SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-K
(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 (No Fee Required)
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from ________ to ________
For fiscal year ended Commission file number
August 1, 1997 0-7536
___________
CRACKER BARREL OLD COUNTRY STORE, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-0812904
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Hartmann Drive, P.O. Box 787 37088-0787
Lebanon, Tennessee (Zip code)
(Address of principal executive offices)
___________
Registrant's telephone number, including area code:
(615)444-5533
___________
Securities registered pursuant to Section 12(b) of the Act:
None
___________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Par Value $.50)
____________
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 _
The aggregate market value of voting stock held by nonaffiliates of
the registrant is $1,918,787,697 as of September 29, 1997.
61,395,068
____________________________________________________________________
(Number of shares of common stock outstanding as of September 29,
1997.)
<PAGE> 1
Documents Incorporated by Reference
___________________________________
Document from which Portions Part of Form 10-K
are Incorporated by Reference to which incorporated
_____________________________ _____________________
1. Annual Report to Shareholders Items 6, 7 and 8
for the fiscal year ended
August 1, 1997
2. Proxy Statement for Annual Part III
Meeting of Shareholders
to be held November 25, 1997
<PAGE> 2
Except for specific historical information, the matters
discussed in this Form 10-K, as well as the Company's Annual Report
to Shareholders for the year ended August 1, 1997 incorporated
herein by reference, are forward-looking statements that involve
risks, uncertainties and other factors which may cause actual
results and performance of Cracker Barrel Old Country Store, Inc. to
differ materially from those expressed or implied by such
statements. Factors which will affect actual results include, but
are not limited to: the availability and costs of acceptable sites
for development; the ability of the Company to recruit and train
restaurant personnel in its expansion locations; the acceptance of
the Cracker Barrel concept as the Company continues to expand into
new geographic regions; continued successful development of new and
regional menu items; changes in or implementation of additional
governmental rules and regulations; and other factors described from
time to time in the Company's filings with the Securities and
Exchange Commission, press releases and other communications.
PART I
ITEM 1. BUSINESS
Overview
Cracker Barrel Old Country Store, Inc. and subsidiaries (the
"Company" or "Cracker Barrel") own and operate 319 full service
"country store" restaurants which are primarily located in the
southeast, midwest, mid-atlantic and southwest United States. The
majority of stores are located along interstate highways, however,
ten stores are located at "tourist destinations". The restaurants
serve breakfast, lunch and dinner between the hours of 6:00 a.m. and
10:00 p.m. (11:00 p.m. on Fridays and Saturdays) and feature home
style country cooking prepared on the premises from the Company's
own recipes using quality ingredients and emphasizing authenticity.
Menu items are moderately priced and include country ham, chicken,
fish, barbecue pork ribs, roast beef, beans, turnip greens,
vegetable plates, salads, sandwiches, pancakes, eggs, bacon, sausage
and grits. The restaurants do not serve alcoholic beverages. The
stores are constructed in a rustic, country store design and feature
a separate retail area offering a wide variety of decorative and
functional items specializing in hand-blown glassware, cast iron
cookware, toys and wood crafts as well as various old fashioned
candies, jellies and other foods. The Company considers its store
operations to constitute an integrated, single line of business.
As announced on August 21, 1996, the Company took a one-time
charge related to store closures and certain other write-offs. The
details related to this charge are included in Note 1 under "Store
closing costs" on page 32 of the Company's 1997 Annual Report.
Operations
STORE FORMAT: The format of Cracker Barrel stores consists of
a rustic, country store style building. All stores are free
standing buildings with adequate parking facilities and standard
landscaping. Store interiors are subdivided into a dining room
consisting of approximately 23% of the total interior store space, a
retail shop consisting of approximately 21% of such space, with the
balance primarily consisting of kitchen and storage areas. All
stores have wood-burning fireplaces and are decorated with
antique-style furnishings and other authentic items of the past
similar to those used and sold in original old country stores. The
kitchens contain modern food preparation and storage equipment
allowing for extensive flexibility in menu variation and
development.
PRODUCTS: Cracker Barrel's restaurants offer rural American
cooking featuring the Company's own recipes. In keeping with the
Company's emphasis on authenticity and quality, Cracker Barrel
restaurants prepare menu selections on the premises. The Company's
restaurants offer breakfast, lunch and dinner from a
moderately-priced menu. Most items may be ordered at any time
throughout the day. Breakfast items include juices, eggs, pancakes,
bacon, country ham, sausage, grits, and a variety of biscuit
specialties, with prices for a breakfast meal ranging from $2.59 to
$7.49. Lunch and dinner items include country ham, chicken, fish,
steak, barbecue pork ribs, roast beef, beans, turnip greens,
vegetable plates, salads, sandwiches, homemade soups and specialty
items such as beef stew with muffins. Lunches and dinners range in
price from $2.99 to $14.99. The Company from time to time increases
its prices and increased its menu prices approximately 1% in October
1996 and 2% in May 1997.
<PAGE> 3
The retail stores, which are decorated with antique signs,
primitive tools and other memorabilia in a turn-of-the-century
atmosphere, offer a wide variety of items consisting primarily of
hand-blown glassware, cast iron cookware, old-fashioned crockery,
handcrafted figurines, classic children's toys and various other
gift items, as well as various candies, preserves, smoked sausage,
syrups and other foodstuffs. Many of the candy items, smoked bacon,
jellies and jams along with other high quality products are sold
under the "Cracker Barrel Old Country Store" brand name.
PRODUCT MERCHANDISING: Cracker Barrel maintains a product
development department which develops new and improved menu items in
response to shifts in customer preferences. Company merchandising
specialists are involved on a continuing basis in selecting and
positioning of merchandise in the retail shop. Management believes
that the Company has adequate flexibility to meet future shifts in
consumer preference on a timely basis.
STORE MANAGEMENT: Store management typically consists of a
general manager, four associate managers and a retail manager who
are responsible for approximately 100 employees on two shifts. The
relative complexity of operating a Cracker Barrel Old Country Store
requires an effective management team at the individual store level.
As a motivation to store managers to improve sales and operational
efficiency, Cracker Barrel has a bonus plan designed to provide
store management with an opportunity to share in the pre-tax profits
of their store when meeting or exceeding predetermined performance
criteria. To assure that individual stores are operated at a high
level of quality, the Company emphasizes the selection and training
of store managers and has a level of District Management to support
individual store managers.
The store management recruiting and training program begins
with an evaluation and screening process. In addition to multiple
interviews and background and experience verification, the Company
conducts testing which it believes is important in selecting those
applicants best suited to manage store operations. Those candidates
who successfully pass this screening process are then required to
complete an 11-week training program consisting of eight weeks of in-
store training and three weeks of training at the Company's
corporate facilities. This program allows new managers the
opportunity to become familiar with the Company's operations,
management objectives, controls and evaluation criteria before
assuming management responsibility.
PURCHASING AND DISTRIBUTION: Cracker Barrel negotiates
directly with food vendors as to price and other material terms of
most food purchases. The Company purchases the majority of its food
products and restaurant supplies on a cost-plus basis through a
distributor headquartered in Nashville, Tennessee with custom
distribution centers in Lebanon, Tennessee; Dallas, Texas;
Gainesville, Florida; and Belcamp, Maryland. The distributor is
responsible for placing food orders and warehousing and delivering
food products to the Company's stores. This distributor is not
affiliated with the Company. Certain perishable food items are
purchased locally by the Company's stores.
On January 10, 1997, the Company signed a new agreement with the
food distributor which became effective February 1, 1997. This
agreement, characterized as a "Prime Vendor Contract", outlined the
relationship between the Company and the distributor and is
considered a mutual agreement between both parties that will permit
a profitable relationship. The contract will remain in effect until
it is mutually modified in writing by both parties or until
terminated by either the Company or the distributor upon one hundred
eighty days written notice to the other party.
The single food category accounting for the largest share
(approximately 17%) of the Company's food purchasing expense is
pork. The single food item within the pork category accounting for
the largest share of the Company's food purchasing expense is
country ham. The Company presently purchases its pork food items
through ten vendors and its country ham through two vendors. Should
any pork items from these vendors become unavailable for any reason,
management is of the opinion that these food items could be obtained
in sufficient quantities from other sources at competitive prices.
<PAGE> 4
The majority of retail items are purchased directly by Cracker
Barrel, warehoused at its Lebanon distribution center and shipped to
the stores. On December 20, 1996, the Company signed a dedicated
carriage agreement with an unaffiliated transportation company for
the transportation of retail merchandise from the Company's
distribution center throughout the contiguous forty-eight states.
This agreement, which is for a period of forty eight (48) months,
sets forth the relationship between the respective companies and is
structured to facilitate the growth of the Company's retail business
over the next four years. The transportation company or the Company
may terminate the agreement on any annual anniversary date by giving
the other party sixty (60) days prior written notice. Certain
retail items are shipped directly to the Company's stores.
QUALITY, COST AND INVENTORY CONTROLS: Costs are monitored by
management to determine if any material variances in food cost or
operating expenses have occurred. The Company's computer systems are
used to analyze store operating information by providing management
reports for continual monitoring of sales mix and detailed
operational cost data. This system is also used in the development
of budget analyses and planning.
MARKETING: New store locations generally are not advertised in
the media until several weeks after they have been opened in order
to give the staff time to adjust to local customer habits and
traffic volume. To effectively reach consumers in the primary trade
area for each Cracker Barrel store and also interstate travelers and
tourists, outdoor advertising is the primary advertising media
utilized, accounting for approximately 50% of advertising
expenditures. The Company utilizes various types of media, such as
television and radio, in its core markets to maintain customer
awareness. Outside of its core markets, radio and print are the
primary media used in an effort to increase name awareness and to
build brand loyalty. The Company defines its core market based on
geographic location, longevity in the market and name awareness in
the market.
SEASONAL ASPECTS: Historically the profits of the Company have
been lower in the second fiscal quarter than in the first and third
fiscal quarters and highest in the fourth fiscal quarter.
Management attributes these variations primarily to the decrease in
interstate tourist traffic during the winter months and the increase
in interstate tourist traffic during the summer months.
WORKING CAPITAL: In the restaurant industry substantially all
sales are either for cash or credit card. Like most other restaurant
companies, the Company is able to, and may from time to time,
operate with negative working capital. Restaurant inventories
purchased through the food distributor are now on terms of net zero
days, while restaurant inventories purchased locally are generally
financed from normal trade credit. Retail inventories purchased
domestically are generally financed from normal trade credit, while
retail imported inventories are generally purchased through letters
of credit. These various trade terms are aided by rapid turnover of
the restaurant inventory.
Expansion
The Company opened fifty new stores in fiscal 1997. Ten of the
stores are located on Interstate 95 in Belcamp, Maryland,
Jacksonville, Florida, Titusville, Florida, Boynton Beach, Florida,
Fayetteville, North Carolina, Wilson, North Carolina, Milford,
Connecticut, Chester, Virginia, St. Augustine, Florida, and Santee,
South Carolina; three are located on Interstate 20 in Vicksburg,
Mississippi, Benbrook, Texas, and Oxford, Alabama; Interstate 40 in
Alma, Arkansas, Flagstaff, Arizona and Midwest City, Oklahoma;
Interstate 70 in Kansas City, Kansas, Springfield, Ohio and New
Stanton, Pennsylvania; and Interstate 90 in Erie, Pennsylvania, East
Greenbush, New York and Lancaster, New York; two are located on
Interstate 55 in Batesville, Mississippi and Romeoville, Illinois;
Interstate 59 in Hattiesburg, Mississippi and Tuscaloosa, Alabama;
Interstate 75 in Venice, Florida and Brighton, Michigan; Interstate
77 in Mooresville and Jonesville, North Carolina; Interstate 78 in
Hamburg and Fogelsville, Pennsylvania; and Interstate 81 in Cicero
and Watertown, New York; and one each is located on: 31st Avenue in
Tulsa, Oklahoma; Highway 17 in South Myrtle Beach, South Carolina;
Highway 358 in Corpus Christi, Texas; Interstate 8 in Yuma, Arizona;
Interstate 10 in Sulfur, Louisiana; Interstate 15 in Layton, Utah;
<PAGE> 5
Interstate 64 in Barboursville, West Virginia; Interstate 25 in Pueblo,
Colorado; Interstate 29 in St. Joseph, Missouri; Interstate 35 in
Burleson, Texas; Interstate 65 in Greenville, Alabama; Interstate
71 in La Grange, Kentucky; Interstate 181 in Johnson City, Tennessee;
Interstate 196 in Grandville, Michigan; Interstate 215 in West Valley,
Utah; and Interstate 275 in Forrest Park, Ohio.
The Company plans to open fifty new stores during fiscal 1998.
Twelve of the stores are already open: two are located on:
Interstate 85 in Henderson, North Carolina and Commerce, Georgia;
and Interstate 10 in Marana, Arizona and Gonzales, Louisiana; and
one each is located on: Interstate 15 in Springville, Utah;
Interstate 35 in Edmond, Oklahoma; Interstate 40 in Russellville,
Arkansas; Interstate 55 in Hammond, Louisiana; Interstate 77 in
Beckley, West Virginia; and Interstate 90 in Billings, Montana;
Interstate 295 in Pennsville, New Jersey; and Loop 101 in Peoria,
Arizona.
Prior to committing to a new location, the Company performs
extensive reviews of various available sites, gathering approximate
cost, demographic and traffic data. This information is entered into
a model to help with the decision on building a store. The Company
utilizes in-house engineers to consult on architectural plans, to
develop engineering plans and to oversee new construction. The
Company is currently engaged in the process of seeking and selecting
new sites, negotiating purchase or lease terms and developing chosen
sites.
It is the Company's preference to own its store properties. Of
the 319 stores open as of October 31, 1997, the Company owns 301,
while the other 18 properties are either ground leases or ground and
building leases. Currently, average cost for a new store is
approximately $1,250,000 for land and sitework, $800,000 for
building, and $550,000 for equipment. The current store size is
approximately 10,000 square feet with 184 seats in the restaurant.
Employees
As of August 1, 1997, Cracker Barrel employed 35,805 people, of
whom 399 were in advisory and supervisory capacities, 1,876 were in
store management positions and 17 were officers of the Company.
Many of the restaurant personnel are employed on a part-time basis.
The Company has an incentive plan for its hourly employees which is
intended to lower turnover and to increase productivity by providing
a defined career path through testing and ranking of employees. The
Company's employees are not represented by any union, and management
considers its employee relations to be good.
Competition
The restaurant business is highly competitive and is often
affected by changes in the taste and eating habits of the public,
local and national economic conditions affecting spending habits,
and population and traffic patterns. Restaurant industry segments
overlap and often provide competition for widely diverse restaurant
concepts. The principal basis of competition in the industry is the
quality and price of the food products offered. Site selection,
quality and speed of service, advertising and the attractiveness of
facilities are also important.
There are a large number of restaurants catering to the public,
including several franchised operations in the family segment of the
restaurant industry, which are substantially larger and have greater
financial and marketing resources than those of the Company and
which compete directly and indirectly in all areas in which the
Company operates.
Trademarks
The Company owns certain registered copyrights, patents and
trademarks relating to the name "Cracker Barrel Old Country Store",
as well as its logo, menus, designs of buildings, general trade
dress and other aspects of operations. The Company believes that
the use of these names have some value in maintaining the atmosphere
and public acceptance of its mode of operations.
Research and Development
While research and development are important to the Company,
these expenditures have not been material.
<PAGE> 6
Compliance With Environmental Protection Requirements
Compliance with federal, state and local provisions which have
been enacted or adopted regulating the discharge of materials into
the environment should have no material effect upon capital
expenditures, earnings, or the competitive position of the Company.
ITEM 2. PROPERTIES
The Company's present corporate headquarters and warehouse
facilities are situated on approximately 120 acres of land owned by
the Company in Lebanon, Tennessee.
The Company utilizes approximately 190,000 square feet of
office space and 400,000 square feet of warehouse facilities.
Management feels that the current amount of office space is
sufficient to meet the Company's needs through the end of fiscal
1999.
