in writing in accordance with the bank's standard procedure, and its attorney Jack Weprin, Esq., 1501 Broadway, New York, New York 10036, at least thirty (30) days prior to the expiration thereof, that it will not renew same. Should the letter of credit not be replaced within twenty (20) days of its due date, then the beneficiary may present same for payment. The terms of the letter of credit shall merely state that the letter of credit is due and payable upon presentation of a sight draft together with a signed statement by Landlord under the lease for store premises 2150 Broadway, New York, New York, stating that Tenant has defaulted thereunder. Should such letter of credit be presented for payment, the proceeds thereof shall be held by Landlord as if same were security in cash received under this lease and shall be disposed of in such fashion. Tenant may, however, twice during the term of this Lease as modified herein replace such cash with a letter of credit as above. Tenant acknowledges that as of the execution of this Amendment there is no security held by Landlord or due to Tenant. 4) Anything to the contrary in the Lease as amended hereby notwithstanding, Landlord may terminate the Lease at any time commencing with December 1, 2003 ("Date of Termination"), provided Landlord has given Tenant notice not less than six (6) months prior to Date of Termination, by paying to Tenant the sum of $250,000.00, which sum shall be reduced by 1/60th for each month that has transpired from December 31, 2003. Said sum to be placed in escrow with Landlord's attorney four (4) weeks before date required for surrender of possession. It is understood that Tenant shall be required to deliver vacant possession of the premises "broom clean" upon the Date of Termination which shall be deemed the Date of Termination pursuant to the Lease as modified with Tenant's right to return of security subject to Landlord's right to apply such portion of it necessary to cure any unperformed obligations of Tenant. Should Tenant not peaceably and voluntarily deliver such possession on such date, this Lease as amended shall in any event be deemed cancelled and Landlord may use such remedies, at law or equity, which might be necessary to obtain such possession. However, should such possession not have been granted peaceably and voluntarily by Tenant on or before Date of Termination, the aforesaid sum shall cease to be due to Tenant and Landlord shall be under no obligation to pay same to such Tenant. Any reference to cancellation referred to in this paragraph requiring the payment of any sums of money to the Tenant, shall deal only with voluntary cancellation by Landlord. It is understood and agreed of course, that should this Lease as amended be terminated or cancelled by Landlord because of Tenant's failure to perform pursuant to the terms of the Lease as amended, that there shall be no monetary consideration due to Tenant. 5) Tenant acknowledges that it waives any claim it may have against Landlord with regard to the collapse of the 2nd floor of the building containing the premises being let hereunder or any damages suffered by Tenant, whether to its own property, to the property of other tenants in the building, or as a result of the remedial work undertaken with regard to any part of the building. Tenant further acknowledges that it waives any claim it may have against Landlord as a result of the alleged missing staircase between the 2nd floor and the 1st floor of the building and Tenant acknowledges it is renting the premises "as is" with all conditions as presently exist. It is understood that any reduced size of the premises being let as a result of the alteration to the premises is what has been considered in arriving at the rental referred to in this Agreement. This does not negate any claims which Tenant might have against Avis. 5) Except for the aforementioned modifications, all of the terms, covenants and conditions of the Lease dated June 9, 1982, including the continuation of 1982/83 as the base tax year, shall remain in full force and effect. IN WITNESS WHEREOF, the parties have hereunto executed this Agreement this ____ day of September, 1995. REBAK REALTY CO. By:_____________________________ MEB EMPORIUM CORP. By:_____________________________ EX-10 4 EXHIBIT 10.50 AMENDMENT AND MODIFICATION OF LEASES AMENDMENT AND MODIFICATION OF LEASES made as of June 13, 1995 by and between BUCHBINDERS RESTAURANT INC., with offices c/o Buchbinder & Warren, One Union Square, New York, New York 10003 dated as of the 1st day of January, 1986 ("Buchbinders") and 377 THIRD AVENUE CO, dated as of the 1st day of April, 1986 ("377 Third"), which two leases together may hereinafter be referred to as "The Leases", and ARK 27TH ST., INC., with offices at 85 Fifth Avenue, New York, New York 10003 ("Tenant"). W I T N E S S E T H: WHEREAS, Buchbinders and Tenant entered into a certain agreement of lease dated as of January 1, 1986 whereby premises 375 Third Avenue and a portion of 203 East 27th Street, New York, New York were leased to Tenant as described in such lease. WHEREAS, 377 Third and Tenant entered into a certain agreement of lease dated as of April 1, 1986 whereby store and basement at 377 Third Avenue, New York, New York were leased to Tenant. WHEREAS, the parties wish to modify and extend The Leases, it is hereby agreed as follows: 1. The term of The Leases shall be extended for a five-year period commencing January 1, 1996 through December 31, 2000. 