<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: NOVEMBER 2, 1998
--------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number: 0-6054
STAR BUFFET, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-1430786
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
440 LAWNDALE DRIVE,
SALT LAKE CITY, UT 84115
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(801) 463-5500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. AS OF DECEMBER 14, 1998 THERE
WERE 3,059,000 SHARES OF COMMON STOCK, $ .001 PAR VALUE, OUTSTANDING.
<PAGE> 2
STAR BUFFET, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets as of November 2, 1998
and January 26, 1998 3
Consolidated Condensed Statements of Income for the twelve
and forty weeks ended November 2, 1998 and November 3, 1997 5
Consolidated Condensed Statements of Cash Flows for the forty
weeks ended November 2, 1998 and November 3, 1997 6
Notes to Consolidated Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
2
<PAGE> 3
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOVEMBER 2, JANUARY 26,
ASSETS 1998 1998
------------ ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,469,000 $15,387,000
Current portion of notes and other receivables 4,058,000 336,000
Inventories 786,000 493,000
Deferred income taxes, net 317,000 110,000
Prepaid expenses 711,000 204,000
----------- -----------
Total current assets 8,341,000 16,530,000
----------- -----------
Property, buildings and equipment, at cost, less
accumulated depreciation 23,907,000 15,077,000
----------- -----------
Real property and equipment under capitalized leases,
at cost, less accumulated amortization 2,181,000 2,287,000
----------- -----------
Other assets:
Notes receivable, net of current portion 2,562,000 3,235,000
Deposits and other 1,647,000 2,167,000
----------- -----------
Total other assets 4,209,000 5,402,000
----------- -----------
Goodwill, less accumulated amortization 4,297,000 1,380,000
Other intangible assets, less accumulated amortization 274,000 293,000
----------- -----------
Total intangible assets 4,571,000 1,673,000
----------- -----------
Total assets $43,209,000 $40,969,000
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE> 4
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY NOVEMBER 2, JANUARY 26,
1998 1998
------------ -----------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable - trade $ 3,553,000 $ 2,212,000
Payroll and related taxes 1,374,000 1,643,000
Sales and property taxes 1,205,000 1,178,000
Rent, licenses and other 405,000 822,000
Current maturities of obligations under
capital leases and long term debt 799,000 259,000
Other current liabilities -- 209,000
----------- -----------
Total current liabilities 7,336,000 6,323,000
----------- -----------
Long-term debt, net of current maturities
Capitalized lease obligations 2,077,000 2,109,000
Notes payable 10,853,000 --
----------- -----------
Total long-term debt 12,930,000 2,109,000
Preferred stock, $.001 par value; authorized
1,500,000 shares; none issued or outstanding -- --
Common stock, $.001 par value; authorized
18,500,000 shares; issued and outstanding
3,450,000 and 5,450,000 shares 3,000 5,000
Additional paid-in capital 19,269,000 31,768,000
Retained earnings 3,671,000 764,000
----------- -----------
Total stockholders' equity 22,943,000 32,537,000
----------- -----------
Total liabilities and stockholders' equity $43,209,000 $40,969,000
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE> 5
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FORTY WEEKS ENDED
------------------------------- -------------------------------
NOVEMBER 2, NOVEMBER 3, NOVEMBER 2, NOVEMBER 3,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total revenues $ 18,996,000 $ 12,178,000 $ 65,245,000 $ 41,484,000
Costs and expenses
Food costs 6,299,000 4,063,000 21,693,000 13,578,000
Labor costs 6,178,000 3,905,000 20,671,000 13,092,000
Occupancy and other expenses 4,011,000 2,524,000 13,255,000 7,956,000
General and administrative expenses 876,000 502,000 3,036,000 1,559,000
Depreciation and amortization 797,000 487,000 2,297,000 1,616,000
------------ ------------ ------------ ------------
Total costs and expenses 18,161,000 11,481,000 60,952,000 37,801,000
------------ ------------ ------------ ------------
Income from operations 835,000 697,000 4,293,000 3,683,000
Interest expense (177,000) (46,000) (298,000) (154,000)
Interest income 145,000 82,000 618,000 82,000
Other Income 77,000 -- 231,000 --
------------ ------------ ------------ ------------
Income before income taxes 880,000 733,000 4,844,000 3,611,000
Income tax expense 352,000 293,000 1,938,000 1,444,000
------------ ------------ ------------ ------------
Net income $ 528,000 $ 440,000 $ 2,906,000 $ 2,167,000
============ ============ ============ ============
Net income per common share - basic
$ 0.13 $ 0.12 $ 0.57 $ 0.74
============ ============ ============ ============
Weighted average shares outstanding
- basic 4,164,000 3,716,000 5,064,000 2,935,000
============ ============ ============ ============
Net income per common share - diluted
$ 0.13 $ 0.12 $ 0.57 $ 0.74
============ ============ ============ ============
Weighted average shares outstanding -
diluted 4,164,000 3,716,000 5,064,000 2,935,000
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE> 6
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FORTY WEEKS ENDED
--------------------------------
NOVEMBER 2, NOVEMBER 3,
1998 1997
----------- ------------
<S> <C> <C>
Net income $ 2,906,000 $ 2,167,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,297,000 1,616,000
Amortization of royalty fee 334,000 --
Interest income (102,000) --
Change in operating assets and liabilities:
Receivables (492,000) (163,000)
Inventories (293,000) --
Prepaid expenses (937,000) --
Deposits and other assets (834,000) (439,000)
Deferred taxes 207,000 --
Accounts payable and other accrued liabilities 472,000 153,000
------------ ------------
Net cash provided by operating activities 3,558,000 3,334,000
Cash flows used in investing activities:
Increase in notes receivable (2,694,000) (3,500,000)
Acquisition of restaurants (6,634,000) (5,433,000)
Acquisition of property, buildings and equipment (4,132,000) (1,708,000)
------------ ------------
Net cash used in investing activities (13,460,000) (10,641,000)
Cash flows from financing activities:
Proceeds from issuance of common stock -- 31,199,000
Payments to extinguish debt (8,212,000) --
Payments to parent company -- (9,323,000)
Principal payment on capital leases (194,000) (151,000)
Proceeds from issuance of long-term debt 10,800,000 --
Loan costs (410,000) --
Retirement of stock (5,000,000) --
------------ ------------
Net cash provided by financing activities (3,016,000) 21,725,000
------------ ------------
Net increase (decrease) in cash and cash equivalents (12,918,000) 14,418,000
Cash and cash equivalents at beginning of period 15,387,000 353,000
------------ ------------
Cash and cash equivalents at end of period $ 2,469,000 $ 14,771,000
============ ============
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements.
6
<PAGE> 7
STAR BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
FORTY WEEKS ENDED
------------------------------------------
NOVEMBER 2, 1998 NOVEMBER 3, 1997
---------------- ----------------
<S> <C> <C>
Supplemental disclosures of cash flow Information:
Cash paid for interest $ 318,000 $ 154,000
=========== ============
Cash paid for income taxes $ 2,616,000 $ --
=========== ============
Non cash investing and financing activities:
Exchange of receivables from Stacey's Buffet, Inc.
for three Stacey's Buffet Restaurants $ 1,004,000 $ --
Acquisition of BuddyFreddys assets with debt
financing $ 1,200,000 $ --
Use of deposit to buy out operating equipment leases -- $ 366,000
Issuance of 2.6 millions shares of common stock to
CKE to acquire interest in Summit Family
Restaurants -- $ 1,000,000
Acquisition of 2,000,000 of common stock with debt
financing (see note C) $ 7,500,000 $ --
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements.
7
<PAGE> 8
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE (A) BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements include
the accounts for Star Buffet, Inc., together with its direct and indirect wholly
owned subsidiaries Summit Family Restaurants Inc. ("Summit"), HTB Restaurants,
Inc. ("HTB"), Northstar Buffet, Inc. ("NSBI"), and Star Buffet Management, Inc.
("SBMI") (collectively the "Company") and have been prepared in accordance with
generally accepted accounting principles, the instructions to Form 10-Q and
Article 10 of Regulation S-X. These financial statements should be read in
conjunction with the audited consolidated financial statements, and the notes
thereto, included in the Company's Annual Report on Form 10-K for the fiscal
year ended January 26, 1998. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the financial position and results of operations for the interim periods
presented have been reflected herein. Results of operations for such interim
periods are not necessarily indicative of results to be expected for the full
fiscal year or for any future periods. Certain reclassifications have been made
to the fiscal 1998 consolidated condensed financial statements to conform to the
fiscal 1999 presentation. The accompanying financial statements include the
results of operations and assets and liabilities directly related to the
Company's operations. Certain estimates, assumptions and allocations were made
in preparing such financial statements.
The operating results for the 12-week period ended November 2, 1998 include 12
weeks of operations for each of the Company's 16 franchised HomeTown Buffet
restaurants, nine JB's Restaurants, six JJ North's Grand Buffet restaurants,
five North Star Buffet restaurants, five Stacey's Buffet restaurants, three
BuddyFreddys restaurants, two Casa Bonita restaurants and two Maggie's Buffet
restaurants. In addition, during such period the Company has three of the five
Stacey's and one of the two Maggie's Buffet restaurants closed for remodeling.
The operations for the 12-week period ended November 3, 1997 include 12 weeks of
operations for each of the Company's 16 franchised HomeTown Buffet restaurants
and two Casa Bonita restaurants and five weeks of operations for JJ North's
Grand Buffet restaurants, but do not include the operations for other
restaurants acquired by the Company in fiscal 1999.
The Company utilizes a 52/53 week fiscal year which ends on the last Monday in
January. The first quarter of each year contains 16 weeks while the other three
quarters each contain 12 weeks.
NOTE (B) PREVIOUSLY ANNOUNCED ACQUISITION
On June 5, 1998, the Company announced that it has entered into an agreement to
purchase four Holiday House Restaurants located in central Florida. The
negotiations are still ongoing.
NOTE (C) PREVIOUSLY ANNOUNCED REPURCHASE OF STOCK
On September 10, 1998, the Company entered into a stock repurchase agreement
authorized by its Board of Directors to purchase two million shares of the
Company's Common Stock held by CKE Restaurants, Inc. ("CKE") for a purchase
price of $5 million in cash and a $7.5 million 90 day promissory note secured by
treasury stock. The Company's Board of Directors also authorized the repurchase
of up to an additional 500,000 shares of the Company's Common Stock to be
effected in the open market, in private transactions or through alternative
repurchase transactions approved by the Board of Directors. During the third
quarter, the Company completed the purchase of two million shares from CKE and
subsequent to the end of the third quarter, the Company repurchased 391,000
shares of the additional 500,000 shares.
8
<PAGE> 9
STAR BUFFET, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following Management's Discussion and Analysis should be read in conjunction
with the unaudited consolidated condensed financial statements, and the notes
thereto, presented elsewhere in this Report. The addition of seven weeks of
operations of the six JJ North's Grand Buffet restaurants and the addition of
twelve weeks of operations of nine JB's Restaurants, three North's Star Buffet
restaurants, and seven operating restaurants in Florida are the principal
reasons for the differences when comparing results of operations for the 12-week
period ended November 2, 1998 with the results of operations for the 12-week
period ended November 3, 1997. Comparability of future periods may also from
time to time be affected by the implementation of the Company's acquisition and
strategic alliance strategies.
Consolidated net income for the 12-week period ended November 2, 1998 increased
$88,000 or 20.0% to $528,000 or $0.13 per share on a diluted basis as compared
with net income of $440,000 for the comparable prior year period. Consolidated
net income for the 40-week period ended November 2, 1998 increased $739,000 or
34.1% to $2,906,000 or $0.57 per share on a diluted basis as compared with net
income of $2,167,000 for the comparable prior year period. The increase in net
income is primarily due to the additional operations of recently acquired
restaurants since their respective dates of acquisition.
This Quarterly Report on Form 10-Q contains forward looking statements, which
are subject to known and unknown risks, uncertainties and other factors which
may cause the actual results, performance, or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; success
of integrating newly acquired under performing or unprofitable restaurants; the
impact of competitive products and pricing; success of operating initiatives;
advertising and promotional efforts; adverse publicity; changes in business
strategy or development plans; quality of management; availability, terms and
deployment of capital; changes in prevailing interest rates and the availability
of financing; food, labor, and employee benefits costs; changes in, or the
failure to comply with, government regulations; weather conditions; construction
schedules; implementation of the Company's acquisition and strategic alliance
strategy; the effect of the Company's accounting polices and other risks
detailed in the Company's Prospectus dated September 24, 1997 and other filings
with the Securities and Exchange Commission.
9
<PAGE> 10
COMPONENTS OF INCOME FROM OPERATIONS
Total revenues include a combination of food, beverage and gift shop sales and
are net of applicable state and city sales taxes.
Food costs primarily consist of the costs of food and beverage items. Various
factors beyond the Company's control, including adverse weather and natural
disasters, may affect food costs. Accordingly, the Company may incur periodic
fluctuations in food costs. Generally, these temporary increases are absorbed by
the Company and not passed on to customers; however, management may adjust menu
prices to compensate for increased costs of a more permanent nature.
Labor costs include restaurant management salaries, bonuses, hourly wages for
unit level employees, various health, life and dental insurance programs,
vacations and sick pay and payroll taxes.
Occupancy and other expenses are primarily fixed in nature and generally do not
vary with restaurant sales volume. Rent, insurance, property taxes, utilities,
maintenance and advertising account for the major expenditures in this category.
General and administrative expenses include all corporate and administrative
functions that serve to support the existing restaurant base and provide the
infrastructure for future growth. Management, supervisory and staff salaries,
employee benefits, data processing, training and office supplies are the major
items of expense in this category.
Other income represents management fee income resulting from the Company's
management agreement related to one JJ North's Grand Buffet restaurant.
The Company records depreciation on its property and equipment on a
straight-line basis over their estimated useful lives.
10
<PAGE> 11
RESULTS OF OPERATIONS
The following table summarizes the Company's results of operations as a
percentage of total revenues for the 12 and 40 weeks ended November 2, 1998 and
November 3, 1997.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FORTY WEEKS ENDED
------------------------- -------------------------
NOVEMBER 2, NOVEMBER 3, NOVEMBER 2, NOVEMBER 3,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Costs and expenses
Food costs 33.2 33.4 33.2 32.6
Labor costs 32.5 32.1 31.7 31.6
Occupancy and other expenses 21.1 20.7 20.3 19.2
General and administrative expenses 4.6 4.1 4.7 3.8
Depreciation and amortization 4.2 4.0 3.5 3.9
---- ---- ---- ----
Total costs and expenses 95.6 94.3 93.4 91.1
---- ---- ---- ----
Income from operations 4.4 5.7 6.6 8.9
Interest expense (0.9) (0.4) (0.5) (0.4)
Interest income 0.8 0.7 0.9 0.2
Other Income 0.4 -- 0.4 --
---- ---- ---- ----
Income before income taxes 4.7 6.0 7.4 8.7
Income tax expense (1.9) (2.4) (3.0) (3.5)
---- ---- ---- ----
Net income 2.8% 3.6% 4.4% 5.2%
==== ==== ==== ====
Effective income tax rate 40.0% 40.0% 40.0% 40.0%
==== ==== ==== ====
</TABLE>
Total revenues increased $6,818,000 or 56.0% from $12.2 million in the 12 weeks
ended November 3, 1997 to $19.0 million in the 12 weeks ended November 2, 1998.
$5.9 million of such increase in revenues was attributable to the inclusion of
the results of the Company's recently acquired restaurants. Total revenues
increased $23.8 million or 57.3% from $41.5 million in the 40 weeks ended
November 3, 1997 to $65.2 million in the 40 weeks ended November 2, 1998. $17.6
million of such increase in revenues was attributable to the inclusion of the
results of the Company's recently acquired restaurants, $5.6 million was
attributable to JJ North's which was acquired in the third quarter of last year,
and $589,000 of the increase was attributable to an increase in same-store sales
in the Company's HomeTown Buffet and Casa Bonita restaurants.
Food costs as a percentage of total revenues decreased from 33.4% during the
12-week period ended November 3, 1997 to 33.2% during the 12 weeks ended
November 2, 1998, and increased from 32.7% during the 40-week period ended
November 3, 1997 to 33.2% during the 40 weeks ended November 2, 1998. The
decrease for the 12-week period ended November 2, 1998 was primarily
attributable to the seasonality of the seven Florida stores acquired in the
first quarter for Fiscal 1999 and the conversion of one Florida restaurant to
the BuddyFreddys concept. The increase as a percentage of total revenues for the
40-week period ended November 2, 1998 was primarily attributable to the
acquisition during the first quarter of fiscal 1999 of seven restaurants located
in Florida and the conversion of three JB's Restaurants to North's Star Buffet
restaurants which operate with higher food costs as a percent of revenues than
the Company's other restaurants.
11
<PAGE> 12
Labor costs as a percentage of total revenues increased from 32.1% during the
12-week period ended November 3, 1997 to 32.5% during the 12-week period ended
November 2, 1998, and increased from 31.6% during the 40-week period ended
November 3, 1997 to 31.7% during the 40 weeks ended November 2, 1998. The
increase as a percentage of total revenues was primarily attributable to
increased labor costs in the Company's Florida division and recently converted
North's Star Buffets.
Occupancy and other expenses as a percentage of total revenues increased from
20.7% during the 12-week period ended November 3, 1997 to 21.1% during the
12-week period ended November 2, 1998, and from 19.2% during the 40-week period
ended November 3, 1997 to 20.3% during the 40-week period ended November 2,
1998. The increase as a percentage of total revenues primarily reflects the
impact of acquired restaurants in Florida which operate with higher occupancy
and other expenses as a percentage of total revenues than the Company's other
restaurants.
General and administrative costs as a percentage of total revenues increased
from 4.2% during the 12-week period ended November 3, 1997 to 4.6% during the
12-week period ended November 2, 1998, and from 3.8% during the 40-week period
ended November 3, 1997 to 4.7% during the 40-week period ended November 2, 1998.
The increase as a percentage of total revenues was primarily attributable to
increases in personnel and administrative costs at the corporate office as the
Company reduces its dependence on CKE to provide certain administrative
functions.
Interest expense as a percentage of total revenues increased from 0.4% during
the 12-week period ended November 3, 1997 to 0.9% during the 12-week period
ended November 2, 1998, and from 0.4% during the 40-week period ended November
3, 1997 to 0.5% during the 40-week period ended November 2, 1998. The increase
as a percentage of total revenues was primarily attributable to increased
interest charges for the facility with CKE for the stock repurchase.
Interest income of $145,000 and $618,000 for the 12 and 40-week periods ended
November 2, 1998 was generated by interest earned on the Company's cash and cash
equivalents and outstanding notes receivable balances during the period. Prior
to September 30, 1997, the Company's excess cash was used to reduce
inter-company liabilities between Summit Family Restaurants Inc. and CKE and
therefore, interest income of $82,000 and $82,000 is significantly less for the
12 and 40-week periods ended November 3, 1997.
IMPACT OF INFLATION
The impact of inflation on the cost of food, labor, equipment and construction
could affect the Company's operations. Many of the Company's employees are paid
hourly rates related to the federal and state minimum wage laws. Recent
legislation increasing the federal minimum wage has resulted in higher labor
costs to the Company. In addition, the cost of food commodities utilized by the
Company are subject to market supply and demand pressures. Shifts in these costs
may have a significant impact on the Company's food costs. The Company
anticipates that increases in these costs can be offset through pricing and
other cost control efforts; however, there is no assurance that the Company
would be able to pass such costs on to its guests or if it were able to do so,
it could do so in a short period of time.
LIQUIDITY AND CAPITAL RESOURCES
The Company, historically financed operations through a combination of cash on
hand, cash provided from operations and, prior to the Company's initial public
offering in September 1997, borrowings available to its predecessor under bank
lines of credit.
12
<PAGE> 13
As of November 2, 1998, the Company had $2.5 million in cash and cash
equivalents. Cash and cash equivalents decreased by $12.9 million during the 40
weeks ended November 2, 1998. Total cash provided by operations was
approximately $3.6 million. The Company used approximately $6.6 million to fund
the acquisition of 23 restaurants, $2.7 million to fund loans related to
acquired restaurants and $4.1 million to fund capital improvements to existing
and acquired restaurants. The Company also repurchased 2 million shares of its
common stock from CKE for a purchase price equal to $5.0 million in cash and a
90 day promissory note in the amount of $7.5 million on September 10, 1998. The
Company used $7.5 million of the proceeds from its bank financing arrangement
with BankBoston, N.A. to discharge all of its obligation to CKE on the 90 day
promissory note.
The Company completed one conversion of a Stacey's Buffet to a BuddyFreddys
Country Buffet during the third quarter of fiscal 1999.
The Company intends to expand its operations through the opening of new
restaurants and the acquisition of regional buffet chains. In addition, the
Company may expand through the purchase of existing restaurant sites which would
be converted to one of the Company's restaurant concepts. Management estimates
the cost of opening its prototype restaurant to be approximately $1.5 million to
$1.7 million, assuming leased real estate. In many instances, management
believes that existing restaurant locations can be acquired and converted to the
Company's prototype at a lower cost than new unit openings. These costs consist
primarily of exterior and interior appearance modifications and the addition of
certain kitchen and food service equipment. There can be no assurance that the
Company will be able to acquire additional restaurant chains or locations or, if
acquired, that these restaurants will have a positive contribution to the
Company's results of operations.
On October 23, 1998, the Company entered into a $20 million syndicated bank
financing agreement led by BankBoston, N.A. The credit facility consists of a
$13 million, 5-year term loan (the "Term Loan Facility") and a $7 million,
5-year revolving credit facility (the "Revolving Credit Facility"). The Term
Loan Facility refinanced existing indebtness and will provide capital for the
repurchase of common stock and acquisitions. The Term Loan Facility balance was
$10.8 million as of November 2, 1998. Principal payments under the Term Loan
Facility are due in quarterly installments, beginning in November 1999 and
continue until the final maturity in October 2003. Borrowings under the
Revolving Credit Facility will be used for the Company's new unit development
and working capital needs. All outstanding amounts under the Revolving Credit
Facility will become due in October 2003. The Revolving Credit Facility balance
was zero on November 2, 1998.
The Company believes that available cash, cash flow from operations and amounts
available under the Term Loan Facility and Revolving Credit Facility will be
sufficient to satisfy its working capital, and capital expenditure requirements
for the foreseeable future. If the Company requires additional funds to support
its working capital requirements or for other purposes, including acquisitions,
it may seek to raise such additional funds through public or private equity
and/or debt financing or from other sources. There can be no assurance, however,
that changes in the Company's operating plans, the unavailability of a credit
facility, the acceleration of the Company's expansion plans, lower than
anticipated revenues, increased expenses, potential acquisitions of other events
will not cause the Company to seek additional financing sooner than anticipated.
There can be no assurance that additional financing will be available on
acceptable terms or at all.
IMPACT OF "YEAR 2000"
The Company is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems. The "Year 2000" problem stems from computer
applications that were written using two digits rather than four digits to
define the applicable year. As a result, these applications may recognize "00"
as "1900" rather than "2000."
13
<PAGE> 14
The Company has investigated the impact of the Year 2000 problem on its
business, including the Company's operational, information and financial
systems. Based on this investigation, the Company does not expect the Year 2000
problem, including the cost of making the Company's computerized information
systems Year 2000 compliant, to have a material adverse impact on the Company's
financial position, results of operations or cash flows in future periods. The
Company's mainframe computer and all significant software are Year 2000
compliant. The Company's few remaining non-compliant restaurants and home office
personal computers will be upgraded in the next 12 months.
The Company has also initiated communications with significant suppliers and
vendors on which the Company relies in an effort to determine the extent to
which the Company's business is vulnerable to the failure by these third
parties' to remediate their Year 2000 problems. While the Company has not been
informed of any material risks associated with the Year 2000 problem on these
entities, there can be no assurance that the computerized information systems of
these third parties will be Year 2000 compliant on a timely basis. The inability
of these third parties to remediate their Year 2000 problems could have a
material adverse impact on the Company.
To date, the Company has expensed incremental costs of approximately $60,000 to
assess and remediate potential Year 2000 problems. The total remaining
incremental cost is estimated to be $140,000. The Company is expensing as
incurred all costs related to the assessment and remediation of the Year 2000
issue. These costs are being funded through operating cash flows.
14
<PAGE> 15
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
On November 12, 1998, North's Restaurants, Inc. ("North's") filed a Demand for
Arbitration against the Company with the American Arbitration Association,
Irvine, California (District No. 949-251-9840), alleging breach of contract in
connection with the Company's failure to perform under a Business Services
Agreement between North's and the Company dated July 24, 1997. The Company has
evaluated the claims and believes that such claims are invalid. The Company
does not believe that the result of the arbitration proceeding will have a
material adverse effect on the Company's business, financial condition and
results of operations.
ITEM 2. USE OF PROCEEDS OF INITIAL PUBLIC OFFERING
Amount of net offering proceeds used for:
Dividend to CKE $ 9,323,000
Payment to CKE for net assets of Casa Bonita 1,099,000
Loan to North's Restaurants, Inc. 3,565,000
Acquisition of restaurants 11,946,000
Loan to BuddyFreddys 2,400,000
Acquisition of furniture, fixtures and equipment 2,440,000
-----------
$30,773,000
===========
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are attached to this report:
Exhibit Description
Number of Exhibit
------- -----------
10.1 Credit Agreement (Portions of this Exhibit are omitted and
were filed separately with the Secretary of the Commission
pursuant to the Company's application for confidential
treatment under Rule 24b-2 of the Exchange Act.)
11 Calculation of Earnings per Share
27.1 Financial Data Schedule (EDGAR version only)
(b) Current Reports on Form 8-K:
(i) A current report on Form 8-K dated September 25, 1998 was
filed to report the Company's Stock Repurchase Agreement
with CKE Restaurants, Inc. and the Stock Repurchase Plan
of up to 500,000 shares.
(ii) A current report on Form 8-K dated November 9, 1998 was
filed to report the resignations of William P. Foley, C.
Thomas Thompson and John F. North from the Company's Board
of Directors.