In addition to the corporate facilities, the Company owns or
leases the following properties as of October 31, 1997:
<TABLE>
<CAPTION>
State Owned Leased
_____ _______________________ _______________________
Land Buildings Land Buildings
____ _________ ____ _________
<S> <C> <C> <C> <C>
Tennessee 27 28 8 5
Florida 32 29 - -
Texas 22 20 - _
Georgia 19 18 2 2
North Carolina 20 19 1 -
Illinois 18 19 1 -
Ohio 16 17 2 -
Indiana 16 15 - -
Virginia 14 14 - -
Alabama 13 12 1 1
Kentucky 12 11 2 2
Michigan 13 13 - -
Missouri 12 11 - -
South Carolina 10 10 2 1
Louisiana 8 8 - -
Mississippi 8 8 - -
Pennsylvania 8 6 - -
Arizona 7 5 - -
Oklahoma 6 5 - -
West Virginia 6 5 - -
New York 5 4 1 -
Arkansas 5 4 - -
Wisconsin 5 4 - -
Colorado 4 4 - -
Kansas 4 3 - -
Minnesota 4 3 - -
Iowa 3 3 - -
Utah 3 3 - -
New Mexico 2 2 1 -
Maryland 2 2 - -
Connecticut 1 1 - -
Montana 1 1 - -
New Jersey - 1 1 -
Idaho 1 - - -
Nebraska 1 - - -
</TABLE>
See "Business-Operations" and "Business-Expansion" for additional
information on the Company's stores.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material pending legal
proceedings.
<PAGE> 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K and
General Instruction G(3) to Form 10-K, the following information is
included in Part I of this Form 10-K.
Executive Officers of the Registrant
The following table sets forth certain information concerning
the executive officers of the Company as of September 29, 1997:
<TABLE>
<CAPTION>
Name Age Position with Registrant
____ ___ ________________________
<S> <C> <C>
Dan W. Evins 62 Chairman of the Board
& Chief Executive Officer
Ronald N. Magruder 49 President & Chief
Operating Officer
Michael A. Woodhouse 52 Senior Vice President,
Finance & Chief Financial
Officer
Michael D. Adkins 42 Senior Vice President,
Restaurant Operations
Norman J. Hill 55 Senior Vice President,
Human Resources
Richard G. Parsons 45 Senior Vice President,
Merchandising
James F. Blackstock 50 Vice President, General
Counsel and Secretary
Ellen C. Cozart 39 Vice President, Human
Resources
Judith K. Donovan 42 Vice President, New
Business Development
James D. Fisher 51 Vice President,
Marketing
Mattie H. Hankins 57 Vice President &
Controller
Debra K. Kidwell 38 Vice President, Retail
Purchasing
Donald G. Kravitz 61 Vice President,
Property Development
Michael J. Matheny 50 Vice President, Information
Services
Thomas R. Pate 38 Vice President, Training and
Management Development
Jonathan C. Sleik 46 Vice President,
Purchasing and Distribution
Mark W. Tanzer 40 Vice President, Product
Development
John J. Davoli 45 Regional Vice President,
Restaurants
Scott C. Diffenderfer 43 Regional Vice President,
Restaurants
Cecilia S. Gibson 42 Regional Vice President, Retail
Carolyn M. Hall 40 Regional Vice President, Retail
<PAGE> 8
Dan L. Markley 40 Regional Vice President, Retail
Terry A. Maxwell 38 Regional Vice President,
Restaurants
Cyril J. Taylor 43 Regional Vice President,
Restaurants
Stanley L. Warner 43 Regional Vice President,
Restaurants
Gary L. Wooddell 33 Regional Vice President, Retail
</TABLE>
The following background material is provided for those
executive officers who have been employed by the Registrant for less
than five years:
Prior to his employment with the Company in August, 1995, Mr.
Magruder was Vice-Chairman of Darden Restaurants, Inc. from 1994 to
1995. Mr. Magruder had been employed by General Mills for 23 years,
serving in various capacities within their restaurant division.
Previously, Mr. Magruder was Executive Vice President of General
Mills Restaurants and President of the Olive Garden from 1987 to
1994.
Prior to his employment with the Company in January 1995, Mr.
Fisher was Executive Vice President of Marketing with Baker's Square
since 1993. Mr. Fisher was Vice President of Marketing with
Shakey's Pizza, Inc. from 1989 to 1993.
Prior to his employment with the Company in November 1995, Mr.
Sleik was with Darden Restaurants, Inc. most recently as Vice
President of Remodeling and Facilities. He was Executive Vice
President of Operations for the Olive Garden from 1985 to 1994 and
Vice President of Purchasing and Distribution for Red Lobster from
1980 to 1985.
Prior to his employment with the Company in December 1995, Mr.
Woodhouse was Senior Vice President and Chief Financial Officer of
Daka International, Inc. from 1993 to 1995. Mr. Woodhouse was Vice
President and Chief Financial Officer of Tia's Inc. from 1992 to
1993. Prior to 1992 he was Executive Vice President and Chief
Financial Officer of Metromedia Steakhouses, Inc.
Prior to his employment with the Company in February 1996, Mr.
Matheny was with Boston Chicken as Director of Systems. He was
Director of Management Information Systems with El Chico Restaurants
from 1992 through 1995. Prior to 1992, he served in various
divisional roles with Metromedia working with their Steak and Ale
and Ponderosa concepts.
Prior to her employment with the Company in September 1996, Ms.
Donovan was with Darden Restaurants, Inc. from 1989-1996 serving
most recently as Senior Vice President of New Business Development.
Prior to her most recent role, she was Senior Vice President and
Division General Manager of The Olive Garden.
Prior to his employment with the Company in June 1997, Mr.
Blackstock was with Travel Centers of America, Inc. from 1993 to
1997 serving as Vice President, General Counsel and Secretary.
Prior to 1993, Mr. Blackstock practiced law in Los Angeles,
California as a principal in the firm of James F. Blackstock,
Professional Law Corporation.
<PAGE> 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Since the initial public offering of the Company's common stock
in November 1981, the Company's common stock has been traded on The
Nasdaq Stock Market (National Market System) with the symbol CBRL.
There were 19,313 shareholders of record as of September 29, 1997.
The following table indicates the high and low sales prices of
the Company's common stock as reported on The Nasdaq Stock Market
(National Market System) during the periods indicated.
Fiscal Year 1997 Prices Fiscal Year 1996 Prices
Quarter High Low High Low
_______ ____ ___ ____ ___
First $25.63 $19.63 $21.50 $17.38
Second 28.38 19.88 19.25 15.75
Third 29.25 24.88 24.88 17.88
Fourth 29.88 23.75 27.38 19.38
In September 1983 the Board of Directors of the Company
initiated a policy of declaring dividends on a quarterly basis.
Prior to such date the Board followed a policy of declaring annual
dividends during the first fiscal quarter. Quarterly dividends of
$.005 per share were paid during all four quarters of fiscal 1996
and 1997. The Company foresees paying comparable cash dividends per
share in the future.
The covenants relating to the 9.53% Senior Notes in the
original amount of $30,000,000 impose certain restrictions on the
payment of cash dividends and the purchase of treasury stock.
Retained earnings not restricted under the covenants were
approximately $382,000,000 at August 1, 1997.
ITEM 6. SELECTED FINANCIAL DATA
The table "Selected Financial Data" on page 23 of the Company's
Annual Report to Shareholders for the year ended August 1, 1997 (the "1997
Annual Report") is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following portions of the 1997 Annual Report are
incorporated herein by reference:
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 24 through 26.
<PAGE> 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following portions of the 1997 Annual Report are
incorporated herein by reference:
Consolidated Financial Statements and Independent Auditors'
Report on pages 27 through 39.
Quarterly Financial Data (Unaudited) on page 38.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors
of the Company is incorporated herein by reference to the section
entitled "Election of Directors" in the Company's definitive proxy
statement for its 1997 Annual Meeting of Shareholders (the "1997
Proxy Statement"). The information required by this item with
respect to executive officers of the Company is set forth in Part I
of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the section entitled "Executive Compensation" in the
Company's 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated herein by
reference to the section entitled "Security Ownership of Management"
in the Company's 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the section entitled "Transactions with Management" in
the Company's 1997 Proxy Statement.
<PAGE> 11
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
A. List of documents filed as part of this report:
1. The following Financial Statements and the Report of
Deloitte & Touche LLP on pages 27 through 39 of the
1997 Annual Report are incorporated herein by reference:
Independent Auditors' Report dated September 10, 1997
Consolidated Balance Sheet as of August 1, 1997 and
August 2, 1996
Consolidated Statement of Income for each of the
three fiscal years ended August 1, 1997, August 2,
1996 and July 28, 1995
Consolidated Statement of Changes in Stockholders'
Equity for each of the three fiscal years ended August
1, 1997, August 2, 1996 and July 28, 1995
Consolidated Statement of Cash Flows for each of the
three fiscal years ended August 1, 1997, August 2, 1996
and July 28, 1995
Notes to Consolidated Financial Statements
2. The exhibits listed in the accompanying Index to
Exhibits on pages 14 & 15 are filed as part of this
annual report.
B. Reports on Form 8-K:
There were no reports filed on Form 8-K during the fourth
quarter of the fiscal year ended August 1, 1997.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Cracker Barrel Old Country Store, Inc.
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CRACKER BARREL OLD COUNTRY STORE, INC.
By: /s/Dan W. Evins By: /s/Mattie H. Hankins
______________________________ ___________________________
Dan W. Evins Mattie H. Hankins
CEO and Chairman of the Board Vice President & Controller
(Principal Executive Officer)
By: /s/Michael A. Woodhouse
______________________________
Michael A. Woodhouse
Senior Vice President, Finance
(Principal Financial Officer)
Date: October 24, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates
indicated.
/s/James C. Bradshaw, M.D.
_____________________________________ _________________________________
James C. Bradshaw, M.D., Director Charles T. Lowe, Jr., Director
/s/B.F. Lowery
_____________________________________ _________________________________
Robert V. Dale, Director B. F. Lowery, Director
/s/Dan W. Evins /s/Ronald N. Magruder
_____________________________________ _________________________________
Dan W. Evins, Director Ronald N. Magruder, Director
/s/Edgar W. Evins /s/ Gordon L. Miller
_____________________________________ _________________________________
Edgar W. Evins, Director Gordon L. Miller, Director
/s/William D. Heydel
_____________________________________ _________________________________
William D. Heydel, Director Martha M. Mitchell, Director
_____________________________________ _________________________________
Robert C. Hilton, Director Jimmie D. White, Director
_____________________________________
Charles E. Jones, Jr., Director
<PAGE> 13
INDEX TO EXHIBITS
Exhibit
3(a) Charter (1)
3(b) Bylaws (2)
4(a) Note Agreement dated as of January 1, 1991, relating to
$30,000,000 of 9.53% Senior Notes (3)
10(a) Credit Agreement dated February 18, 1997, relating to
the $50,000,000 Term Loan and the $75,000,000 Revolving
Credit and Letter of Credit Facility
10(b) Lease dated August 27, 1981 for lease of Clarksville,
Tennessee, and Macon, Georgia, stores between B. F.
Lowery, general counsel and a director, and the
Company (4)
10(c) The Company's Incentive Stock Option Plan of 1982, as
amended (5)
10(d) The Company's 1987 Stock Option Plan, as amended (1)
10(e) The Company's Amended and Restated Stock Option Plan (6)
10(f) The Company's Non-Employee Director's Stock Option Plan,
as amended (7)
10(g) The Company's Executive Employment Agreement (5)
10(h) The Company's Non-Qualified Savings Plan, effective
1/1/96, as amended (8)
10(i) The Company's Deferred Compensation Plan, effective
1/1/94 (8)
10(j) Executive Employment Agreement for Ronald N. Magruder
dated 7/5/95 (9)
10(k) Executive Employment Agreement for Michael A.
Woodhouse dated 11/15/95 (9)
13 Pertinent portions, incorporated by reference herein, of
the Company's 1997 Annual Report to Shareholders
21 Subsidiaries of the Registrant
22 Definitive Proxy Materials
23 Consent of Deloitte & Touche LLP
<PAGE> 14
(1) Incorporated by reference to the Company's Registration
Statement on Form S-8 under the Securities Act of 1933 (File
No. 33-45482).
(2) Incorporated by reference to the Company's Annual Report on
Form 10-K under the Securities Exchange Act of 1934 for the
fiscal year ended July 28, 1995. (File No. 0-7536).
(3) Incorporated by reference to the Company's Registration
Statement on Form S-3 under the Securities Act of 1933 (File
No. 33-38989).
(4) Incorporated by reference to the Company's Registration
Statement on Form S-7 under the Securities Act of 1933 (File
No. 2-74266).
(5) Incorporated by reference to the Company's Annual Report on
Form 10-K under the Securities Exchange Act of 1934 for the
fiscal year ended July 28, 1989 (File No. 0-7536).
(6) Incorporated by reference to the Company's 1996 Definitive
Proxy materials, attached hereto as Exhibit 22.
(7) Incorporated by reference to the Company's Annual Report on
Form 10-K under the Securities Exchange Act of 1934 for the
fiscal year ended August 2, 1991 (File No. 0-7536).
(8) Incorporated by reference to the Company's Annual Report on
Form 10-K under the Securities Exchange Act of 1934 for the
fiscal year ended August 2, 1996 (File No. 0-7536).
(9) Incorporated by reference to the Executive Employment
Agreement section, page 12 and 13 of the Company's 1997
Definitive Proxy materials, attached hereto as Exhibit 22.
<PAGE> 15
CREDIT AGREEMENT
By and Among
CRACKER BARREL OLD COUNTRY STORE, INC.,
THE LENDERS LISTED HEREIN,
and
SUNTRUST BANK, NASHVILLE, N.A.
As Agent
$125,000,000 Revolving Credit, Term Loan and Letter of Credit
Facility
February 18, 1997
TABLE OF CONTENTS
PAGE
Article I. Definitions. -1-
Section 1.01 Construction of Terms -1-
Section 1.02 Definitions -2-
Article II. The Credit -15-
Section 2.01 Loan Facilities -15-
Section 2.02 Letters of Credit -17-
Section 2.03 Swing Line Loan -19-
Section 2.04 Interest Rate -21-
Section 2.05 Borrowing Procedure -23-
Section 2.06 Use of Proceeds -24-
Section 2.07 Participation -25-
Section 2.08 Term of This Agreement -25-
Section 2.09 Payments to Principal Office; Debit
Authority -25-
Section 2.10 Prepayment -26-
Section 2.11 Apportionment of Payments -28-
Section 2.12 Sharing of Payments, Etc -29-
Section 2.13 Right of Offset, Etc -30-
Section 2.14 Commitment Fee -30-
Section 2.15 Usury -30-
Section 2.16 Interest Rate Not Ascertainable, Etc -31-
Section 2.17 Illegality -32-
Section 2.18 Increased Costs -32-
Section 2.19 Mitigation -34-
Article III. Representations and Warranties -35-
Section 3.01 Corporate Existence -35-
Section 3.02 Power and Authorization -35-
Section 3.03 Binding Obligations -35-
Section 3.04 No Legal Bar or Resultant Lien -36-
Section 3.05 No Consent -36-
Section 3.06 Financial Condition -36-
Section 3.07 Investments, Advances, and Guarantees -36-
Section 3.08 Liabilities and Litigation -37-
Section 3.09 Taxes; Governmental Charges -37-
Section 3.10 No Default -37-
Section 3.11 Compliance with Laws, Etc -38-
Section 3.12 ERISA -38-
Section 3.13 No Material Misstatements -38-
Section 3.14 Regulation U -38-
Section 3.15 Filings -39-
Section 3.16 Title, Etc -39-
Section 3.17 Personal Holding Company; Subchapter
S -39-
Section 3.18 Subsidiaries -40-
Article IV. Conditions Precedent -40-
Section 4.01 Initial Conditions -40-
Section 4.02 All Borrowings -42-
Article V. Affirmative Covenants -43-
Section 5.01 Financial Statements and Reports -43-
Section 5.02 Annual Certificates of Compliance -44-
Section 5.03 Taxes and Other Liens -45-
Section 5.04 Maintenance -45-
Section 5.05 Further Assurances -46-
Section 5.06 Performance of Obligations -46-
Section 5.07 Insurance -46-
Section 5.08 Accounts and Records -47-
Section 5.09 Right of Inspection -47-
Section 5.10 Notice of Certain Events -47-
Section 5.11 ERISA Information and Compliance -48-
Section 5.12 Additional Guarantees -48-
Article VI. Negative Covenants -49-
Section 6.01 Liens -49-
Section 6.02 Investments, Loans, and Advances -50-
Section 6.03 Sales and Leasebacks -51-
Section 6.04 Nature of Business -51-
Section 6.05 Mergers, Consolidations, Etc -51-
Section 6.06 Disposition of Assets -52-
Section 6.07 Inconsistent Agreements -52-
Section 6.08 Fiscal Year -52-
Section 6.09 Transactions with Affiliates -52-
Section 6.10 Transfers to Excluded Subsidiaries -52-
Article VII Financial Covenants -52-
Section 7.01 Financial Covenants -53-
Article VIII. Events of Default -53-
Section 8.01 Events of Default -53-
Section 8.02 Remedies -56-
Section 8.03 Default Conditions -57-
Article IX. General Provisions -57-
Section 9.01 Notices -57-
Section 9.02 Invalidity -58-
Section 9.03 Survival of Agreements -58-
Section 9.04 Successors and Assigns -59-
Section 9.05 Waivers -59-
Section 9.06 Cumulative Rights -59-
Section 9.07 Construction -59-
Section 9.08 Time of Essence -60-
Section 9.09 Costs, Expenses, and Indemnification -60-
Section 9.10 Entire Agreement; No Oral
Representations Limiting Enforcement -60-
Section 9.11 Amendments -60-
Section 9.12 Distribution of Information -61-
Article X. Jury Waiver -61-
Section 10.01 Jury Waiver -61-
Article XI. Hazardous Substances -61-
Section 11.01 Representation and Indemnity
Regarding Hazardous Substances -61-
Article XII. The Agent -63-
Section 12.01 Appointment of Agent -63-
Section 12.02 Authorization of Agent with Respect
to the Loan Documents -64-
Section 12.03 Agent's Duties Limited; No Fiduciary
Duty -67-
Section 12.04 No Reliance on the Agent -67-
Section 12.05 Certain Rights of Agent -68-
Section 12.06 Reliance by Agent -69-
Section 12.07 Indemnification of Agent -69-
Section 12.08 The Agent in its Individual Capacity -70-
Section 12.09 Holders of Notes -70-
Section 12.10 Successor Agent -71-
Section 12.11 Notice of Default or Event of
Default -72-
Section 12.12 Benefit of Agreement -73-
Section 12.13 Removal of Lender -76-
Article XIII. Guarantors -78-
Section 13.01 Guarantors -78-
EXHIBITS
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Term Note
EXHIBIT C Form of Swing Line Note
EXHIBIT D Form of Letter of Credit Application
EXHIBIT E Form of Borrowing Request
EXHIBIT F Form of Guaranty Agreement
EXHIBIT G Form of Certificate of Compliance under Section 5.01(c)
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into as of this
18th day of February, 1997, by and between CRACKER BARREL OLD
COUNTRY STORE, INC., a Tennessee corporation (the "Borrower"),
SUNTRUST BANK, NASHVILLE, N.A. ("STB"), WACHOVIA BANK OF GEORGIA,
N.A. ("Wachovia"), THE FIRST NATIONAL BANK OF CHICAGO ("First
Chicago"), and the other banks and lending institutions who
become Lenders pursuant to Section 12.12 herein (STB, Wachovia,
First Chicago and such other banks and lending institutions are
referred to collectively as the "Lenders"), and SUNTRUST BANK,
NASHVILLE, N.A., Agent in its capacity as agent for the Lenders
and each successive agent for such Lenders as may be appointed
from time to time pursuant to Article XII herein (the "Agent").