2. The aggregate base rental payable pursuant to The Leases shall be at the rate of $200,000.00 per annum, payable in monthly installments of $16,666.67. 3. Paragraph 2(a) of Buchbinders is hereby amended whereby the figure "5%" is deleted and replaced with 10%, which overage shall be payable in each calendar year where the aggregate gross receipts of both premises exceed $1,900,000.00. 4. In lieu of the tax contribution called for under The Leases, Tenant shall pay as tax contribution any increase in taxes over and above the fiscal tax year 1994/95 as follows: 375 Third Avenue - 100% 203 East 27th Street - 25% 377 Third Avenue - 50% 5. Tenant shall pay for any increase in vault taxes over and above fiscal tax year ending May 31, 1995 with regard to the premises covered by The Leases. 6. Tenant shall pay for all water & sewer charges as a result of any meter servicing premises 373 Third Avenue and 375 Third Avenue, as well as 203 East 27th Street, New York, New York. 7. Except as hereby extended and amended all of the terms, covenants and conditions of The Leases shall remain in full force and effect. IN WITNESS WHEREOF Buchbinders, 377 Third and Tenant have duly executed this Amendment as of the day and year first above written. BUCHBINDERS RESTAURANT, INC. By:_______________________________ 377 THIRD AVENUE CO. By:_______________________________ ARK 27TH ST., INC. By:_______________________________ EX-10 5 EXHIBIT 10.51 AGREEMENT THIS AGREEMENT is made as of this 5th day of December, 1995, by and among UNITED BRODY CORP., a New York corporation, having a place of business at Leggett Road, Ghent, New York, 12075 (hereinafter "Licensor"), and ARK STEAKHOUSE CORP., a Nevada corporation, having an office at c/o Ark Restaurants Corp., 85 Fifth Avenue, 14th Floor, New York, New York, 10003 (hereinafter "Licensee"). W I T N E S S E T H: WHEREAS, the Licensor is the owner of a certain service mark, namely "GALLAGHER'S", which has been registered with the Patent and Trademark Office of the United States of America under Registration No. 1,507,546 (hereinafter "Service Mark"), and WHEREAS, the Licensor is engaged in the restaurant business in the City of New York, New York, and in connection therewith, Licensor has established a national and international reputation for high-quality foods and fine service, all of which has created substantial value in the Service Mark above described, and WHEREAS, Licensee recognizes and acknowledges the value of such Service Mark, as well as the benefits to be derived from being identified with and licensed by Licensor, with -2- respect to the limited use of such Service Mark, and WHEREAS, the Licensee desires to acquire the limited right to use such Service Mark in connection with the operation of a restaurant at Las Vegas, Nevada. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows: 1. USE OF NAME (SERVICE MARK); TERMINATION OF USE: Licensor gives and grants to Licensee during the term of this Agreement a limited license to use the Service Mark "Gallagher's" alone or together with the name "New York, New York", or together with the name "Las Vegas", or together with both such names, or any other, or any variation thereof as may be approved in writing by the Licensor, in Licensor's absolute discretion, exclusively for the operation of a business of a restaurant at Las Vegas, Nevada (hereinafter "Restaurant") for the sale at retail of full-service meals, in a sit-down environment (non-fast-food style), and also to be permitted to engage in the sale of "take out" food, catering and the retail sale of food items (excluding mail order and excluding locations other than within the City limits of Las Vegas, Nevada), subject to and in accordance with the terms, conditions and standards set forth herein. The Licensee agrees to use Licensor's Service Mark and name in connection with, and exclusively for, the promotion and conduct of the Restaurant, as provided hereunder, in accordance with the standards and terms and conditions stated herein. The Licensee recognizes and acknowledges that the Licensor is the sole and exclusive owner of the Licensor's Service Mark and agrees that it will not register nor attempt to register such Service Mark or any -3- confusingly similar mark in its own name or that of any other firm, person, corporation or entity, whatsoever, and that Licensee will not use the aforesaid Service Mark or any confusingly similar mark as any part of any corporate name or in connection with any enterprise other than the Restaurant. Immediately upon the expiration or termination of this Agreement, the Licensee agrees to cease and forever abstain from