(iii) A current report on Form 8-K dated December 10, 1998 was
filed to report the resignation of Stuart Clifton from the
Company's Board of Directors and the Board of Directors
appointment of Robert E. Wheaton as Chairman of the Board
of Registrant.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STAR BUFFET, INC. AND SUBSIDIARIES
December 17, 1998 By: /s/ Robert E. Wheaton
---------------------------------
Robert E. Wheaton
President and
Chief Executive Officer
16
<PAGE> 17
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
10.1 Credit Agreement (Portions of this Exhibit are omitted and
were filed separately with the Secretary of the Commission
pursuant to the Company's application for confidential
treatment under Rule 24b-2 of the Exchange Act.)
11 Calculation of Earnings per Share
27.1 Financial Data Schedule (EDGAR version only)
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
BANKBOSTON, N.A., as Agent,
BANCBOSTON ROBERTSON STEPHENS SECURITIES, INC.,
as Syndication Agent,
THE LENDERS WHICH ARE PARTIES HERETO,
STAR BUFFET, INC.,
and
ITS SUBSIDIARIES WHICH ARE PARTIES HERETO
Dated: October 23, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS......................................................................1
SECTION 2. THE CREDIT FACILITIES...........................................................16
2.1 THE LOANS AND NOTES.....................................................................16
2.2 SCHEDULED REPAYMENTS OF THE LOANS.......................................................16
2.3 COMMITMENT FEES; INTEREST; DEFAULT RATE.................................................17
2.4 REQUESTS FOR LOANS......................................................................19
2.5 CONVERSION AND CONTINUANCE OF LOANS.....................................................20
2.6 TERMINATION OF THE COMMITMENTS..........................................................20
2.7 MANDATORY PAYMENTS AND PREPAYMENTS......................................................20
2.8 LETTERS OF CREDIT.......................................................................21
2.9 CHANGED CIRCUMSTANCES...................................................................24
2.10 CAPITAL ADEQUACY.......................................................................26
2.11 PAYMENTS BEFORE END OF EURODOLLAR PERIOD...............................................26
2.12 ADDITIONAL FEES........................................................................27
2.13 SECURITY...............................................................................27
2.14 USE OF PROCEEDS........................................................................28
2.15 TIME AND METHOD OF PAYMENTS............................................................28
2.16 NON-RECEIPT OF FUNDS BY AGENT..........................................................29
2.17 SHARING OF PAYMENTS AND SETOFF AMONG LENDERS..........................................29
SECTION 3. CONDITIONS OF LOANS.............................................................30
3.1 CONDITIONS TO INITIAL CREDIT EXTENSION..................................................30
3.2 CONDITIONS TO ALL CREDIT EXTENSIONS.....................................................31
SECTION 4. REPRESENTATIONS AND WARRANTIES..................................................31
4.1 ORGANIZATION AND QUALIFICATION..........................................................31
4.2 CORPORATE OR PARTNERSHIP AUTHORITY......................................................32
4.3 VALID OBLIGATIONS.......................................................................32
4.4 APPROVALS...............................................................................32
4.5 TITLE TO PROPERTIES; ABSENCE OF LIENS...................................................32
4.6 LICENSES, PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY.................................32
4.7 COMPLIANCE WITH LAWS AND AGREEMENTS.....................................................33
4.8 MATERIAL AGREEMENTS.....................................................................33
4.9 ENVIRONMENTAL MATTERS...................................................................33
4.10 COMPLIANCE WITH ERISA..................................................................34
4.11 FINANCIAL STATEMENTS...................................................................34
4.12 SOLVENCY...............................................................................35
4.13 TAXES..................................................................................35
4.14 LITIGATION.............................................................................35
4.15 MARGIN RULES...........................................................................35
4.16 RESTRICTIONS ON THE BORROWERS..........................................................36
4.17 CAPITALIZATION.........................................................................36
4.18 FULL DISCLOSURE........................................................................36
4.19 INVESTMENT COMPANY ACT.................................................................36
4.20 LABOR DISPUTES; COLLECTIVE BARGAINING AGREEMENTS; EMPLOYEE GRIEVANCES..................36
</TABLE>
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<TABLE>
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SECTION 5. FINANCIAL COVENANTS.............................................................37
5.1 MAXIMUM LEVERAGE RATIO..................................................................37
5.2 MINIMUM FIXED CHARGES COVERAGE RATIO....................................................37
5.3 MINIMUM NET WORTH......................................................................37
5.4 MAXIMUM CAPITAL EXPENDITURES............................................................37
SECTION 6. AFFIRMATIVE COVENANTS...........................................................37
6.1 FINANCIAL REPORTING.....................................................................38
6.2 CONDUCT OF BUSINESS.....................................................................39
6.3 MAINTENANCE AND INSURANCE...............................................................40
6.4 TAXES...................................................................................40
6.5 INSPECTION BY THE LENDER................................................................40
6.6 ACCOUNTING SYSTEM.......................................................................40
6.7 FURTHER ASSURANCE.......................................................................41
6.8 ENVIRONMENTAL LAWS......................................................................41
6.9 DEPOSITORY..............................................................................41
SECTION 7. NEGATIVE COVENANTS..............................................................41
7.1 INDEBTEDNESS; CONTINGENT LIABILITIES....................................................41
7.2 SALE AND LEASEBACK......................................................................42
7.3 ENCUMBRANCES............................................................................42
7.4 DISPOSITION OF ASSETS, ETC..............................................................43
7.5 AMENDMENT TO CHARTER OR PARTNERSHIP DOCUMENTS...........................................43
7.6 MERGERS; CONSOLIDATIONS; ISSUANCE OF SECURITIES; ETC....................................43
7.7 EQUITY DISTRIBUTIONS; SUBORDINATED PAYMENTS.............................................44
7.8 INVESTMENTS, LOANS AND ACQUISITIONS.....................................................44
7.9 ERISA...................................................................................44
7.10 TRANSACTIONS WITH AFFILIATES...........................................................45
7.11 AMENDMENT OF CERTAIN AGREEMENTS........................................................45
7.12 MARGIN STOCK...........................................................................45
7.13 NEGATIVE PLEDGES, ETC..................................................................45
SECTION 8. DEFAULTS.........................................................................45
8.1 EVENTS OF DEFAULT.......................................................................45
8.2 REMEDIES................................................................................47
8.3 LETTERS OF CREDIT.......................................................................48
SECTION 9. MISCELLANEOUS....................................................................48
9.1 NOTICES.................................................................................48
9.2 EXPENSES................................................................................49
9.3 INDEMNIFICATION.........................................................................49
9.4 TERM OF AGREEMENT.......................................................................50
9.5 NO WAIVERS..............................................................................50
9.6 GOVERNING LAW...........................................................................50
9.7 ENTIRE AGREEMENT; AMENDMENTS............................................................50
9.8 ASSIGNMENTS; PARTICIPATIONS............................................................51
9.9 COUNTERPARTS; PARTIAL INVALIDITY........................................................53
9.10 WAIVER OF JURY TRIAL...................................................................53
9.11 CONSENT TO JURISDICTION................................................................54
9.12 JOINT AND SEVERAL LIABILITY............................................................54
SECTION 10. THE AGENT......................................................................54
10.1 APPOINTMENT, POWERS AND IMMUNITIES....................................................54
10.2 RELIANCE BY AGENT.....................................................................55
10.3 EVENTS OF DEFAULT.....................................................................55
</TABLE>
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10.4 RIGHTS AS A LENDER....................................................................55
10.5 INDEMNIFICATION.......................................................................55
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS...............................................56
10.7 FAILURE TO ACT........................................................................56
10.8 RESIGNATION OF AGENT..................................................................56
10.9 COOPERATION OF LENDERS................................................................57
</TABLE>
EXHIBITS
Exhibit 2.1(a) Form of Revolving Note
Exhibit 2.1(b) Form of Term Note
Exhibit 2.4 Form of Loan Request
Exhibit 2.5 Form of Interest Rate Option Notice
Exhibit 6.1 Form of Covenant Compliance Report
Exhibit 9.8 Form of Assignment and Acceptance
SCHEDULES
Schedule 1.1(a) Commitments/Percentages
Schedule 1.1(b) Quarterly Dates
Schedule 2.14 Existing Term Debt to be Refinanced
Schedule 4.1 Qualifications
Schedule 4.4 Governmental and Other Consents
Schedule 4.6 Intellectual Property; Trademarks, Etc.
Schedule 4.8 Restaurants; Material Agreements
Schedule 4.9 Environmental Matters
Schedule 4.14 Litigation
Schedule 4.17 Capitalization
Schedule 7.1 Other Indebtedness
Schedule 7.3 Other Encumbrances
Schedule 7.8 Other Investments
Schedule 7.10 Transactions with Affiliates
-iii-
<PAGE> 5
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT is made as of October 23, 1998 among STAR BUFFET,
INC. , a Delaware corporation (the "Parent"); and its direct and indirect
Subsidiaries, SUMMIT FAMILY RESTAURANTS, INC., a Delaware corporation
("Summit"), HTB RESTAURANTS, INC., a Delaware corporation and a wholly-owned
Subsidiary of Summit ("HTB"), NORTHSTAR BUFFET, INC., a Delaware corporation,
and STAR BUFFET MANAGEMENT, INC., a Delaware corporation (the "Existing
Subsidiaries"), the Parent's future Subsidiaries which become parties hereto
(the Parent, the Existing Subsidiaries and all of such future Subsidiaries which
become parties hereto being collectively referred to as the "Borrowers" and each
individually as a "Borrower"); the various financial institutions which are now,
or in accordance with Section 9.8 hereafter become, parties hereto as Lenders
(individually, a "Lender" and collectively, the "Lenders"); BANKBOSTON, N.A., a
national banking association, as administrative agent for the Lenders (together
with its successors and assigns in such capacity, the "Agent"), and BANCBOSTON
ROBERTSON STEPHENS SECURITIES, INC., as syndication agent.
RECITALS
A. The Borrowers are engaged in the business of owning and operating
Restaurants;
B. The Borrowers, have requested that the Lenders provide (i) term
financing of up to $13,000,000 to refinance existing Indebtedness, redeem
capital stock of the Parent and for Preapproved Acquisitions and (ii) a
revolving line of credit of up to $7,000,000 for working capital and general
corporate purposes, new Restaurant development, Permitted Acquisitions,
Preapproved Real Estate Acquisitions and standby letters of credit; and
C. The Lenders are willing, subject to the terms and conditions set
forth herein, to provide such financing.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. As used herein, the capitalized terms set forth
below shall have the following meanings:
Accountants: KPMG Peat Marwick LLP or other independent certified public
accountants acceptable to the Agent.
Acquisition: See definition of Permitted Acquisition.
Adjusted Eurodollar Rate: As applied to any Interest Period, the rate
per annum determined pursuant to the following formula:
AER = [ IOR ]*
-------------
[1.00 - RP]
<PAGE> 6
AER = Adjusted Eurodollar Rate
IOR = Interbank Offered Rate
RP = Reserve Percentage
- ------------------
* The amount in brackets shall be rounded upwards, if necessary, to the
next higher 1/100th of 1%.
Where:
The "Interbank Offered Rates" applicable to any Eurodollar Loan
for any Interest Period means the rate of interest determined by the
Lender to be the prevailing rate per annum at which deposits in US
dollars are offered to the Lender by first-class banks in the interbank
Eurodollar market in which it regularly participates on or about 10:00
a.m. (Boston time) two Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount
of the Eurodollar Loan to which such Interest Period is to apply for a
period of time approximately equal to such Interest Period; and
The "Reserve Percentage" applicable to any Interest Period means
the rate (expressed as a decimal) applicable to the Lender during such
Interest Period under regulations issued from time to time by the Board
of Governors of the Federal Reserve System for determining the maximum
reserve requirement (including, without limitation, any basic,
supplemental, emergency or marginal reserve requirement) of the Lender
with respect to "Eurocurrency liabilities" as that term is defined under
such regulations.
The Adjusted Eurodollar Rate shall be adjusted automatically as of the
effective date of any change in the Reserve Percentage.
Affiliate: As applied to any Person, (a) if an individual, a spouse or
relative of such person; (b) if a business entity, any partner, shareholder,
member, director, officer or manager of such Person (except an equityholder of
not more than 5% of the outstanding stock of any company listed on a national
securities exchange or actively traded in the over-the-counter securities
market); (c) any corporation, association, partnership, joint venture, firm or
other entity of which such Person is a partner, stockholder (except an
equityholder of not more than 5% of the outstanding stock of any company listed
on a national securities exchange or actively traded in the over-the-counter
securities market), venturer, member, director, officer or manager; and (d) any
other Person directly or indirectly controlling, controlled by, or under common
control with, such Person.
Agent: See the Preamble.
Applicable Margin: See Section 2.3.
Assignment and Acceptance Agreement: See Section 9.8.
Available Revolver Commitment: At any time, the aggregate Revolver
Commitments minus the Revolving Credit Outstandings.
- 2 -
<PAGE> 7
Base Rate: The higher of (a) the annual rate of interest announced from
time to time by BankBoston, N.A. at its head office as its Base Rate, and (b)
the Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if
necessary, to the next 1/8th of 1%). The Base Rate is not necessarily intended
to be the lowest rate of interest determined by the Agent in connection with
extensions of credit.
Base Rate Loan: Any Revolving Loan or portion of any Term Loan bearing
interest calculated by reference to the Base Rate.
Borrowers: See the Preamble.
Business Day: (i) For all purposes other than as covered by clause (ii)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts and are open for the transaction of a substantial part of
their commercial banking business; and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, any day that is a Business Day described in clause (i) and
that is also a day for trading by and between banks in the US Dollar deposits in
the interbank Eurodollar market.
Capital Expenditures: Expenditures for Acquisitions, fixed assets,
leasehold improvements, store fixtures, installment purchases of machinery and
equipment and similar expenditures, in each case capitalized in accordance with
GAAP.
Capitalized Leases: Leases under which any Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with GAAP.
Change in Control: Shall mean any of the following:
(a) The acquisition by any entity, individual or group (within
the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") of beneficial ownership (as defined in
Rule 13d-3 promulgated under the Exchange Act) of at least thirty percent (30%)
of the common stock of the Parent and/or other securities which have at least
thirty percent (30%) of the combined voting power of the securities of the
Parent entitled to vote in the election of directors; or
(b) If the Parent or, with respect to HTB, Summit, shall cease
to own directly one hundred percent (100%) of the outstanding capital stock of
each of its Subsidiaries; or
(c) for any reason, Robert Wheaton shall cease to operate as
chief executive officer of the Parent or to devote his full time management
responsibilities to such capacity, unless a successor of at least comparable
abilities is appointed within 60 days of such cessation and the Required Lenders
have approved such successor within 10 days of such appointment.
Code: The Internal Revenue Code of 1986 and the rules and regulations
promulgated thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
- 3 -
<PAGE> 8
Collateral: Any and all real and personal property of the Borrowers and
their Subsidiaries, whether tangible or intangible, in which the Agent on behalf
of the Lenders now has, is granted by this Agreement or otherwise, or hereafter
acquires a security interest or any other lien to secure any of the Obligations.
Commitments: As to any Lender, collectively, such Lender's Revolver
Commitment and Term Loan Commitment.
Companies: The Borrowers and their existing and future Subsidiaries.
Consolidated Cash Flow: For any period, without duplication, the sum of
(a) the Consolidated EBITDAR of the Borrowers and their Subsidiaries for such
period, minus (b) cash taxes of the Borrowers and their Subsidiaries for such
period, minus (c) the aggregate amount of Maintenance Capital Expenditures for
such period; in each case determined on a consolidated basis in accordance with
GAAP.
Consolidated EBITDA: For any period, without duplication, an amount
equal to Consolidated Net Income of the Borrowers and their Subsidiaries for
such period, plus (a) taxes in respect of income and profits of the Borrowers
and their Subsidiaries for such period (excluding any such taxes taken into
account in the computation of EBITDA in any prior period), plus (b) Consolidated
Interest Expense for such period, to the extent deducted in the calculation of
Consolidated Net Income for such period, plus (c) depreciation, amortization and
other non-cash charges for such period; all to the extent deducted in computing
Consolidated Net Income for such period, in each case determined on a
consolidated basis in accordance with GAAP.
Consolidated EBITDAR: For any period, without duplication, the sum of
(a) Consolidated EBITDA, plus (b) rental expense under Operating Leases; in each
case determined on a consolidated basis in accordance with GAAP.
Consolidated Financial Obligations: For any period, the sum of all
scheduled payments including without limitation, principal, Consolidated
Interest Expense and rental expense under Operating Leases which came due during
such period; in each case determined on a consolidated basis in accordance with
GAAP.
Consolidated Funded Indebtedness: Without duplication, all Indebtedness
of the Borrowers and their Subsidiaries with respect to any of the following:
(i) money borrowed (whether recourse or non-recourse), including principal,
interest and premiums, (ii) obligations evidenced by a bond, debenture, note or
other like written obligation to pay money, (iii) obligations under Capitalized
Leases, (iv) obligations under conditional sales or other title retention
agreements or secured by any Encumbrance, (v) the aggregate drawing amount of
any letters of credit or similar instruments (including reimbursement
obligations with respect thereto), (vi) the deferred unpaid purchase price of
property or services, except trade payables and accrued expenses incurred in the
ordinary course of business, or (vii) any Guaranty of any or all of the
foregoing; in each case determined on a consolidated basis in accordance with
GAAP. The aggregate amount of Consolidated Funded Indebtedness at any time shall
include all accrued interest which has become due and payable but
- 4 -
<PAGE> 9
has not been paid (whether or not capitalized) and the accreted amount of any
Debt Issuance issued with original issue discount.
Consolidated Interest Expense: For any period, without duplication, the
sum of all interest (including without limitation interest on Capitalized
Leases) and commitment, letter of credit and similar fees on all Indebtedness of
the Borrowers and their Subsidiaries which came due during such period; in each
case determined on a consolidated basis in accordance with GAAP.
Consolidated Net Income: For any period, the net income (or loss) of the
Borrowers and their Subsidiaries, excluding any extraordinary income (or loss)
for such period (taken as a cumulative whole), after deducting all operating
expenses, provisions for all taxes and reserves (including reserves for deferred
income taxes) and all other proper deductions; in each case determined on a
consolidated basis in accordance with GAAP.
Consolidated Net Worth: As of any date, the amount of which is to be
determined, (i) Consolidated Total Assets of the Borrowers and their
Subsidiaries on a consolidated basis determined in accordance with GAAP, minus
(ii) Consolidated Total Liabilities of the Borrowers and their Subsidiaries, as
determined in accordance with GAAP.
Consolidated Total Assets: As of any date, all assets that should, in
accordance with GAAP, be classified as assets on the consolidated balance sheet
of the Borrowers and their Subsidiaries.
Consolidated Total Liabilities: As of any date, all obligations that
should, in accordance with GAAP on a consolidated basis, be classified as
liabilities on the balance sheet of the Borrowers and their Subsidiaries,
including in any event all Indebtedness.
Controlled Group: All trades or businesses (whether or not incorporated)
under common control that, together with the Borrowers and their Subsidiaries,
are treated as a single employer under Section 414(b) or 414(c) of that Code or
Section 4001 of ERISA.
Credit Extensions: The Loans and the Letters of Credit.
Debt/Equity Proceeds Payments: See Section 2.7.
Debt Issuance: The issuance of Indebtedness subordinated to the
obligations of the Borrowers to pay principal of and interest on and other
amounts due with respect to the Loans, the Notes and other Obligations hereunder
on terms of subordination satisfactory to the Required Lenders, and pursuant to
documentation containing other terms and including, without limitation,
interest, amortization, mandatory prepayments, covenants and events of default
in form and substance satisfactory to the Required Lenders.
Default: An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
Encumbrances: See Section 7.3.
- 5 -
<PAGE> 10
Environmental Laws: Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over any of the borrowers and all
applicable judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations, relating to injury to,
or the protection of, real or personal property or human health or the
environment, including, without limitation, all requirements pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
emissions, discharges, releases or threatened releases of Hazardous Materials,
chemical substances, pollutants or contaminants whether solid, liquid or gaseous
in nature, into the environment or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of such
Hazardous Materials, chemical substances, pollutants or contaminant. Without
limiting the generality of the foregoing, the term shall encompass each of the
following statutes and regulations promulgated thereunder, and amendments and
successors to such statutes and regulations, as enacted and promulgated from
time to time: (a) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified in scattered sections of 26 U.S.C.; 33 U.S.C.;
42 U.S.C. and 42 U.S.C. Section 9601 et seq.); (b) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq. ); (c) the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.); (d) the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.); (e) the Clean Water Act
(33 U.S.C. Section 1251 et seq.); (f) the Clean Air Act (42 U.S.C. Section 7401
et seq.); (g) the Safe Drinking Water Act (21 U.S.C. Section 349; 42 U.S.C.
Section 201 and Section 300 et seq.); (h) the National Environmental Policy Act
of 1969 (42 U.S.C. Section 4321); (i) the Superfund Amendment and
Reauthorization Act of 1986 (codified in scattered sections of 10 U.S.C.; 29
U.S.C.; 33 U.S.C. and 42 U.S.C.); and (j) Title III of the Superfund Amendment
and Reauthorization Act (40 U.S.C. Section 1101 et seq.).
Equity Affiliate: Any Affiliate of the Parent who owns or controls any
Borrower's shares of capital stock or any warrants, options or rights for the
purchase thereof.
Equity Issuance: (a) any issuance or sale by any Borrower or any of its
Subsidiaries of (i) any of its capital stock or other equity interests (other
than upon exercise of the options described in clause (ii) below), (ii) any
warrants or options exercisable in respect of capital stock or other equity
interests (except for options issued pursuant to the Borrower's existing
employee stock option plan), or (iii) any other security or instrument if
representing an equity interest (or the right to obtain any equity interest) in
any Borrower or any of its Subsidiaries .
ERISA: The Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Eurodollar Loan: Any Revolving Loan or portion of any Term Loan bearing
interest at a rate calculated by reference to the Adjusted Eurodollar Rate.
Event of Default: See Section 8.1.
Expiration Date: October 31, 2003, or such earlier date on which all the
Commitments of the Lenders shall terminate in accordance with the terms hereof.
- 6 -
<PAGE> 11
Federal Funds Effective Rate: For any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by the
Agent.
Fee Letter: A letter agreement dated on or about the date hereof by and
between the Agent and the Borrowers regarding the payment of certain fees.
GAAP: For all purposes other than the financial statements contemplated
by Sections 6.1(a) and (b) of this Agreement, GAAP shall mean US generally
accepted accounting principles in effect as of December 31, 1997, applied on a
consistent basis. With respect to the financial statements contemplated by
Sections 6.1(a) and (b) of this Agreement, GAAP shall mean generally accepted
accounting principles in effect at the time of the effective dates thereof,
applied on a consistent basis with past financial statements.
Guaranty or Guarantees: All guarantee(s), endorsement(s) or other
contingent or surety obligation(s) of any Borrower or any of its Subsidiaries
with respect to obligations of others, whether or not reflected on the
Borrowers' balance sheets, including any obligation to furnish funds, directly
or indirectly (whether by virtue of partnership arrangements, by agreement to
keep-well or otherwise), through the purchase of goods, supplies or services, or
by way of stock purchase, capital contribution, advance or loan, or to enter
into a contract for any of the foregoing, for the purpose of payment of
obligations of any other person or entity.
Hazardous Material: Any substance (a) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (b) which is or becomes defined as a "hazardous waste",
"hazardous material", "hazardous material or oil" or "hazardous substance" or
"controlled industrial waste" or "pollutant" or "contaminant" or "chemical
substance or mixture" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6903 et
seq.) and any applicable local statutes and the regulations promulgated
thereunder; (c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous or which is or
becomes regulated by any governmental authority, agency, department, commission,
board, agency or instrumentality of any foreign country, and the United States,
any state of the United States, or any political subdivision thereof to the
extent any of the foregoing has or had jurisdiction over any Borrower or any of
its Subsidiaries; or (d) without limitation, which contains gasoline, diesel
fuel or other petroleum products, asbestos or polychlorinated biphenyls.
Holiday House Acquisition: The purchase by the Parent of substantially
all of the assets of Holiday House Corporation for an estimated purchase price
of no greater than $[*] pursuant
- -----------
[*] Omitted pursuant to Rule 24b-2
- 7 -
<PAGE> 12
to an asset purchase agreement substantially in the form of the draft thereof
submitted to the Agent prior to the date hereof.
[*] Acquisition: The purchase by the Parent of substantially all of the
assets of [*] for an estimated purchase price of no greater than $[*] pursuant
to an asset purchase agreement substantially in the form of the draft thereof
submitted to the Agent prior to the date hereof.
HTB: See the Preamble.
HTB Prohibited Assets: Any of the assets of HTB, but only to the extent
any franchise agreement (in existing form or less restrictive) between HTB and
HomeTown Buffet, Inc. or JB's Family Restaurants, Inc. restricts the pledge of
the same with respect to the Restaurant covered by such franchise agreement
without the consent of HomeTown Buffet, Inc. or JB's Family Restaurant, Inc., as
applicable, unless such consent is obtained.
Indebtedness: As applied to any Borrower or any of its Subsidiaries: (a)
all obligations for borrowed money whether or not secured or unsecured, absolute
or contingent, including, without limitation, unmatured reimbursement
obligations with respect to letters of credit or guarantees issued for the
account of or on behalf of any Borrower or any of its Subsidiaries and all
obligations representing the deferred purchase price of property or services,
other than accounts payable or accrued expenses arising in the ordinary course
of business, (b) all obligations evidenced by bonds, notes, debentures or other
similar instruments, (c) all obligations secured by any mortgage, pledge,
security interest or other lien on property owned or acquired by any Borrower or
any of its Subsidiaries whether or not the obligations secured thereby shall
have been assumed, (d) that portion of all obligations arising under Capitalized
Leases that is required to be capitalized on the Borrowers' consolidated balance
sheet, (e) all Guarantees and Sale Leaseback obligations, and (f) all
obligations that are immediately due and payable out of the proceeds of or
production from property now or hereafter owned or acquired by any Borrower or
any of its Subsidiaries.