RECITALS
A. The Borrower desires that the Lenders extend the
Borrower credit pursuant to the terms of this Credit Agreement.
B. The Lenders are willing to extend the Borrower credit
pursuant to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the parties hereto agree
as follows:
Article I. Definitions.
Section 1.01 Construction of Terms. The terms defined in
this article have the meanings attributed to them in this
article. Singular terms shall include the plural as well as the
singular, and vice versa. Words of masculine, feminine or neuter
gender shall mean and include the correlative words of other
genders. All references herein to a separate instrument are to
such separate instrument as the same may be amended or
supplemented from time to time pursuant to the applicable
provisions thereof. All accounting terms not otherwise defined
herein have the meanings assigned to them, and all computations
herein provided for shall be made, in accordance with generally
accepted accounting principles applied on a consistent basis. All
references herein to "generally accepted accounting principles"
refer to such principles as they exist at the date of application
thereof. All references herein to designated "Articles",
"Sections" and other subdivisions or to lettered Exhibits are to
the designated Articles, Sections and other subdivisions hereof
and the Exhibits annexed hereto unless the context otherwise
clearly indicates. All Article, Section, other subdivision and
Exhibit captions herein are used for reference only and in no way
limit or describe the scope or intent of, or in any way affect,
this Agreement.
Section 1.02 Definitions. As used in this Agreement, the
following terms shall have the following meanings, unless the
context expressly otherwise requires:
"Advance" or "Advances" shall mean any and all amounts
advanced by Lenders to or for the account of Borrower
hereunder, including credit extended under the Term Loan,
the Revolving Credit Loan and all amounts advanced by the
Swing Line Lender under the Swing Line Loan, including,
without limitation, advances of loan proceeds, payments in
overdraft, and amounts evidenced by Letters of Credit. The
terms "Advance" and "Loan" are used interchangeably in this
Agreement.
"Affiliate" of any specified Person means any other
Person which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with such specified Person. For purposes of
this definition, "control" when used with respect to any
specified Person means the power to direct or cause the
direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms
"controls" and "controlled" have meanings correlative to the
foregoing.
"Agent" means SunTrust Bank, Nashville, N.A. or its
successor as appointed pursuant to the provisions of
Article XII herein.
"Agreement" means this Credit Agreement (including all
exhibits hereto) as the same may be modified, amended, or
supplemented from time to time.
"Applicable Rate" means: (i) with respect to the
Revolving Credit Loan either the Base Rate Option or the
LIBOR Rate Option, as elected by Borrower; (ii) with respect
to the Term Loan, the Term Loan Rate; and (iii) with respect
to the Swing Line Loan, the Swing Line Rate.
"Assignment and Acceptance" means an Assignment and
Acceptance form executed by a Lender assigning its interest
in the Revolving Credit Loan and/or the Term Loan (other
than as participation), to an Eligible Assignee in a form
reasonably satisfactory to Agent.
"Base Rate" means the rate of interest equal to the
rate of interest most recently announced by Agent as its
reference, base, or prime lending rate, as the case may be,
for Dollar loans in the United States.
"Base Rate Option" shall mean that rate of interest
equal to the higher of (i) the Base Rate minus one percent
(1%) per annum; or (ii) the Federal Funds Rate (as in effect
from time to time) plus one-half of one percent (1/2%) per
annum. The Base Rate Option is determined daily.
"Borrower" means Cracker Barrel Old Country Store, Inc.
and its permitted successors and assigns.
"Borrowing Request" means a request in the form of
Exhibit E hereto submitted by Borrower for an Advance as
described in Section 2.05 of this Agreement.
"Business Day" means any day other than a Saturday, a
Sunday, a legal holiday or day on which commercial banks are
authorized to close for business in New York City or the
State of Tennessee; provided that in the case of an Advance
as a LIBOR Rate Loan, such day is also a day on which
dealings between banks are carried on in U.S. dollar
deposits in the London interbank market.
"Closing Date" means the 17th day of February, 1997.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.
"Conditions Precedent" means those matters or events
that must be completed or must occur or exist prior to
Lenders' being obligated to fund any Advance, including, but
not limited to, those matters described in Article IV
hereof.
"Debt" means, with respect to any Person, all
obligations of such Person, contingent or otherwise, which
in accordance with GAAP would be classified on a balance
sheet of such Person as liabilities, and in addition such
term shall include, but without duplication: (a) liabilities
secured by any mortgage, pledge or lien existing on Property
owned by such Person and subject to such mortgage, pledge or
lien, whether or not the liability secured thereby shall
have been assumed by such Person, (b) all indebtedness and
other similar monetary obligations of such Person, (c) all
guaranties, obligations in respect of letters of credit,
endorsements (other than endorsements of negotiable
instruments for purposes of collection in the ordinary
course of business), obligations to purchase goods or
services for the purpose of supplying funds for the purchase
or payment of Debt of others and other contingent
obligations in respect of, or to purchase, or otherwise
acquire, or advance funds for the purchase of, Debt of
others, (d) all obligations of such Person to indemnify
another Person to the extent of the amount of indemnity, if
any, which would be payable by such Person at the time of
determination of Debt and (e) all obligations of such Person
under capital leases.
"Default Rate" means an interest rate equal to the Base
Rate plus two percent (2.00%) per annum.
"Default" or "Event of Default" means the occurrence of
any of the events specified in Section 8.01 hereof.
"Default Conditions" or "Default Condition" means the
occurrence of any of the events specified in Section 8.03
hereof.
"EBIT" (Earnings Before Interest and Taxes) means for
Borrower, as determined on a consolidated basis for any
specified period, an amount equal to the sum of: (A) pre-tax
income, plus (B) total Interest Expense.
"Eligible Assignee" means: (i) with the prior consent
of Borrower, which will not be unreasonably withheld or
delayed, a commercial bank or financial institution having
total assets in excess of $1,000,000,000 or any commercial
finance or asset-based lending Affiliate of any such
commercial bank or financial institution which has complied
with Section 12.12 herein, or (ii) any Lender, or an
Affiliate thereof. The consent of Borrower shall not be a
condition precedent to assignment to an Eligible Assignee if
an Event of Default exists and is continuing.
"Environmental Law" means any federal, state, or local
law, statute, ordinance, or regulation applicable or
pertaining to health, industrial hygiene, waste materials,
removal of waste materials, oil, gas, underground storage
tanks, Hazardous Substances, other environmental conditions
on, under, or affecting any of the Borrower's Property.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, including (unless
the context otherwise requires) any rules or regulations
promulgated thereunder.
"Excluded Subsidiary" or "Excluded Subsidiaries" means
collectively Cracker Barrel Old Country Store TV, Inc., and
any future Subsidiary which is not required to execute a
Guaranty under the provisions of Section 5.12 hereof.
"Facing Fee" means the product of (a) .04% multiplied
by (b) the face amount of any Letter of Credit.
"Federal Funds Rate" means for any period, a
fluctuating interest rate per annum equal for each day
during such period to the weighted average of the rates on
overnight Federal funds transactions with member banks 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 Atlanta, 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 (3) Federal funds brokers of recognized
standing selected by the Agent.
"Financial Statements" means (i) the consolidated
financial statement or statements of Borrower and its
Subsidiaries, described or referenced in Section 3.06 hereof
and delivered with this Agreement to Agent for distribution
to Lenders, and (ii) subsequent financial statements
required to be provided pursuant to Section 5.01(a) and (b)
of this Agreement.
"Fiscal Quarter" means each of the quarters of the
Fiscal Year ending on or about the last day of each January,
April, July and October.
"Fiscal Year" or "Annually" means the twelve-month
accounting period ending on or about July 31st of each year
and presently used by the Borrower as its fiscal year for
accounting purposes.
"Funding Account" shall mean that certain account
maintained by Borrower with Agent, bearing account no.
7020125402.
"GAAP" means generally accepted accounting principles
in the United States.
"Guarantors" or "Guarantor" means all Subsidiaries of
Borrower, whether now existing or hereafter created, except
for Excluded Subsidiaries.
"Guaranty" and "Guarantees" means the guaranty
agreements executed by each Guarantor in substantially the
form as set forth in Exhibit F, or as otherwise agreed
between Agent and Guarantor.
"Hazardous Substances" means those substances included
within the definition of hazardous substances, hazardous
materials, toxic substances, or solid waste under the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. 9601, et
seq.; the Resource Conservation and Recovery Act of 1976, 42
U.S.C. 6901, et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. 1801, et seq.; any
applicable state law and in the regulations promulgated
pursuant to such acts and laws, and such other substances,
materials, and waste which are or become regulated under any
Environmental Law.
"Interest Expense" shall mean with respect to the
applicable period, the aggregate interest expense and
amortization of deferred loan costs of Borrower (calculated
without regard to any limitations on the payment thereof),
imputed interest on capitalized lease obligations of
Borrower, and net costs under interest rate protection
agreements for Borrower, all on a consolidated basis and as
determined in conformity with GAAP.
"Interest Rate Period" or "Interest Period" shall be
applicable only to Advances calculated using the LIBOR Rate
Option, and shall mean a one-month, two-month, three-month,
or six-month time period selected by Borrower pursuant to
Section 2.04 herein. No Interest Rate Period may end on a
date extending beyond the Maturity Date.
"Lease Adjusted Funded Debt" shall mean the sum of (1)
all Debt (as previously defined in this Agreement); and (2)
the present value of all operating lease obligations as
determined in accordance with standard S & P methodology.
The calculation of Lease Adjusted Funded Debt for the
Borrower shall include all Lease Adjusted Funded Debt of
Borrower determined on a consolidated basis, plus all Lease
Adjusted Funded Debt of other Persons, which has been
guaranteed by Borrower and any Person whose financial
statements are consolidated with the Financial Statements of
Borrower or which is supported by a letter of credit issued
for the account of Borrower and any Person whose financial
statements are consolidated with the Financial Statements of
Borrower, or as to which and to the extent which Borrower
and any other Person whose financial statements are
consolidated with the Financial Statements of Borrower or
their assets have become liable for payment thereof.
"Lender" or "Lenders" means STB, the other banks and
lending institutions listed on the signature pages hereof
and each permitted assignee thereof, if any, pursuant to
Section 12.12, but shall not include any participant.
"Letter of Credit Application Agreement" means that
certain Application and Agreement for Issuance of a Letter
of Credit in the form of Exhibit D hereto or any other
similar form required by the Agent appropriately completed
by the Borrower pursuant to Section 2.02(a) herein.
"Letter of Credit Fee" means an amount equal to the
product of: (a) one quarter of one percent (.25%) per annum
multiplied by (b) the face amount of the Letter of Credit,
but in any event no less than Five Hundred Dollars ($500).
"Letters of Credit" has the same meaning as set forth
in Section 2.02 herein.
"LIBOR Rate" means the offered rates for deposits in
U.S. Dollars for the applicable Interest Rate Period,
selected by Borrower in accordance with the terms of
Section 2.04, as quoted on the Telerate System subscribed to
by Agent, and which appears on Telerate Page 3750 as of
11:00 a.m., London time, two (2) Business Days prior to the
beginning of any applicable Interest Rate Period. If any of
such one-month or two-month or three-month or six-month
rate, as the case may be, is unavailable on the Telerate
System, then such rate shall be determined by and based on
any other interest rate reporting service of generally
recognized standing designated in advance in writing by the
Agent to the Borrower.
"LIBOR Rate Option" means that rate of interest equal
to the LIBOR Rate for the applicable Interest Rate Period
plus one quarter of one percent (.25%) per annum.
"Lien" means any interest in Property securing an
obligation owed to, or a claim by, a Person other than the
owner of the Property, whether such interest is based on the
common law, statute, or contract, and including, but not
limited to, the lien or security interest arising from a
mortgage, encumbrance, pledge, security agreement,
conditional sale, or trust receipt or a lease, consignment,
or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases,
and other title exceptions and encumbrances affecting the
Property. For the purposes of this Agreement, Borrower shall
be deemed to be the owner of any Property that Borrower has
acquired or holds subject to a conditional sale agreement,
financing lease, or other arrangement pursuant to which
title to the Property has been retained by or vested in some
other Person for security purposes.
"Loan" or "Loans" means any borrowing by Borrower under
this Agreement, and/or any extension of credit by Lenders or
Swing Line Lender to the Borrower pursuant to this
Agreement, the Revolving Credit Loan, the Term Loan, the
Swing Line Loan, or any other Loan Document, including any
renewal, amendment, extension, or modification thereof.
"Loan Documents" means, collectively, each document or
certificate executed, furnished or delivered in connection
with this Agreement (whether before, at, or after the
Closing Date), including, without limitation, this
Agreement, the Revolving Credit Note, the Term Note, the
Swing Line Note, the Guarantees, and all other documents,
certificates, reports, and instruments that this Agreement
requires or that were executed or delivered (or both) at
Agent's request.
"Majority Lenders" means those Lenders with an
aggregate Pro Rata Share equal to or greater than 66 2/3%.
"Material" or "material" as used herein shall be
determined with respect to Borrower on a consolidated basis.
"Maturity Date" for the Revolving Credit Loan, the Term
Loan and the Swing Line Loan shall mean December 2, 2001.
"Maximum Total Amount" means: (i) with respect to the
Revolving Credit Loan, the principal amount of $75,000,000,
less the aggregate face amounts of all outstanding Letters
of Credit (which has a sublimit under Section 2.02 of
$25,000,000), less the aggregate outstanding principal
amount of the Swing Line Note; (ii) with respect to the Term
Loan, the principal amount of $50,000,000; and (iii) with
respect to the Swing Line Loan, the principal amount of
$5,000,000.
"Moody's" means Moody's Investors Services, Inc.
"PBGC" means the Pension Benefit Guaranty Corporation
and any entity succeeding to any or all of its functions
under ERISA.
"Permitted Encumbrances" means: (i) taxes, assessments,
and other governmental charges that are not delinquent or
that are being contested in good faith by appropriate
proceedings duly pursued; (ii) mechanic's, materialmen's,
contractors', landlords', or other similar Liens arising in
the ordinary course of business, securing obligations that
are not delinquent or that are being contested in good faith
by appropriate proceedings duly pursued; and (iii)
restrictions, exceptions, reservations, easements, and
restrictive covenants affecting any of Borrower's real
property and that do not materially and adversely affect
such real property.