the use of the aforesaid Service Mark and Licensee at its sole cost and expenses, shall either destroy or return to Licensor, all documents, instruments, display items, including stationery, identification cards, building signage, menus, invoices, matchbooks, and the like bearing the aforesaid Service Mark. The delivery of all such materials as are required to be delivered to the Licensor hereunder shall be made by the Licensee to the Licensor, at Licensee's prepaid expense, free and clear of all charges or liens, at the place for notice hereinafter described or at such other place within the State of New York, as the Licensor shall indicate in writing. Such delivery shall be made immediately upon the expiration or termination of this Agreement, irrespective of the reason for termination. The Licensee, after the expiration or other termination hereof, shall not directly or indirectly contest or aid in contesting the validity or ownership of the Service Mark or any action whatsoever in derogation of the Licensor's claimed rights therein. Nothing contained in this Agreement shall be construed to vest in the Licensee any right, title or interest in or to the Licensor's Service Mark, the good will now or hereafter associated therewith, or any right in the design or any such Service Mark or the character of any such signage in connection therewith, other than the rights and license expressly granted herein. Any and all good will -4- associated with the Licensor's Service Mark shall inure directly and exclusively to the benefit of and is the property of the Licensor. All advertising by the Licensee shall be in good taste. The Licensee shall refrain from the use of the Licensor's Service Mark in conjunction with or integrated with any other tradename or Service Mark or any accompanying words, insignias or symbols, except as hereinabove approved, or as expressly approved by the Licensor, or as may be expressly required by law. 2. ANNUAL MINIMUM LICENSE FEE: The Annual Minimum License Fee shall be Ten Thousand Dollars ($10,000) per year. Such minimum fee for the first year of the term of this agreement is being paid concurrently with the execution of this Agreement. If the lease for the Restaurant (the "Lease") is not executed on or before September 30, 1996, the Licensor shall return to the Licensee $5,000 of such minimum fee for the first year and upon such payment this agreement shall be null and void and neither party shall have any liability hereunder. The Annual Minimum License Fee, for each year during the term of this agreement, shall be applied against an Annual License Fee computed at two percent (2%) of Licensee's gross sales (as hereinafter defined). Payments to be made monthly on account of such license fee on or before the 15th day of each month beginning in the month immediately following the month in which the restaurant commences operation and the same shall be based upon the gross sales of the preceding calendar month. -5- For the purposes of this Paragraph 2, each twelve month period shall be based on Licensee's fiscal year ending on the Saturday nearest September 30th and shall consist of the twelve months or shorter period ending on such date and the first year of the term of this agreement (which may be shorter than twelve months) shall be deemed to begin on the date Licensee commences operations at the Restaurant. The terms "gross sales" shall mean the aggregate of all receipts, revenues and income, however characterized, resulting or derived directly from the operation of the Restaurant during the term. Gross sales shall include revenues from the sale at the Restaurant, for cash or credit, of all food, beverages (including alcoholic beverages), goods, wares or merchandise customarily produced for retail sale to the consumer public at a sit-down restaurant operation both served at the premises or catered off premises. Gross sales shall not include (i) any sales, excise or other taxes collected or received by the Licensee in connection with the Restaurant and paid to the taxing authorities by Licensee, (ii) gratuities to employees paid by Licensee's customers, and (iii) the amount of sales otherwise included in the gross sales which are received for payment of "complimentary meals" supplied to the casino/hotel guests, patrons and executives for which the Licensee receives a discounted payment below the stated menu prices; further provided, however, that solely for purposes of calculating gross sales the total of such excluded "complimentary meals" shall be limited to $500,000 per annum (or with respect to any period less than a year, $500,000 multiplied by a fraction, the numerator of which shall be the number of days in such period less than a year and the denominator of which shall be 365). -6- 3. ACCOUNTING PROCEDURE: Licensee agrees to keep complete records of the gross receipts of the Restaurant. Licensee shall furnish on a monthly basis statements for the Restaurant's gross receipts for the preceding month. Such statements will be certified by an officer of Licensee for the subject