Initial Financial Statement: See Section 4.11.
Insolvent or Insolvency: As applied to any Person, a Person as to which
there has occurred one or more of the following events, as applicable: (a)
dissolution; (b) termination of existence; (c) insolvency within the meaning of
the United States Bankruptcy Code or other applicable statute; (d) such Person's
inability to pay his or its debts as they come due; or (e) appointment of a
receiver of any part of the property of, execution of a trust mortgage or an
assignment for the benefit of creditors by, of the filing of a petition in
bankruptcy or the commencement of any proceedings under any bankruptcy or
insolvency laws, or any laws relating to the relief of debtors, readjustment or
indebtedness or reorganization of debtors, or the offering of a plan to
creditors for composition or extension, except for an involuntary proceeding
commenced against such Person which is dismissed within 60 days after the
commencement thereof without the entry of an order for relief or the appointment
of a trustee.
Intercompany Notes: See Section 7.1.
- -----------
[*] Omitted pursuant to Rule 24b-2
- 8 -
<PAGE> 13
Interest Adjustment Date: See Section 2.3(c).
Interest Expense: For any period, the aggregate amount (determined in
accordance with GAAP) of interest, premium and fees paid or required to be paid
during such period in respect of all Indebtedness of the Companies.
Interest Period: (a) With respect to each Eurodollar Loan, the period
commencing on the date of the making or continuation of or conversion to such
Eurodollar Loan and ending one, two, three or six months thereafter, as the
Borrowers may elect in the applicable Loan Request or Interest Rate Option
Notice; and (b) with respect to each Base Rate Loan, the period commencing on
the date of the making or continuation of or conversion to such Base Rate Loan
and ending on the next Quarterly Date thereafter provided that, in each case:
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iv) below) that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless, in the case of Eurodollar Loans, such Business Day falls in the
next calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day;
(ii) if the Borrowers shall fail to give notice as provided in
Section 2.5, the Borrowers shall be deemed to have requested a
conversion of the affected Eurodollar Loan to a Base Rate Loan on the
last day of the then current Interest Period with respect thereto;
(iii) any Interest Period relating to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is not numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to clause (iv) below,
end on the last Business Day of a calendar month;
(iv) any Interest Period related to a Eurodollar Loan under the
Revolving Note that would otherwise end after the Expiration Date shall
end on the Expiration Date, and any Interest Period related to a
Eurodollar Loan under any Term Note that would otherwise end after the
final maturity date of the Term Loan shall end on such final maturity
date;
(v) no Interest Period applicable to any Term Loan shall include
a principal repayment date for any Term Loan unless an aggregate
principal amount of Loans at least equal to the principal amount due on
such principal repayment date shall be Base Rate Loans or Eurodollar
Loans having Interest Period ending on or before such date; and
(vi) notwithstanding clauses (iv) and (v) above, no Interest
Period relating to a Eurodollar Loan shall have a duration of less than
one month.
Interest Rate Protection Agreement: Any interest rate swap agreement,
interest rate swap agreement or other financial agreement or arrangement
designed to protect any Borrower or any of its Subsidiaries against fluctuations
in interest rate.
- 9 -
<PAGE> 14
Interest Rate Option Notice: See Section 2.5.
Issuing Bank: BankBoston, N.A. or any successor issuing bank of Letters
of Credit.
LC Draw Obligation: The Borrowers' obligation to reimburse the Issuing
Bank on account of any drawing under any Letter of Credit as provided in Section
2.8(c).
LC Exposure Amount: At any time, the sum of (i) the aggregate undrawn
face amount of all Letters of Credit outstanding at such time, and (ii) the
aggregate amount of all drawings under Letters of Credit for which the Agent for
the account of the Issuing Bank shall not have been reimbursed by the Borrowers
as provided in Section 2.8(c). The amount of any Lender's LC Exposure Amount at
any time shall be the product of (i) the LC Exposure Amount, multiplied by (ii)
such Lender's Percentage at such time.
Lenders: See the Preamble.
Letter of Credit: See Section 2.8(a).
Letter of Credit Documents: See Section 2.8(a).
Letter of Credit Fee: See Section 2.8(i).
Leverage Ratio: See Section 2.3.
Loan Documents: Collectively, this Agreement, the Notes, the Letters of
Credit, the Letter of Credit Documents, the Security Documents, each Assignment
and Acceptance Agreement, the Fee Letter and any and all other agreements,
instruments, certificates or reports executed in connection with this Agreement,
as amended from time to time.
Loan Request: See Section 2.4.
Loans: Collectively, the Revolving Loans and the Term Loans.
Maintenance Capital Expenditures: Capital Expenditures relating solely
to the maintenance and repair (but not upgrading or development) of Restaurants
and related purposes as provided in Section 6.3 below.
Margin Stock: See Section 4.15.
Net Debt/Equity Proceeds: In the case of any Debt Issuance or any Equity
Issuance involving the issuance of debt or equity in excess of $250,000 in the
aggregate, the aggregate amount of all cash received by any Borrower or any of
its Subsidiaries in respect thereof, net of reasonable expenses incurred by the
Borrowers and their Subsidiaries for such Debt Issuance or Equity Issuance.
- 10 -
<PAGE> 15
Net Equity Proceeds: In the case of any Equity Issuance, the aggregate
amount of all cash received by any Borrower or any of its Subsidiaries in
respect thereof, net of reasonable expenses incurred by the Borrowers and their
Subsidiaries for such Equity Issuance.
Net Sale Proceeds: With respect to any sale of assets with a total
purchase price equal to or greater than $250,000 (other than sales or other
dispositions permitted pursuant to Section 7.4(a) of this Agreement), the
aggregate amount of all cash received by any Borrower or any of its Subsidiaries
in respect thereof, net of (a) reasonable expenses and deductions incurred by
Borrower or any of its Subsidiaries with respect thereto and estimated income or
other taxes payable by the Borrower or any of its Subsidiaries on account
thereof, and (b) the amount of any purchase money Indebtedness secured by a
purchase money lien permitted under Section 7.3(f) on the assets being sold to
the extent such lien is discharged with the proceeds of the related sale.
Notes: The Revolving Notes and the Term Notes, and any and all
amendments, substitutions, replacements or renewals thereof.
Obligations: Any and all obligations of any of the Borrowers and any of
their Subsidiaries to the Agent or any Lender of every kind and description,
direct or indirect, absolute or contingent, primary or secondary, due or to
become due, now existing or hereafter arising, regardless of how they arise or
by what agreement or instrument they may be evidenced or whether evidenced by
any agreement or instrument, and including obligations to perform acts and to
refrain from acting as well as obligations to pay money; including without
limitation all of the Borrower's obligations under this Agreement, the Notes,
the Security Documents, the Letters of Credit, the Letter of Credit Documents
and any Interest Rate Protection Agreements with any Lender.
Operating Leases: Leases or other periodic payment arrangements for the
use of real or personal property, other than Capitalized Leases.
Organizational Documents: See Section 4.2.
Parent: See the Preamble.
PBGC: The Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA
Percentage: As to any Lender, at any time, the percentage set forth
opposite such Lender's name on Schedule 1.1(a) hereto (or, if such Lender has
executed an Assignment and Acceptance Agreement, opposite such Lender's
signature on the most recent Assignment and Acceptance Agreement then executed
by it).
Permitted Acquisitions: The acquisition by any Borrower, whether by way
of the purchase of assets or equity interests, by merger or consolidation or
otherwise, of all or substantially all of the assets of or equity interests in a
- 11 -
<PAGE> 16
Restaurant or Restaurants (each, an "Acquisition"), subject to the fulfillment
of the following conditions:
(a) Such Acquisition shall (1) have been approved in writing by
the Required Lenders prior to the execution of the acquisition agreement
relating thereto, (2) be a Preapproved Acquisition, or (3) shall have a
total purchase price not exceeding $1,000,000;
(b) If such Acquisition involves the purchase of equity
interests, the same shall be effected in such a manner as to assure that
the acquired entity becomes a wholly-owned Subsidiary of the Parent;
(c) No later than: (1) 15 days prior to the consummation of any
such Acquisition or, if earlier, 10 Business Days after the execution
and delivery of the related acquisition agreement, the Borrowers shall
have delivered to the Agent a copy of executed counterparts of such
acquisition agreement, together with all schedules thereto, and all
applicable financial information (including on a per unit basis),
including new Projections updated to reflect such Acquisition and any
related transactions, a business description, location listing, real
estate lease terms and estimated value of owned real estate of the
business to be acquired, (2) promptly following a request therefor,
copies of such other information or documents relating to such
Acquisition as the Agent shall have reasonably requested, and (3)
promptly following the consummation of such Acquisition, copies of the
material agreements, instruments and documents executed and delivered at
the closing under such acquisition agreement;
(d) No Borrower nor any Subsidiary shall, in connection with any
such Acquisition, assume or remain liable with respect to any
Indebtedness (including any material tax or ERISA or Environmental Laws
liability) relating to the seller or otherwise, except (i) to the extent
permitted under this Agreement and (ii) trade obligations of the seller
incurred in the ordinary course of business and necessary or desirable
to the continued operation of the underlying Restaurant business;
(e) All assets and properties acquired in connection with such
Acquisition shall be free and clear of any Encumbrances, other than
Permitted Encumbrances;
(f) Immediately prior to any such Acquisition and after giving
effect thereto, no Default shall have occurred or be continuing;
(g) Without limiting the generality of the foregoing, after
giving effect to such Acquisition (including any Loan therefor) the
Borrowers shall be in compliance with the provisions of Section 5, (i)
calculated on a pro forma basis as of the end of and for the Reference
Period most recently ended prior to the effective date of such
Acquisition, and (ii) under the updated Projections referred to above.
The Borrowers shall provide to the Agent a certificate signed on behalf
of the Borrowers by their treasurer demonstrating such compliance in
reasonable detail;
(h) On or before the consummation of each such Acquisition
involving the purchase or formation of a Subsidiary, such Subsidiary
shall be wholly-owned by the Parent and the Loan Documents shall be
revised pursuant to amendments satisfactory in form and
- 12 -
<PAGE> 17
substance to Lender providing for such Subsidiary to become another
"Borrower" hereunder and for compliance with all requirements of Section
2.13; and
(i) On or before the consummation of each such Acquisition, the
Borrowers and their Subsidiaries shall have complied with all of the
requirements of Section 2.13 hereto, including the execution and
delivery of any required Security Documents, and the Agent shall have
received on behalf of the Lenders a first priority security interest in
all of the assets so acquired to the extent required by Section 2.13,
whether by way of an asset or equity interest acquisition, and the Agent
shall have also received, on behalf of the Lenders, a first priority
perfected security interest in and pledge of the equity interests of any
such acquired Subsidiary.
Permitted Encumbrances: See Section 7.3.
Permitted Sale: See Section 7.4.
Person: Any individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization or any government
or any agency or political subdivision thereof.
Plan: At any time, an employee pension or other benefit plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (a) maintained by any Borrower or any of
its Subsidiaries or any member of the Controlled Group for employees of any
Borrower or any of its Subsidiaries or any member of the Controlled Group or (b)
if such Plan is established maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer makes
contributions and to which any Borrower or any of its Subsidiaries or any member
of the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five Plan years made contributions.
Preapproved Acquisitions: The Holiday House Acquisition and the [*]
Acquisition.
Preapproved Real Estate Acquisitions: [*]
Projections: See Section 4.11.
- -----------
[*] Omitted pursuant to Rule 24b-2
- 13 -
<PAGE> 18
Qualified Investments: As applied to any Company, investments in (a)
notes, bonds or other obligations of the United States of America or any agency
thereof that as to principal and interest constitute direct obligations or are
guaranteed by the United States of America, (b) certificates of deposit or other
deposit instruments or accounts of banks or trust companies organized under the
laws of the United States or any state thereof that have capital and surplus of
at least $500,000,000 and are members of the Federal Deposit Insurance
Corporation, (c) commercial paper of the Lender or commercial paper of other
issuers that is rated not less than prime-one or A-1 or their equivalents by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or their successors or municipal bonds with at least the equivalent rating, (d)
existing Subsidiaries, (e) any repurchase agreement secured by any one or more
of the foregoing and (f) Permitted Acquisitions.
Quarterly Dates: The last day of each fiscal quarter of the Borrowers
using their fiscal year accounting as in effect with the Initial Financial
Statements as shown on Schedule 1.1(b) hereto.
Reference Period: Each period of four consecutive fiscal quarters of the
Borrowers and their Subsidiaries ending on or after November 2, 1998.
Related Lender Party: With respect to any Lender, such Lender's parent
company and/or any affiliate of such Lender which is at least fifty percent
(50%) owned by such Lender or its parent company or, in the case of any Lender
which is a fund investing in bank loans, any other fund that invests in bank
loans and is managed by the same investment advisor as such Lender or by a
controlled affiliate of such investment advisor.
Remedial Work: All activities relating to the investigation, remediation
or clean-up of spills, releases or discharges of Hazardous Materials or to
corrective action pursuant to any Environmental Law, including, without
limitation, cleanup design and implementation, removal activities,
investigation, field and laboratory testing and analysis, monitoring and other
remedial and response actions, taken or to be taken, arising out of or in
connection with Hazardous Materials, including without limitation (a) all
activities included within the meaning of the terms "removal," "remedial action"
or "response," as defined in 42 U.S.C. Section 9601(23), (24) and (25), and (b)
all activities included within the meaning of the terms "remedial response
actions" and "Remedial Response Implementation Plan (RRIP)," as defined in 310
CMR 40.
Required Lenders: At any time, Lenders (a) holding in the aggregate at
least 662/3% of the sum of (i) the Revolver Commitments at such time (or if such
Commitments have been terminated, Revolving Credit Outstandings) and (ii) the
aggregate principal amount of Term Loans outstanding at such time.
Restaurant: Any restaurant owned or controlled by any Borrower or any
Affiliate thereof whether doing business under the trademarks and service marks
for JJ North's Grand Buffet, Casa Bonitas, Buddy Freddy's, JB's Restaurant and
Home Town Buffet, Stacey's Buffet, Maggie's or otherwise.
Revolving Credit Outstandings: At any time, the sum of (i) the aggregate
principal amount of Revolving Loans outstanding at such time plus (ii) the LC
Exposure Amount at such time.
- 14 -
<PAGE> 19
Revolver Commitment: With respect to each Lender, the amount set forth
on Schedule 1.1(a) hereto as the amount of such Lender's commitment to make
Revolving Loans to the Borrowers hereunder, as the same may be reduced from time
to time or terminated in accordance with the terms hereof.
Revolving Credit Period: The period beginning on the date of this
Agreement and extending through and including the Expiration Date or such
earlier date on which all Commitments are terminated or reduced to zero in
accordance with the terms hereof.
Revolving Loans: See Section 2.1.
Revolving Note: See Section 2.1.
Sale Leaseback: See Section 7.2.
Sale Proceeds Payments: See Section 2.7.
Security Documents: Collectively, the agreements and instruments
referred to in Section 3.1 and any and all other agreements, documents and
instruments executed by any of the Borrowers, and/or any of their Subsidiaries
or other Affiliates, to secure, or otherwise in connection with, the
Obligations, all as amended from time to time.
Subsidiary: (a) Any corporation, association, joint stock company,
business trust or other similar organization of which 50% or more of the
ordinary voting power for the election of a majority of the members of the board
of directors or other governing body of such entity is held or controlled by any
Borrower or a Subsidiary of any Borrower; (b) any other such organization the
management of which is directly or indirectly controlled by any Borrower or a
Subsidiary of any Borrower through the exercise of voting power or otherwise; or
(c) any joint venture, association, partnership or other entity in which any
Borrower has at least a 50% equity interest.
Summit: See the Preamble.
Term Loan Commitment: With respect to each Lender, the amount set forth
on Schedule 1.1(a) hereto as the amount of such Lender's commitment to make Term
Loans to the Borrowers in accordance with Section 2.1 hereof.
Term Loan Maturity Date: October 31, 2003, or such earlier date on which
all the Commitments of the Lenders shall terminate in accordance with the terms
hereof.
Term Loans: See Section 2.1.
Term Notes: See Section 2.1.
- 15 -
<PAGE> 20
SECTION 2. THE CREDIT FACILITIES.
2.1 The Loans and Notes.
(a) Revolving Loans. Each Lender severally agrees, subject to the terms
of this Agreement, to make revolving credit loans (the "Revolving Loans") to the
Borrowers from time to time from and after the effectiveness of this Agreement
until the Expiration Date in an aggregate principal amount at any time
outstanding up to, but not exceeding, the Revolver Commitment of such Lender at
such time minus such Lender's LC Exposure Amount at such time. The aggregate of
all Revolver Commitments on the date hereof is equal to $7,000,000. Subject to
the terms and conditions of this Agreement, from time to time from and after the
effectiveness of this Agreement until the Expiration Date, the Borrowers may
borrow, repay and reborrow Revolving Loans. The Revolving Loans of each Lender
shall be evidenced by a promissory note in the form of Exhibit 2.1(a) hereto
delivered to such Lender in the amount of its Revolver Commitment on the date
hereof (the "Revolving Notes").
(b) Term Loans. Each Lender severally agrees, subject to the terms of
this Agreement, to make up to four term loans (the "Term Loans") to the
Borrowers from time to time from and after the effectiveness of this Agreement
until December 31, 1998 in an aggregate principal amount up to, but not
exceeding, the Term Loan Commitment of such Lender. The aggregate of all Term
Loan Commitments on the date hereof is equal to $13,000,000. The Borrowers shall
not be entitled to reborrow all or any part of the principal of the Term Loans
which shall be paid or prepaid at any time. The Term Loan of each Lender shall
be evidenced by a promissory note in the form of Exhibit 2.1(b) hereto delivered
to such Lender in the amount of its Term Loan on the date hereof (the "Term
Notes").
(c) Notations on Notes. The Borrowers irrevocably authorize each Lender
to make an appropriate notation on the applicable Note reflecting the making of
each Loan and each payment on the Loans. The outstanding amount of the Loans
entered in the computer records of each Lender shall be prima facie evidence of
the principal amount thereof owing and unpaid to the such Lender, but the
failure to enter, or any error in so entering, any such amount shall not limit
or otherwise effect the obligations of the Borrowers hereunder or under any Note
to make payments of principal, interest and other amounts due thereunder.
2.2 Scheduled Repayments of the Loans.
(a) Scheduled Repayments of Revolving Loans. The Borrowers shall pay
jointly and severally to the Agent for the account of the Lenders on the
Expiration Date all then outstanding principal, interest and other amounts
payable with respect to the Revolving Loans.
(b) Scheduled Repayments of Term Loans. The Borrowers shall pay jointly
and severally to the Agent for the account of the Lenders principal of the Term
Loans in [ 16] consecutive quarterly installments in the amounts set forth
below, payable on each Quarterly Date falling during the periods set forth
below, commencing on November 1, 1999:
Period Amount
------ ----------
Closing Date - August 9, 1999 $ -0-
November 1, 1999 through August 14, 2000 $ 625,000
November 6, 2000 through August 13, 2001 $ 750,000
November 5, 2001 through August 12, 2002 $ 875,000
November 4, 2002 through August 11, 2003 $1,000,000
- 16 -
<PAGE> 21
All remaining principal, interest and other amounts payable in respect of the
Term Loans will, if not sooner paid, become due and payable on the Term Loan
Maturity Date.
2.3 Commitment Fees; Interest; Default Rate.
(a) Commitment Fees. The Borrowers shall pay jointly to the Agent for
the account of the Lenders a commitment fee (the "Commitment Fee") on the daily
unused portion of the aggregate Revolver Commitments (taking into account the LC
Exposure Amount as usage) at a per annum rate equal to the Applicable Margin (as
defined below).
(b) Interest Rate. The Borrowers may elect an interest rate for each
Loan (or one or more portions thereof) based on either the Base Rate or the
applicable Adjusted Eurodollar Rate and determined as follows: (i) the rate for
any Base Rate Loan shall be the Base Rate plus the Applicable Margin; and (ii)
the rate for any Eurodollar Loan shall be the applicable Adjusted Eurodollar
Rate plus the Applicable Margin.
(c) Applicable Margin. For purposes of this Agreement, the term
"Applicable Margin" shall mean:
(i) from and after the date hereof until the first Interest
Adjustment Date identified below, the Applicable Margin for Base Rate
Loans shall be .25% and the Applicable Margin for Eurodollar Loans shall
be 1.50%; from time to time the first Interest Adjustment Date until the
Interest Adjustment Date relating to financial statements for the fiscal
quarter ending May 17, 1999, the Applicable Margin for Base Rate Loans
shall be no less than .25% and the Applicable Margin for Eurodollar
Loans shall be no less than 1.50%;
(ii) from and after the tenth day after each date the Agent
receives the quarterly financial statements required by Section 6.1(b)
and the covenant compliance certificate required by Section 6.1(c)
(beginning with the financial statements for the fiscal quarter ending
November 2, 1998) (each, an "Interest Adjustment Date"), subject to the
provisions of paragraphs (i) above and (iv) below, the Applicable Margin
shall be determined from the following table based upon the Leverage
Ratio (as defined below) as of the Quarterly Date immediately preceding
such Interest Adjustment Date:
- 17 -
<PAGE> 22
<TABLE>
<CAPTION>
Unused
Leverage Ratio Applicable Margin for Loans Commitment Fee
-------------- --------------------------- --------------
Base Rate Eurodollar
--------- ----------
<S> <C> <C> <C>
Greater than or .75% 2.00% .500%
equal to 2.25:1.00
Less than 2.25:1.00, .50% 1.75% .500%
but greater than or
equal to 2.00:1.00
Less than 2.00:1.00, .25% 1.50% .500%
but greater than or
equal to 1.00:1.00
Less than 1.00:1.00 .00% 1.25% .375%
</TABLE>
(iii) As used herein, the term "Leverage Ratio" shall mean the
ratio of (A) Consolidated Funded Indebtedness as of any Quarterly Date
to (B) Consolidated EBITDA for the Reference Period ending on such
Quarterly Date.
(iv) Notwithstanding the foregoing, no downward adjustment of the
Applicable Margin hereunder shall be permitted unless (A) all of the
required financial statements for the relevant Reference Period have
been delivered to the Agent and the Lenders as required in Section 6.1;
and (B) there shall exist no Default at the time of such proposed
downward adjustment.
(v) The determination of the Applicable Margin hereunder as of
any Quarterly Date shall be based on unaudited quarterly financial
statements for the relevant Reference Period; provided, however, that in
the event of any discrepancy between computations based upon any
unaudited quarterly financial statements and the related audited
financial statements furnished pursuant to Section 6.1(a) (the "Audited
Financial Statements") in favor of the Lenders, the computation based
upon the Audited Financial Statements shall govern (retroactive to the
relevant Interest Adjustment Date), and the amount of interest and
Commitment Fees thereby overdue and payable by the Borrowers shall be
paid to the Agent, for the account of the Lenders, within three Business
Days after the Agent's demand therefor.
(c) Interest and Commitment Fees Payment Dates. Interest on Base Rate
Loans shall be due and payable, without setoff, deduction or counterclaim,
quarterly in arrears on each Quarterly Date, commencing with the first Quarterly
Date after the date hereof, and when such Base Rate Loan is due (whether at
maturity, by reason of acceleration or otherwise). The rate of interest on Base
Rate Loans shall change on the date of any change in the applicable Base Rate.
Interest on each Eurodollar Loan shall be payable, without setoff, deduction or
counterclaim, for the related Interest Period on the last day thereof and when
such Eurodollar Loan is due (whether at maturity, by reason
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<PAGE> 23
of acceleration or otherwise) and, if such Interest Period is longer than three
months, at intervals of three months after the first day of such Interest
Period. Commitment Fees shall be due and payable in arrears on each Quarterly
Date and on the Expiration Date.
(d) Default Rate; Late Fee. During the existence of any Event of
Default, the outstanding principal under the Notes and, to the extent permitted
by applicable law, any interest (under this Section 2.3) and fees or any other
amounts due and payable hereunder (including without limitation overadvances)
shall bear interest, from and including the date such Event of Default occurred
until such Event of Default is waived or cured to the satisfaction of the Agent
and Required Lenders (or Lenders, as applicable pursuant to Section 9.7), at a
rate per annum equal to 2% above the rate which then applies to Base Rate Loans
with respect to each type of Loan, which interest shall be compounded daily and
payable on demand. If any payment of principal, interest or other amount due
hereunder is not paid in full within 10 days after the same is due, the
Borrowers shall also jointly and severally pay to the Agent on behalf of the
Lenders a late fee in the amount of 3.0% of the amount not paid when due.
Nothing in this Section 2.3(d) shall affect the rights of the Agent and the
Lenders to exercise any of their respective rights or remedies, including those
provided in Section 8.2 and in the Security Documents, arising upon the
occurrence of an Event of Default.
(e) Computations. Interest on the Loans and on fees and expenses shall
be computed on the basis of the actual number of days elapsed over a 360-day
year. Except as otherwise provided in the definition of the term "Interest
Period" with respect to Eurodollar Loans, if any payment hereunder or under the
Notes shall be due and payable on a day which is not a Business Day, such
payment shall be deemed due on the next following Business Day and interest
shall be payable at the applicable rate specified herein through such extension
period.