"Person" means any individual, corporation,
partnership, joint venture, association, joint stock
company, trust, unincorporated organization, government, or
any agency or political subdivision thereof, or any other
form of entity.
"Plan" means any employee benefit or other plan
established or maintained, or to which contributions have
been made, by the Borrower or any Subsidiary and covered by
Title IV of ERISA or to which Section 412 of the Code
applies.
"Principal Office" means the principal office of the
Agent located at 201 Fourth Avenue North, Nashville,
Tennessee 37219.
"Pro Rata Share" means the percentage of interest held
by each of the Lenders as set forth opposite their
respective signatures hereto, as such percentage may be
adjusted from time to time as a result of assignments or
amendments made pursuant to this Agreement.
"Property" or "Properties" means any interest in any
kind of property or asset, whether real, personal, or mixed,
or tangible or intangible.
"Revolving Credit Advance" means an Advance under the
Revolving Credit Notes.
"Revolving Credit Loan" means the aggregate amount of
all Advances under the Revolving Credit Notes.
"Revolving Credit Loan Commitment" means, relative to
any Lender, such Lender's obligation to make Advances
pursuant to Section 2.01(a) of this Agreement.
"Revolving Credit Note" and "Revolving Credit Notes"
means, as the context may require: (a) any of the revolving
credit notes executed by the Borrower payable to the order
of any Lender, substantially in the form of Exhibit A
hereto, originally in the principal amounts each such
Lender's Pro Rata Share bears to the Maximum Total Amount
for the Revolving Credit Loan, evidencing the aggregate
indebtedness of the Borrower to such Lender resulting from
the outstanding Revolving Credit Loan, as each such
Revolving Credit Note may from time to time be amended,
increased, decreased, extended, renewed, restated, and/or
changed in any way, and all other promissory notes accepted
from time to time in amendment, renewal, payment and/or
substitution thereof and/or therefor, and/or (b)
collectively, all of the foregoing.
"S&P" means Standard & Poor's, a division of The McGraw-
Hill Companies.
"Subsidiary" means any corporation of which more than
fifty percent (50%) of the issued and outstanding Voting
Stock is owned or controlled at the time as of which any
determination is being made directly or indirectly by any
Person.
"Swing Line Lender" shall mean the Agent and its
successors and assigns.
"Swing Line Loan" means all Advances made under the
Swing Line Note up to the Swing Line Subcommitment.
"Swing Line Note" means the revolving credit note of
the Borrower, payable to the order of the Swing Line Lender,
in substantially the form of Exhibit C hereto, in the
principal amount of up to $5,000,000 issued pursuant to
Section 2.03 herein, as such may be from time to time
supplemented, modified, amended, renewed or extended.
"Swing Line Rate" shall be a rate of interest equal to
the LIBOR Rate for three-month periods plus three-tenths of
one percent (.30%) per annum. The Swing Line Rate of
interest shall fluctuate on a daily basis.
"Swing Line Subcommitment" shall mean $5,000,000.
"Term Loan" means the Advance under the Term Notes.
"Term Loan Advance" means the Advance under the Term
Notes.
"Term Loan Commitment" means, relative to any Lender,
such Lender's obligation to make an Advance pursuant to
Section 2.01(b) of this Agreement.
"Term Loan Rate" means a rate of interest equal to the
LIBOR Rate for three-month periods plus one quarter of one
percent (.25%) per annum. The Term Loan Rate shall be reset
two (2) Business Days prior to the end of the applicable
Interest Rate Period and shall be effective for the next
ensuing Interest Rate Period.
"Term Note" and "Term Notes" means, as the context may
require: (a) any of the term notes executed by the Borrower
payable to the order of any Lender, substantially in the
form of Exhibit B hereto, originally in the principal
amounts each such Lender's Pro Rate Share bears to the
Maximum Total Amount of the Term Loan, evidencing the
aggregate indebtedness of the Borrower to such Lender
resulting from the outstanding Term Loan, as each such Term
Note may from time to time be amended, increased, decreased,
extended, renewed, restated, and/or changed in any way, and
all other promissory notes accepted from time to time in
amendment, renewal, payment and/or substitution thereof
and/or therefor, and/or (b) collectively, all of the
foregoing.
"Total Capitalization" means an amount equal to the sum
of Lease Adjusted Funded Debt plus Borrower's shareholders'
equity (as determined by GAAP), all as determined on a
consolidated basis.
"Voting Stock" means securities of any class of a
corporation, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of
the corporate directors (or persons performing similar
functions).
Article II. The Credit.
Section 2.01 Loan Facilities. Subject to the conditions
precedent set forth in this Agreement and pursuant to the terms
of the Loan Documents and in reliance upon the representations,
warranties, and covenants set forth in the Loan Documents,
Lenders agree to make the following loans to Borrower:
(a) The Revolving Credit Loan. In the aggregate for all
Lenders up to the Maximum Total Amount and on any Business Day
occurring prior to the Maturity Date, each Lender severally
agrees to make Revolving Credit Advances under the terms of this
Agreement (relative to such Lender) to the Borrower as evidenced
by a Revolving Credit Note equal to such Lender's Pro Rata Share
of the aggregate amount of the borrowing of total Revolving
Credit Advances requested by the Borrower to be made on such day.
(b) Term Loan. Each Lender severally agrees to make a Term
Loan Advance on March 3, 1997, under the terms of this Agreement
(relative to such Lender) to the Borrower as evidenced by the
Term Note equal to such Lender's Pro Rata Share of Fifty Million
Dollars ($50,000,000).
(c) The amount available to be advanced under the Revolving
Credit Loan shall be reduced dollar-for-dollar by the sum of: (i)
the face amount of any outstanding Letter of Credit, and (ii) the
principal amount outstanding from time to time under the Swing
Line Note. In no event shall the Borrower permit the sum of (x)
the face amount of outstanding Letters of Credit; plus (y) the
outstanding principal amount of the Swing Line Note, plus (z) the
outstanding principal amount of the Revolving Credit Notes to
exceed the Maximum Total Amount. The outstanding principal amount
of all Term Notes shall not exceed the Maximum Total Amount.
(d) On the terms and subject to the conditions hereof and
the Revolving Credit Notes, and provided no Event of Default or
Default Condition has occurred, the Borrower may borrow, repay,
and reborrow under the Revolving Credit Loan. On the terms and
subject to the conditions hereof and the Term Notes, Borrower
shall borrow Fifty Million Dollars ($50,000,000) on March 3,
1997, as the Term Loan.
(e) The failure of any Lender to make an Advance under its
Revolving Credit Loan Commitment or Term Loan Commitment shall
not relieve any other Lender of its obligations hereunder to make
Advances under such Lender's Revolving Credit Loan Commitment or
Term Loan Commitment, but no Lender shall be responsible for the
failure of any other Lender to make an Advance to be made by such
other Lender on the date of any requested Advance.
Section 2.02 Letters of Credit. (a) Provided no Event of
Default or Default Condition exists, and subject to the terms and
conditions of the Loan Documents, the Lenders have agreed that
the Agent on behalf of the Lenders will issue to third party
beneficiaries on Borrower's account, irrevocable standby letters
of credit ("Letters of Credit") in the face amount of up to
$25,000,000 in the aggregate. Agent on behalf of the Lenders
shall not be required to issue Letters of Credit in an aggregate
face amount exceeding $25,000,000. In connection with the
issuance of each Letter of Credit, the Borrower shall complete a
Letter of Credit Application Agreement, and such other
documentation in form and substance as required by Agent. The
term of any Letter of Credit shall not exceed twelve (12) months
from the date of its issuance.
(b) In connection with the issuance of any Letter of
Credit, the Borrower shall pay to Agent a Letter of Credit Fee
(payable on the date of the issuance of the Letter of Credit) to
be apportioned and paid by Agent to each of the Lenders pursuant
to the Pro Rata Share of each Lender. If the term of any Letter
of Credit is less than one (1) month, the Letter of Credit Fee
shall be calculated as if the term of the Letter of Credit was
equal to one (1) month.
(c) In connection with the issuance of any Letter of
Credit, the Borrower shall also pay to Agent a Facing Fee
(payable on the date of the issuance of the Letter of Credit)
calculated on an annual basis. None of the Lenders, except for
the Agent, shall share in the Facing Fee.
(d) The Agent agrees to use its best efforts to issue and
deliver to the Borrower each requested Letter of Credit within
three (3) Business Days following submission by Borrower of a
properly completed Letter of Credit Application Agreement.
(e) No Letter of Credit shall be issued for a term that
extends beyond the Maturity Date. The language of each Letter of
Credit, including the requirements for a draw thereunder, shall
be subject to the reasonable approval of the Agent.
(f) The face amount of any outstanding Letter of Credit
shall reduce the Borrower's ability to receive Advances under the
Revolving Credit Loan by such amount. Additionally, any payment
by Agent under a Letter of Credit shall be treated as an Advance
under the Revolving Credit Loan, and the terms and provisions of
repayment shall be treated as an Advance under the Revolving
Credit Loan.
(g) The Lenders shall participate in all Letters of Credit
requested by the Borrower under this Agreement. Each Lender
holding a Revolving Credit Note, upon issuance of a Letter of
Credit by the Agent, shall be deemed to have purchased without
recourse, a risk participation from the Agent in such Letter of
Credit and the obligations arising thereunder, in each case in an
amount equal to its Pro Rata Share of all obligations under such
Letter of Credit and shall absolutely, unconditionally, and
irrevocably assume, as primary obligor and not as surety, and be
obligated to pay to the Agent therefor and discharge when due,
its Pro Rata Share of all obligations arising under such Letter
of Credit. Without limiting the scope and nature of a Lender's
participation in any Letter of Credit, to the extent that the
Agent has not been reimbursed as required hereunder or under any
such Letter of Credit, each such Lender shall pay to the Agent
its Pro Rata Share of such unreimbursed drawing in same day funds
on the day of notification by the Agent of an unreimbursed
drawing. The obligation of each Lender to so reimburse the Agent
shall be absolute and unconditional and shall not be affected by
the occurrence of a Default Condition or an Event of Default or
any other occurrence or event.
Section 2.03 Swing Line Loan.
(a) Swing Line Subcommitment. Subject to and upon the
terms and conditions herein set forth, the Swing Line Lender
severally establishes in favor of the Borrower, its Swing
Line Subcommitment. The Swing Line Lender, subject to and
upon the terms and conditions set forth herein, from time to
time, agrees to make to the Borrower Advances under the
Swing Line Loan in an aggregate principal amount outstanding
at any time not to exceed the Swing Line Subcommitment.
Borrower shall be entitled to repay and reborrow Advances
under the Swing Line Loan in accordance with the provisions
hereof and the Swing Line Note.
(b) Amount and Terms of Swing Line Loan. Each Advance
under the Swing Line Loan shall be made from the Swing Line
Lender at the Swing Line Rate in accordance with the
borrowing procedure specified in Section 2.05(c). Each
Advance under the Swing Line Loan shall be in a principal
amount of not less than $100,000 and shall be in multiples
of $100,000 in excess thereof. The Borrower shall be
required to repay any Advance made under the Swing Line Loan
in full within thirty (30) days after such Advance is made.
(c) Repayment of Swing Line Loan by Revolving Credit
Loan. If (i) after giving effect to any request for an
Advance, the aggregate principal amount of the Revolving
Credit Loan (including the face amount of all outstanding
Letters of Credit), and the Swing Line Loan would exceed the
maximum amount of the Revolving Credit Note held by the
Swing Line Lender, or (ii) there are any outstanding
Advances under the Swing Line Loan upon the occurrence of an
Event of Default, then each Lender holding a Revolving
Credit Note hereby agrees, upon the request of the Swing
Line Lender, to make an Advance under the Revolving Credit
Loan in an amount equal to such Lender's Pro Rata Share of
the outstanding principal amount of the Swing Line Loan (the
"Refundable Swing Line Loan") outstanding on the date such
notice is given. On or before 11:00 a.m. (Nashville,
Tennessee time) on the first Business Day following receipt
by such Lender of a request to make the Advances referenced
in the preceding sentence, each such Lender (other than the
Swing Line Lender) shall deposit in an account specified by
the Agent to the Lenders from time to time the amount as
requested in same day funds, whereupon such funds shall be
immediately delivered to the Swing Line Lender (and not the
Borrower) and applied to repay the Refundable Swing Line
Loan. On the day such Advances are made by the Lenders, the
Swing Line Lender's Pro Rata Share of the Refundable Swing
Line Loan shall be deemed to be paid with the proceeds of
the Revolving Credit Advance made by the Swing Line Lender.
Upon the making of any Advance under the Revolving Credit
Loan pursuant to this subpart (c), the amount so funded
shall become due under each Lender's Revolving Credit Note
and shall no longer be owed under the Swing Line Note.
Additionally, the Applicable Rate on such Refundable Swing
Line Loan shall initially be the Base Rate Option. Each
Lender's obligation to make Advances under its Revolving
Credit Note referred to in this subpart (c) shall be
absolute and unconditional and shall not be affected by any
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(d) Purchasing of Participations. In the event that
(i) the Borrower is subject to any bankruptcy or insolvency
proceedings, or (ii) if the Swing Line Lender otherwise
requests, each Lender holding a Revolving Credit Note shall
acquire without recourse or warranty, an undivided
participation interest in the Swing Line Loan equal to such
Lender's Pro Rata Share by paying to the Swing Line Lender,
in same day funds, an amount equal to such Lender's Pro Rata
Share of the Swing Line Loan. From and after the date on
which such Lender purchases an undivided participation
interest in the Swing Line Loan pursuant to this clause, the
Swing Line Lender shall distribute to such Lender
(appropriately adjusted, in the case of interest payments,
to reflect the period of time during which such Lender's
participation interest is outstanding and funded) its
ratable amount of all payments of principal and interest in
respect of the Swing Line Loan in like funds as received;
provided, however, that in the event such payment received
by the Swing Line Lender is required to be returned to the
Borrower, such Lender shall return to the Swing Line Lender
the portion of any amounts which such Lender had received
from the Swing Line Lender in like funds.
Section 2.04 Interest Rate.
(a) The Applicable Rate for Advances under the
Revolving Credit Loan shall either be the Base Rate Option
or the LIBOR Rate Option, as selected by Borrower pursuant
to the procedures specified in parts (b) and (c) below. The
Applicable Rate for Advances under the Term Loan shall be
the Term Loan Rate. The Term Loan Advance shall be for an
Interest Rate Period of three-months. The Term Loan Rate
shall be reset two (2) Business Days prior to the end of the
current Interest Rate Period, for the next ensuing Interest
Rate Period. The Applicable Rate for the Swing Line Loan
shall be the Swing Line Rate.
(b) So long as the Borrower complies with Section 2.05
herein, the Borrower may elect that any Advance under the
Revolving Credit Loan shall bear interest at either the Base
Rate Option or the LIBOR Rate Option. In the event that the
Borrower fails to designate an Applicable Rate for a
Revolving Credit Loan, or in the event the Borrower fails to
make an interest rate election in strict compliance
herewith, then it shall be conclusively presumed that the
Borrower has selected the LIBOR Rate Option with a one (1)
month Interest Rate Period for such Revolving Credit
Advance.
(c) At least two (2) Business Days prior to the
expiration of any applicable Interest Rate Period for a
Revolving Credit Loan, the Borrower shall designate a new
Applicable Rate. In the event that the Borrower fails to
designate a new Applicable Rate at least two (2) Business
Days prior to the expiration of any applicable Interest Rate
Period, then it shall be conclusively presumed that the
Borrower has selected the LIBOR Rate Option with a one (1)
month Interest Rate Period as the Applicable Rate to be
effective on the expiration of such Interest Rate Period.
(d) In the event that the Borrower selects the Base
Rate Option as the Applicable Rate for a Revolving Credit
Loan, then the Base Rate Option shall remain effective until
two (2) Business days subsequent to the date Agent receives
notice that Borrower has elected to change the Applicable
Rate for a Revolving Credit Advance to a LIBOR Rate Option.
(e) Upon the occurrence of an Event of Default, the
indebtedness described herein and all obligations hereunder
shall bear interest at the Default Rate.
(f) All interest and all fees for the issuance of
Letters of Credit shall be calculated on the basis of a 360-
day year and actual days elapsed.
Section 2.05 Borrowing Procedure. (a) In General. The
Borrower authorizes the Agent to deposit all Advances into the
Funding Account. Any one of the Persons who hold the following
titles with Borrower is authorized to request an Advance: Chief
Executive Officer, President, Chief Financial Officer, Treasurer
and Assistant Treasurer.