period. All such statements shall be in accord with good accounting practice and shall be submitted to the Licensor not later than the fifteenth (15th) day of the month following the period for which the written statement is required to be submitted. In addition thereto, the Licensee shall submit, with such statements, its State of Nevada sales tax return for the immediately-preceding sales tax reporting period. Licensee shall submit an annual statement on or before October 20th of each year for the year just ended, which statement shall be certified to by an officer of Licensee. The Annual Statement shall set forth (i) gross receipts less the authorized exclusion amount as set forth above, (ii) the calculation of the percentage license fee for the prior year, (iii) the license fee previously paid and (iv) the balance due, if any. If any such annual statement shows additional sums payable by the Licensee to the Licensor, such amount shall be delivered simultaneously with the annual statement. If any such annual statement shows that an amount is payable by Licensor to the Licensee, the Licensor shall within ten (10) days of the annual statement pay such amount to the Licensee. 4. RIGHT OF AUDIT: Licensee agrees that, on reasonable notice, Licensor or its agent shall have the right, once per annum during the term of this Agreement, during regular business hours, to examine or audit the books and accounts of Licensor to verify gross receipts -7- as certified hereunder. If the audit shows a deficit, the parties shall endeavor to resolve such dispute. In the event that the parties are unable to arrive at a mutually satisfactory resolution, the accountants of each of Licensee and Licensor, shall select an independent certified public accountant who shall resolve the dispute, which resolution shall be conclusive and binding on the parties. If the audit shows a deficit in the license fees of five (5%) percent or more, the cost of the audit shall be paid by Licensee. If the audit shows a deficit of less than five (5%) percent, the cost of the audit shall be shared equally by Licensor and Licensee. If the audit shows no deficit or any overpayment, the cost of the audit will be borne by the Licensor. All deficits uncovered by an audit shall bear interest at the rate of TWELVE (12%) per annum from the date same was first due until paid. 5. STANDARDS: Licensee acknowledges that Licensor's reputation and the value of its Service Mark has derived, in part, from Licensor's high quality of service, presentation of restaurant product, showcasing, pre-preparation of certain food products and preparation of food products. Licensee further acknowledges that with respect to such service, presentation of restaurant product, showcasing, pre-preparation of certain food products and preparation of food products, Licensor has a secret, protected propriety interest in the methods with respect thereto. Accordingly, Licensee agrees that Licensor's Service Mark can only be protected through the adherence to certain public service and food preparation standards. In order to protect Licensor's proprietary interests, Licensee agrees that the -8- making of this Agreement and the payment of the initial fee is a prerequisite to the availability of the various methodologies and standards with respect thereto. Licensor shall, within thirty (30) days from the date the Lease is executed, undertake the training of Licensee with regard to Licensor's methodologies and standards employed at Licensor's location at 228 West 52nd Street, New York, New York, 10019. Thereafter, Licensor shall provide Licensee with a detailed written manual of such methodologies and standards (hereinafter "Manual"). During the operation of the Restaurant, in recognition of the mutual benefits accruing from maintaining the modus operandi set forth in the Manual, Licensee agrees to make all reasonable efforts to adhere to the Manual in connection with the Restaurant. If Licensee deviates in a material fashion from the Manual, Licensor will give Licensee notice setting forth in reasonable detail the manner in which the Licensee is materially deviating from the Manual and Licensor shall take all reasonable steps to correct the deviation. Licensor agrees that Licensee will not be in default hereunder as long as it is making reasonable efforts, in good faith, to comply with the Manual. Nothing, however, shall relieve Licensee of complying with the standards as set forth herein (Manual), and continued deviation and/or noncompliance shall constitute default hereunder. Any dispute as to whether the Licensee is complying with the standards shall be resolved by arbitration pursuant to Paragraph 21 below. 