2.4 Requests for Loans. The Borrowers shall give the Agent telephonic
notice confirmed in writing in the form of Exhibit 2.4(a) of each Loan requested
hereunder (a "Loan Request") no later than (a) 1:00 PM (Boston time) on the same
Business Day as the proposed date of any Base Rate Loan and (b) 1:00 PM (Boston
time) on the third Business Day prior to the proposed date of any Eurodollar
Loan. Each such notice shall specify (i) the type of Loan and, if a Revolving
Loan, the principal amount thereof requested and the use or uses thereof, (ii)
the proposed date of such Loan, (iii) the Interest Period for such Loan, if a
Eurodollar Loan, and (iv) whether such Loan shall be a Base Rate Loan or a
Eurodollar Loan. Each Loan Request shall be irrevocable and binding on the
Borrowers and shall obligate the Borrowers to accept the Loan requested from the
Lenders on the proposed date. Each Loan Request for a Base Rate Loan shall be in
a minimum amount of $50,000 (and integrals thereof) and each Loan Request for a
Eurodollar Loan shall be in a minimum amount of $100,000 (and integrals
thereof); provided, that at no time shall there be more than five Eurodollar
Loans outstanding from any Lender. The Agent shall promptly notify the Lenders
of each Loan Request. Not later than 2:00 PM, Boston time, on the date specified
for each borrowing hereunder, each Lender shall transfer to the Agent, by wire
transfer or otherwise, but in any event in immediately available funds, the
amount of the Loan to be made by it on such date, and the Agent, upon its
receipt thereof, shall disburse such sum to the Borrowers by depositing it in a
joint account of the Borrowers with the Agent.
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<PAGE> 24
2.5 Conversion and Continuance of Loans.
(a) Conversion to a Different Type of Loan. The Borrowers may elect from
time to time to convert any outstanding Revolving Loan or any portion of the
Term Loans to a Base Rate Loan or Eurodollar Loan, as the case may be provided
that (i) with respect to any such conversion of a Eurodollar Loan to a Base Rate
Loan, the Borrowers shall provide the appropriate Interest Rate Option Notice in
the form of Exhibit 2.5 hereto to Agent by 1:00 PM (Boston time) on the date of
such proposed conversion; (ii) with respect to any such conversion of a Base
Rate Loan to a Eurodollar Rate Loan, the Borrowers shall provide the appropriate
Interest Rate Option Notice to Agent by 1:00 PM (Boston time) at least three
Business Days' prior to the date of such proposed conversion; (iii) with respect
to any such conversion of a Eurodollar Loan into a Base Rate Loan, such
conversion shall only be made on the last day of the related Interest Period;
(iv) no Loans may be converted into a Eurodollar Loan when any Default has
occurred and is continuing; (v) at no time shall there be more than five
Eurodollar Loans outstanding from any Lender; and (vi) any conversion of less
than all of the outstanding Loans of either type into Loans of the other type
shall be in a minimum principal amount of $100,000.
(b) Continuance of an Interest Rate Option. The Borrowers may continue
any Loan of either type as a Loan of the same type upon the expiration of the
related Interest Period by providing an Interest Rate Option Notice to the Agent
in compliance with the notice provisions set forth in Section 2.5(a); provided
that no Eurodollar Loan may be continued as such when any Default has occurred
and is continuing, but shall be automatically converted to a Base Rate Loan on
the last day of the first applicable Interest Period which ends during the
continuance of such Default.
2.6 Termination of the Commitments. The Revolver Commitments shall be
automatically and permanently reduced to -0- on the Expiration Date, when all
outstanding principal, accrued interest and other amounts due on the Revolving
Notes shall be due and payable in full. The Term Loan Commitments shall be
automatically and permanently reduced to -0- on December 31, 1998.
2.7 Mandatory Payments and Prepayments.
(a) Overdraws. If at any time the Revolving Credit Outstandings exceed
the sum of the Revolver Commitments, the Borrowers shall immediately pay to the
Agent, for the account of the Lenders, the amount of such excess, which excess
shall be first applied to any unpaid LC Draw Obligations or, if a Default then
exists and is continuing, applied at the Required Lenders' sole and absolute
discretion.
(b) Mandatory Payments in Connection with Prepayment Events. The
Borrowers shall, not later than 30 days following each day any Net Sale Proceeds
are received by any Borrower or any of its Subsidiaries, pay to the Agent on
account of the Lenders the amount of such Net Sale Proceeds (each such payment
to the Agent being referred to herein as a "Sale Proceeds Payment").
(c) Mandatory Payments in Connection with Debt or Equity Issuances. The
Borrowers shall, not later than 30 days next following each day any Net
Debt/Equity Proceeds are received by any Borrower or any of its Subsidiaries,
pay to the Agent on account of the Lenders the amount of
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<PAGE> 25
such Net Debt/Equity Proceeds (each such payment to the Agent being referred to
herein as a "Debt/Equity Proceeds Payment").
(d) Voluntary Prepayments. Subject to the provisions hereof, including
without limitation the provisions of Section 2.11, the Borrowers may at any time
voluntarily prepay the Revolving Loans or the Term Loans, in whole or in part in
multiples of $500,000 from time to time upon not less than one Business Day
prior notice by 1:00 PM to Agent with respect to Base Rate Loans and three
Business Days' prior notice by 1:00 PM to Agent with respect to Eurodollar
Loans; provided, however, that (i) Eurodollar Loans may be repaid only on the
last day of an Interest Period for such Loans and (ii) all repayments of
Eurodollar Loans or any portion thereof shall be made together with payment of
all interest accrued on the amount repaid and other amounts due with respect
thereto through the date of such repayment.
(e) Application of Payments.
(i) If no Default then exists hereunder, all Sale Proceeds
Payments and all Debt/Equity Proceeds Payments shall be first applied to
remaining scheduled installments of Term Loans (each in inverse order of
maturity) and then (after all principal of the Term Loans has been paid
in full) to principal of the Revolving Loans. Any such payments applied
to Revolving Loans shall immediately, automatically and permanently
reduce the aggregate Revolving Commitments by the amount thereof.
(ii) Except as set forth in subparagraph (i) above (or if a
Default exists in which case all payments and prepayments may be applied
as Required Lenders elect), all payments and repayments made pursuant to
the terms hereof shall be applied (A) first to all (if any) amounts
(except principal, interest and fees) due and payable under this
Agreement at such time, (B) then to payment of all fees due and payable
at such time, (C) then to interest due and payable at such time, (D)
then to accrued interest and then to principal of Base Rate Loans, (E)
then to principal of Eurodollar Loans, and (F) finally, to all other
Obligations.
2.8 Letters of Credit.
(a) Letter of Credit Commitment. Subject to the execution and delivery
by the Borrowers of a letter of credit application and any other related
documents in a form satisfactory to the Issuing Bank (collectively, the "Letter
of Credit Documents") and in reliance upon the representations and warranties of
the Borrowers contained herein, the Issuing Bank agrees from time to time during
the Revolving Credit Period to issue, extend and renew for the account of any
Borrower or any of their Subsidiaries one or more standby letters of credit
(each individually, a "Letter of Credit"), in such form as may be requested from
time to time by the Borrowers and agreed to by the Issuing Bank. In the event
and to the extent that any provision of any Letter of Credit Document shall be
inconsistent with any provision of this Agreement, then the provisions of this
Agreement shall govern.
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<PAGE> 26
(b) Conditions to Issuance of Letters of Credit; Etc.
(i) The obligation of the Issuing Bank to issue, extend or renew
any Letter of Credit hereunder shall be subject to the conditions for
Loans set forth in Section 3 and to the following conditions:
(A) Such Letter of Credit shall provide for payment in US
Dollars and shall expire by its terms no later than the earlier
to occur of (A) the Expiration Date and (b) one year from the
date of its issuance;
(B) After giving effect to such issuance, extension or
renewal, (1) the aggregate outstanding principal amount of the
Revolving Loans shall not exceed the Available Revolver
Commitment and (2) the sums of the aggregate LC Exposure Amount
shall not exceed $2,000,000;
(C) The form and terms of each Letter of Credit and the
related Letter of Credit Documents shall be acceptable to the
Issuing Bank; and
(D) Each Letter of Credit shall be issued to support
obligations of one or more Companies incurred in the ordinary
course of its or their business.
(ii) Whenever the Borrowers desire to have a Letter of Credit
issued, extended or renewed, the Borrowers will furnish to the Agent and
the Issuing Bank a written application therefor which shall (A) be
received by the Agent and the Issuing Bank not less than three Business
Days prior to the proposed date of issuance, extension or renewal and
(B) specify (1) such proposed date (which must be a Business Day), (2)
the expiration date of such Letter of Credit, (3) the name and address
of the beneficiary of the Letter of Credit, (4) the amount of such
Letter of Credit, and (5) the purpose and proposed form of such Letter
of Credit. Each Letter of Credit shall be subject to the Uniform Customs
Act and, to the extent not inconsistent therewith, the laws of The
Commonwealth of Massachusetts.
(c) LC Draw Obligations of the Borrowers. In order to induce the Issuing
Bank to issue, extend and renew each Letter of Credit, the Borrowers hereby
jointly and severally agree to reimburse or pay to the Agent for the account of
the Issuing Bank:
(i) except as otherwise expressly provided in paragraphs (ii) and
(iii) below, on each date that any draft presented under such Letter of
Credit is honored by the Issuing Bank or the Issuing Bank otherwise
makes a payment with respect thereto, as indicated in the notice thereof
from the Issuing Bank to the Borrowers (A) the amount paid by the
Issuing Bank under or with respect to such Letter of Credit, and (B) the
amount of any taxes, fees, charges or other reasonable costs and
expenses whatsoever incurred by the Issuing Bank in connection with any
payment made by the Issuing Bank under or with respect to such Letter of
Credit;
(ii) upon the reduction (but not termination) of the aggregate
Revolver Commitments to an amount less than the LC Exposure Amount, an
amount equal to such
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<PAGE> 27
difference, which amount shall be held by the Agent as cash collateral
for all LC Draw Obligations; and
(iii) upon the termination (or reduction) of the Revolver
Commitments, or the acceleration of the LC Draw Obligations in
accordance with Section 8.1, an amount equal to the LC Exposure Amount
(or with respect to a reduction, the excess thereof over the reduced
aggregate Revolver Commitments), which amount shall be held by the Agent
as cash collateral for all LC Draw Obligations.
Interest shall accrue on any and all amounts remaining unpaid by the Borrowers
under this Section 2.8 at any time from the date such amounts become due and
payable (whether as stated in this Section 2.8, by acceleration of otherwise)
until payment in full (whether before or after judgment) at the rate specified
in Section 2.3(d) for overdue principal on the Loans and shall be payable to the
Agent on demand.
(d) Participations in Letters of Credit. By the issuance of a Letter of
Credit and without any further action on the part of the Issuing Bank or the
other Lenders in respect thereof, the Issuing Bank hereby grants to each Lender,
and each Lender hereby acquires from the Issuing Bank, a participation in such
Letter of Credit equal to such Lender's Percentage of the face amount of such
Letter of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Agent, for the account of the Issuing
Bank, such Lender's Percentage of each LC Draw Obligation. Each Lender
acknowledges and agrees that its obligation to acquire participations in respect
of Letters of Credit is absolute and unconditional and shall not be affected by
any circumstances whatsoever, including the occurrence and continuance of a
Default hereunder, and that each such payment shall be made without any setoff,
withholding or reduction whatsoever.
(e) Revolving Loans to Satisfy LC Draw Obligations. The Borrowers may
elect to satisfy any LC Draw Obligation arising under paragraph (c)(i) of this
Section by borrowing a Base Rate Loan in the amount thereof and applying the
proceeds thereto, provided that (i) all conditions to such Revolving Loan set
forth in Section 3 shall have been satisfied in full and (ii) after giving
effect to such Revolving Loan and the application of proceeds thereof, the
Revolving Credit Outstandings will not exceed the aggregate Revolver
Commitments. If the Agent has not received from the Borrowers the payment
required pursuant to Section 2.8(c)(i) above by 1:00 PM (Boston time) on the
date on which the Issuing Bank has notified the Borrowers that the payment of a
draft has been presented under any Letter of Credit will be made, the Agent
shall promptly notify the Issuing Bank and each other Lender of the LC Draw
Obligation and, in the case of each Lender, its percentage of such Letter of
Credit Disbursement. Each Lender shall pay to the Agent, not later than 3:00 PM
(Boston time) on such date, such Lender's Percentage of such LC Draw Obligation,
which the Agent shall promptly pay to the Issuing Bank. The Agent will promptly
remit to each Lender its share of any amount subsequently received by the Agent
from the Borrowers in respect of such LC Draw Obligation.
(f) Borrowers' Obligations Absolute. The Borrowers assume all risks in
connection with the Letters of Credit. The Borrowers' obligations under this
Section 2.8 shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or
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<PAGE> 28
any condition precedent whatsoever or any setoff, counterclaim or defense to
payment which any Borrower may have or have had against the Agent, the Issuing
Bank or any Lender or any beneficiary of a Letter of Credit. The Borrowers also
agree that the Agent, the Issuing Bank and any other Lender shall not be
responsible for, and the Borrowers' LC Draw Obligations shall not be affected
by, among other things, (i) the validity, genuineness or enforceability of
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient (provided all such
documents conform on their face), fraudulent or forged, or (ii) any dispute
between or among any Borrower, any of its Subsidiaries, the beneficiary of any
Letter of Credit or any financing institution or other party to which any Letter
of Credit may be transferred or any claims or defenses whatsoever of any
Borrower or any of its Subsidiaries against the beneficiary of any Letter of
Credit or any such transferee. The Agent, the Issuing Bank and any other Lender
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Borrowers agree that
any action taken or omitted by the Agent, the Issuing Bank or any other Lender
under or in connection with each Letter of Credit and the related drafts and
documents, if done in good faith, shall be binding upon the Borrowers and shall
not subject the Agent, the Issuing Bank or any other Lender to any liability to
the Borrowers.
(g) Reliance by Issuer. The Lender shall be entitled to rely, and shall
be fully protected in relying upon, any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, telegram, telecopy,
telex or teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person and upon advice and statements of legal counsel, independent accountants
and other experts selected by the Issuing Bank.
(h) Letter of Credit Fee. In order to induce the Issuing Bank to issue,
extend and renew each Letter of Credit, the Borrowers hereby agree jointly and
severally to pay to the Agent on each Quarterly Date in arrears with respect to
each such issuance, extension and renewal a fee (in each case, a "Letter of
Credit Fee") for the account of the Issuing Bank and the Lenders, on the stated
amount of such Letter of Credit at a rate per annum equal to the Applicable
Margin for Eurodollar Loans per annum on the LC Exposure Amount. Notwithstanding
anything herein to the contrary, the Issuing Bank shall receive a portion of the
Letter of Credit Fee equal to 1/8th of 1% per annum on the stated amount of such
Letter of Credit, and the balance of each Letter of Credit Fee shall be shared
ratably among the Lenders (including the Issuing Bank) based upon their Revolver
Commitments. In addition, the Borrowers shall pay to the Issuing Bank any and
all standard charges customarily made by the Issuing Bank in connection with
such issuance, extension or renewal.
2.9 Changed Circumstances.
(a) Eurodollar Loans. In the event that:
(i) on any date on which the Adjusted Eurodollar Rate would
otherwise be set, the Agent shall have determined in good faith (which
determination shall be final and conclusive) that adequate and fair
means do not exist for ascertaining the Interbank Offered Rate, or
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<PAGE> 29
(ii) at any time the Required Lenders shall have determined in
good faith (which determination shall be final and conclusive) that:
(A) the making or continuation of, or conversion of any
Base Rate Loan to, a Eurodollar Loan has been made impracticable
or unlawful by (1) the occurrence of a contingency that
materially and adversely affects the Interbank Eurodollar market
or (2) compliance by the Agent or any Lender in good faith with
any future applicable law or governmental regulation, guideline
or order or interpretation or change thereof by any governmental
authority charged with the interpretation or administration
thereof or with any request or directive of any such governmental
authority (whether or not having the force of law); or
(B) the Adjusted Eurodollar Rate shall no longer represent
the effective cost to the Lenders for US dollar deposits in the
Interbank market for deposits in which they regularly
participate;
then, and in any such event, the affected Lender shall so notify the Agent and
the Agent shall so notify the Borrowers. Until the Agent notifies the Borrowers
that the circumstances giving rise to such notice no longer apply, the
obligation of the affected Lenders to allow selection by the Borrowers of
Eurodollar Loans shall be suspended. If at the time the Agent so notifies the
Borrowers, the Borrowers have previously given the Agent a Loan Request or
Interest Rate Option Notice with respect to one or more Eurodollar Loans but
such Loans have not yet gone into effect, such notification shall be deemed to
be void and Borrower may choose to borrow such Loans as Base Rate Loans. Upon
such date as the Lender shall specify in such notice, the Borrowers shall prepay
all outstanding Eurodollar Loans, together with interest thereon, and may borrow
Base Rate Loans in accordance with this Agreement by delivering an Interest Rate
Option Notice pursuant to Section 2.5. In the event that the affected Lender
determines at any time following the giving of notice pursuant to this clause
that such Lender may lawfully make Eurodollar Loans, the affected Lender(s)
shall give notice thereof to the Agent and the Agent shall give notice to the
Borrowers of such determination, whereupon the Borrowers' right to request, and
the Lenders' obligation to make, Eurodollar Loans shall be restored. If any of
the events contemplated in Section 2.9(a)(i) or (ii) above occurs, prior to
giving the notice contemplated herein, the affected Lenders shall make all
reasonable efforts (which shall not require them to incur a loss or take any
action which would be disadvantageous to them as determined in their sole
discretion) to make an assignment of their rights and delegation and transfer of
their Eurodollar Loan obligations hereunder to another of their offices,
branches, or affiliates for the purpose of causing such event to cease to exist
so long as: (x) such assignment and delegation will not create another event
contemplated in Section 2.9(a)(i) or (ii), and (y) the Lenders shall be
permitted under applicable law to continue to hold Eurodollar Loans pending such
assignment and delegation.
(b) All Credit Extensions. After the date hereof, in case any change in
any existing or any new law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
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<PAGE> 30
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
(i) subjects the Agent or any Lender to any tax with respect to
payments of principal or interest or any other amounts payable hereunder
by any Borrower or otherwise with respect to the transactions
contemplated hereby (except for taxes on the overall net income of such
Persons imposed by the United States of America or any political
subdivision thereof), or
(ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by,
or deposits in or for the account of, or Loans or Letters of Credit
issued by Agent or any Lender (other than such requirements as are
already included in the determination of the Adjusted Eurodollar Rate),
or
(iii) imposes upon the Agent or any Lender any other condition
with respect to the Loans or the Letters of Credit or otherwise with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to the Agent or
any Lender, reduce the income receivable by the Agent or any Lender or impose
any expense with respect to any Loan or Letter of Credit (in each case without
duplication of amounts described in Section 2.10), the affected Lender shall so
notify Agent and agent shall so notify the Borrowers. The Borrowers agree to pay
to the Agent the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, within 10 days after presentation by the Agent of a statement in the
amount and setting forth the Agent's or such Lender's calculation thereof, which
statement shall be deemed true and correct, absent manifest error.
2.10 Capital Adequacy. The affected Lender shall notify the Agent and
the Agent shall notify the Borrowers if, after the date hereof, the Agent or any
Lender determines that (a) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for banks or bank holding
companies , or any change in the interpretation or application thereof by any
governmental authority charged with the administration thereof, or (b)
compliance by any such Person or its parent bank holding company with any
guideline, request or directive of any such entity regarding capital adequacy
(whether or not having the force of law), has the effect of reducing the return
on such Person's or such holding company's capital as a consequence of such
Person's commitment to make Loans or issue Letters of Credit hereunder to a
level below that which such Person or such holding company could have achieved
but for such adoption, change or compliance (taking into consideration such
Person's or such holding company's then existing policies with respect to
capital adequacy and assuming the full utilization of such entity's capital) by
any amount deemed by such Person to be material. The Borrowers agree to pay to
the Agent the amount of such reduction of return of capital as and when such
reduction is determined, within a reasonable period of time (as determined by
such Person in its reasonable discretion), after presentation by the Agent of a
statement in the amount and setting forth the Agent's or such Lender's
calculation thereof, which statement shall be deemed true and correct absent
manifest error. In determining such amount, the affected Lender, Issuing Bank or
Agent may use any reasonable averaging and attribution methods used by such
Person in similar circumstances.
2.11 Payments Before End of Eurodollar Period. If any Borrower for any
reason makes any payment or prepayment of principal with respect to any
Eurodollar Loan on any day other than
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<PAGE> 31
the last day of the applicable Interest Period, or fails to borrow, continue or
convert to a Eurodollar Loan after giving a Loan Request or Interest Rate Option
Notice pursuant to Section 2.4 or 2.5, or if any Eurodollar Loan is accelerated
pursuant to Section 8.1, the Borrowers shall pay to the Agent for the account of
the Lenders a makewhole payment pursuant to the following formula:
L = (R - T) x P x D
---------------
360
L = amount payable to the Agent R = interest rate on such
Loan
T = effective interest rate per annum at which any
readily marketable bond or other obligation of the
United States, selected at the Agent's sole
discretion, maturing on or near the last day of the
then applicable Interest Period and in approximately
the same amount as such Loan can be purchased by the
Lenders on the day of such payment of principal or
failure to borrow, continue or convert
P = the amount of principal prepaid or the amount of
the requested Loan
D = the number of days remaining in the Interest Period
as of the date of such payment or the number of days
of the requested Interest Period
The Borrowers shall pay such amount upon demand upon presentation by the Agent
of a statement setting forth the amount and the Agent's calculation thereof
pursuant hereto, which statement shall be deemed true and correct absent
manifest error.
2.12 Additional Fees. The Borrowers shall pay jointly and severally to
the Agent certain fees as provided in the Fee Letter dated on or about the date
hereof.
2.13 Security.
The Obligations, whether under this Agreement, the Notes, the Letter of
Credit Documents, the other Loan Documents or otherwise, shall be secured at all
times by:
(a) a first priority perfected security interest in all presently owned
and hereafter acquired tangible and intangible personal property and fixtures of
the Borrowers and their Subsidiaries (including without limitation all
Intercompany Notes and all trademarks and service marks and licenses, but
excluding HTB Prohibited Assets), subject only to Permitted Encumbrances,
together with landlord waivers and mortgagee waivers with respect to the
locations of such personal property and fixtures and, after an Event of Default
has been declared, lock box account agreements with respect to cash receipts;
(b) a first priority perfected pledge of all of the issued and
outstanding shares of capital stock and other equity interests of all of the
Borrowers (other than the Parent and, without the consent, if required, of
HomeTown Buffet, Inc., HTB) and their Subsidiaries, together with all options,
warrants and other similar rights to the purchase thereof, now or hereafter
owned legally or beneficially by any of the Borrowers; and
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<PAGE> 32
(c) the subordination to the Agent and the Lenders of all now existing
or thereafter arising obligations of the Borrowers to any of the other
Borrowers, the Subsidiaries, or other Affiliates of any of the foregoing
pursuant to a subordination agreement satisfactory to the Agent in form and
substance.
The Borrowers agree to take such actions (and to cause their Subsidiaries to
take such actions) as the Agent may reasonably request from time to time in
order to cause the Agent and the Lenders to be secured at all times as described
in this Section.
2.14 Use of Proceeds. Each of the Borrowers hereby covenants, warrants
and represents as follows:
(a) The proceeds of the Term Loans shall be used by the Borrowers on or
prior to December 31, 1998 in no more than four advances to (i) refinance
existing Indebtedness described in Schedule 2.14 (which lists the approximate
payoff amounts thereof); (ii) to redeem up to 500,000 shares of common stock of
the Parent from non-Affiliates for a total redemption price which does not
exceed $[*] in the aggregate (the "Stock Redemption"); and (iii) to
finance the Preapproved Acquisitions.
(b) Proceeds of Revolving Loans shall be used for (i) working capital
and general corporate purposes of the Borrowers; (ii) new Restaurant
development; (iii) Permitted Acquisitions; and (iv) Preapproved Real Estate
Acquisitions.
2.15 Time and Method of Payments. All payments of principal, interest,
fees and other amounts (including indemnities) payable by the Borrowers
hereunder shall be made in US Dollars, in immediately available funds, without
deduction, setoff or counterclaim, to the Agent at its principal office on the
date on which such payment shall become due; provided, however, that any payment
not received by the Agent by 1:00 PM, (Boston time) on the date made shall be
deemed received on the next Business Day (but no Default shall be deemed to have
occurred as a result thereof under Section 8.1 if payment is received after 1:00
PM, (Boston time), but prior to 5:00 PM, (Boston time) on the date on which such
payment shall become due). The Agent or any Lender for whose account any such
payment is to be made may, but shall not be obligated to, debit the amount of
any such payment which is not made by such time to any deposit account of any of
the Borrowers with the Agent or such Lender, as the case may be. Each payment
received by the Agent hereunder for the account of a Lender shall be paid
promptly to such Lender, in like funds. If any payment of principal or interest
becomes due on a day other than a Business Day, such payment may be made on the
next succeeding Business Day, and such extension shall be included in computing
interest in connection with such payment. All payments hereunder and under the
Notes shall be made without setoff or counterclaim and in such amounts as may be
necessary in order that all such payments shall not be less than the amounts
otherwise specified to be paid under this Agreement and the Notes after
withholding for or on account of (i) any present or future taxes, levies,
imposts, duties or other similar charges of whatever nature imposed by any
government or any political subdivision or taxing authority thereof, other than
any tax (except those referred to in clause (ii) below) on or measured by the
net income of the Agent, any Lender or the Issuing Bank to which any such
payment is due pursuant to applicable federal, state and local income tax laws,
and (ii) deduction of amounts equal to the taxes on or measured by, the net
income of such Person with respect to the amount by which
- -----------
[*] Omitted pursuant to Rule 24b-2
- 28 -
<PAGE> 33
the payments required to be made under this sentence exceed the amounts
otherwise specified to be paid in this Agreement and the Notes.
2.16 Non-Receipt of Funds by Agent. Unless the Agent shall have been
notified by a Lender or the Borrowers prior to the date on which such Lender is
to make payment to the Agent of the proceeds of a Loan to be made by it
hereunder or Borrowers is to make a payment to the Agent for the account of one
or more of the Lenders, as the case may be, that such Person does not intend to
make such payment to the Agent, the Agent may assume that such payment has been
made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended recipient on such date and, if
such Person has not in fact made such payment to the Agent, the recipient of
such payment shall, on demand, repay to the Agent the amount made available to
it together with interest thereon at a rate per annum equal to the Federal Funds
Rate (when the recipient is a Lender) or equal to the rate of interest
applicable to such Loan (when the recipient is any Borrower).