(b) Requests for Revolving Credit Loan. Borrower shall give
the Agent at least two (2) Business Day's prior written notice of
a proposed Advance at the LIBOR Rate Option and same day prior
written notice (by 11:00 a.m. Nashville, Tennessee time) of a
proposed Advance at the Base Rate Option, under the Revolving
Credit Loan by presentation of a Borrowing Request. Any notice
received by Borrower after 11:00 a.m. Nashville, Tennessee time
will be deemed given on the next Business Day. With regard to
requests for Advances under the Revolving Credit Loan, the
following shall apply: (a) in the event that the Borrower
designates the Base Rate Option as the Applicable Rate, the
requested Advance must be in a minimum amount of $500,000 and
increments of $100,000 in excess thereof; and (b) in the event
the Borrower designates the LIBOR Rate Option as the requested
Applicable Rate, the requested Advance must be in a minimum
amount of $2,500,000 and increments of $500,000 in excess
thereof. Agent shall give notice to Lenders of a request for an
Advance by 1:00 p.m. (Nashville, Tennessee time) on the date of
such request, and each Lender shall wire immediately available
funds to Agent by 2:00 p.m. (Nashville, Tennessee time) the date
of the requested Advance.
(c) Swing Line Note. Borrower may give the Agent oral
notice of a request for an Advance under the Swing Line Note no
later than 11:00 A.M. (Nashville, Tennessee time) followed by
facsimile transmission sent to Agent. Borrower shall specify that
such request is a request under the Swing Line Note, and subject
to availability under the Swing Line Note and provided the
request is made no later than 11:00 A.M. (Nashville, Tennessee
time), the Agent shall make the Advance by crediting the Funding
Account no later than the close of business on the day of the
borrowing. With regard to requests for Advances under the Swing
Line Loan, the following shall apply: Advances shall be in a
minimum amount of $100,000 and increments of $100,000 in excess
thereof.
(d) No Liability. The Agent and the Lenders shall have no
liability to Borrower arising out of their compliance with the
borrowing procedure specified in this Section 2.05, except for
acts of gross negligence or willful misconduct.
(e) Warranty. The request by the Borrower of an Advance
shall constitute a warranty by the Borrower that as of the date
of the request and as of the date the Advance is made: (i) no
Event of Default or Default Condition has occurred; and (ii) the
representations and warranties contained in Article III of this
Agreement remain true, correct, and accurate.
Section 2.06 Use of Proceeds. Proceeds of the Revolving
Credit Loan and the Swing Line Loan shall be used to fund
Borrower's working capital, acquisitions, capital expenditures
needs and for Borrower's general corporate purposes. Proceeds of
the Term Loan shall be used to repay and to cancel all
outstanding amounts owed to STB under that certain $50,000,000
promissory note dated November 22, 1996.
Section 2.07 Participation. Any Lender shall have the right
to enter into one or more participation agreements with one or
more of its Affiliates. Subject to Borrower's approval under
Section 12.12(d), each Lender shall have the right to enter into
one or more participation agreements with one or more banks, or
financial institutions which are not Affiliates of such Lender,
on such terms and conditions as such Lender shall deem advisable.
Notwithstanding any provisions of this section or Section
12.12(d), a Lender shall have the right to enter into one or more
participation agreements without the consent of Borrower, if an
Event of Default exists and is continuing. Borrower shall furnish
a sufficient number of copies of reports and certificates to
Lenders so that Lenders and each participating lender shall
receive a copy of each such document.
Section 2.08 Term of This Agreement. This Agreement shall
mature and all amounts under this Agreement, the Revolving Credit
Note, the Term Note and the Swing Line Note shall be due and
payable on the Maturity Date. This Agreement shall be binding
upon the Borrower so long as any portion of the indebtedness
described herein remains outstanding, provided and except,
Borrower's representations, warranties, and indemnity agreements
shall survive the payment in full of such indebtedness.
Section 2.09 Payments to Principal Office; Debit Authority.
Each payment under the Revolving Credit Loan and Term Loan shall
be made without defense, setoff, or counterclaim to Agent at its
Principal Office in U.S. Dollars for the account of Lenders and
in immediately available funds before 11:00 a.m. (Nashville,
Tennessee time) on the date such payment is due. The Agent 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
the Borrower with the Agent. Each payment under the Swing Line
Loan shall be made to Agent at its Principal Office in U.S.
Dollars and in immediately available funds before 11:00 a.m.
(Nashville, Tennessee time) on the date such payment is due.
Payments received after 11:00 a.m. (Nashville, Tennessee time)
will be deemed received on the next Business Day. Agent shall
wire, in immediately available funds, each such payment to
Lenders by 2:00 p.m. (Nashville, Tennessee time) on the date
payments are received.
Section 2.10 Prepayment.
(a) Required Prepayment. Whenever the aggregate
amount outstanding under the Revolving Credit Loan or Term
Loan (as applicable) exceeds the Maximum Total Amount, the
Borrower shall immediately pay to Lenders such amounts as
may be necessary to cause the aggregate principal amount
outstanding under the Revolving Credit Loan or Term Loan (as
applicable) to be equal to or less than the Maximum Total
Amount. Whenever the amount outstanding under the Swing Line
Note exceeds the Maximum Total Amount permitted to be
outstanding under the Swing Line Loan, the Borrower shall
immediately pay to Agent such amounts as may be necessary to
cause the principal amount outstanding under the Swing Line
Note to be equal to or less than the Maximum Total Amount
permitted to be outstanding under the Swing Line Loan;
(b) Optional Prepayment. The Borrower may prepay the
Revolving Credit Loan and Swing Line Loan as follows:
(i) The Borrower may prepay the Swing Line
Loan (provided that such reduction shall be in a
principal amount of at least $100,000 and integral
multiples of $100,000 in excess thereof) by written
notice delivered to Agent no later than 11:00 a.m. on
the date of such prepayment;
(ii) Borrower may prepay Advances under the
Revolving Credit Notes which bear interest at the Base
Rate Option (provided that such reduction shall be in a
principal amount of at least $100,000 and integral
multiples of $100,000 in excess thereof) by written
notice delivered to Agent no later than 11:00 a.m. on
the date of such prepayment and Agent shall give notice
to Lenders by 2:00 p.m. on the date of such prepayment;
(iii) Borrower shall not have the right and
option to prepay Advances under the Revolving Credit
Notes bearing interest at the LIBOR Rate Option until
the expiration of the applicable Interest Period for
such Advance.
All prepayments will be applied first to unpaid expenses (if
any), then to accrued interest, then to principal.
(c) Permanent Prepayments. The Borrower may
permanently prepay the Term Loan or permanently reduce the
Revolving Credit Loan as follows:
(i) Upon ten (10) days prior written notice
delivered from Borrower to Agent, the Borrower may
permanently reduce the maximum principal amount that
may be borrowed under the Revolving Credit Loan;
provided that such reduction shall be in a principal
amount of at least $2,500,000 and integral multiples of
$2,500,000 in excess thereof, and provided that such
reduction shall not reduce an outstanding Revolving
Credit Advance with a LIBOR Rate Option until the
expiration of the applicable Interest Period for such
Advance. In the event that a permanent reduction is
made by the Borrower in the amount that may be borrowed
under the Revolving Credit Loan, the Maximum Total
Amount for the Revolving Credit Loan and the Revolving
Credit Loan Commitment shall be reduced accordingly.
Agent shall notify Lenders of a prepayment under this
subsection within one Business Day after receipt of
notice.
(ii) Upon ten (10) days prior written notice
delivered from Borrower to Agent, the Borrower may
permanently prepay all or a part of the Term Loan;
provided that, such reduction shall be in a principal
amount of at least $5,000,000 and integral multiples of
$5,000,000 in excess thereof. Notwithstanding any
provision in this Section 2.10 to the contrary,
Borrower cannot prepay a Term Loan until the end of the
applicable Interest Period. Agent shall notify Lenders
of a prepayment under this subsection within one
Business Day after receipt of notice.
Section 2.11 Apportionment of Payments. Aggregate principal
and interest payments with respect to Advances under the
Revolving Credit Loan and/or the Term Loan shall be apportioned
among all outstanding Revolving Credit Loan Commitments and Term
Loan Commitments to which such payments relate proportionately to
the Lenders' respective Pro Rata Share of such Revolving Credit
Loan Commitments and Term Loan Commitments. In the event the
Agent receives payment under the Revolving Credit Loan and/or
Term Loan by 11:00 A.M. (Nashville, Tennessee time), then the
Agent shall distribute to each Lender its share of all such
payments received by the Agent no later than 2:00 P.M.
(Nashville, Tennessee time) on the date of Agent's receipt of
such payments. Payments received subsequent to 11:00 A.M.
(Nashville, Tennessee time) shall be treated as received on the
next succeeding Business Day. Payments received by Agent for the
Swing Line Loan shall not be apportioned, but shall be delivered
to the Swing Line Lender.
Section 2.12 Sharing of Payments, Etc. If any Lender shall
obtain any payment or reduction (including, without limitation,
any amounts received as adequate protection of a deposit treated
as cash collateral under the Bankruptcy Code) of the indebtedness
relating to Advances under the Revolving Credit Loan (whether
voluntary, involuntary, through the exercise of any right of set-
off or otherwise) in excess of its Pro Rata Share of payments or
reductions of the Revolving Credit Loan, such Lender shall
forthwith (a) notify each of the other Lenders and Agent of such
receipt, and (b) purchase from the other Lenders such
participations in the Revolving Credit Loan as shall be necessary
to cause such purchasing Lender to share the excess payment or
reduction, net of costs incurred in connection therewith, ratably
with each of them, provided that if all or any portion of such
excess payment or reduction is thereafter recovered from such
purchasing Lender or additional costs are incurred, the purchase
shall be rescinded and the purchase price restored to the extent
of such recovery or such additional costs, but without interest
unless the Lender obligated to return such funds is required to
pay interest on such funds. Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this
Section 2.12 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-
off) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of
such participation.
Section 2.13 Right of Offset, Etc. The Borrower hereby
agrees that, in addition to (and without limitation of) any right
of set-off, banker's lien or counterclaim the Lenders may
otherwise have, the Lenders shall be entitled, at their option,
to offset balances held by any of them at any of their offices
against any principal of or interest on the indebtedness
described herein which is not paid when due by reason of a
failure by the Borrower to make any payment when due to such
Lender (regardless whether such balances are then due to the
Borrower), in which case such offsetting Lender shall promptly
notify the Borrower, provided that its failure to give such
notice shall not affect the validity thereof.
Section 2.14 Commitment Fee. Commencing on March 31, 1997
and on the last day of each Fiscal Quarter thereafter and on the
Maturity Date, the Borrower shall pay to the Agent for
distribution to the Lenders based on their Pro Rata Share, a
commitment fee equal to one-tenth of one percent (.10%) per annum
calculated on the average unused portion of the Revolving Credit
Loan for the preceding Fiscal Quarter (or portion thereof);
provided that the payment made on March 31, 1997 shall be for a
time period from the Closing Date to March 31, 1997. The
commitment fee shall be calculated based on a year of 360 days
for the actual number of days elapsed.
Section 2.15 Usury. The parties to this Agreement intend to
conform strictly to applicable usury laws as presently in effect.
Accordingly, if the transactions contemplated hereby would be
usurious under applicable law (including the laws of the United
States of America and the State of Tennessee), then, in that
event, notwithstanding anything to the contrary in any Loan
Document or agreement executed in connection with the
indebtedness described herein, Borrower, Agent, and Lenders agree
as follows: (i) the aggregate of all consideration that
constitutes interest under applicable law which is contracted
for, charged, or received under any of the Loan Documents or
agreements, or otherwise in connection with the indebtedness
described herein, shall under no circumstance exceed the maximum
lawful rate of interest permitted by applicable law, and any
excess shall be credited on the indebtedness by the holder
thereof (or, if the indebtedness described herein shall have been
paid in full, refunded to Borrower); and (ii) in the event that
the maturity of the indebtedness described herein is accelerated
as a result of any Event of Default or otherwise, or in the event
of any required or permitted prepayment, then such consideration
that constitutes interest may never include more than the maximum
amount of interest permitted by applicable law, and excess
interest, if any, for which this Agreement provides, or
otherwise, shall be cancelled automatically as of the date of
such acceleration or prepayment and, if previously paid, shall be
credited on the indebtedness described herein (or, if the
indebtedness shall have been paid in full, refunded to Borrower).
Section 2.16 Interest Rate Not Ascertainable, Etc. In the
event that the Agent shall in good faith have determined that on
any date for determining the LIBOR Rate, by reason of any changes
arising after the date of this Agreement affecting the London
interbank market or the Agent's position in such market, adequate
and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of
LIBOR Rate, then, and in any such event, the Agent shall
forthwith give notice (by telephone confirmed in writing) to the
Borrower of such determination and a summary of the basis for
such determination. At the expiration of any Interest Rate Period
then in effect and until the Agent notifies the Borrower that the
circumstances giving rise to the suspension described herein no
longer exist (which notice shall be given forthwith after such
determination is made by the Agent), all Loans shall bear
interest at the Base Rate Option.
Section 2.17 Illegality. (a) In the event that the Agent
shall have determined any time that the making or continuance of
any Advance bearing interest at the LIBOR Rate Option has become
unlawful by compliance by any Lender (an "Affected Lender") in
good faith with any applicable law, governmental rule,
regulation, guideline or order (whether or not having the force
of law and whether or not failure to comply therewith would be
unlawful), then, in any such event, the Agent shall give prompt
notice (by telephone confirmed in writing) to the Borrower of
such determination and a summary of the basis for such
determination.
(b) Upon the giving of the notice to the Borrower referred
to in Section 2.17(a), the Borrower's right to elect a LIBOR Rate
Option shall be immediately suspended, and all outstanding
Advances made by the Affected Lender shall bear interest at the
Base Rate Option after the current Interest Period has expired.
The Borrower shall have the right and option to replace the
Affected Lender pursuant to Section 12.13 hereof, for so long as
the Affected Lender which remains under the disability described
in Section 2.17(a), has not been replaced.
Section 2.18 Increased Costs. (a) If by reason of (i) after
the date hereof, the introduction of or any change (including,
without limitation, any change by way of imposition or increase
of reserve requirements) in or in the interpretation of any law
or regulation, or (ii) the compliance with any guideline or
request from any central bank or other governmental authority or
quasi-governmental authority exercising control over banks or
financial institutions generally (whether or not having the force
of law):
(A) the Agent or any Lender shall be subject to any
tax, duty or other charge with respect to any Advances
bearing interest at the LIBOR Rate Option (all such Advances
being collectively referred to as the "LIBOR Loans") or its
obligation to make LIBOR Loans, or the basis of taxation of
payments to the Agent or any Lender of the principal of or
interest on its LIBOR Loans or its obligation to make LIBOR
Loans shall have changed (except for changes in the tax on
the overall net income of the Agent or such Lender, or
similar taxes, pursuant to the laws of jurisdictions with
taxing authority over the Agent or such Lender); or
(B) any reserve (including, without limitation, any
reserve imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or
credit extended by, the Agent or any Lender shall be imposed
or deemed applicable or any other condition affecting its
LIBOR Loans or its obligation to make LIBOR Loans shall be
imposed on the Agent or any Lender or the London interbank
market;
and as a result thereof there shall be any increase in the cost
to the Agent or such Lender (a "LIBOR Affected Lender") of
agreeing to make or making, funding or maintaining LIBOR Loans
(except to the extent already included in the determination of
the interest rate for LIBOR Loans), or there shall be a reduction
in the amount received or receivable by the Agent or any LIBOR
Affected Lender, then the Borrower shall from time to time, upon
written notice from and demand in good faith by the Agent, pay to
the Agent for the account of the Lenders (or any LIBOR Affected
Lender) within five (5) Business Days after the date of such
notice and demand, additional amounts sufficient to indemnify the
Agent or such LIBOR Affected Lender against such increased cost;
provided, however, that nothing in this section shall require
Borrower to indemnify the Agent or any Lender for withholding
taxes; provided that Borrower shall have the right and option to
replace a LIBOR Affected Lender pursuant to the terms of Section
12.13 hereof.
(b) If the Agent shall in good faith determine that at any
time, because of the circumstances described in Section
2.18(a)(i) or (ii) arising after the date of this Agreement
affecting the Agent or any Lender or the London interbank market
or the Agent or any Lender's position in such market, the
calculations for the interest rates for LIBOR Loans as determined
by the Agent or any Lender will not adequately and fairly reflect
the cost to the Agent or any Lender of funding such LIBOR Loans,
the Agent shall forthwith give notice (by telephone confirmed in
writing) to the Borrower of such advice, and a summary of the
basis for such determination, and then, and in any such event and
until Agent notifies the Borrower that such circumstances no
longer exist (which notice shall be given forthwith after such
determination is made by the Agent):
(i) The Borrower's right to request, and the Agent's
and any Lender's obligation to make or permit portions of
the indebtedness described herein to remain outstanding past
the last day of the then current Interest Rate Period as
LIBOR Loans shall be immediately suspended; and
(ii) After the last day of the then-current Interest
Rate Period, all indebtedness described herein shall bear
interest at the Base Rate Option.