6. RIGHT OF ENTRY AND INSPECTION: The Licensor or its authorized agent and representative shall have the right to enter and inspect the premises and examine and test food products and supplies for the purpose of ascertaining that Licensee is operating the -9- Restaurant in accordance with the terms of this Agreement and, in particular, subject to the standards herein contained (Manual). Any such inspection requiring the participation of personnel employed by Licensee shall be limited to twice per annum. Inspections shall be conducted during normal business hours. The Licensor shall notify the Licensee in writing of any deficiencies detected during the inspection. Licensor and Licensee shall discuss such deficiencies and the manner in which they should be corrected and licensee shall proceed to make all reasonable efforts, in good faith, to correct the deficiencies. 7. AUTHORITY: The Licensee shall not represent or hold itself out as an agent, legal representative, partner, subsidiary, joint venturer, franchise or employee of the Licensor. The Licensee shall have no right or power to and shall not bind or obligate the Licensor in any way, manner or thing whatsoever, nor represent that it has any right to do so. In its public records and in its relationship with other persons, or letterheads and business forms, Licensee shall indicate its independent ownership of said business, and that it is only a licensee of the Licensor. Licensee agrees to exhibit on the premises in a place agreed upon between the Licensor and Licensee a notification that it is a licensee of Licensor. All disclaimers required hereunder shall be subject to Licensor's prior written approval. 8. DEFAULT: TERMINATION: The occurrence of any of the following events -10- shall constitute good cause for Licensor, at its option and without prejudice to any other rights or remedies provided for herein or hereunder or by law or equity, to terminate this Agreement: A. If Licensee shall be adjudicated a bankrupt, because insolvent, or if a receiver (permanent or temporary) of its property or any part thereof is appointed by a court of competent jurisdiction and authority; if it makes a general assignment for the benefit of creditors, or if a final judgment remains unsatisfied of record for thirty (30) days or longer (unless supersedeas bond is filed) or if execution is levied against Licensee's business or property or suit to foreclose any lien or mortgage against the premises or equipment is instituted against Licensee and not dismissed within thirty (30) days; or if Licensee defaults in the performance of any term, condition or obligation in the payment of any indebtedness to Licensor, its suppliers or others, arising out of the purchase of supplies or the purchase or lease of equipment or operation of the Restaurant, except where any such amount owed are being diligently contested in good faith by appropriate proceedings, and if any such default is not cured within thirty (30) days after written notice by Licensor to Licensee. B. If Licensee defaults in the payment of any fee or other payment due hereunder or fails to submit the financial or reports, sales slips or the like of the "gross sales" as provided herein, and fails to cure said default within thirty (30) days -11- after written notification thereof, or if Licensee makes any intentionally false statement in connection therewith. C. If Licensee fails in good faith to make reasonable efforts to cure any material deviation from the standards as set forth in Paragraph 5 and 6 of this Agreement and such failure or non-compliance shall continue after notification; or if Licensee repeatedly commits violations of such provisions. D. If Licensee violates any other term or condition of this Agreement and Licensee shall not have diligently commenced to cure such defaults thirty (30) days after written notice from Licensor to cure same. E. If Licensee suffers a violation of any law, ordinance, rule or regulation of a governmental agency in connection with the operation of the Restaurant and permits the same to go on uncorrected after notification thereof, unless there is a bona fide dispute as to the violation or legality of such law, ordinance, rule or regulation. F. If Licensee ceases to do business at the premises or defaults under the Lease or loses its rights to possession of the premises. -12- 9. LICENSOR'S OBLIGATION: The Licensor shall have no obligations to Licensee, whatsoever, except as expressly stated herein. Licensor shall not have the obligation to direct or advise Licensee in the operation of the Restaurant, and the terms hereof shall be considered limitations for the purpose of protecting the Service Mark of the Licensor and the good will connected therewith. This Agreement is not intended to create a franchise, and the Licensee is not relying on any relationship, as such. 10. NO REPRESENTATIONS: Licensee acknowledges that Licensor has made no representations to Licensee with regard to the profitability of the Restaurant, the market therefor or the operations thereof. Licensor acknowledges that Licensee had made no representations to Licensor with regard to the profitability of the Restaurant, the market therefor or the operations thereof. 11. EXCLUSIVITY: The Licensee's rights shall be exclusive to the City of Las Vegas, Nevada. 