2.17 Sharing of Payments and Setoff among Lenders. Each of the Borrowers
hereby agrees that, in addition to (and without limitation of) any right of
setoff, banker's lien or counterclaim a Lender may otherwise have, each Lender
shall be entitled, at its option, to offset balances held by it at any of its
offices for any Borrower or any of its Subsidiaries against any principal of or
interest on any of its Loans or the LC Draw Obligations hereunder, or any fee
payable to it, which is not paid when due (regardless of whether such balances
held by it are then due to any Borrower or any of its Subsidiaries), in which
case it shall promptly notify the Borrowers (and the Agent) thereof, provided
that its failure to give such notice shall not affect the validity thereof. If a
Lender shall effect payment of any principal of or interest on any of its Loans
or the LC Draw Obligations hereunder or any fee payable to it, through the
exercise of any right of setoff, banker's lien, counterclaim or similar right,
it shall promptly purchase at par from the other Lenders participations in the
corresponding Obligations held by the other Lenders in such amounts, and make
such other adjustments from time to time as shall be equitable, to the end that
all the Lenders shall share the benefit of such payment pro rata in accordance
with the unpaid principal and interest on the Obligations held by each of them.
To such end all the Lenders shall make appropriate adjustments among themselves
(by the resale of participations sold or otherwise) if such payment is rescinded
or must otherwise be restored. Each of the Borrowers agrees that any Lender so
purchasing a participation in the Loans or the LC Draw Obligations held by the
other Lenders may exercise all rights of setoff, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of Obligations in the amount of such participation. Nothing
contained herein shall require any Lender to exercise any such right or shall
affect the right of any Lender to exercise and retain the benefits of exercising
any such right with respect to any other indebtedness or obligation of any
Borrower or any of its Subsidiaries.
SECTION 3. CONDITIONS OF LOANS.
3.1 Conditions to Initial Credit Extension. The obligations of the Agent
and the Lenders to enter into this Agreement and make the initial Credit
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<PAGE> 34
Extensions hereunder are subject to the fulfillment of the following conditions
precedent:
(a) Receipt by the Agent of the following documents, certificates and
opinions in form and substance satisfactory to the and duly executed and
delivered by the parties thereto:
(i) This Agreement;
(ii) The Notes;
(iii) The Security Documents and such assignments, consents,
landlord waivers (provided, that Borrower shall have up to 45 days from
the date of the initial Credit Extension to obtain such waivers),
mortgagee waivers, UCC financing statements and other instruments and
documents as the Agent shall deem necessary to satisfy the requirements
of Section 2.13;
(v) An officer's certificate executed by the chief financial
officer of the Borrowers in the form acceptable to the Agent, including
all attachments thereto;
(vi) Certificates of insurance or insurance binders evidencing
compliance with Section 6.3 (including the required lender's loss
payable endorsements);
(vii) A favorable legal opinion satisfactory to the Agent,
addressed to the Agent and the Lenders, from Stradling Yocca Carlson and
Rauth, counsel to the Borrowers and their Subsidiaries; and
(viii) A favorable trademark legal opinion satisfactory to the
Agent, addressed to the Agent and the Lenders, from Knobbe, Martens,
Olsen and Bear, trademark counsel to the Borrowers and their
Subsidiaries.
(b) The Borrowers shall have paid the fees required under Section 2.12
to be paid as of the date hereof and all reasonable fees and expenses of the
Agent's counsel through the closing date.
(c) The Borrowers shall have provided the Agent with such additional
instruments, certificates, opinions and other documents as the Agent or its
counsel shall reasonably request.
(d) All corporate, partnership and other proceedings, and all documents,
instruments and other legal, diligence and financial matters in connection with
the transactions contemplated by the Loan Documents shall be reasonably
satisfactory in form and substance to the Agent and its counsel.
3.2 Conditions to All Credit Extensions. The obligation of the Agent and
the Lenders to make any Credit Extension (including the initial Credit
Extension) is subject to the following conditions:
(a) All representations and warranties contained in this Agreement or
otherwise made in writing by or on behalf of any of the Borrowers or any of
their Subsidiaries in connection with the transactions contemplated hereby shall
be true and correct in all material respects at the time of each such Credit
Extension (except to the extent affected by transactions occurring after the
date hereof
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<PAGE> 35
and permitted hereunder), with and without giving effect to the Credit Extension
at such time and the application of the proceeds thereof.
(b) At the time of each such Credit Extension (i) the Borrowers and
their Subsidiaries shall have performed and complied with all covenants and
conditions required in this Agreement to be performed or complied with by them
prior to the making of such Credit Extension, (ii) no Default shall have
occurred and be continuing or would result from such Credit Extension, and (iii)
there shall have been no material adverse change in the business, assets,
condition (financial or otherwise), or prospects of any of the Companies, since
the date of this Agreement.
(c) As to any such Credit Extension, the Agent shall have received a
properly completed Loan Request or Letter of Credit Documents, as appropriate.
(d) The Agent shall have received such other supporting documents and
certificates as it may reasonably request.
Each request for a Credit Extension shall be deemed to constitute the Borrowers'
representations and warranty that all of the foregoing conditions in Sections
3.1 and 3.2 have been satisfied in full.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent
and Lenders to enter into this Agreement and make the Credit Extensions
hereunder, each of the Borrowers hereby confirms the representations and
warranties made by any of them in the Security Documents (which are incorporated
by reference herein) and, further, represents and warrants (all of which
representations and warranties assume the making of the initial Credit
Extensions hereunder) as follows:
4.1 Organization and Qualification. Each of the Companies (a) is a
limited partnership or corporation duly organized, validly existing and in good
standing under the laws of its state of formation (as designated on Schedule
4.1); (b) has all requisite corporate or partnership power and authority, as the
case may be, to own its property and conduct its business as now conducted and
as presently contemplated; and (c) is duly qualified and in good standing in
each jurisdiction where the nature of its properties or its business (present or
proposed) requires such qualification, as specified in Schedule 4.1, except
where the failure to so qualify will not materially adversely affect its
business and (d) has no Subsidiaries except as specified in Schedule 4.1.
4.2 Corporate or Partnership Authority. The execution, delivery and
performance of each of the Loan Documents and the transactions contemplated
thereby (including the granting of security interests thereunder in favor of
Agent on behalf of Lenders) are within the corporate and partnership authority
of each of the Companies, have been authorized by all necessary corporate and
partnership proceedings on the part of each of the Companies, and do not and
will not contravene any provision of law (including without limitation the rules
and provision of law or the charter documents, by-laws, certificates of limited
partnership or partnership agreements (collectively, "Organizational Documents")
of any of the Companies, or contravene any provisions of, or constitute a
Default hereunder or a default under any other material agreement (including any
lease, any shareholder agreement, any license agreement or any supplier
contracts), instrument, judgment, order, decree, permit, license or undertaking
binding upon or applicable to any of the Companies or
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<PAGE> 36
any of its properties, or result in the creation, other than in favor of the
Agent on behalf of the Lenders, of any Encumbrance upon any of the properties of
any of the Companies.
4.3 Valid Obligations. Each of the Loan Documents and all of its
respective terms and provisions (including the security interests granted
thereunder) are legal, valid and binding obligations of each of the Companies
who are named as parties thereto, enforceable in accordance with their terms.
4.4 Approvals. The execution, delivery and performance of the Loan
Documents and the transactions contemplated thereby do not require any approval
or consent of, or filing or registration with, any governmental or other agency
or authority or any other Person, except as disclosed on Schedule 4.4.
4.5 Title to Properties; Absence of Liens. As of the date of this
Agreement and after giving effect to the application of the proceeds of the
Loans as provided in Section 2.14, each of the Companies has good and marketable
title to all of its properties of every name and nature now purported to be
owned by it, including without limitation all assets of the Restaurants listed
on Schedule 4.8 (as updated from time to time as required hereunder), the
Collateral and the properties reflected in the Initial Financial Statement, in
each case free from all Encumbrances whatsoever except for Permitted
Encumbrances. All of the Restaurants are operated by the Parent or one of its
wholly-owned Subsidiaries which are Borrowers hereto.
4.6 Licenses, Patents, Trademarks and Intellectual Property. Except as
otherwise described in Schedule 4.6, each of the Companies has all necessary
permits, approvals, authorizations, consents, license (including liquor
licenses), franchises, registrations, patents, trademarks, trade names and
copyrights, recipes and other rights and privileges to allow it to own and
operate their businesses and to operate the Restaurants listed on Schedule 4.8
(as updated from time to time as required hereunder) without any violation of
law or the rights of others, except where such violation would not have a
material adverse effect on the Borrower and its Subsidiaries, taken as a whole.
All trademarks, service marks, trade names, patents and patent applications in
which any Company has an ownership or licensee interest, and all United States,
state and foreign registrations thereof and applications therefor, are listed on
Schedule 4.6, and such Company is and will at all times hereafter be the owner
(or licensee if so indicated thereon) thereof, free of all Encumbrances except
Encumbrances in favor of the Agent (other than Encumbrances in favor of the
Agent on HTB Prohibited Assets if the same cannot be pledged pursuant to the
definition thereof). No interest in any of such intellectual property has been
licensed by any Company to any other Person.
4.7 Compliance with Laws and Agreements. No Company is in violation of
any provision of its Organizational Documents and no Company is in violation of
any provision of any material indenture, agreement or instrument to which it is
a party or by which it is bound (including without limitation any material
lease) or, to the best of the Borrowers' knowledge and belief, of any provision
of law, the violation of which could have a material adverse effect upon any
Company or any Restaurant or any order, judgment or decree of any court or other
agency of government. Without limiting the scope of the foregoing, each Company
is in compliance in all material respects with all federal and state laws and
regulations (including all Environmental Laws and all other
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<PAGE> 37
federal and state securities laws) the violation of which could have a material
adverse effect upon it or upon any Restaurant.
4.8 Material Agreements. Schedule 4.8 accurately and completely lists
all Restaurants owned and/or operated by any Company (with the owner and/or
operator and address of each Restaurant listed thereon) and all Organizational
Documents and all material agreements to which any Company is a party. Each of
the material agreements listed on Schedule 4.8 is in full force and effect and
constitutes the legally valid and binding obligation of the Company identified
with it thereon and, to Borrowers' knowledge, the other parties thereto,
enforceable against each of them in accordance with its respective terms. No
Company is in violation under any material agreements, where such violations in
the aggregate would be likely to have a material adverse effect on any Company
or any Restaurant. To Borrowers' knowledge, except as disclosed in Schedule 4.8,
third parties to any material agreements are not in material violation thereof
to the extent that such violations in the aggregate would be likely to have a
material adverse effect on any Company or Restaurant.
4.9 Environmental Matters. Except as specified in Schedule 4.9:
(a) Each Company has obtained all permits, licenses and other
authorizations which are required under all Environmental Laws, except to the
extent failure to have any such permit, license or authorization would not have
a material adverse effect on the business, financial condition or operations of
any Company or any Restaurant. Each Company and each Restaurant is in compliance
with the terms and conditions of all such permits, licenses and authorizations,
and is also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a material adverse effect on the business, financial condition,
prospects or operations of any Company or any Restaurant.
(b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending, to Borrowers'
knowledge, or threatened by any governmental or other entity with respect to any
alleged failure by any Company or any Restaurant to have any permit, license or
authorization required in connection with the conduct of its business or with
respect to any Environmental Laws, including, without limitation, Environmental
Laws relating to the generation, treatment, storage, recycling, transportation,
disposal or release of any Hazardous Materials, except to the extent that such
notice, complaint, penalty or investigation did not or could not result in the
remediation of any property costing in excess of $100,000 in the aggregate in
each fiscal year.
(c) To Borrowers' knowledge, no material oral or written notification of
a release of a Hazardous Material has been filed by or on behalf of any Company
or any Restaurant and no property now or previously owned, leased or used by any
Company or any Restaurant is listed or proposed for listing on the National
Priorities List under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or on any similar state list of sites
requiring investigation or clean-up.
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<PAGE> 38
(d) There are no Encumbrances arising under or pursuant to any
Environmental Laws on any of the real properties owned or leased by any Company
or any Restaurant, and no governmental actions have been taken or are in process
which could subject any of such properties to any Encumbrances or, as a result
of which any Company or any Restaurant would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any property
owned by it or in any deed to such property.
(e) No Company or Restaurant has (i) engaged in or permitted any
operations or activities upon or any use or occupancy of any property owned or
leased by it, or any portion thereof, for the purpose of or in any way involving
the handling, manufacture, treatment, storage, use generation, release,
discharge, refining, dumping or disposal (whether legal or illegal, accidental
or intentional) of any Hazardous Materials on, under, in or about such property,
except to the extent commonly used in day-to-day operations of such property and
in such case only in compliance with all Environmental Laws, or (ii) transported
any Hazardous Materials to, from or across such property except to the extent
commonly used in day-to-day operations of such property and, in such case, in
compliance with, all Environmental Laws; nor to the knowledge of the Borrowers
have any Hazardous Materials migrated from other properties upon, about or
beneath such property, nor to the knowledge of the Borrowers, are any Hazardous
Materials presently constructed, deposited, stored or otherwise located on,
under, in or about such property except to the extent commonly used in
day-to-day operations, and, in such case, in compliance with, all Environmental
Laws.
4.10 Compliance with ERISA. Each of the Companies and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the applicable provisions of ERISA and the Code,
and have not incurred any liability to the PBGC or a Plan under Title IV of
ERISA; and no "prohibited transaction" or "reportable event" (as such terms are
defined in ERISA) has occurred with respect to any Plan.
4.11 Financial Statements. The Borrowers have furnished to the Agent and
the Lenders their consolidated audited balance sheets as at January 26, 1998 and
company-prepared consolidated balance sheet as at August 10, 1998 and related
statements of operations and cash flow for the fiscal year and fiscal quarter
then ended, which were prepared in accordance with GAAP and (as to fiscal year
1997) audited by the Accountants (collectively, the "Initial Financial
Statements"). Such Initial Financial Statements fairly present the financial
position of the Companies as at such dates and the results of operations for
such periods covered thereby. The Borrowers have reviewed the projections for
the future results of operations of the Companies for the period commencing
fiscal year 1998 through fiscal year 2003 (the "Projections"), and the Borrowers
hereby certify to the Agent and the Lenders that the Projections were made in
good faith upon reasonable assumptions at the time of their preparation, which
assumptions are still reasonable on the date hereof. Except as reflected in the
Initial Financial Statements, none of the Companies has any material contingent
obligations, liabilities for taxes or unusual forward or long-term commitments.
Since the effective date of the latest audited Initial Financial Statements,
there have been no changes in the assets, liabilities, financial condition or
business of any Company, the effect of which has, individually or in the
aggregate, been materially adverse to any Company or any Restaurant.
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<PAGE> 39
4.12 Solvency. Each of the Companies has assets (both tangible and
intangible) having a fair salable value in excess of the amount required to pay
the probable liability on its respective existing debts (whether matured or
unmatured, liquidated or unliquidated, fixed or contingent); each of the
Companies has access to adequate capital for the conduct of its respective
business for the foreseeable future and the discharge of its debts incurred in
connection therewith as such debts mature; each of the Companies is not
Insolvent and, immediately prior to the consummation of the initial Loans
hereunder, each of the Companies was not Insolvent; and each of the Companies
does not intend to or believe that it will incur debts beyond its ability to pay
them at their maturity.
4.13 Taxes. Each of the Companies has filed all federal, state and other
tax returns required to be filed and has paid or made adequate provision for the
payment of all taxes, assessments and other such governmental charges due have
been fully paid, except for being contested in good faith and for which adequate
reserves have been made and no Encumbrance has been filed. No Company has
executed any waiver that would have the effect of extending the applicable
statute of limitations in respect of tax liabilities.
4.14 Litigation. Except as otherwise described in Schedule 4.14, there
is no litigation, proceeding or governmental investigation, administrative or
judicial, pending or, to Borrowers' knowledge, threatened against or affecting
any Company or any Restaurant or its properties in which there is a reasonable
possibility of an outcome which could result in a materially adverse effect on
the business, properties or condition (whether financial or otherwise) of the
Borrowers and its Subsidiaries, taken as a whole, or their ability to perform
any of their obligations under any Loan Document.
4.15 Margin Rules. No portion of any Loan is intended to be used for the
purpose of purchasing or carrying any "margin security" or "margin stock", as
such terms are used in Regulations U or X and the Board of Governors of the
Federal Reserve System ("Margin Stock").
4.16 Restrictions on the Borrowers. No Company is a party to or bound by
any contract, agreement or instrument, nor subject to any charter or other
corporate restriction, which could reasonably be expected to materially and
adversely affect the Borrowers' business, property, assets, operations or
condition, financial or otherwise, taken as a whole.
4.17 Capitalization. Schedule 4.17 describes the ownership structure of
each of the Borrowers and their Subsidiaries, showing accurate ownership
percentages and accompanied by a statement of authorized and issued equity
securities as of the date hereof and the names and addresses of the holders
thereof. The Borrowers have supplied the Agent with true and complete copies of
their Organizational Documents. Except as otherwise set forth in Schedule 4.17:
(a) no securities of any Company carry preemptive rights; (b) there are no
outstanding subscriptions, warrants or options to purchase any securities of any
Company; (c) no Company is obligated to redeem or repurchase any of its
securities; and (d) there is no other agreement, arrangement or plan which could
directly or indirectly affect the equity structure of any Company. All equity
securities of each Company are validly issued and fully paid and non-assessable,
free of any Encumbrance, except for liens on the securities of the Companies
other than the Parent granted to the Agent on behalf of the Lenders and
restrictions on transfer indicated on the certificates evidencing such shares
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<PAGE> 40
pursuant to applicable Federal or state securities regulations. No Company has
any Subsidiaries except as set forth on Schedule 4.17.
4.18 Full Disclosure. No statement of fact made by or on behalf of any
Company or the Principal in this Agreement or any of the other Loan Documents or
in any certificate or schedule furnished to the Agent or Lenders pursuant hereto
or thereto in light of all information provided to the Agent and the Lenders,
contains any untrue statement of a material fact or omits to state any material
fact necessary to make statements continued therein or herein not misleading.
There is no fact currently known to any Borrower which has not been disclosed to
the Agent and the Lenders in writing which materially affects adversely, or, as
far as any Borrower can reasonably foresee, will materially affect adversely,
the business, operations, properties, assets or condition, financial or
otherwise, of any Company or the Principal, or the ability of the Companies and
the Principal to perform their respective obligations under the Loan Documents.
4.19 Investment Company Act. No Company is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company," or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.20 Labor Disputes; Collective Bargaining Agreements; Employee
Grievances. As of the date hereof (a) there are no collective bargaining
agreements or other labor contracts covering any Company or any Restaurant; (b)
no union or other labor organization is seeking to organize, or to be recognized
as bargaining representative for, a bargaining unit of employees of any Company
or any Restaurant; (c) there is no material labor dispute pending or threatened
against or affecting any Company or any Restaurant; (d) there has not been,
during the five year period prior to the date hereof, any material labor dispute
against or affecting any Company or any Restaurant, other than employee
grievances arising in the ordinary course of business which are not, in the
aggregate, material. Each of the Companies and each Restaurant has complied with
(or corrected in full any prior noncompliance) and is in compliance with the
provisions of the Fair Labor Standards Act and regulations thereunder, except
where such non-compliance would not reasonably be expected to have a material
adverse effect on the Borrower and its Subsidiaries, taken as a whole.
SECTION 5. FINANCIAL COVENANTS. Each of the Borrowers covenants and
agrees that, until all Commitments have been terminated, all Letters of Credit
have terminated or expired, and all Obligations have been indefeasibly paid in
full in cash, the Borrowers will not cause or permit:
5.1 Maximum Leverage Ratio. The ratio of Consolidated Funded
Indebtedness at any time to Consolidated EBITDA for any Reference Period to be
greater than 2.50:1.00.
5.2 Minimum Fixed Charges Coverage Ratio. The ratio of Consolidated Cash
Flow for any Reference Period ending on any Quarterly Date to Consolidated
Financial Obligations for such Reference Period to be less than 1.30:1.00.
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<PAGE> 41
5.3 Minimum Net Worth. At all times on and after the date hereof,
maintain Consolidated Net Worth of no less than $22,000,000, plus an amount
equal to the sum of (a) 50% of positive Consolidated Net Income for each fiscal
quarter ending on or after the third quarter end in fiscal year 1999, and (b)
100% of Net Equity Proceeds after the date hereof.
5.4 Maximum Capital Expenditures. Make or agree to make, or incur any
obligations with respect to, any Capital Expenditures in excess of the maximum
amounts set forth below for the fiscal years listed.
<TABLE>
<CAPTION>
Maximum Amount of
Fiscal Year Capital Expenditures
- ----------- --------------------
<S> <C>
1999 $20,000,000
2000 $ 8,500,000
2001 $10,000,000
2002 $11,500,000
2003 $13,000,000
2004 and each fiscal year thereafter $ 8,000,000
</TABLE>
SECTION 6. AFFIRMATIVE COVENANTS. Each of the Borrowers covenants and
agrees that, until all Commitments have been terminated, all Letters of Credit
have terminated or expired, and all Obligations have been indefeasibly paid in
full in cash:
6.1 Financial Reporting. The Borrowers will furnish to the Agent and the
Lenders:
(a) as soon as available, but in any event within 90 days after each
fiscal year-end, the Borrowers' balance sheet as at the end of, and related
statements of operations and cash flow for, such year, prepared in accordance
with GAAP consistently applied and audited by the Accountants; and concurrently
with such financial statements, consolidating financial statements and a written
statement by the Accountants that, in conducting such audit, they have obtained
no knowledge of any Default or Event of Default (or, if such an event exists, a
statement as to its nature and status);
(b) as soon as available, but in any event within 45 days after the end
of each fiscal quarter, the Borrowers' balance sheet as at, the end of, and
related statements of operations and cash flow for, the portion of the year then
ended and the fiscal quarter then ended, prepared in accordance with GAAP (or in
lieu thereof, unless otherwise requested by Agent, the Parent's Form 10-Q
quarterly report filed with the Securities and Exchange Commission), together
with a comparison of such results to budgeted results and to the results for the
comparable period in the prior fiscal year, prepared on a consolidated basis, in
each case certified by the Borrowers' chief financial officer or controller;
(c) as soon as available, but in any event within 45 days after the end
of each month, the Borrowers' unaudited balance sheet as at the end of, and
related unaudited statements of operations and cash flow for, the portion of the
year then ended and the month then ended, prepared in accordance with GAAP,
except for the absence of notes thereto and subject to normal year-end
adjustments, together with a comparison of such results to budgeted results and
to the results for the
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<PAGE> 42
comparable period in the prior fiscal year, prepared on a consolidated basis and
a per Restaurant basis, in each case certified by the Borrowers' chief financial
officer or controller;
(d) as soon as available, but in any event within 45 days after the end
of each fiscal quarter, a covenant compliance report in substantially the form
of Exhibit 6.1, signed by the Borrowers' chief financial officer or controller;
(e) promptly as they become available, a copy of each report (including
any so-called management letters) submitted to any Company by the Accountants in
connection with each annual, interim or special audit of its books;
(f) promptly as they become available, copies of all such financial
statements, proxy material and reports as any Company shall send or make
available to its stockholders and/or material creditors;
(g) promptly as they become available, copies of the Parent's quarterly
report filed on Form 10-Q and annual report filed on Form 10-K with the
Securities and Exchange Commission and copies of all registration statements and
regular periodic reports, if any, that the Parent shall have filed with the
Securities and Exchange Commission (or any governmental agency substituted
therefor) or any national securities exchange;
(h) within 30 days after the beginning of each fiscal year, pro forma
projections for the Companies for such fiscal year, prepared on a quarterly
basis, consisting of projected statements of operations and projections of
Capital Expenditures, all prepared on a basis consistent with the financial
statements required by Section 6.1(a);
(i) no more than five Business Days after any Company gives or is
required to give notice to the PBGC of any "Reportable Event" (as defined in
Section 4043 of ERISA) with respect to any Plan that might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that any member
of the Controlled Group or the plan administrator of any Plan has given or is
required to give notice of any such Reportable Event, a copy of the notice of
such Reportable Event given or required to be given to the PBGC;
(j) immediately upon becoming aware of the existence of any condition or
event that constitutes an Event of Default, written notice thereof specifying
the nature and duration thereof and the action being or proposed to be taken
with respect thereto;
(k) no more than five Business Days after becoming aware of any
litigation or of any investigative proceedings by a governmental agency or
authority commenced or threatened against any Company, the outcome of which
could have a materially adverse effect on the assets, business or prospects of
any Company or any Restaurant, written notice thereof and of the action being or
proposed to be taken with respect thereto;
(l) no more than five Business Days after becoming aware of any
investigative proceedings by a governmental agency or authority commenced or
threatened against any Company regarding any potential violation of
Environmental Laws, any spill, release, discharge or disposal of
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any Hazardous Material or any event required to be reported to any such
governmental agency or authority, written notice thereof and of the action being
proposed to be taken with respect thereto;
(m) Prior to the consummation of any Permitted Sale, written notice
thereof, specifying the purchase price, payment terms and closing date thereof;
(n) At the same time as written notice, if any, is required to be given
to the Agent concerning a Permitted Sale or concerning a Permitted Acquisition,
an updated Schedule 4.8 to this Agreement, giving effect to such Permitted Sale
or Permitted Acquisition, as the case may be; and
(o) as soon as reasonably possible and in any event within 10 days after
request therefor, such other information regarding the operations, assets,
business, affairs and financial condition of any Company or any Restaurant as
the Agent may reasonably request.
6.2 Conduct of Business. Each of the Companies will (a) duly observe and
comply in all material respects with all applicable laws and all requirements of
any governmental authorities relative to its corporate existence, rights and
franchises, to the conduct of its business and to its property and assets
(including without limitation all Environmental Laws and ERISA); (b) maintain
and keep in full force and effect all licenses and permits necessary to the
proper conduct of its business; (c) comply in all material respects with all
material agreements (including without limitation material leases and supplier
contracts) to which it is a party; (d) maintain its corporate or partnership
existence, as the case may be; and (e) remain or engage in the business of
owning and operating Restaurants and incidental purposes, and in no other
business.