Section 2.19 Mitigation. Each Lender shall take such
commercially reasonable steps as it may determine are not
disadvantageous to it, including changes in lending offices to
the extent feasible, in order to reduce additional payments by
the Borrower pursuant to Section 2.18 and to make the LIBOR Rate
Option available under Sections 2.17 and 2.18 hereof.
Article III. Representations and Warranties.
To induce Lenders to enter this Agreement and extend credit
under this Agreement, the Borrower covenants, represents and
warrants to Lenders that as of the date hereof:
Section 3.01 Corporate Existence. The Borrower and its
Subsidiaries are corporations duly organized, legally existing,
and in good standing under the laws of the states of their
incorporation, and are duly qualified as foreign corporations in
all jurisdictions in which the Property owned or the business
transacted by them makes such qualification necessary, except
where failure to so qualify does not have a material adverse
effect upon the Borrower, its Subsidiaries, their business, or
their Properties, as a whole on a consolidated basis.
Section 3.02 Power and Authorization. The Borrower and each
of the Guarantors, as applicable, are duly authorized and
empowered to execute, deliver, and perform under all Loan
Documents; the board of directors of the Borrower (and each
Guarantor, as applicable) has authorized the execution and
performance of the Loan Documents; and all other corporate action
on Borrower's (and Guarantors') part required for the due
execution, delivery, and performance of the Loan Documents has
been duly and effectively taken.
Section 3.03 Binding Obligations. This Agreement is, and the
Loan Documents when executed and delivered in accordance with
this Agreement will be, legal, valid and binding upon and against
the Borrower (and the Guarantors, as applicable), enforceable in
accordance with their terms, subject to no defense, counterclaim,
set-off, or objection of any kind.
Section 3.04 No Legal Bar or Resultant Lien. The Borrower's
(and the Guarantors', as applicable) execution, delivery and
performance of the Loan Documents do not constitute a default
under, and will not violate any provisions of the articles of
incorporation (or charter), or bylaws of the Borrower (or the
Guarantors), or any contract, agreement, law, regulation, order,
injunction, judgment, decree, or writ to which the Borrower (or
the Guarantors) are subject, or result in the creation or
imposition of any Lien upon any Properties of the Borrower (or
the Guarantors).
Section 3.05 No Consent. The Borrower's and the Guarantors',
as applicable, execution, delivery, and performance of the Loan
Documents do not require the consent or approval of any other
Person.
Section 3.06 Financial Condition. The Financial Statements
of Borrower which have been delivered to Lenders dated August 2,
1996 have been prepared in accordance with GAAP consistently
applied, and the Financial Statements present fairly the
financial condition of Borrower as of the date or dates and for
the period or periods stated therein. No material adverse change
in the financial condition of the Borrower has occurred since the
date of such Financial Statements.
Section 3.07 Investments, Advances, and Guarantees. Except
for advances to, investments in or guaranties of its
Subsidiaries, neither the Borrower nor the Guarantors have made
investments in, advances to, or guaranties of the obligations of
any Person, or committed or agreed to undertake any of these
actions or obligations, except as referred to or reflected in the
Financial Statements.
Section 3.08 Liabilities and Litigation. Neither the
Borrower nor its Subsidiaries have material liabilities
(individually or in the aggregate) direct or contingent which
would require adjustment to or disclosure in the Financial
Statements, except as referred to or reflected in the Financial
Statements. There is no litigation, legal or administrative
proceeding, investigation, or other action of any nature pending
or, to the knowledge of Borrower threatened against or affecting
the Borrower or the Subsidiaries, that involves the possibility
of any judgment or liability not fully covered by insurance and
that may materially and adversely affect the business or the
Properties of the Borrower or the Subsidiaries, or their ability
to carry on their business as now conducted.
Section 3.09 Taxes; Governmental Charges. The Borrower and
its Subsidiaries have filed or caused to be filed all tax returns
and reports required to be filed and has paid all taxes,
assessments, fees, and other governmental charges levied upon it
or upon any of their Properties or income, which are due and
payable. The Borrower and its Subsidiaries have made all required
withholding deposits.
Section 3.10 No Default. Neither the Borrower nor its
Subsidiaries is in default in any respect that materially and
adversely affects their business, Properties, operations, or
condition, financial or otherwise, under any indenture, mortgage,
deed of trust, credit agreement, note, agreement, or other
instrument to which they are a party or by which their Properties
are bound. Neither the Borrower nor the Subsidiaries are in
violation of their respective Articles of Incorporation (or
Charter) or Bylaws. No Default Conditions hereunder have occurred
or are continuing as of the date hereof.
Section 3.11 Compliance with Laws, Etc. Neither the Borrower
nor its Subsidiaries are in violation of any law, judgment,
decree, order, ordinance, or governmental rule or regulation to
which they or any of their Properties is subject in any respect
that materially and adversely affects their business, Properties,
or financial condition. Neither the Borrower nor its Subsidiaries
have failed to obtain any license, permit, franchise, or other
governmental authorization necessary to the ownership of their
Properties or to the conduct of their business, which if not
obtained would have or has a material, adverse effect on the
Borrower and its Subsidiaries, as a whole.
Section 3.12 ERISA. The Borrower and its Subsidiaries are in
compliance in all material respects with the applicable
provisions of ERISA. Neither the Borrower nor its Subsidiaries
have incurred any "accumulated funding deficiency" within the
meaning of ERISA which is material, and they have not incurred
any material liability to PBGC in connection with any Plan.
Section 3.13 No Material Misstatements. No information,
exhibit, or report furnished or to be furnished by Borrower (or
Guarantors) to Lender in connection with this Agreement, contains
any material misstatement of fact or fails to state any material
fact, the omission of which would render the statements therein
materially false or misleading.
Section 3.14 Regulation U. Neither the Borrower nor any of
its Subsidiaries are engaged as one of its important activities,
in the business of extending credit for the purpose of purchasing
or carrying "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System. No part of
the indebtedness described herein shall be used at any time to
purchase or to carry margin stock within the meaning of
Regulation U or to extend credit to others for the purpose of
purchasing or carrying any margin stock if to do so would cause
the Lenders to violate the provisions of Regulation U.
Section 3.15 Filings. To the date hereof, the Borrower has
filed all reports and statements required to be filed with the
Securities and Exchange Commission. As of their respective dates,
the reports and statements referred to above complied in all
material respects with all rules and regulations promulgated by
the Securities and Exchange Commission and did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
Section 3.16 Title, Etc. The Borrower and its Subsidiaries
have good title to their Properties, free and clear of all Liens
except those referenced or reflected in the Financial Statements,
and except for any defects in title which would not have a
material adverse effect on the business, Properties, financial
condition or operations of the Borrower and its Subsidiaries (as
a whole, on a consolidated basis) or on the ability of the
Borrower to perform its obligations under this Agreement.
Borrower and its Subsidiaries possess all trademarks, copyrights,
trade names, patents, licenses, and rights therein, adequate for
the conduct of their business as now conducted, except for such
that would not have a material adverse effect on the business,
Properties, financial condition or operations of the Borrower
(and its Subsidiaries) or on the ability of the Borrower (as a
whole, on a consolidated basis) to perform its obligations under
this Agreement.
Section 3.17 Personal Holding Company; Subchapter S.
Neither the Borrower nor any of its Subsidiaries are "personal
holding companies" as defined in Section 542 of the Code, and
neither the Borrower nor any of its Subsidiaries are "Subchapter
S" corporations within the meaning of the Code.
Section 3.18 Subsidiaries. As of the Closing Date, Borrower
has only the following Subsidiaries: CBOCS West, Inc.; CBOCS
Distribution, Inc.; Cracker Barrel Old Country Store TV, Inc.;
CBOCS Sierra, Inc.; CBOCS Michigan, Inc.; and Rocking Chair, Inc.
Article IV. Conditions Precedent.
Section 4.01 Initial Conditions. Lenders' obligation to
extend credit and to issue any Letter of Credit, and Swing Line
Lender's obligation to make an Advance under the Swing Line Loan
hereunder is subject to the Conditions Precedent that Agent shall
have received (or agreed in writing to waive or defer receipt of)
all of the following, each duly executed, dated and delivered as
of the date hereof, in form and substance satisfactory to Agent
and its counsel:
(a) Notes and Loan Documents. This Agreement, the
Revolving Credit Notes, the Term Notes, the Swing Line Note,
the Guarantees of each of the Guarantors, any Letter of
Credit Application Agreements, and other documents executed
in connection with this Agreement (the "Loan Documents").
(b) Resolutions. Certified copies of resolutions of
the Board of Directors of the Borrower and each Guarantor,
authorizing or ratifying the execution, delivery, and
performance, respectively, of Loan Documents.
(c) Certificate of Existence. A certificate of
existence of the Borrower and each Guarantor from the state
in which the Borrower and such Guarantor is incorporated or
organized, which certificate shall contain no facts
reasonably objectionable to Agent.
(d) Consents, Etc. Certified copies of all documents
evidencing any necessary corporate action, consents, and
governmental approvals (if any) with respect to this
Agreement and the Loan Documents.
(e) Officer's Certificate. A certificate of the
secretary or any assistant secretary of the Borrower and
each Guarantor certifying: (i) the names of the officer or
officers of the Borrower and the Guarantor authorized to
sign the applicable Loan Documents, together with a sample
of the true signature of such officer(s), and (ii) as to
representations and warranties of, and litigation involving,
the Borrower and the Guarantor.
(f) Charter and By-Laws and Organizational Documents.
A copy of the Borrower's (and each Guarantor's) by-laws and
charter or articles of incorporation (including all
amendments thereto) certified by the secretary or any
assistant secretary of the Borrower (and the Guarantor), and
in the case of the charter or articles of incorporation, by
the Secretary of State of the state in which the Borrower
(or Guarantor) is incorporated, as being true and complete
copies of the current charter or articles of incorporation
and by-laws of the Borrower (or Guarantor).
(g) Attorneys Opinion Letter. An opinion letter from
counsel to the Borrower and the Guarantor opining as to such
matters as reasonably required by Agent.
(h) Payment of Fees, Etc. Payment of all outstanding
fees and expenses to Agent, Swing Line Lender, or any
Lender, including all of Agent's reasonable legal fees.
(i) Other. Such other documents as Agent may
reasonably request.
Section 4.02 All Borrowings. The Lenders' obligation to
extend credit pursuant to this Agreement and to issue any Letter
of Credit and Swing Line Lender's obligation to make an Advance
under the Swing Line Loan is subject to the following additional
Conditions Precedent which shall be met each time an Advance
(including the request for the issuance of a Letter of Credit) is
requested:
(a) The representations of the Borrower contained in
Article III are true and correct as of the date of the
requested Advance, with the same effect as though made on
the date of such Advance; (b) There has been no material
adverse change in the Borrower's consolidated financial
condition since the date of the last borrowing hereunder;
(c) No Default Condition or Event of Default has occurred
and continues to exist; (d) No material litigation
(including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings not
disclosed in writing by the Borrower to the Agent prior to
the date of the execution and delivery of this Agreement is
pending or known to be threatened against the Borrower
(and/or the Guarantors) and no material development not so
disclosed has occurred in any litigation, arbitration
proceedings or governmental proceedings so disclosed, which
could reasonably be expected to materially and adversely
affect the financial position or business of the Borrower
(and/or the Guarantors) or impair the ability of the
Borrower (and/or the Guarantors) to perform its obligations
under this Agreement or any other Loan Documents, as
applicable.
Article V. Affirmative Covenants.
The Borrower covenants that, during the term of this
Agreement (including any extensions hereof) and until all
indebtedness described herein shall have been finally paid in
full, unless Agent shall otherwise first consent in writing, the
Borrower shall:
Section 5.01 Financial Statements and Reports. Promptly
furnish to Agent and to each Lender:
(a) Annual Reports. As soon as available, and in any
event within ninety (90) days after the close of each Fiscal
Year of the Borrower, the audited consolidated Financial
Statements of the Borrower setting forth the audited
consolidated balance sheets of the Borrower as at the end of
such year, and the audited consolidated statements of
income, statements of cash flows, and statements of
stockholders' equity of the Borrower for such year, setting
forth in each case in comparative form (beginning when
comparative data are available) the corresponding figures
for the preceding Fiscal Year accompanied by the report of
the Borrower's certified public accountants. The audit
opinion in respect of the Financial Statements of the
Borrower shall be the opinion of a firm of independent
certified public accountants among the "Big Six" accounting
firms;
(b) Quarterly and Year-to-Date Reports. As soon as
available and in any event within forty-five (45) days after
the end of each Fiscal Quarter, the consolidated unaudited
balance sheets of the Borrower as of the end of such Fiscal
Quarter, and the consolidated unaudited statements of income
and cash flow of the Borrower for such quarter and for a
period from the beginning of the Fiscal Year to the close of
such Fiscal Quarter, all certified by the chief financial
officer or chief accounting officer of the Borrower as being
true and correct to the best of his or her knowledge,
subject to ordinary year-end accounting adjustments;
(c) Compliance Reports. As soon as available and in
any event within ninety (90) days after the close of the
Fiscal Year and within forty-five (45) days after the end of
each Fiscal Quarter (other than the fourth Fiscal Quarter of
each Fiscal Year), the calculations by Borrower of the
financial covenants contained in Article VII herein, along
with a certificate of compliance (in substantially the form
as Exhibit G), certified by the president or chief financial
officer of the Borrower stating that such officer has no
knowledge of any Event of Default or Default Condition, or
if such officer has obtained such knowledge, disclosing the
nature, details, and period of existence of such event;
(d) SEC Filings and Public Information. At the same
time as they are filed with the Securities and Exchange
Commission, copies of the Borrower's 10-Q and 10-K reports;
and
(e) Other Information. Promptly upon its becoming
available, such other material information about Borrower,
the Guarantors or the indebtedness described herein as Agent
may reasonably request from time to time.
All such balance sheets and other Financial Statements referred
to in Sections 5.01(a) and (b) hereof shall conform to GAAP on a
basis consistent with those of previous Financial Statements.
Section 5.02 Annual Certificates of Compliance. Concurrently
with the furnishing of the annual Financial Statements pursuant
to Section 5.01(a) hereof, furnish or cause to be furnished to
Agent and each Lender a certificate of compliance in a form
reasonably satisfactory to Agent prepared by independent
certified public accountants acceptable to Agent, stating that in
making the examination necessary for their audit they have
obtained no knowledge of any Default Condition or Event of
Default, or event which, after notice or lapse of time (or both),
would constitute a Default Condition or Event of Default or, if
they have obtained such knowledge, disclosing the nature,
details, and period of existence of such event.
Section 5.03 Taxes and Other Liens. Pay and discharge
promptly all taxes, assessments, and governmental charges or
levies imposed upon the Borrower or its Subsidiaries, or upon any
of their income or Property as well as all claims of any kind
(including claims for labor, materials, supplies, and rent)
which, if unpaid, might become a Lien upon any or all of their
Property; provided, however, that neither the Borrower nor any
Subsidiary shall be required to pay any such tax, assessment,
charge, levy, or claim if the amount, applicability, or validity
thereof shall currently be contested in good faith by appropriate
proceedings diligently conducted and if the Borrower (or the
Subsidiary, as applicable) shall establish reserves therefor
adequate under GAAP.
Section 5.04 Maintenance.
(a) Maintain its and its Guarantors' corporate
existence, name, rights, and franchises;
(b) observe and comply (to the extent necessary so
that any failure will not materially and adversely affect
the business or Property of the Borrower or the Guarantors)
with all applicable laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations,
certificates, franchises, permits, licenses, authorizations,
and requirements of all federal, state, county, municipal,
and other governments; and
(c) maintain its Property and the Property of its
Guarantors (and any Property leased by or consigned to them
or held under title retention or conditional sales
contracts) in good and workable condition at all times and
make all repairs, replacements, additions, and improvements
to their Property reasonably necessary and proper to ensure
that the business carried on in connection with their
Property may be conducted properly and efficiently at all
times.
Section 5.05 Further Assurances. Promptly cure any defects
in the creation, issuance, and delivery of the Loan Documents.
Borrower at its expense promptly will execute and deliver to
Agent upon request all such other and further documents,
agreements, and instruments in compliance with or accomplishment
of the covenants and agreements of Borrower in the Loan
Documents, or to correct any omissions in the Loan Documents, all
as may be reasonably necessary or appropriate in connection
therewith.
Section 5.06 Performance of Obligations.
(a) Pay the indebtedness described herein according to
the terms of the Loan Documents; and
(b) do and perform, and cause to be done and to be
performed, every act and discharge all of the obligations
provided to be performed and discharged by Borrower under
the Loan Documents, at the time or times and in the manner
specified.