12. TERM: This Agreement shall be effective on the date hereof and shall end on the termination of the Lease, as such may be renewed or extended, unless this Agreement is otherwise terminated in accordance with the terms hereof. The term of this Agreement, for purposes of the license fee, shall be governed by the provisions of Paragraph 2 above. -13- 13. ASSIGNABILITY: This Agreement is not assignable by Licensee, except with the written consent of Licensor, which shall not be unreasonably withheld. Any attempted assignment without such consent shall be void and constitute a default hereunder. Notwithstanding the foregoing, Licensee shall be able to assign its rights and obligations hereunder, without the consent of Licensor, in connection with the sale of all or substantially all of the assets or stock of Ark Restaurant Corp. Nothing herein shall preclude the transfer of Licensor's rights hereunder. 14. ENFORCEMENT OF SERVICE MARK: A. Licensee and Licensor shall promptly notify each other of any suspected infringement of their respective interests in and to the Service Mark by any third party. In the event that any legal action against any third party is deemed necessary by either Licensee or Licensor for the protection of their respective interests in and to the Service Mark, Licensee and Licensor shall cooperate with each other and render all reasonably necessary assistance in connection with any such legal action; provided, however, that neither party shall settle any such action without the prior written consent of the other, which shall not be unreasonably withheld. Within thirty (30) days after notice from Licensee of a suspected infringement, Licensor shall advise Licensee of whether or not Licensor shall prosecute a suit for infringement. If Licensor elects to prosecute such a suit, Licensor may select legal counsel and shall bear all legal fees and other costs and expenses incurred in connection therewith. Any monies recovered after such costs and expenses are reimbursed, shall be shared fifty (50%) percent by Licensor and fifty -14- (50%) percent by Licensee. If Licensor chooses not to prosecute any such suit for infringement, then Licensee may do so after notice to Licensor; and Licensee may select legal counsel and shall bear all legal fees and other costs and expenses incurred in connection therewith. Any monies recovered after such costs and expenses are reimbursed, shall be shared fifty percent (50%) by Licensor and fifty percent (50%) by Licensee. B. Licensor hereby agrees to be solely responsible for, to defend and indemnify Licensee, its officers, agents and employees and to hold each of them harmless from any claims, demands, causes of action or damages, including reasonable attorney's fees (collectively the "Costs"), arising out of an action against Licensee contesting the right of Licensee to use the Service Mark. In the event such claim is asserted against the Licensee, the Licensee shall notify the Licensor of such claim, and the Licensor shall immediately thereafter bear all the Costs. The provisions of this paragraph shall survive the termination of this Agreement. 15. INDEMNIFICATION: Licensee hereby agrees to be solely responsible for, to defend and indemnify Licensor, its officers, agents and employees, and to hold each of them harmless from any claims, demands, causes of action or damages, including reasonable attorneys' fees, arising out of the operation of the Restaurant. Licensee will obtain and keep in full force and effect the following (the "Policies"): A. a policy of commercial general liability on an occurrence basis with a -15- combined single limit with respect to each occurrence in an amount of $1,000,000 for bodily injury or death to persons; and B. a Liquor Liability insurance policy in an amount of $1,000,000 for bodily injury or death to persons The Licensor shall be named as an additional insured on the Policies. 16. NOTICE: Any and all notices required or permitted to be given or made pursuant to any of the provisions of this Agreement shall be deemed to have been duly given or made for all purposes if sent by mail, postage prepaid, or by recognized overnight delivery service, or by telephone facsimile, in any case addressed as follows: If to Licensee, at: c/o Ark Restaurants Corp. Attention: Michael Weinstein 85 Fifth Avenue, 14th Floor New York, New York 10003 Telecopy: (212) 206-8814 With copy to: Shack & Siegel, P.C. Attention: Donald D. Shack, Esq. 530 Fifth Avenue New York, New York 10036 Telecopy: (212) 730-1964 If to Licensor, at: United Brody Corp. Attention: Jerome Brody Leggett Road -16- Ghent, New York 12075 Telecopy: With a copy to: Rapport, Meyers, Whitbeck, Shaw & Rodenhausen Attention: Carmi Rapport, Esq. 436 Union Street Hudson, New York 12534 Telecopy: (518) 828-9719 or at such other address as any party may specify by notice given to the other party in accordance with this paragraph. The date of giving of any such notice shall be the third business day after mailing if sent by certified mail and the date of first receipt if sent by any other permitted method. 