6.3 Maintenance and Insurance. Each of the Companies will maintain and
keep its properties in good repair, working order and condition, and from time
to time make all needful and proper repairs, renewals, replacements, additions
and improvements thereto so that its business may be properly and advantageously
conducted at all times. Each of the Companies and each Restaurant at all times
will maintain, or cause to be maintained, insurance covering it and its tangible
property in such amounts (including, without limitation, so-called "all perils"
coverage at replacement value, "broad form" liability coverage, and fidelity and
business interruption insurance), against such hazards and liabilities and for
such purposes as is customary in the industry for companies of established
reputation engaged in the same or similar businesses and owning or operating
similar properties. The Agent shall be named as loss payee (pursuant to a
standard "lender's loss payable" endorsement) and additional insured and shall
be given 30 days' advance notice of any cancellation, change in form or renewal
of insurance. Such insurance shall insure the Agent's interest regardless of any
breach or violation of the underlying policies by any Company or any other
Person. Each of the Companies shall insure, or cause to be insured, its assets
in amounts sufficient to prevent the application of any co-insurance provisions.
The Borrowers shall evidence their compliance with this Section by delivering a
certificate with respect to each policy concurrently with the execution hereof,
annually thereafter and at any time upon the Agent's request. If any Company
fails to provide or cause to be provided such insurance, the Agent, in its sole
discretion, may provide such insurance and charge the cost to any of the
Borrowers' deposit accounts with Agent or any Lender.
6.4 Taxes. Each of the Companies will pay or cause to be paid all taxes,
assessments or governmental charges on or against it or its properties prior to
such taxes becoming delinquent;
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except for any tax, assessment or charge (other than any charge for required
environmental cleanup costs) which is being contested in good faith by
appropriate legal or other proceedings or actions and with respect to which
adequate reserves have been established and are being maintained in accordance
with GAAP, if no Encumbrance shall have been filed to secure such tax,
assessment or charge.
6.5 Inspection by the Lender. Each of the Companies will at all
reasonable times, during normal business hours permit the Agent and the Lenders
or their designees, to (a) visit and inspect the Restaurants and other
properties of the Companies and (b) examine and make copies of and take
abstracts from the Companies' and the Restaurants' books and records. Without
limiting the foregoing, the Agent and the Lenders may conduct as many commercial
credit examinations of the Companies and the Restaurants as it reasonably deems
necessary, whether or not an Event of Default exists, and the Borrowers will
reimburse the Agent and the Lenders the costs of all such credit examinations.
6.6 Accounting System. The Companies will maintain an accurate system of
accounting in accordance with GAAP, will at all times be part of a consolidated
group for accounting purposes, and, without the Agent's prior written consent,
will not change their fiscal year from the fiscal year accounting used in the
preparation of the Initial Financial Statements.
6.7 Further Assurance. From time to time hereafter, the Companies will
execute and deliver, or cause to be executed and delivered, such additional
instruments, certificates and documents, and take all such actions, as the Agent
shall reasonably request for the purpose of implementing or effectuating the
provisions of this Agreement, the Notes, the Letter of Credit Documents or the
other Loan Documents, and upon the exercise by the Agent of any power, right,
privilege or remedy pursuant to this Agreement, the Notes, the Letter of Credit
Documents or the other Loan Documents which requires any consent, approval,
registration, qualification or authorization of any governmental authority or
instrumentality, exercise and deliver all applications, certifications,
instruments and other documents and papers that the Agent may be so required to
obtain.
6.8 Environmental Laws. Each of the Companies will comply in all
material respects with, and perform or cause to be performed any and all
Remedial Work necessary under, all Environmental Laws applicable (now or in the
future) to it or to its business.
6.9 Depository. The Borrowers shall maintain a depository account or
accounts with the Agent to facilitate borrowings and payments hereunder. Each of
the Companies hereby irrevocably authorizes the Agent to debit such depository
account or accounts in order to effect the making of any such payments not paid
when due.
SECTION 7. NEGATIVE COVENANTS. Each of the Borrowers covenants and
agrees that, until all Commitments have been terminated, all Letters of Credit
have terminated or expired, and all Obligations have been indefeasibly paid in
full in cash:
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<PAGE> 45
7.1 Indebtedness; Contingent Liabilities. No Company will create, incur,
assume, guarantee or be or remain liable with respect to any Indebtedness
except:
(a) Indebtedness of the Companies to the Agent and the Lenders under the
Loan Documents;
(b) Indebtedness in the amounts existing on the date hereof and
described in Schedule 7.1 (but no refinancings, renewals or extensions thereof
without the Agent's prior written consent;
(c) Guarantees in respect of endorsements of negotiable instruments for
collections in the ordinary course of business (and refinancings, renewals or
extensions thereof);
(d) Capitalized Leases and purchase money Indebtedness not exceeding
$500,000 in the aggregate secured by Permitted Encumbrances under Section
7.3(f);
(e) unsecured Indebtedness of the Subsidiaries who are Borrowers
hereunder to the Parent, evidenced by promissory notes pledged and delivered to
the Lender pursuant to the Security Documents (the "Intercompany Notes");
(f) With the prior written consent of the Required Lenders, Debt
Issuance which is unsecured and subordinate to the Obligations pursuant to a
written subordination agreement in form and substance satisfactory to the Agent
and provided the prepayment required by Section 2.7 is paid in full with respect
thereto (unless such prepayment is otherwise waived by the Required Lenders in
writing);
(g) Indebtedness incurred in connection with the Preapproved
Acquisitions in an aggregate amount not to exceed $3,000,000; and
(h) current trade payables incurred in the ordinary course of business.
7.2 Sale and Leaseback. No Company will enter into any arrangement (a
"Sale Leaseback"), directly or indirectly whereby any of them shall sell or
transfer any of its property acquired prior to the date of this Agreement in
order to lease such property or lease other property that any Company intends to
use for substantially the same purpose as such property being sold or
transferred.
7.3 Encumbrances. No Company nor the Principal on behalf of any
Restaurant will create, incur, assume or suffer to exist any mortgage, pledge,
security interest, lien or other charge or encumbrance, including the lien or
retained security title of a conditional vendor upon or with respect to any of
its property or assets ("Encumbrances"), or assign or otherwise convey any right
to receive income, including the sale or discount of accounts receivable with or
without recourse, except the following ("Permitted Encumbrances"):
(a) Encumbrances in favor of the Agent under the Loan Documents;
(b) Encumbrances existing as of the date of this Agreement and disclosed
in Schedule 7.3;
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<PAGE> 46
(c) liens for taxes, fees, assessments and other governmental charges to
the extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 6.4;
(d) landlord's and lessors' liens in respect of rent not in default or
liens in respect of pledges or deposits under worker's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent; liens securing the performance of
bids, tenders, contracts (other than for the payment of money); and statutory
obligations incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in the operation of its business;
(e) judgment liens that shall not have been in existence for a period of
longer than 30 days after the creation thereof or, if a stay of execution shall
have been obtained, for a period longer than 30 days after the expiration of
such stay;
(f) Encumbrances in respect of Capital Leases and purchase money
obligations incurred within 90 days of purchase which in the aggregate do not
secure Indebtedness in excess of $500,000 for tangible personal property other
than inventory used in its business, provided that any such Encumbrances shall
not extend to property and assets not financed by such Capitalized Lease or
purchase money obligation and shall not secure Indebtedness greater than the
lesser of the cost or fair market value of such tangible personal property so
acquired; and
(g) easements, rights of way, restrictions and other similar
Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business, if the same were permitted exceptions
to the title insurance policies deemed by Agent to be satisfactory.
7.4 Disposition of Assets, Etc. No Company will sell, lease, transfer or
otherwise dispose of any of its properties, assets, rights, licenses or
franchises to any Person, except for (a) dispositions of inventory in the
ordinary course of business (which dispositions may be made free from the
Encumbrances of the Loan Documents), the disposition in the ordinary course of
business, without replacement, of equipment which is obsolete or no longer
needed in the conduct of its business and the disposition and replacement in the
ordinary course of business of equipment or other tangible personal property
with other equipment of at least equal utility and value (provided that the
Agent's lien upon such newly acquired equipment shall have the same priority as
the Agent's lien upon the replaced equipment); and (b) so long as no Default
exists or would result therefrom, any other sale of assets other than the sale
of all or substantially all of the assets of any Company, or any Restaurant for
not less than the fair market value thereof, (each such sale being referred to
as a "Permitted Sale"), provided that prior notice thereof is given to the
Agent, if required, pursuant to Section 6.1(l) and the Sale Proceeds Payment
with respect thereto is made, if and to the extent required, pursuant to Section
2.7(b) of this Agreement.
7.5 Amendment to Charter or Partnership Documents. Each of the Companies
will not permit or suffer any amendment of its Organizational Documents which
could materially adversely affect its financial condition or adversely affect
(in light of the entire transaction in which it is a part)
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the rights of the Agent or any Lender hereunder or under the Loan Documents (it
being expressly agreed that the inclusion in any such charter documents of any
provision similar to those set forth in Section 102(b)(2) of Title 8 of the
Delaware General Corporation Law is prohibited under this Section).
7.6 Mergers; Consolidations; Issuance of Securities; Etc. No Company
will dissolve, liquidate, merge or consolidate into or with any other Person;
provided that any Borrower may merge any of its Subsidiaries into a Borrower or
another Subsidiary so long as such Borrower or such Subsidiary is the surviving
entity of such merger and all Borrowers remain as surviving entities. No Company
will issue any additional shares of capital stock or other equity securities,
any options therefor or any securities convertible thereto, unless no Default
exists or would result therefrom and the Debt/Equity Proceeds Payment with
respect thereto is made, if and to the extent required, pursuant to Section
2.7(e) of this Agreement.
7.7 Equity Distributions; Subordinated Payments. No Company will pay any
cash or cash equivalent dividends or other distributions on any class of its
equity interests or make any other distribution or payment on account of or in
redemption, retirement or repurchase of such securities; provided, (a) the
Subsidiaries of the Parent shall declare and pay cash distributions to the
Parent to the extent required to ensure that the Borrowers can meet their
Obligations under the Loan Documents, and (b) if no Default then exists or could
result therefrom, the Parent may repurchase up to 500,000 shares of its common
stock from shareholders other than Affiliates for purchase prices which do not
exceed $[*] in the aggregate while this Agreement is in effect. No Company will
make any payment on any Debt Issuance except interest payments if expressly
permitted under the applicable subordination agreement relating thereto.
7.8 Investments, Loans and Acquisitions. No Company will (a) purchase or
acquire any share of capital stock, partnership interest, evidence of
Indebtedness or other equity security of any other Person, (b) acquire all or
substantially all of the assets of any Person or any division of any Person, (c)
make any loan, advance or extension of credit to, or contribution to the capital
of, any other Person, (d) purchase any real estate for sale or investment, (e)
purchase any commodities futures contracts other than in connection with bona
fide hedging transactions in the ordinary course of business, (f) make any other
investment in any Person, (g) form any Subsidiary (except to the extent the
Parent determines that the formation of a Subsidiary is necessary or appropriate
in connection with a Permitted Acquisition), or (h) make any commitment or
acquisition of any option or enter into any other arrangement for the purpose of
making any of the foregoing investments, loans or acquisitions, except the
following:
(i) Qualified Investments;
(ii) Permitted Acquisitions;
(iii) Loans from the Parent to Subsidiaries who are Borrowers
hereunder pursuant to Section 7.1 (e);
(iv) the existing investments referred to in Schedule 7.8
hereto; and
(v) the Preapproved Real Estate Acquisitions.
- -----------
[*] Omitted pursuant to Rule 24b-2
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<PAGE> 48
7.9 ERISA. No Company nor any member of the Controlled Group shall
permit any Plan maintained by it to (a) engage in any "prohibited transaction"
(as defined in Section 4975 of the Code), (b) incur any "accumulated funding
deficiency" (as defined in Section 302 of ERISA) whether or not waived, or (c)
terminate any Plan in a manner that could result in the imposition of a lien or
encumbrance on the assets of any Company pursuant to Section 4068 of ERISA.
7.10 Transactions with Affiliates. No Company will enter, directly or
indirectly, into any purchase, sale, lease or other transaction with any
Affiliate, except in the ordinary course of business and on terms that are no
less favorable to such Company than those which could be obtained at the time in
a comparable arm's length transaction with any Person who is not an Affiliate.
No Company will incur Indebtedness to any Affiliate except as permitted under
Section 7.1(e) of this Agreement. All transactions of any Company with
Affiliates existing on the date of this Agreement are described on Schedule 7.10
hereto. Notwithstanding anything herein to the contrary, no Company will make a
payment of cash or property, or both, directly or indirectly for any reason to
any Affiliate, if a Default exists hereunder or would result therefrom (other
than reasonable compensation and employee benefit expenses paid to employees of
such Company pursuant to employment agreements in the ordinary course of
business and reasonable bona fide out-of-pocket reimbursement expenses incurred
on behalf of such Company).
7.11 Amendment of Certain Agreements. No Company will amend or modify
any Organizational Document or any other material agreement, if the same would
be likely to have a material adverse effect upon its business, its ability to
fulfill any of its obligations under the Loan Documents or any of the Agent's or
any Lender's rights under the Loan Documents.
7.12 Margin Stock. No Company will use or permit the use of any of the
proceeds of the Credit Extensions, directly or indirectly, for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry, any Margin
Stock or for any other purpose which might constitute a "purpose credit" within
the meaning of Regulation U (12 CFR Part 221) of the Board of Governors of the
Federal Reserve System, or cause this Agreement to violate any other regulation
of the Board of Governors of the Federal Reserve System or the Securities
Exchange Act of 1934, as amended, or any rules or regulations promulgated under
such statutes.
7.13 Negative Pledges, Etc. No Company will enter into any agreement,
amendment or arrangement (excluding this Agreement or any other Loan Document)
prohibiting or restricting (a) it from amending or otherwise modifying this
Agreement or any other Loan Document, (b) the creation or assumption of any
Encumbrances upon its properties, revenues or assets, whether now owned or
hereafter acquired, or (c) the ability of any Subsidiary to make any payment or
distribution, directly or indirectly, to the Parent.
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SECTION 8. DEFAULTS.
8.1 Events of Default. There shall be an Event of Default hereunder if
any of the following events occurs:
(a) any Borrower shall fail to pay any amount of principal of any Loan,
any LC Draw Obligation or any principal on any other Obligation or any interest
thereon, or fees or expenses, when the same becomes due and payable, in each
case (whether on the date fixed for such payment, by acceleration or otherwise);
or
(b) any Company shall fail to (i) perform any term, covenant or
agreement contained in Section 5, Section 6, or Section 7 hereof; or (ii) pay
any amount due to Agent when the same becomes due and payable under any term,
covenant or agreement contained in Section 2;
(c) any Company shall fail to perform any term, covenant or agreement
contained in this Agreement or any default shall occur on the part of any
Company under any other Loan Document, other than those referred to in Sections
8.1(a) and (b) above, and such default shall continue for 10 days after the
earlier of (i) written notice thereof to the Borrowers by the Agent or (ii)
actual knowledge thereof by any Company; or
(d) any representation or warranty of any Company made in this Agreement
or any other Loan Document or in any report, certificate or financial statement
delivered hereunder shall prove to have been false in any material respect upon
the date when made or deemed to have been made; or
(e) any Company shall fail to pay at maturity, or within any applicable
period of grace, any obligations which, together with all other such obligations
of the Companies and the Restaurants, exceed $250,000 in the aggregate, or fail
to observe or perform any term, covenant or agreement evidencing or securing
such obligations, the result of which failure is to permit the holder or holders
of such obligations to cause the indebtedness relating thereto to become due
prior to its stated maturity upon delivery of required notice, if any; or
(f) any Company shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee, liquidator or
similar official of itself or of all or a substantial part of its property, (ii)
be generally not paying its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) take any
action or commence any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts, or
any other law providing for the relief of debtors, (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code or other
law, (vii) take any action under the laws of its jurisdiction of incorporation
or organization similar to any of the foregoing, or (viii) take any action for
the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced with respect to any Company,
without the application or consent of such in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts, (ii) the
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appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets, or (iii) similar relief in respect
of it, under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts or any other law providing for
the relief of debtors, and such proceeding or case shall continue undismissed,
or unstayed and in effect, for a period of 60 days; or an order for relief shall
be entered in an involuntary case under the Federal Bankruptcy Code, against any
Company; or action under the laws of the jurisdiction of incorporation or
organization of any Company similar to any of the foregoing shall be taken with
respect to any Company and shall continue unstayed and in effect for any period
of 60 days; or
(h) a judgment or order for the payment of money shall be entered
against any Company by any court, or a warrant of attachment or execution or
similar process shall be issued or levied against property of any Company, that,
together with all other such judgments and attachments against the Companies
exceeds $250,000 in the aggregate in value and such judgment, order, warrant or
process shall continue undischarged or unstayed for 30 days; or
(i) any Company or any member of the Controlled Group shall fail to pay
when due an amount or amount that it shall have become liable to pay to the PBGC
or to a Plan under Title IV of ERISA and which, together with all such amounts,
exceeds $100,000 in the aggregate; or notice of intent to terminate a Plan or
Plans shall be filed under Title IV of ERISA by any Company, any member of the
Controlled Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans against
any Company and such proceedings shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or
(j) for any reason, the Parent shall cease to own 100% of all of the
legal and beneficial equity interests of all of its other Subsidiaries existing
as of the date hereof, or 100% of all of the legal and beneficial equity
interests of any Subsidiary formed after the date hereof;
(k) for any reason, any Security Documents shall not be in full force or
effect in all material respects, or any party thereto shall contest the validity
thereof or disaffirm its obligations thereunder or default with respect to any
of its material obligations thereunder; or
(l) for any reason, any Change in Control shall occur.
8.2 Remedies. Upon the occurrence of an Event of Default described in
Section 8.1(f) or (g), immediately and automatically, and upon the occurrence
and continuance of any other Event of Default, or if on any date that a draft is
presented under a Letter of Credit or any date that a Letter of Credit is sought
to be issued, extended or renewed, the conditions precedent to the issuance,
extension or renewal of Letters of Credit are not satisfied, at the Required
Lenders' option and upon the Agent's declaration: (a) the Commitments and any
obligation to issue, extend or renew Letters of Credit shall terminate; and (b)
the unpaid principal amount of the Loans, together with accrued interest, all LC
Draw Obligations and all other Obligations shall become immediately due and
payable without presentment, demand, protest or further notice of any kind, all
of which are hereby
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expressly waived. Upon termination of the Revolver Commitments and acceleration
of the Loans and the LC Draw Obligations, the Agent may exercise any and all
rights it has under this Agreement, the Security Documents or any other Loan
Documents, or at law or in equity, and proceed to protect and enforce the
Agent's and the Lenders' rights by any action at law, in equity or other
appropriate proceeding. In the event that the Agent shall apply for the
appointment of, or the taking of possession by, a trustee, receiver or
liquidator of any Company or any Restaurant or of any other similar official to
hold or liquidate all or any substantial part of the properties or assets of any
Company or any Restaurant following the occurrence of a default in payment of
any amount owed hereunder and following any applicable notice or cure period,
each of the Companies and the Principal (with all due and proper corporate,
partnership or other authorization, as the case may be), hereby consents to such
appointment and taking of possession and agrees to execute and deliver any and
all documents requested by the Agent relating thereto (whether by joining in a
petition for the voluntary appointment of, or entering no contest to a petition
for the appointment of, such an official or otherwise, as appropriate under
applicable law).
8.3 Letters of Credit. If any one or more Events of Default shall at any
time occur, the Agent may also, by written notice to the Borrowers, take any or
all of the following actions, at the same or different times:
(a) The Agent may send notices to all or any of the beneficiaries of the
Letters of Credit advising such beneficiaries of the intention and desire of the
Lender to effect the termination, cancellation and surrender of such Letters of
Credit in 30 days; provided, however, that the Agent shall not send any such
notice to any beneficiary unless the Lender has requested that the Borrowers
deliver cash collateral to the Agent pursuant to paragraph (b) below and the
Borrowers have failed to deliver such cash collateral to the Agent within 10
days after such request; and
(b) The Lender may require that the Borrowers deliver to the Lender
first priority perfected cash collateral in an amount equal to the face amount
of all Letters of Credit which remain outstanding.
SECTION 9. MISCELLANEOUS.
9.1 Notices. Unless otherwise specified herein, all notices hereunder to
any party hereto shall be in writing and shall be deemed to have been given (a)
when delivered by hand or electronic facsimile transmission on a Business Day,
provided written confirmation of either is obtained, (b) three Business Days
after mailing by certified mail, return receipt requested, or (c) one Business
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<PAGE> 52
Day after mailing by overnight mail with a nationally recognized overnight
courier; in each case addressed to such party at its address indicated below:
(a) If to the Borrowers:
Star Buffet, Inc.
1312 North Scottsdale Road
Scottsdale, AZ 85257
Attention: Mr. Robert Wheaton
Telecopier No.: (602) 425-0494
with a copy (which shall not constitute notice) to:
David E. Lafitte, Esq.
Stradling Yocca Carlson and Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Telecopier No.: (949) 725-4100
(b) If to any Lender:
To its address set forth below its name on the signature
pages hereof, with a copy to the Agent; and
(c) If to the Agent:
BankBoston, N.A.
100 Federal Street
Mail Stop: 01-09-05
Boston, Massachusetts 02110
Attention: J. Nicholas Cole
Telecopier No.: (617) 434-0637
with a copy (which shall not constitute notice) to:
Susan E. Siebert, Esq.
Edwards & Angell, LLP
101 Federal Street, 23rd Floor
Boston, Massachusetts 02110
Telecopier No.: (617) 439-4170
or to any other address specified by such party in writing.
9.2 Expenses. The Borrowers will pay jointly and severally on demand all
expenses of the Agent and the Lenders in connection with the preparation, waiver
or amendment of this Agreement or any other Loan Documents (subject to the limit
on legal expenses hereinabove provided), or the default or collection of the
Loans, the LC Draw Obligations or any other Obligation or in connection with the
Agent's exercise, preservation or enforcement or after a Default, any Lender's
enforcement of any of its rights, remedies or options thereunder, including
without
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limitation fees of outside legal counsel or the allocated costs of in-house
legal counsel, accounting, consulting, brokerage or other similar reasonable
professional fees or expenses, and any reasonable fees or expense associated
with any travel or other costs relating to any appraisals or credit or other
examinations conducted in connection with the Obligations or any collateral
therefor, and the amount of all such expenses shall, commencing 5 days after
becoming due and payable, bear interest at the highest rate applicable to
principal hereunder (including any default rate). All such expenses not paid
when due may be charged against any deposit account maintained by any Borrower
with the Agent or any Lender and notice thereof shall be provided to Borrowers.
9.3 Indemnification. Each of the Borrowers shall absolutely and
unconditionally indemnify and hold the Agent and Lenders harmless against any
and all claims, demands, suits, actions, causes of action, expenses and all
other liabilities whatsoever which shall at any time or times be incurred or
sustained by any of them or by any of their respective shareholders, directors,
officers, employees, subsidiaries, affiliates or agents (except any of the
foregoing incurred or sustained as a result of the gross negligence or willful
misconduct of such Person) on account of, or in relation to, or in any way in
connection with, any of the arrangements or transactions contemplated by,
associated with or ancillary to any of the Loan Documents, whether or not all or
any of the transactions contemplated by, associated with or ancillary to this
Agreement or any of such documents are ultimately consummated.
9.4 Term of Agreement. This Agreement shall continue in force and effect
until all Commitments have been terminated, all Letters of Credit have been
terminated or expired, and all Obligations have been indefeasibly paid in full
in cash.
9.5 No Waivers. No failure or delay by the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other documents
or agreements executed in connection herewith shall operate as a waiver thereof;
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein, in the Notes and in the Loan Documents are
cumulative and not exclusive of any rights or remedies otherwise provided by
agreement or law.
9.6 Governing Law. This Agreement shall be deemed to be a contract made
under seal and shall be construed in accordance with and governed by the laws of
Massachusetts (without giving effect to any conflicts of laws provisions
contained therein).
9.7 Entire Agreement; Amendments. This Agreement, the Notes and the
other Loan Documents constitute the final agreement of the parties hereto and
supersede any prior agreement or understanding, written or oral, with respect to
the matters contained herein and therein. No modification or waiver of any
provision hereof or of the Notes or any other Loan Document, nor consent to the
departure by any Borrower or any of its Subsidiaries therefrom, shall be
effective unless the same is in writing, and then such waiver or consent shall
be effective only in the specific instance, and for the purpose, for which
given. Except as hereafter provided, the consent of the Required Lenders shall
be required and sufficient (a) to amend with the consent of the Borrowers, any
term of this Agreement, the Notes or any other Loan Document or to waive the
observance of any such term (either generally or in a particular instance or
either retroactively or prospectively); (b) to take or refrain from taking any
action under this Agreement, the Notes, any other Loan
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<PAGE> 54
Document or applicable law, including, without limitation, (i) the acceleration
of the payment of the Notes, (ii) the termination of the Commitments, (iii) the
exercise of the Agent's and the Lenders' remedies hereunder and under the
Security Documents and (iv) the giving of any approvals, consents, directions or
instructions required under this Agreement or the Security Documents; provided
that no such amendment, waiver or consent shall, without the prior written
consent of all of the Lenders or the holders of all of the Notes at the time
outstanding, (A) extend the fixed maturity or reduce the principal amount of, or
reduce the amount or extend the time of payment of any principal of, or interest
on, any Note (other than Sale Proceeds Payments or Debt/Equity Proceeds
Payments), (B) increase or extend any Commitment of any Lender (it being
understood that waivers or modifications of conditions precedent, covenants,
Defaults or Events of Default shall not constitute any such increase or
extension), (C) release Guaranties of the Obligations, if any, or any
Collateral, unless such release of Collateral is permitted under Section 7.4 in
connection with a Permitted Sale or otherwise, (D) change the percentage
referred to in the definition of "Required Lenders" contained in Section 1, or
(E) amend the provisions of this Section 9.7; and provided, further, that
neither notice to, nor the consent of, any of the Borrowers shall be required
for any modification, amendment or waiver of the provisions of this Section 9.7
governing the number of Lenders required to consent to any act or omission under
the Loan Documents or the definition of "Required Lenders".