Section 5.07 Insurance. Maintain and continue to maintain,
and cause each Subsidiary to maintain and continue to maintain,
with financially sound and reputable insurers, insurance
satisfactory in type, coverage and amount to Agent against such
liabilities, casualties, risks, and contingencies and in such
types and amounts as is customary in the case of corporations
engaged in the same or similar businesses and similarly situated.
Upon request of Agent, Borrower will furnish or cause to be
furnished to Agent from time to time a summary of the insurance
coverage of Borrower (or its Subsidiaries) in form and substance
satisfactory to Agent and if requested will furnish Agent copies
of the applicable policies.
Section 5.08 Accounts and Records. Keep books of record and
account, in which full, true, and correct entries will be made of
all dealings or transactions in accordance with GAAP, except only
for changes in accounting principles or practices with which
Borrower's certified public accountants concur.
Section 5.09 Right of Inspection. Permit any officer,
employee, or agent of Agent or any Lender as may be designated by
Agent to visit and inspect any of the Properties of the Borrower
and the Guarantors, to examine Borrower's (or Guarantors') books
of record and accounts, to take copies and extracts from such
books of record and accounts, and to discuss the affairs,
finances, and accounts of Borrower (or of the Guarantors) with
the respective officers, accountants, and auditors of Borrower
(or of the Guarantors), all at such reasonable times and as often
as Agent may reasonably desire. Notwithstanding the foregoing
provisions of this Section, Wachovia and First Chicago (and their
Affiliates) shall have the right of inspection as set forth in
this Section without any requirement of approval or designation
by Agent.
Section 5.10 Notice of Certain Events. Promptly, but in any
case within five (5) Business Days, notify Agent if the Borrower
learns of the occurrence of (i) any event that constitutes a
Default Condition or Event of Default together with a detailed
statement by a responsible officer of the steps being taken as a
result thereof; or (ii) the receipt of any notice from, or the
taking of any other action by, the holder of any promissory note,
debenture, or other evidence of material Debt of the Borrower (or
a Guarantor) with respect to a claimed default, together with a
detailed statement by a responsible officer of the Borrower
specifying the notice given or other action taken by such holder
and the nature of the claimed default and what action the
Borrower is taking or proposes to take with respect thereto; or
(iii) any legal, judicial, or regulatory proceedings affecting
Borrower (or a Guarantor) in which the amount involved is
material and is not covered by insurance or which, if adversely
determined, would have a material and adverse effect on the
business or the financial condition of the Borrower and the
Guarantors as a whole; or (iv) any dispute between the Borrower
(or a Guarantor) and any governmental or regulatory authority or
any other Person, entity, or agency which, if adversely
determined, might materially interfere with the normal business
operations of the Borrower (or a Guarantor); or (v) any material
adverse changes, either individually or in the aggregate, in the
assets, liabilities, financial condition, business, operations,
affairs, or circumstances of the Borrower from those reflected in
the Financial Statements or from the facts warranted or
represented in any Loan Document.
Section 5.11 ERISA Information and Compliance. Comply with
ERISA and all other applicable laws governing any pension or
profit sharing plan or arrangement to which the Borrower or any
Subsidiary is a party. The Borrower shall provide Agent with
notice of any "reportable event" or "prohibited transaction" or
the imposition of a "withdrawal liability" within the meaning of
ERISA.
Section 5.12 Additional Guarantees. Within thirty (30) days
after the Borrower acquires or creates a Subsidiary (other than
an Excluded Subsidiary), the Borrower shall cause the Subsidiary
to execute a Guaranty, in substantially the form and substance
set forth in Exhibit F, guaranteeing the indebtedness as set
forth in this Agreement and the Loan Documents. In the event
Borrower creates a Subsidiary and is desirous that such
Subsidiary be an Excluded Subsidiary, Borrower shall notify Agent
of such request in writing. Agent, with the consent of the
Majority Lenders, may consent (in their sole discretion) to a
Subsidiary being an Excluded Subsidiary. Borrower shall pay the
costs and expenses, including without limitation Agent's legal
fees and expenses, in connection with the preparation, execution
and review of such Guaranty.
Article VI. Negative Covenants.
The Borrower covenants and agrees that, during the term of
this Agreement and any extensions hereof and until the
indebtedness described herein has been paid and satisfied in
full, unless Agent shall otherwise first consent in writing, the
Borrower (on a consolidated basis, taking into account all its
Subsidiaries) will not, either directly or indirectly:
Section 6.01 Liens. Create, incur, assume, or permit to
exist any Lien on its Property (real, personal, or mixed now
owned or hereafter acquired) except, subject to all other
provisions of this Article, the foregoing restrictions shall not
apply to:
(a) Liens securing the payment of any of the
indebtedness described in this Credit Agreement;
(b) Permitted Encumbrances as defined in this
Agreement;
(c) Liens securing purchase money security
indebtedness up to $50,000,000 in the aggregate;
(d) Liens for taxes net yet due and payable or taxes,
assessments, or other governmental charges that are not
assessed or are being contested in good faith by appropriate
action promptly initiated and diligently conducted, if
Borrower shall have made any reserve therefor required by
GAAP;
(e) Liens of landlords, warehousemen, mechanics,
materialmen and similar liens imposed by law and created in
the ordinary course of business or being contested in good
faith by appropriate proceedings and subject to maintenance
of adequate reserves under GAAP;
(f) Customary liens incurred or deposited made in the
ordinary course of business in connection with worker's
compensation, unemployment insurance and other types of
social security and to secure performance of statutory
obligations, surety and appeal bonds and similar
obligations; and
(g) Zoning, easements and restrictions on use of real
property which do not materially impair the use of such
property.
Section 6.02 Investments, Loans, and Advances. Make or
permit to remain outstanding any loans or advances to or
investments in any Person, except that, subject to all other
provisions of this Article, the foregoing restriction shall not
apply to:
(a) investments in direct obligations of the United
States of America or any agency thereof;
(b) investments in direct obligations of any political
subdivisions of the United States of America or any State of
the United States of America having a debt rating from
Standard and Poor's Corporation or Moody's Investors
Services, Inc. of AA or better;
(c) any other investments with a maturity of less than
one year and having a credit rating of "A1/P1" or "AA" (or
their equivalent) from S&P or Moody's, or upon the
discontinuance of either or both of such services, any other
nationally recognized rating service,
(d) investments in certificates of deposit having
maturities of less than one year, or repurchase agreements
issued by commercial banks in the United States of America
having capital and surplus in excess of $50,000,000, or
commercial paper of the highest quality;
(e) investments in money market funds so long as the
entire investment therein is fully insured or so long as the
fund is a fund operated by a commercial bank of the type
specified in (d) above or in a brokerage account with
Merrill Lynch;
(f) investments received in the settlement of Debt
which was created in the ordinary course of business;
(g) investments in a Subsidiary; and
(h) loans, advances to, or investments in any Person
which in the aggregate do not exceed $25,000,000.
Section 6.03 Sales and Leasebacks. Enter into any arrange
ment, directly or indirectly, with any Person by which the
Borrower (or a Guarantor) shall sell or transfer any Property,
whether now owned or hereafter acquired, and by which the
Borrower (or a Guarantor) shall then or thereafter rent or lease
as lessee such Property or any part thereof or other Property
that Borrower (or a Guarantor) intends to use for substantially
the same purpose or purposes as the Property sold or transferred.
Section 6.04 Nature of Business. Suffer or permit any
material change to be made in the character of the business of
the Borrower or the Guarantors, as carried on as of the date
hereof.
Section 6.05 Mergers, Consolidations, Etc. Merge,
consolidate or reorganize with or into, or sell, assign, lease,
or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its Property
(whether now owned or hereafter acquired) to, or become an
Affiliate of, any Person; provided, however, that no Event of
Default and no Default Condition has occurred, Borrower may
merge, reorganize or consolidate with any Person as long as,
immediately after and giving effect to any such merger,
reorganization or consolidation no event shall occur or would
reasonably be expected to occur which constitutes a Default
Condition or an Event of Default and, in the case of any such
merger, reorganization or consolidation to which Borrower is a
party, the Borrower is the surviving corporation and has a
consolidated net worth equal to or greater than Borrower prior to
such merger, reorganization or consolidation.
Section 6.06 Disposition of Assets. Dispose of any of the
assets of the Borrower (or of a Guarantor) other than in the
ordinary course of Borrower's (or a Guarantor's, as applicable)
present business upon terms standard in Borrower's industry.
Section 6.07 Inconsistent Agreements. Enter into any
agreement containing any provision which would be violated or
breached by the performance by Borrower of its obligations.
Section 6.08 Fiscal Year. Change its Fiscal Year without
the written consent of the Majority Lenders.
Section 6.09 Transactions with Affiliates. Enter into any
transaction with its Subsidiaries or any Affiliates (other than a
wholly-owned Subsidiary) except on an arms-length basis.
Section 6.10 Transfers to Excluded Subsidiaries. Transfer
assets to Excluded Subsidiaries (whether in one transfer or
multiple transfers) in any Fiscal Year, which exceeds five
percent (5%) of Borrower's total assets in such Fiscal Year.
Article VII Financial Covenants. The Borrower covenants and
agrees that, during the term of this Agreement and any extensions
hereof and until the indebtedness described herein has been paid
and satisfied in full, unless the Majority Lenders shall
otherwise first consent in writing, the Borrower will not:
Section 7.01 Financial Covenants.
(a) Interest Coverage Ratio. Permit Borrower's ratio of
EBIT to Interest Expense to be less than 3.0 to 1.0. The ratio
made herein shall be determined for each Fiscal Quarter,
calculated on a trailing four (4) Fiscal Quarter basis.
(b) Lease Adjusted Funded Debt to Total Capitalization.
Permit the Borrower's ratio of Lease Adjusted Funded Debt to
Borrower's Total Capitalization to exceed .40 to 1.0 at the end
of any Fiscal Quarter.
Article VIII. Events of Default.
Section 8.01 Events of Default. Any of the following events
shall be considered an Event of Default as those terms are used
in this Agreement:
(a) Principal and Interest Payments. The Borrower
fails to make payment by 11:00 a.m. (Nashville, Tennessee
time) within five (5) days when due of any installment of
interest on the Revolving Credit Notes, the Term Notes or
Swing Line Note, the Borrower fails to make payment by 11:00
a.m. (Nashville, Tennessee time) on the due date, of any
principal due under the Revolving Credit Notes, the Term
Notes or Swing Line Note, or the Borrower fails to pay
within fifteen (15) days when due any other payment due
hereunder or under any of the Loan Documents; or
(b) Representations and Warranties. Any representation
or warranty made by the Borrower in any Loan Document is
incorrect in any material respect as of the date thereof; or
any representation, statement (including financial
statements), certificate, or data furnished or made by
Borrower in any Loan Document with respect to any
indebtedness is untrue in any material respect, as of the
date as of which the facts therein set forth were stated or
certified; or
(c) Borrower fails to perform any term, obligation or
covenant under Section 5.10, Article VI, or Article VII.
(d) Other Obligations. Borrower (or Guarantor, as
applicable) fails to perform any of its other obligations as
required by and contained in this Agreement or any Loan
Document, and such failure to perform is not cured within
thirty (30) days following receipt of written notice thereof
from Agent; or
(e) Involuntary Bankruptcy or Receivership Proceed
ings. A receiver, custodian, liquidator, or trustee of the
Borrower or any Guarantor, or of any of their Properties, is
appointed by the order or decree of any court or agency or
supervisory authority having jurisdiction; or the Borrower
or any Guarantor is adjudicated bankrupt or insolvent; or
any of the Property of the Borrower or any Guarantor is
sequestered by court order or a petition is filed against
the Borrower or any Guarantor under any state or federal
bankruptcy, reorganization, debt arrangement, insolvency,
readjustment of debt, dissolution, liquidation, or
receivership law of any jurisdiction, whether now or
hereafter in effect; or
(f) Voluntary Petitions. The Borrower or any Guarantor
files a petition in voluntary bankruptcy to seek relief
under any provision of any bankruptcy, reorganization, debt
arrangement, insolvency, readjustment of debt, dissolution,
or liquidation law of any jurisdiction, whether now or
hereafter in effect, or consents to the filing of any
petition against it under any such law; or
(g) Assignments for Benefit of Creditors, Etc. The
Borrower or any Guarantor makes an assignment for the
benefit of its creditors, or admits in writing its inability
to pay its debts generally as they become due, or consents
to the appointment of a receiver, trustee, or liquidator of
the Borrower or any Guarantor or of all or any part of their
Properties; or
(h) Discontinuance of Business, Etc. The Borrower or a
Guarantor discontinues its principal business; or
(i) Undischarged Judgments. A final judgment which,
with other outstanding final judgments against the Borrower
and its Subsidiaries, exceeds an aggregate of $10,000,000 in
excess of applicable insurance coverage shall be rendered
against the Borrower or any of its Subsidiaries, if, (i)
within 30 days after entry thereof, such judgment shall not
have been discharged or execution thereof stayed pending
appeal or (ii) within 30 days after the expiration of any
such stay, such judgment shall not have been discharged; or
(j) Violation of Laws, Etc. The Borrower or any
Subsidiary violates or otherwise fails to comply with any
law, rule, regulation, decree, order, or judgment under the
laws of the United States of America, or of any state or
jurisdiction thereof the effect of which has a material and
adverse impact on the Borrower and its Subsidiaries as a
whole; or the Borrower or any Subsidiary fails or refuses at
any and all times to remain current in its or their
financial reporting requirements pursuant to such laws,
rules, and regulations or pursuant to the rules and
regulations of any exchange upon which the shares of the
Borrower are traded; or
(k) A default by Borrower (or any Subsidiary) on any
other indebtedness which individually or in the aggregate
exceeds $10,000,000 and which causes the acceleration of
such indebtedness; or
(l) any Person (or related group of Persons) which
does not presently own 30% of the outstanding shares of
Borrower, obtains beneficial ownership of more than 30% of
the Voting Shares of Borrower; or
(m) there exists a default under any Guaranty subject
to any cure or grace periods therein; or
(n) Borrower commences dissolution proceedings under
applicable law.
Section 8.02 Remedies. Upon the happening of any Event of
Default set forth above, with the exception of those events set
forth in Section 8.01(e) and 8.01(f): (i) Agent, acting pursuant
to Lenders' direction as set forth in Article XII, may declare
the entire principal amount of all indebtedness under this
Agreement then outstanding, including interest accrued thereon,
to be immediately due and payable without presentment, demand,
protest, notice of protest, or dishonor or other notice of
default of any kind, all of which Borrower hereby expressly
waives, (ii) at Lenders' sole discretion and option, all
obligations of any of the Lenders under this Agreement shall
immediately cease and terminate unless and until each of the
Lenders shall reinstate such obligations in writing; and/or (iii)
Lenders may bring an action to protect or enforce their rights
under the Loan Documents or seek to collect the indebtedness
described herein by any lawful means.
Upon the happening of any event specified in Section 8.01(e)
and Section 8.01(f) above: (i) all indebtedness described herein,
including all principal, accrued interest, and other charges or
monies due in connection therewith shall be immediately and
automatically due and payable in full, without presentment,
demand, protest, or dishonor or other notice of any kind, all of
which Borrower hereby expressly waives, (ii) all obligations of
Lenders under this Agreement shall immediately cease and
terminate unless and until each of the Lenders shall reinstate
such obligations in writing; or (iii) Lenders may bring an action
to protect or enforce their rights under the Loan Documents or
seek to collect the indebtedness described herein and/or enforce
the obligations evidenced herein by any lawful means.
Section 8.03 Default Conditions. Any of the following events
shall be considered a Default Condition:
(a) The Borrower suffers a material adverse change in
its financial condition; and
(b) Should any event occur that except for the giving
of notice and/or the passage of time would be an Event of
Default.
Upon the occurrence of a Default Condition or at any time
thereafter until such Default Condition no longer exists, the
Borrower agrees that the Lenders, in their sole discretion, and
without notice to Borrower, may immediately cease making any
Advances, all without liability whatsoever to Borrower or any
other Person whomsoever, all of which is expressly waived hereby.
Borrower releases the Lenders and the Agent from any and all
liability whatsoever, whether direct, indirect, or consequential,
and whether seen or unforeseen, resulting from or arising out of
or in connection with Lenders' determination to cease making
Advances pursuant to this Section.
Article IX. General Provisions.
Section 9.01 Notices. All communications under or in con
nection with this Agreement or any of the other Loan Documents
shall be in writing and shall be mailed by first class certified
mail, postage prepaid, or otherwise sent by telex, telegram,
telecopy, or other similar form of rapid transmission confirmed
by mailing (in the manner stated above) a written confirmation at
substantially the same time as such rapid transmission, or
personally delivered to an officer of the receiving party. All
such communications shall be mailed, sent, or delivered as
follows:
(a) if to Borrower, to its address shown below, or to
such other address as Borrower may have furnished to Agent
in writing:
Cracker Barrel Old Country Store, Inc.