17. CONSTRUCTION: This Agreement and the terms hereof shall be construed in accordance with the laws of the State of New York and, subject to the provisions of Paragraph 21 below, venue for all actions in a court of competent jurisdiction shall lie in New York, New York and for federal litigation, in the Southern District of the State of New York. 18. ENTIRE AGREEMENT, MODIFICATION: No statements, representations, variations, either written or oral from whatever source arising, except as stated in this Agreement, shall have any legal validity between the parties or be binding upon any of them. The parties acknowledge that this Agreement contains the entire understanding and agreement of the parties. No modifications hereof shall be effective unless made in writing and computed by the parties hereto with the same formalities as this Agreement is executed. -17- 19. NON-WAIVER: The failure of the Licensor to exercise any right, power or option given to it hereunder or to insist upon strict compliance with the terms hereof by the Licensee shall not constitute a waiver of the terms and conditions of this Agreement with respect to any other or subsequent breach thereof, nor a waiver by the Licensor of its rights at any time thereafter to require exact and strict compliance with all of the terms hereof. The rights and remedies hereunder are cumulative to any other rights or remedies which may be granted by law. 20. SEVERABILITY: Should any word, phrase or provisions hereof be declared illegal or invalid by a court of competent jurisdiction, such declaration of illegality and/or invalidity shall not affect the remainder hereof. 21. ARBITRATION: Except as otherwise specifically provided in this agreement, any controversy or claim arising out of or relating to this Agreement, of the breach thereof, shall be settled by arbitration in the City and County of New York, in accordance with the commercial arbitration rules of the American Arbitration Association, and any judgment upon the award may be entered in any court having competent jurisdiction thereof. The arbitrator shall be entitled to award any relief which may be available at law or in equity, including, without limitation, issuing a preliminary or permanent injunction. -18- 22. HEADINGS: The headings or captions associated with paragraphs of this Agreement are for convenience and reference only and do not form a part hereof, and do not in any way modify, interpret or construe the intent of the parties or affect any of the provisions of this Agreement. LICENSEE: LICENSOR: ARK STEAKHOUSE CORP. UNITED BRODY CORP. By___________________________ By____________________________ Robert Towers, Vice President Jerome Brody, President -19- EX-21 6 EXHIBIT 21 EXHIBIT 21 Subsidiaries of the Registrant
Jurisdiction of Subsidiary Incorporation ---------- ------------- Columbus Cafe Corp. New York SSWB Restaurants, Inc. New York MEB Emporium Corp. New York MEB On Columbus Inc. New York MEB Dining 18, Inc. New York MEB On First, Inc. New York Conis Realty Corp. New York Conis Restaurant Corp. New York Ernie's Hackensack, Inc. New Jersey Four Gentlemen From Verona, Inc. New Jersey La Femme Noire, Inc. New York Ark 27th Street, Inc. New York Ark Seventh Avenue South Corp. New York Ark Rio Corp. New York Ark Operating Corp. New York Ark Sub-One Corp. New York Ark 474 Corp. New York Ark Twenty-Ninth Street Corp. New York Ark Boston Corp. Massachusetts
Jurisdiction of Subsidiary Incorporation ---------- ------------- Ark Union Station, Inc. District of Columbia Ark D.C. Kiosk, Inc. District of Columbia Ark Potomac Corporation District of Columbia Washington Parties & Events Related Industries, Inc. District of Columbia Aroc and Ark Corporation New York Ark Bryant Park Corp. New York Ark of the Seaport, Inc. New York Ark Parties, Inc. New York Tysons America Corp. Virginia Ark JC Corp. Florida Ark Oxnard Corp. California Ark JMR Corp. New York Ark Fifth Avenue Corp. New York Ark Islamorada Corp. Florida KRA Holdings, Inc. New York La Femme Noire D.C. Incorporated District of Columbia Ark Cafeteria Corp. New Jersey Ark Steakhouse Corp. Nevada
EX-23 7 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Form S-8 Registration Statement No. 33-48217 and Registration Statement No. 33-85724 of Ark Restaurants Corp. of our report dated November 30, 1995 (except for Note 13, as to which the date is December 28, 1995), appearing in this Annual Report on Form 10-K of Ark Restaurants Corp. for the year ended September 30, 1995. New York, New York December 28, 1995 EX-27 8 EXHIBIT 27
5 The schedule contains summary financial information extracted from the consolidated balance sheet of Ark Restaurants Corp. and its subsidiaries as of September 30, 1995, and the related consolidated statement of operations, and is qualified in its entirety by reference to such financial statements. YEAR SEP-30-1995 SEP-30-1995 $1,271,284 0 1,273,827 0 888,344 5,484,300 26,923,993 10,548,687 28,541,920 5,443,304 5,148,189 45,364 0 0 16,660,937 16,706,301 73,026,907 73,026,907 20,024,944 48,743,331 4,582,329 0 359,159 1,898,557 777,431 1,121,126 0 0 0 1,121,126 0.34 0 -----END PRIVACY-ENHANCED MESSAGE-----