(b) Any amendment or waiver effected in accordance with this Section 9.7
shall be binding upon each holder of any Note at the time outstanding, each
future holder of any Note and each of the Borrowers. The Lenders' failure to
insist (directly or through the Agent) upon the strict performance of any term,
condition or other provision of this Agreement, any Note, or any of the Loan
Documents, or to exercise any right or remedy hereunder or thereunder, shall not
constitute a waiver by the Lenders of any such term, condition or other
provision or Default or Event of Default in connection therewith, nor shall a
single or partial exercise of any such right or remedy preclude any other or
future exercise, or the exercise of any other right or remedy; and any waiver of
any such term condition or other provision or of any such Default or Event of
Default shall not affect or alter this Agreement, any Note or any of the Loan
Documents, and each and every term, condition and other provision of this
Agreement, the Notes and the Loan Documents shall, in such event, continue in
full force and effect and shall be operative with respect to any other then
existing or subsequent Default or Event of Default in connection therewith. An
Event of Default hereunder and a Default under any Note or under any of the Loan
Documents shall be deemed to be continuing unless and until cured or waived in
writing by the Required Lenders or all of the Lenders, as provided in paragraph
(a) above.
9.8 Assignments; Participations.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrowers and their successors and to the benefit of the Lenders and the Agent
and their respective successors and assigns. The rights and obligations of the
Borrowers under this Agreement shall not be assigned or delegated without the
prior written consent of the Agent and the Lenders, and any purported assignment
or delegation without such consent shall be void.
(b) Each Lender may assign its rights and interests under this Agreement,
the Credit Extensions, the Notes and the other Loan Documents and/or delegate
its obligations hereunder and
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<PAGE> 55
thereunder, in whole or in part, and sell participations in the Notes, the LC
Draw Obligations and the Security Documents as security therefor, provided as
follows:
(i) Any such assignment, other than an assignment in whole, made
other than to another Lender or a Related Lender Party, shall reflect an
assignment, ratably, of such assigning Lender's Notes, Credit Extensions
and Commitments which is in an aggregate principal amount of at least
$5,000,000, and if greater, shall be an integral multiple of $5,000,000.
(ii) Notwithstanding any provision of this Agreement to the
contrary, each Lender may at any time assign all or any portion of its
rights under this Agreement and each of the other Loan Documents,
including, without limitation, the Notes held by such Lender, to a Federal
Reserve Bank (or equivalent thereof in the case of Lenders chartered
outside of the United States); provided that no such assignment shall
release a Lender from any of its obligations and liabilities under the
Loan Documents. Any Federal Reserve Bank (or equivalent thereof) which
receives such an assignment from any Lender may make further assignments
of such rights in accordance with the provisions of this Section.
(iii) Any assignments and/or delegations made hereunder shall be
pursuant to an instrument of assignment and acceptance (the "Assignment
and Acceptance") substantially in the form of Exhibit 9.8 and the parties
to each such assignment shall execute and deliver to the Agent for its
acceptance the Assignment and Acceptance together with any Note or Notes
subject thereto. Upon such execution and delivery, from and after the
effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the
execution thereof, (A) the assignee thereunder shall become a party hereto
and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with applicable Commitments
as set forth therein and (B) the assigning Lender thereunder shall, to the
extent provided in such assignment, be released from its obligations under
this Agreement as to that portion of its obligation being so assigned and
delegated. The Assignment and Acceptance shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of the assignee as a Lender and the resulting adjustment of
Commitments arising from the purchase by and delegation to such assignee
of all or a portion of the rights and obligations of such assigning Lender
under this Agreement.
(iv) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and the assignee together with the Note or Notes
subject to such assignment (or a standard indemnity letter from the
respective assigning Lender in respect of any lost Note or Notes) and
payment by the assignee to the Agent (without recourse to any Borrower) of
a registration and processing fee of $3,500 (provided that only a single
$3,500 fee, if applicable as hereinabove set forth, shall be payable in
the case of contemporaneous assignments by a Lender to more than one fund
managed by the same investment advisor), the Agent shall accept such
Assignment and Acceptance. Promptly upon delivering such Assignment and
Acceptance to the Agent, the assigning Lender shall give notice thereof to
the Borrowers and the Agent. Within five (5) Business Days after receipt
of such notice, the Borrowers shall execute and deliver to the Agent in
exchange for each such surrendered Note a new Note
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<PAGE> 56
payable to the order of such assignee in an amount equal to the portion of
the applicable Commitment(s) assumed by such assignee pursuant to such
Assignment and Acceptance and a new Note payable to the order of the
assigning Lender in an amount equal to the portion of the applicable
Commitment(s) retained by it hereunder. Such new Notes shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form provided in this Agreement. Canceled Notes shall be
returned to the Borrowers upon the execution and delivery of such new
Notes.
(v) Each Lender may sell participations in all or a portion of its
rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and the Notes held by it);
provided, however, that, (A) the selling Lender shall remain obligated
under this Agreement to the extent as it would if it had not sold such
participation, (B) the selling Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations, (C) at
no time shall the selling Lender agree with such participant to take or
refrain from taking any action hereunder or under any other Loan Document,
except that the selling Lender may agree not to consent, without such
participant's consent, to any of the actions referred to in Section 9.7,
to the extent that the same require the consent of each Lender hereunder,
(D) all amounts payable by the Borrowers hereunder shall be determined as
if such Lender had not sold such participation and no participant shall be
entitled to receive any greater amount pursuant to this Agreement than the
selling Lender would have been entitled to receive in respect of the
amount of the participation transferred by such Lender to such participant
had no such transfer occurred, and (E) the Borrowers, the Agent and the
other Lenders shall continue to deal solely and directly with the selling
Lender in connection with such Lender's rights and obligations under this
Agreement.
(vi) Except for an assignment made to another Lender or a Related
Lender Party,, no assignment referred to above shall be permitted without
(A) the prior written consent of the Agent, which consent shall not be
unreasonably withheld or delayed, and (B) the prior written consent of the
Borrowers, which consent shall not be so required with respect to any
assignment made during the existence of a Default and, if required, shall
not be unreasonably withheld or delayed.
(b) Each of the Borrowers authorizes each Lender to disclose to any
participant or assignee any prospective participant or assignee any and all
information in such Lender's possession concerning the Companies which has been
delivered to such Lender by or on behalf of the Companies pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Companies in connection with such Lender's credit evaluation prior to becoming a
party to this Agreement.
9.9 Counterparts; Partial Invalidity. This Agreement may be signed in
any number of counterparts with the same effect as if the signatures hereto and
thereto were upon the same instrument. The invalidity or unenforceability of any
one or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
9.10 WAIVER OF JURY TRIAL. EACH OF BORROWERS, THE AGENT AND THE LENDERS
AGREES THAT NEITHER IT NOR ANY ASSIGNEE OR SUCCESSOR
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<PAGE> 57
SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY
OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENT OR ANY OTHER LOAN DOCUMENT, ANY COLLATERAL OR THE DEALINGS OR
THE RELATIONSHIP AMONG ANY BORROWER, THE AGENT OR ANY LENDER, OR (B) SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS. NO LENDER NOR THE AGENT NOR ANY BORROWER HAS AGREED WITH OR
REPRESENTED TO ANY OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
9.11 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS AND THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, AS WELL AS TO
THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN OR OTHER REVIEW
SOUGHT FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER
PROCEEDING ARISING OUT OF ANY BORROWERS' OBLIGATIONS UNDER OR WITH RESPECT TO
THE NOTES, ANY SECURITY DOCUMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS
IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.
9.12 Joint and Several Liability. Each of the Borrowers acknowledges and
agrees that it is jointly and severally liable for all Obligations under the
Loan Documents.
SECTION 10. THE AGENT.
10.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
designates and appoints BankBoston, N.A., which designation and appointment is
coupled with an interest, as the Agent of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes
BankBoston, N.A., as the Agent of such Lender, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement and the other Loan Documents, together with
such other powers as are reasonably incidental thereto. The Agent and its
affiliates and their officers, directors, employees and agents) shall not: (a)
have any duties or responsibilities to be a trustee for any Lender; (b) be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by either of them under, this
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability, perfection or sufficiency of this Agreement, any Note, any
Security Document, any other Loan Document or any other document referred to or
provided for herein or for any failure by any Borrower or any other Person to
perform any of its obligations hereunder or thereunder; (c) be required to
initiate or conduct any litigation or collection proceedings hereunder except to
the extent
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<PAGE> 58
requested by the Required Lenders; and (d) be responsible for any action taken
or omitted to be taken by it hereunder or under any other document or instrument
referred to or provided for herein or in connection herewith, except for its own
gross negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact it selects with reasonable care. Subject
to the foregoing, and to Section 9.7, the Agent shall, on behalf of the Lenders,
(a) hold and apply any and all Collateral, and the proceeds thereof, at any time
received by it, in accordance with the provisions of the Security Documents and
this Agreement; (b) exercise any and all rights, powers and remedies of the
Lenders under this Agreement or any of the Security Documents, including the
giving of any consent or waiver or the entering into of any amendment, subject
to the provisions of Section 9.7; (c) execute, deliver and file UCC financing
statements, mortgages, deeds of trust, lease assignments and other such
agreements, and possess instruments on behalf of any or all of the Lenders; and
(d) in the event of acceleration of the Borrowers' Indebtedness hereunder, sell
or otherwise liquidate or dispose of any portion of the Collateral held by it
and otherwise exercise the rights of the Lenders hereunder and under the
Security Documents.
10.2 Reliance by Agent. The Agent shall be entitled to rely upon any
certification, notice or other communication (including any communication by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent. As to any matters not expressly provided
for by this Agreement, the Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Required Lenders or the Lenders, as the case may be, and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on the Lenders.
10.3 Events of Default. The Agent shall not be deemed to have knowledge
of the occurrence of an Event of Default (other than the non-payment of
principal of or interest on the Notes) unless the Agent has received written
notice from any Lender or the Borrowers specifying such Event of Default and
stating that such notice is a "Notice of Default". In the event that the Agent
receives such a notice of the occurrence of an Event of Default, the Agent shall
give prompt notice thereof to the Lenders (and shall give each Lender prompt
notice of each such non-payment). The Agent shall (subject to Section 10.7) take
such action with respect to such Event of Default as shall be directed by the
Required Lenders, as provided under Section 9.7, provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action on behalf of the Lenders, or refrain from taking
such action, with respect to such Event of Default as it shall deem advisable in
the best interest of the Lenders.
10.4 Rights as a Lender. With respect to its Commitments and the Credit
Extensions made by BankBoston, N.A. hereunder, BankBoston, N.A. shall have the
same rights and powers hereunder as any other Lenders and may exercise the same
as though it were not acting as the Agent. The Agent and its affiliates may,
without having to account therefor to the Lenders and without giving rise to any
fiduciary or other similar duty to any Lender, accept deposits from, lend money
to and generally engage in any kind of banking, trust or other business with any
Company and any of their affiliates as if it were not acting as an Agent, and
the Agent may accept fees and other consideration
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<PAGE> 59
from any Company for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.
10.5 Indemnification. The Lenders agree to indemnify the Agent (to the
extent not reimbursed under Section 9.3, but without limiting the obligations of
the Borrowers, ratably in accordance with the Revolving Credit Outstandings held
by the Lenders (or, if no such principal or interest is at the time outstanding,
ratably in accordance with their respective Commitments), for any and all
liabilities, obligations, losses, damages, penalties, action, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement, any Security Document, any other Loan Document or
any other document contemplated by or referred to herein or the transactions
contemplated by or referred to herein or therein (including, without limitation,
the costs and expenses which the Borrowers are obligated to pay under Section
9.2) or the enforcement of any of the terms of this Agreement, any Security
Document, any other Loan Document or of any such other documents, provided that
no Lender shall be liable for any of the foregoing to the extent they arise from
the gross negligence or willful misconduct of the party to be indemnified.
10.6 Non-Reliance on Agent and other Lenders. Each Lender agrees that it
has, independently and without reliance on the Agent or any other Lenders, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrowers and their Subsidiaries and its own decision
to enter into this Agreement and that it will, independently and without
reliance upon the Agent or any other Lenders, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement. The
Agent shall not be required to keep itself informed as to the performance or
observance by the Borrowers and their Subsidiaries of this Agreement or any
other document referred to or provided for herein or to inspect the properties
or books of the Borrowers or their Subsidiaries. Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall have no duty or responsibility
to provide any Lender with any credit or other information concerning the
affairs, financial condition or businesses of the Borrowers (or any of their
affiliates) which may come into the possession of the Agent or any of its
Affiliates. Notwithstanding the foregoing, the Agent will provide to the Lenders
any and all information reasonably requested by them and reasonably available to
the Agent promptly upon such request.
10.7 Failure to Act. Except for action expressly required of the Agent
hereunder, the Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
10.8 Resignation of Agent. BankBoston, N.A. (or any other Agent
hereunder), may resign as the Agent at any time by giving 30 days' prior written
notice thereof to the Lenders and the Borrowers. Any such resignation shall take
effect at the end of such 30-day period or upon the earlier appointment of a
successor Agent by the Required Lenders as provided below. Upon any resignation
of BankBoston, N.A. (or any other Agent hereunder), and subject to the
Borrowers' approval (which approval shall not be unreasonably withheld or
delayed and shall not be required with respect to any such appointment made
during the existence of any Default), the Required
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<PAGE> 60
Lenders shall appoint a successor agent from among the Lenders or, if such
appointment is deemed inadvisable or impractical by the Required Lenders,
another financial institution with a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by such
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent.
After the effective date of the resignation of an Agent hereunder, the retiring
Agent shall be discharged from its duties and obligations hereunder, provided
that the provisions of this Section 10 shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as the Agent. In the event that there shall not be a duly appointed and acting
Agent, each of the Borrowers agrees to make each payment due to the Agent
hereunder, if any, directly to each Lender entitled thereto, pursuant to written
instructions provided by the retiring Agent, and to provide copies of each
certificate or other document required to be furnished to the Agent hereunder,
if any, directly to each Lender.
10.9 Cooperation of Lenders. Each Lender shall (a) promptly notify the
other Lenders and the Agent of any Event of Default known to such Lender under
this Agreement and not reasonably believed to have been previously disclosed to
the other Lenders; (b) provide the other Lenders and the Agent with such
information and documentation as such other Lenders or the Agent shall
reasonably request in the performance of their respective duties hereunder,
including, without limitation, all information relative to the outstanding
balance of principal, interest and other sums owed to such Lender by the
Borrowers; and (c) cooperate with the Agent with respect to any and all
collections and/or foreclosure procedures at any time commenced against any
Borrower, any of its Subsidiaries, the Principal or otherwise in respect of the
Collateral by the Agent in the name and on behalf of the Lenders.
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<PAGE> 61
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed under seal by their duly authorized officers as of the day and year
first above written.
LENDER:
-------
BANKBOSTON, N.A.
By: /s/ J. Nicholas Cole
--------------------------------
J. Nicholas Cole, Vice President
Address for Notices:
--------------------
BankBoston, N.A.
100 Federal Street, Mail Stop: 01-09-05
Boston, Massachusetts 02110
Attention: J. Nicholas Cole
Telecopier: (617) 434-0816
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Janet E. Jordan
--------------------------------
Janet E. Jordan, Vice President
Address for Notices:
--------------------
U.S. Bank National Association
555 S.W. Oak Street, Suite 400
Portland, OR 97204
Attention: Janet E. Jordan
Facsimile: (503) 275-5428
AGENT:
------
BANKBOSTON, N.A., AS AGENT
By: /s/ J. Nicholas Cole
--------------------------------
J. Nicholas Cole, Vice President
Address for Notices:
--------------------
BankBoston, N.A.
100 Federal Street, Mail Stop: 01-09-05
Boston, Massachusetts 02110
Attention: J. Nicholas Cole
Telecopier: (617) 434-0816
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<PAGE> 62
BORROWERS:
----------
STAR BUFFET, INC.
By: /s/ Robert E. Wheaton
--------------------------------
Title: President
SUMMIT FAMILY RESTAURANTS, INC.
By: /s/ Robert E. Wheaton
--------------------------------
Title: President
HTB RESTAURANTS, INC.
By: /s/ Robert E. Wheaton
--------------------------------
Title: President
NORTHSTAR BUFFET, INC.
By: /s/ Robert E. Wheaton
--------------------------------
Title: President
STAR BUFFET MANAGEMENT, INC.
By: /s/ Robert E. Wheaton
--------------------------------
Title: President
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<PAGE> 63
STAR BUFFET, INC. AND SUBSIDIARIES
EXHIBITS AND SCHEDULES
TO
CREDIT AGREEMENT
DATED AS OF OCTOBER 23 1998
<PAGE> 64
EXHIBITS
--------
Exhibit 2.1(a) Form of Revolving Note
Exhibit 2.1(b) Form of Term Note
Exhibit 2.4 Form of Loan Request
Exhibit 2.5 Form of Interest Rate Option Notice
Exhibit 6.1 Form of Covenant Compliance Report
Exhibit 9.8 Form of Assignment and Acceptance
SCHEDULES
---------
Schedule 1.1(a) Commitments/Percentages
Schedule 1.1(b) Quarterly Dates
Schedule 2.14 Existing Term Debt to be Refinanced
Schedule 4.1 Qualifications
Schedule 4.4 Governmental and Other Consents
Schedule 4.6 Intellectual Property; Trademarks, Etc.
Schedule 4.8 Restaurants; Material Agreements
Schedule 4.9 Environmental Matters
Schedule 4.14 Litigation
Schedule 4.17 Capitalization
Schedule 7.1 Other Indebtedness
Schedule 7.3 Other Encumbrances
Schedule 7.8 Other Investments
Schedule 7.10 Transactions with Affiliates
<PAGE> 65
EXHIBIT 2.1(a)
REVOLVING NOTE
$[ ] Dated as of October 23, 1998
FOR VALUE RECEIVED, STAR BUFFET, INC., a Delaware corporation, SUMMIT
FAMILY RESTAURANTS, INC., a Delaware corporation, HTB RESTAURANTS, INC., a
Delaware corporation, NORTHSTAR BUFFET, INC., a Delaware corporation, and STAR
BUFFET MANAGEMENT, INC., a Delaware corporation (collectively, the "Borrowers"),
hereby jointly and severally promise to pay to the order of [ ] (hereinafter,
together with its successors in title and assigns, called the "Lender"), at the
office of BankBoston, N.A., as agent (with its successors and assigns in such
capacity, the "Agent") pursuant to the Credit Agreement dated as of October 23,
1998, as the same may be amended, restated, renewed, replaced, supplemented or
otherwise modified from time to time hereafter (the "Credit Agreement"), among
the Borrowers, the various financial institutions that are now or hereafter
become "Lenders" under the Credit Agreement, the Agent and BancBoston Robertson
Stephens Securities, Inc., as Syndication Agent for the Lenders, the principal
sum of $[ ] or, if less, the aggregate unpaid principal amount of Revolving
Loans advanced by the Lender to any of the Borrowers pursuant to the Credit
Agreement, together with interest on the principal balance thereof from time to
time outstanding from the date hereof until payment in full, without set-off,
deduction or counterclaim, on the dates and in such amounts as specified in the
Credit Agreement, and at the final maturity of this Note, whether by payment or
prepayment, acceleration or otherwise. Interest accruing on the unpaid balance
hereof from time to time shall be calculated on the basis of a 360-day year for
the actual number of days elapsed. Capitalized terms used in this Note without
definition have the meanings assigned to them in the Credit Agreement.
Overdue principal (whether at maturity, by reason of acceleration or
otherwise) and, to the extent permitted by applicable law, overdue interest and
fees or any other amounts payable under the Credit Agreement due to the
Borrowers' failure to pay the same in full shall bear interest from and
including the due date thereof until paid, at a rate or rates per annum
determined in accordance with the Credit Agreement, which interest shall be
compounded daily and payable on demand.
All payments under this Note shall be made to the Agent, at the head
office of the Agent at its address specified in the Credit Agreement (or at such
other place as the Agent may designate from time to time in writing) in lawful
money of the United States of America in immediately available funds.
The outstanding principal amount of this Note and accrued and unpaid
interest thereon shall be due and payable as provided in the Credit Agreement.
The Borrowers have the right in
1
<PAGE> 66
certain circumstances and the obligation in certain other circumstances to
prepay this Note in whole or in part on the terms and conditions provided in the
Credit Agreement.
This Note is one of the "Revolving Notes" referred to in the Credit
Agreement and evidences Revolving Loans thereunder. This Note is entitled to the
benefits of the Credit Agreement (including the Schedules thereto) and all other
instruments evidencing and/or securing the indebtedness hereunder; but neither
this reference to the Credit Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of the Borrowers to pay the
principal of and interest on this Note as herein provided. The occurrence or
existence of an "Event of Default" as defined in the Credit Agreement shall
constitute a default under this Note and the entire indebtedness hereunder may
become or be declared due and payable as may be provided for in the Credit
Agreement.
All agreements involving the Borrowers and the Lender are hereby expressly
limited so that in no contingency or event whatsoever shall the amount paid or
agreed to be paid to the Lender for the use or forbearance of the indebtedness
evidenced hereby exceed the maximum amount which the Lender is permitted to
receive under applicable law. If, from any circumstances whatsoever, fulfillment
of any provision hereof or of the Credit Agreement, at the time performance of
such provision shall be due, shall involve exceeding such amount, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity, and if from any circumstance the Lender should ever receive as
interest an amount which would exceed such maximum amount, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest. As used herein, the
term "applicable law" shall mean the law in effect as of the date hereof;
provided, however, that in the event there is a change in the law which results
in a higher permissible rate of interest, then this Note shall be governed by
such new law as of its effective date. This provision shall control every
provision of all agreements involving the Borrowers and the Lender.
Each of the Borrowers and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, assent
to any extension or postponement of the time of payment or any other indulgence,
to any substitution, exchange or release of collateral and to the addition or
release of any other party or person primarily or secondarily liable.
This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
2
<PAGE> 67
IN WITNESS WHEREOF, each of the undersigned has caused this Note to be
signed in its corporate name under seal by its duly authorized officer as of the
day and year first above written.
STAR BUFFET, INC.
By:
--------------------------------------------
Title:
SUMMIT FAMILY RESTAURANTS, INC.
By:
--------------------------------------------
Title:
HTB RESTAURANTS, INC.
By:
--------------------------------------------
Title:
NORTHSTAR BUFFET, INC.
By:
--------------------------------------------
Title:
STAR BUFFET MANAGEMENT, INC.
By:
--------------------------------------------
Title:
3
<PAGE> 68
EXHIBIT 2.1(b)
TERM NOTE
$[ ] Dated as of October 23, 1998
FOR VALUE RECEIVED, STAR BUFFET, INC., a Delaware corporation, SUMMIT
FAMILY RESTAURANTS, INC., a Delaware corporation, HTB RESTAURANTS, INC., a
Delaware corporation, NORTHSTAR BUFFET, INC., a Delaware corporation, and STAR
BUFFET MANAGEMENT, INC., a Delaware corporation (collectively, the "Borrowers"),
hereby jointly and severally promise to pay to the order of [ ] (hereinafter,
together with its successors in title and assigns, called the "Lender"), at the
office of BankBoston, N.A., as agent (with its successors and assigns in such
capacity, the "Agent") pursuant to the Credit Agreement dated as of October 23,
1998, as the same may be amended, restated, renewed, replaced, supplemented or
otherwise modified from time to time hereafter (the "Credit Agreement"), among
the Borrowers, the various financial institutions that are now or hereafter
become "Lenders" under the Credit Agreement, the Agent and BancBoston Robertson
Stephens Securities, Inc., as Syndication Agent for the Lenders, the principal
sum of $[ ] or, if less, the aggregate unpaid principal amount of Term Loans
advanced by the Lender to any of the Borrowers pursuant to the Credit Agreement,
together with interest on the principal balance thereof from time to time
outstanding from the date hereof until payment in full, without set-off,
deduction or counterclaim, on the dates and in such amounts as specified in the
Credit Agreement, and at the final maturity of this Note, whether by payment or
prepayment, acceleration or otherwise. Interest accruing on the unpaid balance
hereof from time to time shall be calculated on the basis of a 360-day year for
the actual number of days elapsed. Capitalized terms used in this Note without
definition have the meanings assigned to them in the Credit Agreement.
Overdue principal (whether at maturity, by reason of acceleration or
otherwise) and, to the extent permitted by applicable law, overdue interest and
fees or any other amounts payable under the Credit Agreement due to the
Borrowers' failure to pay the same in full shall bear interest from and
including the due date thereof until paid, at a rate or rates per annum
determined in accordance with the Credit Agreement, which interest shall be
compounded daily and payable on demand.
All payments under this Note shall be made to the Agent, at the head
office of the Agent at its address specified in the Credit Agreement (or at such
other place as the Agent may designate from time to time in writing) in lawful
money of the United States of America in immediately available funds.
The outstanding principal amount of this Note and accrued and unpaid
interest thereon shall be due and payable as provided in the Credit Agreement.
The Borrowers have the right in certain circumstances and the obligation in
certain other circumstances to prepay this Note in whole or in part on the terms
and conditions provided in the Credit Agreement.
- 1 -
<PAGE> 69
This Note is one of the "Term Notes" referred to in the Credit Agreement
and evidences Loans thereunder. This Note is entitled to the benefits of the
Credit Agreement (including the Schedules thereto) and all other instruments
evidencing and/or securing the indebtedness hereunder; but neither this
reference to the Credit Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of the Borrowers to pay the
principal of and interest on this Note as herein provided. The occurrence or
existence of an "Event of Default" as defined in the Credit Agreement shall
constitute a default under this Note and the entire indebtedness hereunder may
become or be declared due and payable as may be provided for in the Credit
Agreement.
All agreements involving the Borrowers and the Lender are hereby expressly
limited so that in no contingency or event whatsoever shall the amount paid or
agreed to be paid to the Lender for the use or forbearance of the indebtedness
evidenced hereby exceed the maximum amount which the Lender is permitted to
receive under applicable law. If, from any circumstances whatsoever, fulfillment
of any provision hereof or of the Credit Agreement, at the time performance of
such provision shall be due, shall involve exceeding such amount, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity, and if from any circumstance the Lender should ever receive as
interest an amount which would exceed such maximum amount, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest. As used herein, the
term "applicable law" shall mean the law in effect as of the date hereof;
provided, however, that in the event there is a change in the law which results
in a higher permissible rate of interest, then this Note shall be governed by
such new law as of its effective date. This provision shall control every
provision of all agreements involving the Borrowers and the Lender.
Each of the Borrowers and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, assent
to any extension or postponement of the time of payment or any other indulgence,
to any substitution, exchange or release of collateral and to the addition or
release of any other party or person primarily or secondarily liable.
This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
- 2 -
<PAGE> 70
IN WITNESS WHEREOF, each of the undersigned has caused this Note to be
signed in its corporate name under seal by its duly authorized officer as of the
day and year first above written.
STAR BUFFET, INC.
By:
--------------------------------------------
Title:
SUMMIT FAMILY RESTAURANTS, INC.
By:
--------------------------------------------
Title:
HTB RESTAURANTS, INC.
By:
--------------------------------------------
Title:
NORTHSTAR BUFFET, INC.
By:
--------------------------------------------
Title:
STAR BUFFET MANAGEMENT, INC.
By:
--------------------------------------------
Title:
- 3 -
<PAGE> 71
EXHIBIT 2.4
LOAN REQUEST
--------------, -------
BankBoston, N.A., as Agent
100 Federal Street, Mail Stop: 01-09-05
Boston, Massachusetts 02110
Attention: J. Nicholas Cole
Re: Credit Agreement dated as of October 23, 1998 among Star Buffet, Inc.
and its Subsidiaries from time to time (collectively, the "Borrowers"),
the Lenders from time to time party thereto, BankBoston, N.A., as Agent
for the Lenders and BancBoston Robertson Stephens Securities, Inc., as
Syndication Agent for the Lenders (as amended, restated, renewed,
replaced, supplemented or otherwise modified from time, the "Credit
Agreement"). (Capitalized terms used herein have the meanings assigned
to them in the Credit Agreement.)
Ladies and Gentleman:
Pursuant to Section 2.4 of the Credit Agreement, the Borrowers hereby
confirm their request made on _______________ for a [Revolving/Term] Loan in the
amount of $______________ to be made on ___________________. The Borrowers
hereby confirm their request that such Loan be a [Base Rate/Eurodollar] Loan
[with an Interest Period of one/two/three/six months]. [The proceeds of such
Revolving Loan shall be used by the Borrowers as set forth in Schedule A
hereto.]
(a) The Borrowers hereby confirm that the representations and warranties
contained in the Credit Agreement and other Loan Documents are as of the date
hereof and, on the date such Loan is made will be, true and accurate in all
material respects (except to the extent affected by transactions occurring after
the date of the Credit Agreement and permitted therein), with and without giving
effect to the requested Loan and the application of the proceeds thereof.
(b) The Borrowers hereby further confirm that at the date hereof (i) the
Borrowers and their Subsidiaries have performed and complied with all covenants
and conditions in the Credit Agreement to be performed or complied with by them
prior to the making of the requested Loan, (ii) no Default has occurred and is
continuing or will result from such Loan, and (iii) there has been no material
adverse change in the business, assets, condition (financial or otherwise), or
prospects of any of the Companies since the date of the Credit Agreement.
[(c) With reference to Section 2.1(a) of the Credit Agreement, after
giving effect to the Loans requested hereby and the use of proceeds thereof on
the date of such Loans, the, (i) the aggregate amount of all outstanding
Revolving Loans will be $_________, and (ii) the aggregate LC Exposure Amount
will be $___________, and the total amount referred to in the foregoing clauses
(i) and (ii) will be $___________, which amount does not exceed the aggregate
Revolver
1
<PAGE> 72
Commitments in effect on the date hereof and will not exceed the aggregate
Revolver Commitments on the date of such Loans.]
Executed as an instrument under seal as of the date first above written.
STAR BUFFET, INC.
SUMMIT FAMILY RESTAURANTS, INC.
HTB RESTAURANTS, INC.
NORTHSTAR BUFFET, INC.
STAR BUFFET MANAGEMENT, INC.
By:
-----------------------------------
Duly authorized signatory as to all
2
<PAGE> 73
Schedule A
to
EXHIBIT 2.4
Use of Proceeds
<PAGE> 74
EXHIBIT 2.5
INTEREST RATE OPTION NOTICE
-------------------, ----------
BankBoston, N.A., as Agent
100 Federal Street, Mail Stop: 01-09-05
Boston, Massachusetts 02110
Attention: J. Nicholas Cole
Re: Credit Agreement dated as of October 23, 1998 among Star Buffet, Inc.
and its Subsidiaries from time to time (collectively, the "Borrowers"), the
Lenders from time to time party thereto, BankBoston, N.A., as Agent for the
Lenders and BancBoston Robertson Stephens Securities, Inc., as Syndication Agent
for the Lenders (as amended, restated, renewed, replaced, supplemented or
otherwise modified from time, the "Credit Agreement"). (Capitalized terms used
herein have the meanings assigned to them in the Credit Agreement.)
Ladies and Gentleman:
Pursuant to Section 2.5 of the Credit Agreement, the Borrowers hereby
confirm their request made on ________________ to have the interest rate on an
outstanding [Eurodollar] [Base Rate] Loan in the amount of $___________________
made on _______________ [converted to] [continued as] a [Base Rate] [Eurodollar]
Loan as of __________________.
[The Borrowers hereby further confirm their request that the Interest
Period beginning on such date and applicable to such Eurodollar Loan end
[one/two/three/six] months after such date, unless an earlier date is otherwise
required by the Credit Agreement.]
The Borrowers hereby further confirm that the representations and
warranties contained in the Credit Agreement and the other Loan Documents are as
of the date hereof and, on the date such Loan is made will be, true and accurate
in all material respects (except to the extent affected by transactions
occurring after the date of the Credit Agreement and permitted therein), with
and without giving effect to the requested Loan and the application of proceeds
thereof.
- 1 -
<PAGE> 75
The Borrowers hereby further confirm that at the date hereof (i) the
Borrowers and their Subsidiaries have performed and complied with all covenants
and conditions in the Credit Agreement to be performed or complied with by them
prior to the making of the requested Loan, (ii) no Default has occurred and is
continuing or will result from such Loan, and (iii) there has been no material
adverse change in the business, assets, condition (financial or otherwise), or
prospects of any Borrower since the date of the Credit Agreement.
Executed as an instrument under seal as of the date first above written.
STAR BUFFET, INC.
SUMMIT FAMILY RESTAURANTS, INC.
HTB RESTAURANTS, INC.
NORTHSTAR BUFFET, INC.
STAR BUFFET MANAGEMENT, INC.
By:
-----------------------------------
Duly authorized signatory as to all
- 2 -
<PAGE> 76
EXHIBIT 6.1
COVENANT COMPLIANCE REPORT
The undersigned ______________________, [Chief Financial Officer/
Controller] of STAR BUFFET, INC. and its Subsidiaries (collectively, the
"Borrowers"), HEREBY CERTIFIES that:
This Report is furnished pursuant to Section 6.1 of the Credit Agreement
dated as of October 23, 1998 by and among the Borrowers, the Lenders party
thereto, BankBoston, N.A., as Agent for the Lenders and BancBoston Robertson
Stephens Securities, Inc., as Syndication Agent for the Lenders, as amended,
restated, renewed, replaced, supplemented or otherwise modified from time to
time (the "Credit Agreement"). Unless otherwise defined herein, the terms used
in this Report have the meanings assigned to them in the Credit Agreement.
As required by Section 6.1[(a)][(b)] of the Credit Agreement, the
financial statements of the Borrowers for the [year/quarter] ended , (the
"Financial Statements"), prepared in accordance with GAAP, accompany this
Report. The Financial Statements present fairly the financial position of the
Borrowers and their Subsidiaries as at the date thereof and their results of
operations for the period covered thereby [(subject only to normal year-end
adjustments)].
Based on the Financial Statements provided with this Report [and with
the Reports previously furnished for the quarters ended and , ____], the figures
set forth in Schedule A hereto for determining compliance with the financial
covenants contained in Article V of the Credit Agreement for the applicable
reporting periods are accurate.
The activities of the Borrowers and their Subsidiaries and such
Professional Corporations during the period through the date of this certificate
have been reviewed by the undersigned, as [Chief Financial Officer/Controller]
of the Borrowers, or by employees or agents under the undersigned's supervision.
Based on such review, to the best knowledge and belief of the undersigned, as of
the date of this Report, no Default has occurred and is continuing, except as
follows ______________________________________________________________________
______________________________________________________________________________
[give a description in reasonable detail of each such Default and the actions
being taken or proposed to be taken with respect thereto, or insert "None" if
appropriate].
1
<PAGE> 77
WITNESS my hand this ____ day of ______________, ____.
STAR BUFFET, INC.
SUMMIT FAMILY RESTAURANTS, INC.
HTB RESTAURANTS, INC.
NORTHSTAR BUFFET, INC.
STAR BUFFET MANAGEMENT, INC.
By:
------------------------------------
_______________ , Chief Financial
Officer/Controller as to all
2
<PAGE> 78
Schedule A to Covenant Compliance Report
(to be provided by Agent)
<PAGE> 79
EXHIBIT 9.8
ASSIGNMENT AND ACCEPTANCE
-------------------------
THIS ASSIGNMENT AND ACCEPTANCE (this "Agreement") is made this day of
______, by and between _______________ ("Assignor"), and ("Assignee").
1. Recitals. (a) Assignor is a party to the Credit Agreement dated as of
October 23, 1998 (which, as the same has been and may from time to time be
amended, modified, renewed, extended or restated, is hereinafter called the
"Credit Agreement") among STAR BUFFET, INC., and its Subsidiaries (collectively,
the "Borrowers"), the Lenders from time to time party thereto, BANKBOSTON, N.A.,
as Agent for the Lenders, and BANCBOSTON ROBERTSON STEPHENS SECURITIES, INC., as
Syndication Agent for the Lenders.
(b) Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
(c) Immediately prior to the assignment and assumption provided herein,
Assignor's Revolver Commitment and Term Loan Commitment and its outstanding
Loans and LC Draw Obligations are as specified in Schedule A attached hereto.
Assignor desires to assign and delegate to Assignee, and Assignee desires to
acquire and assume from Assignor, a portion (the "Purchased Percentage") of
Assignor's Revolver Commitment and Term Loan Commitment and outstanding Loans
and LC Draw Obligations and all related claims for interest and fees after the
Effective Date (as defined below).
2. Assignment. For and in consideration of the assumption of obligations
by Assignee set forth in Section 3 hereof and the other consideration set forth
herein, and effective as of , which date is at least five (5) Business Days
following the execution hereof (the "Effective Date"), Assignor does hereby
sell, assign, transfer and convey all of its right, title and interest in and
to, and does hereby delegate its obligations in respect of, the Purchased
Percentage of (a) the Revolver Commitment and Term Loan Commitment of Assignor
(as in effect on the Effective Date), (b) all Loans made by Assignor and
outstanding on the Effective Date; (c) Assignor's LC Exposure and (d) the Credit
Agreement and the other Loan Documents. Pursuant to Section 9.8 of the Credit
Agreement, on and after the Effective Date, Assignee shall have the rights,
benefits and obligations of a Lender under the Loan Documents with respect to
the Purchased Percentage. After giving effect to the assignment and delegation
provided herein, the respective Revolver Commitments and Term Loan Commitments
and outstanding Loans and LC Draw Obligations of the parties hereto shall be as
set forth on Schedule A hereto, which Schedule also contains certain additional
information with respect to Assignee.
- 1 -
<PAGE> 80
3. Assumption. For and in consideration of the assignment of rights by
Assignor set forth in Section 2 hereof and the other consideration set forth
herein, and effective as of the Effective Date, Assignee does hereby accept the
foregoing assignment of rights and delegation of obligations, and does hereby
assume and covenant and agree fully, completely and timely to perform, comply
with and discharge, each and all of the obligations, duties and liabilities of
Assignor under the Credit Agreement, which are assigned and delegated to
Assignee hereunder, which assumption includes, without limitation, the
obligation to fund the unfunded portion of the Purchased Percentage of the
Assignor's Revolver Commitment and Term Loan Commitment in accordance with the
provisions set forth in the Credit Agreement. Assignee agrees to be bound by all
provisions relating to the Lenders under, and as defined in, the Credit
Agreement, including, without limitation, provisions relating to the
dissemination of information and the payment of indemnification. From and after
the Effective Date, Assignor is released from Assignor's obligations with
respect to the Purchased Percentage.
4. Fees; Etc. Assignor and Assignee have made arrangements with respect to
(a) the portion, if any, to be paid, and the date or dates for payment, by
Assignor to Assignee of any fees heretofore received by Assignor pursuant to the
Credit Agreement prior to the Effective Date and (b) the portion, if any, to be
paid, and the date or dates for payment, by Assignee to Assignor of fees or
interest received by Assignee pursuant to the Credit Agreement from and after
the Effective Date.
5. Payment Obligations. On and after the Effective Date, Assignee shall be
entitled to receive from Agent all payments of principal, interest and fees with
respect to the Purchased Percentage (if any) of Assignor's respective Revolver
Commitment and Term Loan Commitment and Loans and LC Draw Obligations. Assignee
shall advance funds directly to the Agent with respect to all Loans and LC Draw
Obligations made or incurred on or after the Effective Date. In consideration
for the sale and assignment of Loans and LC Draw Obligations hereunder, (a) on
the date of execution hereof, Assignee shall pay to the Agent the registration
and processing fee referred to Section 9.8(b)(iv) of the Credit Agreement, and
(b) on the Effective Date, Assignee shall pay Assignor an amount equal to the
Purchased Percentage (if any) of all Loans and LC Draw Obligations made or
incurred by Assignor outstanding on the Effective Date or such other purchase
price for the Purchased Percentage of the applicable agreed to by Assignor and
Assignee. On and after the Effective Date, Assignee will also remit to Assignor
any amounts of interest on Loans and LC Draw Obligations and fees received from
Agent which relate to the Purchased Percentage of the applicable Loans and LC
Draw Obligations made by Assignor accrued for periods prior to the Effective
Date. In the event that either party hereto receives any payment to which the
other party hereto is entitled under this Agreement, then the party receiving
such amount shall promptly remit it to the other party hereto.
- 2 -
<PAGE> 81
6. Representations and Certain Agreements.
(a) Assignee's Representations, Warranties and Agreements. Assignee
represents, warrants and agrees to and with Assignor as follows:
(i) Assignee has full power and authority, and has taken all action
necessary, to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
(ii) the making and performance by Assignee of this Agreement and all
documents required to be executed and delivered by it hereunder do not and
will not violate any law or regulation of the jurisdiction of its
organization or any other law or regulation applicable to it;
(iii) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligations of the Assignee,
enforceable against it in accordance with its terms;
(iv) all approvals and authorizations of, all filings with and all
actions by any governmental or other administrative or judicial authority
necessary for the validity or enforceability of Assignee's obligations
under this Agreement have been obtained;
(v) Assignee has received a copy of the Credit Agreement and the
other Loan Documents, together with copies of the most recent financial
statements and covenant compliance report delivered pursuant to Sections
6.1 (a), (b), (c) and (d) thereof and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision
to enter into this Agreement;
(vi) Assignee appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement
and the other Loan Documents as are delegated to Agent by the terms
thereof, together with such powers as are reasonably incidental thereto;
and
(vii) Assignee agrees that it will perform in accordance with their
terms all the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender, including, without limitation,
obligations to make Loans and incur LC Draw Obligations to the full amount
of the portion of the Revolver Commitment and Term Loan Commitment
acquired by Assignee.
(b) Assignor's Representations and Warranties. Assignor represents
and warrants to Assignee as follows:
(i) Assignor has full power and authority, and has taken all action
necessary, to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
(ii) the making and performance by Assignor of this Agreement and all
documents required to be executed and delivered by it hereunder do not and
will not violate any law or regulation of the jurisdiction of its
organization or any other law or regulation applicable to it;
- 3 -
<PAGE> 82
(iii) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligations of Assignor,
enforceable against it in accordance with its terms;
(iv) all approvals and authorizations of, all filings with and all
actions by any governmental or other administrative or judicial authority
necessary for the validity or enforceability of Assignor's obligations
under this Agreement have been obtained;
(v) the amount of Assignor's Revolver Commitment and Term Loan
Commitment and the aggregate outstanding principal amount of the Loans and
LC Draw Obligations held by the Assignor are, on and as of the date of
this Agreement (immediately prior to giving effect to the sale, assignment
and transfer contemplated by Section 2), correctly set forth in Schedule A
hereto; and
(vi) immediately prior to giving effect to the sale, assignment and
transfer contemplated by Section 2, the Assignor has good title to, and is
the sole legal and beneficial owner of, the Purchased Percentage, free and
clear of all liens, security interests, participations and other
encumbrances.
7. Credit Determination; Limitations on Assignor's Liability. It is
understood and agreed that Assignee has independently made its own credit
determinations and analysis based upon such information as Assignee deems
sufficient to enter into the transaction contemplated hereby and not based
on any statements or representations by Assignor and that it will,
independently and without reliance upon Assignor, any other Lender or
Agent and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement. It is understood
and agreed that the assignment and assumption hereunder are made WITHOUT
RECOURSE to Assignor and that Assignor makes no representation or warranty
of any kind to Assignee (except as set forth in Section 5(b) above) and
shall not be responsible for (a) the due execution, legality, validity,
enforceability, genuineness, sufficiency, value or collectibility of the
Credit Agreement or any other Loan Document, including without limitation,
documents granting the Assignor and other Lenders a security interest in
assets of any of the Borrowers and their Subsidiaries, (b) any
representation, warranty or statement made in or in connection with any of
the Loan Documents, (c) the financial condition or creditworthiness of any
Borrower or of any Subsidiary of any Borrower, (d) the performance or
compliance with any of the terms or provisions of any of the Loan
Documents, (e) inspecting any of the property, books or records of the
Borrowers or (f) the validity, enforceability, perfection, priority,
condition, value or sufficiency of any collateral securing or purporting
to secure the Loans and LC Draw Obligations. Neither Assignor nor any of
its officers, directors, employees, agents or attorneys shall be liable
for any mistake, error of judgment, or action taken or omitted to be taken
in connection with the Loans and LC Draw Obligations or the Loan
Documents, except for its or their own gross negligence or willful
misconduct.
- 4 -
<PAGE> 83
8. Indemnity. Assignee agrees to indemnify and to hold harmless
Assignor from and against any and all losses, costs, damages, expenses
(including, without limitation, reasonable attorneys' fees) and
liabilities incurred by Assignor in connection with or arising in any
manner from Assignee's performance or nonperformance of obligations
assumed under this Agreement.
9. Subsequent Assignments. After the Effective Date, Assignee shall
have the right to assign the rights which are assigned to Assignee
hereunder to any entity or person, provided that (a) any such subsequent
assignment does not violate any of the terms and conditions of the Loan
Documents or any law, rule, regulation, order, writ, judgment, injunction
or decree and that any consent required under the terms of the Loan
Documents has been obtained and (b) Assignee is not thereby released from
any of its obligations to Assignor hereunder.
10. Governing Law. This Agreement shall be governed by the internal
law, and not the law of conflicts, of the Commonwealth of Massachusetts.
11. Notices. Notices shall be given under this Agreement in the
manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered)
shall be the addresses set forth under the parties' respective name(s) on
the signature pages hereto.
12. Further Assurances. Assignor and Assignee hereby agree to execute
and deliver such other instruments, and take such other actions, as either
party may reasonably request in connection with the transaction
contemplated by this Agreement.
13. Expenses. Each party hereto shall bear its own expenses in
connection with the execution, delivery and performance of this Agreement.
14. Amendment, Modification or Waiver. No provision of this Agreement
may be amended, modified or waived except by an instrument in writing
signed by Assignor and Assignee.
15. Jurisdiction; Venue. Each of the parties hereto hereby submits to
the nonexclusive jurisdiction of the United States District Court for the
District of Massachusetts and of any Massachusetts state court for the
purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law,
any objective which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an
inconvenient forum.
16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
17. Counterparts. This Agreement may be executed in counterparts,
each of which shall be identical and all of which, taken together, shall
constitute one instrument.
- 5 -
<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
by their duly authorized officers as of the date first above written.
By:______________________________
Name:_______________________
Title:______________________
Address:_________________________
Telephone:_______________________
Telecopy:________________________
_________________________________
By:______________________________
Name:_______________________
Title:______________________
Address:_________________________
Telephone:_______________________
Telecopy:________________________
ACCEPTED:
- ---------
BANKBOSTON N.A., as Agent
By:_____________________________________
Name:______________________________
Title:_____________________________
- 6 -
<PAGE> 85
SCHEDULE A
TO ASSIGNMENT AND
ACCEPTANCE AGREEMENT
LIST OF LENDING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT AND LOAN AMOUNTS
-------------------------------------------
ASSIGNOR:
[Insert Name of Assignor]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Revolver Term Loan Revolving
Commitment Commitment Loans Term Loans
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Original Amount $_________ $__________ $_________ $_________
Original Percentage ______% ______% ______% ______%
- -------------------------------------------------------------------------------------
</TABLE>
Following assignment of the Purchased Percentage, Assignor's portions of
the Commitments and outstanding Loans and LC Draw Obligations will be as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Revolver Term Loan Revolving
Commitment Commitment Loans Term Loans
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Amount $_________ $__________ $_________ $_________
New Percentage ______% ______% ______% ______%
- -------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------
Commitment Loans
- -------------------------------------------------------------------------
ASSIGNEE:
[Insert Name of Assignee]
- -------------------------------------------------------------------------
1
<PAGE> 86
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Revolver Term Loan Revolving
Commitment Commitment Loans Term Loans
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Original Amount $_________ $__________ $_________ $_________
Original Percentage ______% ______% ______% ______%
- -------------------------------------------------------------------------------------------
</TABLE>
Following assignment of the Purchased Percentage, Assignee's portions of
the Commitments and outstanding Loans and LC Draw Obligations will be as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Revolver Term Loan Revolving
Commitment Commitment Loans Term Loans
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Amount $_________ $__________ $_________ $_________
New Percentage ______% ______% ______% ______%
- -------------------------------------------------------------------------------------------
</TABLE>
Address for Notices:
[Address]
Attention:______________________
Telephone:______________________
Telecopy:_______________________
Telephone:______________________
Confirmation:___________________
LIBOR/Eurodollar Lending Office:
- --------------------------------
________________________________
________________________________
________________________________
Domestic Lending Office:
- ------------------------
________________________________
________________________________
________________________________
2
<PAGE> 87
SCHEDULE 1.1(a)
Commitments
---------------------------------------------------
Revolver Term
Lender Amount Amount
---------------------------------------------------
BankBoston, N.A. $3,500,000 $6,500,000
---------------------------------------------------
U.S. Bank National $3,500,000 $6,500,000
Association
---------------------------------------------------
Percentages
---------------------------------------------------
Revolver Term
Lender Amount Amount
---------------------------------------------------
BankBoston, N.A. 50% 50%
---------------------------------------------------
U.S. Bank National
Association 50% 50%
---------------------------------------------------
<PAGE> 88
Domestic Lending Office:
- ------------------------
________________________________
________________________________
________________________________
<PAGE> 1
EXHIBIT 11
STAR BUFFET, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED FORTY WEEKS ENDED
----------------------------- -----------------------------
NOVEMBER 2, NOVEMBER 3, NOVEMBER 2, NOVEMBER 3,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net Income $ 528,000 $ 440,000 $2,906,000 $2,167,000
---------- ---------- ---------- ----------
Weighted average number of common shares
outstanding during the period 4,164,000 3,716,000 5,064,000 2,935,000
---------- ---------- ---------- ----------
Basic Earnings per Share $ 0.13 $ 0.12 $ 0.57 $ 0.74
---------- ---------- ---------- ----------
DILUTED EARNINGS PER SHARE
Net Income $ 528,000 $ 440,000 $2,906,000 $2,167,000
---------- ---------- ---------- ----------
Weighted average number of common
shares outstanding during the period 4,164,000 3,716,000 5,064,000 2,935,000
---------- ---------- ---------- ----------
Incremental common shares attributable
to outstanding stock options -- -- -- --
---------- ---------- ---------- ----------
4,164,000 3,716,000 5,064,000 2,935,000
Diluted Earnings per Share $ 0.13 $ 0.12 $ 0.57 $ 0.74
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS BALANCE SHEET AND STATEMENTS OF OPERATIONS AS OF AND FOR THE TWELVE
WEEK PERIOD ENDED NOVEMBER 2, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-25-1999
<PERIOD-START> JAN-27-1998
<PERIOD-END> NOV-02-1998
<CASH> 2,469,000
<SECURITIES> 0
<RECEIVABLES> 4,058,000
<ALLOWANCES> 0
<INVENTORY> 786,000
<CURRENT-ASSETS> 8,341,000
<PP&E> 40,070,000
<DEPRECIATION> (13,982,000)
<TOTAL-ASSETS> 43,209,000
<CURRENT-LIABILITIES> 7,336,000
<BONDS> 0
0
0
<COMMON> 3,000
<OTHER-SE> 22,940,000
<TOTAL-LIABILITY-AND-EQUITY> 43,209,000
<SALES> 18,996,000
<TOTAL-REVENUES> 18,996,000
<CGS> 17,285,000
<TOTAL-COSTS> 18,161,000
<OTHER-EXPENSES> (222,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177,000
<INCOME-PRETAX> 880,000
<INCOME-TAX> 352,000
<INCOME-CONTINUING> 528,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 528,000
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