305 Hartmann Drive
Lebanon, Tennessee 37087
Attention: Michael A. Woodhouse
(b) if to Agent, to its address shown below, or to
such other address or to such individual's or department's
attention as it may have furnished Borrower in writing:
SunTrust Bank, Nashville, N.A., Agent
201 Fourth Avenue, North
Nashville, Tennessee 37219
Attention: Allen Oakley
(c) if to Lenders, to the address of each of the
Lenders as shown beside the respective signature of each of
the Lenders.
Any communication so addressed and mailed by certified mail shall
be deemed to be given when so mailed.
Section 9.02 Invalidity. In the event that any one or more
of the provisions contained in any Loan Document for any reason
shall be held invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect
any other provision of any Loan Document.
Section 9.03 Survival of Agreements. All representations and
warranties of Borrower in this Agreement and all covenants and
agreements in this Agreement not fully performed before the
Closing Date of this Agreement shall survive the Closing Date.
Section 9.04 Successors and Assigns. The Borrower may not
assign its rights or delegate duties under this Agreement or any
other Loan Document. All covenants and agreements contained by or
on behalf of the Borrower in any Loan Document shall bind the
Borrower's successors and assigns and shall inure to the benefit
of the Agent, each Lender, the Swing Line Lender, and their
respective successors and assigns.
Section 9.05 Waivers. Pursuant to T.C.A. Section 47-50-112,
no action or course of dealing on the part of Agent, the Swing
Line Lender, or any Lender, its officers, employees, consultants,
or agents, nor any failure or delay by Agent, Swing Line Lender,
or any Lender with respect to exercising any right, power, or
privilege of Agent, Swing Line Lender, or any Lender under any of
the Loan Documents shall operate as a waiver thereof, except as
otherwise provided in this Agreement. Acting pursuant to the
requirements of Article XII herein, Agent may from time to time
waive any requirement hereof, including any of the Conditions
Precedent; however no waiver shall be effective unless in writing
and signed by the Agent. The execution by Agent of any waiver
shall not obligate Agent, Swing Line Lender, or any Lender to
grant any further, similar, or other waivers.
Section 9.06 Cumulative Rights. The rights and remedies of
Agent, Swing Line Lender, or any Lender under each Loan Document
shall be cumulative, and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other
right or remedy.
Section 9.07 Construction. This Agreement and the other Loan
Documents constitute a contract made under and shall be construed
in accordance with and governed by the laws of the State of
Tennessee.
Section 9.08 Time of Essence. Time is of the essence with
regard to each and every provision of this Agreement.
Section 9.09 Costs, Expenses, and Indemnification. Borrower
agrees to: (a) pay all reasonable out-of-pocket costs and
expenses of (i) the Agent in connection with the negotiation,
preparation, execution and delivery of this Agreement and the
other Loan Documents; (ii) the Agent and the Lenders in
connection with enforcement of the Loan Documents, including,
without limitation, in connection with any such enforcement, the
reasonable fees and disbursements of counsel (including
allocation of cost of in-house counsel) for the Agent and each of
the Lenders; and (b) indemnify the Agent and each Lender, its
officers, directors, employees, representatives and agents from
and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses (but excluding any such
losses, liabilities, claims, damages or expenses to the extent
incurred by reason of gross negligence or willful misconduct on
the part of the Person to be indemnified) incurred by any of them
as a result of, or arising out of, or related to, or by reason
of, any litigation or other proceeding related to the entering
into and/or performance of any Loan Document or the use of
proceeds of any Loans hereunder or the consummation of any other
transactions contemplated in the Loan Documents.
Section 9.10 Entire Agreement; No Oral Representations
Limiting Enforcement. This Agreement represents the entire
agreement between the parties hereto except for such other
agreements set forth in the Loan Documents, and any and all oral
statements heretofore made regarding the matters set forth herein
are merged herein.
Section 9.11 Amendments. The parties hereto agree that this
Agreement may not be modified or amended except in writing signed
by the parties hereto.
Section 9.12 Distribution of Information. The Borrower
hereby authorizes the Agent, the Swing Line Lender, and each
Lender, as the Agent, the Swing Line Lender, and each Lender may
elect in its sole discretion, to discuss with and furnish to any
Affiliate, to any government or self-regulatory agency with
jurisdiction over the Agent, the Swing Line Lender, and each
Lender, or, subject to the terms of Section 12.12(e) hereof, to
any participant or prospective participant, all financial
statements, audit reports and other information pertaining to the
Borrower (or any Subsidiary) whether such information was
provided by Borrower or prepared or obtained by the Agent or
third parties. Neither the Agent nor any of its employees,
officers, directors or agents make any representation or warranty
regarding any audit reports or other analyses of Borrower which
the Agent may elect to distribute, whether such information was
provided by Borrower or prepared or obtained by the Agent or
third parties, nor shall the Agent or any of its employees,
officers, directors or agents be liable to any Person receiving a
copy of such reports or analyses for any inaccuracy or omission
contained in such reports or analyses or relating thereto.
Article X. Jury Waiver.
Section 10.01 Jury Waiver. IF ANY ACTION OR PROCEEDING
INVOLVING THIS LOAN AGREEMENT OR ANY LOAN DOCUMENT IS COMMENCED
IN ANY COURT OF COMPETENT JURISDICTION, BORROWER, AGENT, SWING
LINE LENDER, AND EACH LENDER HEREBY WAIVE THEIR RIGHTS TO DEMAND
A JURY TRIAL.
Article XI. Hazardous Substances.
Section 11.01 Representation and Indemnity Regarding
Hazardous Substances.
(a) Borrower has no knowledge of any spills, releases,
discharges, or disposal of Hazardous Substances that have
occurred or are presently occurring on or onto any of its
Property (or the Property of any Subsidiary); or of any
spills or disposal of Hazardous Substances that have
occurred or are occurring off any of its Property as a
result of any construction on or operation and use of such
Property; in each case under this paragraph (a) so as to
violate any Environmental Law in a manner that would have a
material adverse effect on the business, Properties or
financial condition of the Borrower (or a Subsidiary) or on
the ability of the Borrower (or a Subsidiary) to perform its
obligations under this Agreement or any of the other Loan
Documents.
(b) The Borrower represents that its Property and any
current operation concerning its Property (and the Property
of any Subsidiary) and its business operations are not in
material violation of any applicable Environmental Law, and
the Borrower has no actual knowledge or any notice from any
governmental body claiming that such Property or such
business operations or operations or uses of the Property
have or may result in any violation of any Environmental Law
or requiring or calling attention to the need for any work,
repairs, corrective actions, construction alterations or
installation on or in connection with such Property or the
Borrower's business in order to comply with any
Environmental Law with which Borrower has not complied, in
each case under this paragraph (b) wherein such violation
would have a material adverse effect on the business,
Properties, or financial condition of the Borrower. If there
are any such notices which would have such effect with which
Borrower has not complied, Borrower shall provide Agent with
copies thereof. If Borrower receives any such notice which
would have such effect, Borrower will immediately provide a
copy to Agent.
(c) Borrower agrees to indemnify and hold Agent, Swing
Line Lender, and Lenders harmless from and against any and
all claims, demands, damages, losses, liens, liabilities,
penalties, fines, lawsuits, and other proceedings, costs and
expenses (including, without limitation, reasonable
attorneys' fees), arising directly or indirectly from or out
of, or in any way connected with (i) the presence of any
Hazardous Substances on any of its Property (or the Property
of a Subsidiary) in violation of any Environmental Law; (ii)
any violation or alleged violation of any Environmental Law
relating to Hazardous Substances on any of its Property (or
the Property of a Subsidiary), whether attributable to
events occurring before or after acquisition of any of such
Property; (iii) any violation of any Environmental Law by
the Borrower (or a Subsidiary) resulting from the conduct of
its business, use of its Property, or otherwise; or (iv) any
inaccuracy in the certifications contained in Section
11.01(a).
Article XII. The Agent.
Section 12.01 Appointment of Agent. Each Lender hereby
designates STB as Agent to administer all matters concerning the
Loans and to act as herein specified. Each Lender hereby
irrevocably authorizes, and each holder of any Revolving Credit
Note and Term Note by the acceptance of a Revolving Credit Note
and Term Note shall be deemed irrevocably to authorize, the Agent
to take such actions on its behalf under the provisions of this
Agreement, the other Loan Documents and all other instruments and
agreements referred to herein or therein, and to exercise such
powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms
hereof and thereof and such other powers as are reasonably
incidental thereto. The Agent may perform any of its duties
hereunder by or through its agents or employees. The Lenders
agree that neither the Agent nor any of its directors, officers,
employees or agents shall be liable for any action taken or
omitted to be taken by it or them hereunder or in connection
herewith, except for its or their own gross negligence or willful
misconduct. The Lenders agree that the Agent shall not have any
duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any of the Lenders,
and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or
otherwise be imposed upon or exist against the Agent.
Section 12.02 Authorization of Agent with Respect to the
Loan Documents. (a) Each Lender hereby authorizes the Agent to
enter into each of the Loan Documents and to take all action
contemplated thereby, all in its capacity as Agent for the
ratable benefit of the Lenders. All rights and remedies under the
Loan Documents may be exercised by the Agent for the benefit of
the Agent and the Lenders upon the terms thereof. The Lenders
further agree that the Agent may assign its rights and
obligations under any of the Loan Documents to any Affiliate of
the Agent, if necessary or appropriate under applicable law,
which assignee in each such case shall (subject to compliance
with any requirements of applicable law governing the assignment
of such Loan Documents) be entitled to all the rights of the
Agent under and with respect to the applicable Loan Document.
(b) The Agent shall administer the Loans described herein
and the Loan Documents on behalf of and for the benefit of the
Lenders in all respects as if the Agent were the sole Lender
under the Loan Documents, except that:
(i) The Agent shall administer the Loans and the Loan
Documents with a degree of care at least equal to that
customarily employed by the Agent in the administration of
similar credit facilities for its own account.
(ii) The Agent shall not, without the consent of the
Majority Lenders, take any of the following actions:
(A) agree to a waiver of any material
requirements, covenants, or obligations of the Borrower
contained herein;
(B) agree to any amendment to or
modification of any of the terms of any of the Loan
Documents;
(C) waive any Event of Default or Default
Condition as set forth in the Credit Agreement;
(D) accelerate the indebtedness described in
the Credit Agreement following an Event of Default;
(E) initiate litigation or pursue other
remedies to enforce the obligations contained in any
Loan Document or to collect the indebtedness described
herein.
(iii) The Agent shall not, without the consent of all
of the Lenders, take any of the following actions:
(A) extend the maturity of any payment of
principal of or interest on the indebtedness described
herein;
(B) reduce any fees paid to or for the
benefit of Lenders under this Credit Agreement;
(C) reduce the rate of interest charged on
the indebtedness described herein;
(D) release any Guaranty;
(E) waive, amend, modify or change the
Conditions Precedent;
(F) postpone any date fixed for the payment
in respect of principal of, or interest on the
indebtedness described herein, or any fees hereunder;
(G) modify the definition of Majority
Lenders; or
(H) modify this Section 12.02(b)(ii) or (iii).
(c) The Agent, upon its receipt of actual notice
thereof, shall notify the Lenders of: (i) each proposed
action that would require the consent of the Lenders as set
forth herein, or (ii) any action proposed to be taken by the
Agent in the administration of the Loans and Loan Documents
not in the ordinary course of business; provided that any
failure of the Agent to give the Lenders any such notice
shall not alone be the basis for any liability of the Agent
to the Lenders except for the Agent's gross negligence or
willful misconduct.
(d) The Lenders agree that the Agent shall incur no
liability under or in respect of this Agreement with respect
to anything which it may do or refrain from doing in the
reasonable exercise of its judgment or which may seem to it
to be necessary or desirable in the circumstances, except
for its gross negligence or willful misconduct.
(e) The Agent shall not be liable to the Lenders or to
any Lender in acting or refraining from acting under this
Agreement or any other Loan Document in accordance with the
instructions of the Majority Lenders or all of the Lenders,
where expressly required by this Agreement, and any action
taken or failure to act pursuant to such instructions shall
be binding on all Lenders. In each circumstance where any
consent of or direction from the Majority Lenders or all of
the Lenders is required or requested by Agent, the Agent
shall send to the Lenders a notice setting forth a
description in reasonable detail of the matter as to which
consent or direction is requested and the Agent's proposed
course of action with respect thereto. In the event the
Agent shall not have received a response from any Lender
within five (5) Business Days after Agent sends such notice,
such Lender shall be deemed not to have agreed to the course
of action proposed by the Agent.
Section 12.03 Agent's Duties Limited; No Fiduciary Duty. The
Lenders agree that the Agent shall have no duties or responsi-
bilities except those expressly set forth in this Agreement
and the other Loan Documents. The Lenders agree that none of the
Agent nor any of its respective officers, directors, employees
or agents shall be liable for any action taken or omitted by it as
such hereunder or in connection herewith, unless caused by its
or their gross negligence or willful misconduct. The Agent shall
not have by reason of this Agreement a fiduciary relationship to
or in respect of any Lender, and nothing in this Agreement, express
or implied, is intended to or shall be so construed as to impose
upon the Agent any obligations in respect of this Agreement or
the other Loan Documents except as expressly set forth herein.
SECTION 12.04 No Reliance on the Agent. (A) EACH LENDER
REPRESENTS AND WARRANTS TO THE AGENT AND THE OTHER LENDERS THAT
INDEPENDENTLY AND WITHOUT RELIANCE UPON THE AGENT, EACH LENDER,
TO THE EXTENT IT DEEMS APPROPRIATE, HAS MADE AND SHALL CONTINUE
TO MAKE (I) ITS OWN INDEPENDENT INVESTIGATION OF THE FINANCIAL
CONDITION AND AFFAIRS OF THE BORROWER, THE GUARANTORS AND ANY
SUBSIDIARY IN CONNECTION WITH THE TAKING OR NOT TAKING OF ANY
ACTION IN CONNECTION HEREWITH, AND (II) ITS OWN APPRAISAL OF THE
CREDITWORTHINESS OF THE BORROWER, THE GUARANTORS AND ANY
SUBSIDIARY, AND, EACH LENDER FURTHER AGREES THAT, EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, THE AGENT SHALL HAVE NO
DUTY OR RESPONSIBILITY, EITHER INITIALLY OR ON A CONTINUING
BASIS, TO PROVIDE ANY LENDER WITH ANY CREDIT OR OTHER INFORMATION
WITH RESPECT THERETO, WHETHER COMING INTO ITS POSSESSION BEFORE
THE MAKING OF THE LOANS OR AT ANY TIME OR TIMES THEREAFTER. AS
LONG AS ANY OF THE LOANS ARE OUTSTANDING AND/OR ANY AMOUNT IS
AVAILABLE TO BE REQUESTED OR BORROWED HEREUNDER, OR THIS
AGREEMENT AND THE LOAN DOCUMENTS HAVE NOT BEEN CANCELLED AND
TERMINATED, EACH LENDER SHALL CONTINUE TO MAKE ITS OWN
INDEPENDENT EVALUATION OF THE FINANCIAL CONDITION AND AFFAIRS OF
THE BORROWER, THE GUARANTORS AND THE SUBSIDIARIES.
(b) The Agent shall not be responsible to any Lender for
any recitals, statements, information, representations or
warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution,
effectiveness, genuineness, validity, enforceability,
collectability, priority or sufficiency of this Agreement, the
Revolving Credit Notes, the Swing Line Note, the Term Notes, the
Guarantees, the other Loan Documents, or any other documents
contemplated hereby or thereby, or the financial condition of the
Borrower, the Guarantors and any Subsidiary, or be required to
make any inquiry concerning either the performance or observance
of any of the terms, provisions or conditions of this Agreement,
the Revolving Credit Notes, the Swing Line Note, the Term Notes,
the Guarantees, the other Loan Documents or the other documents
contemplated hereby or thereby, or the financial condition of the
Borrower, the Guarantors and any Subsidiary, or the existence or
possible existence of any Default Condition or Event of Default.
Section 12.05 Certain Rights of Agent. The Lenders agree
that if the Agent shall request instructions from the Majority
Lenders (or all of the Lenders where unanimity is expressly
required under the terms of this Agreement) with respect to any
action or actions (including the failure to act) in connection
with this Agreement, the Agent shall be entitled to refrain from
such act or taking such act, unless and until the Agent shall
have received instructions from the Majority Lenders (or all of
the Lenders where unanimity is expressly required under the terms
of this Agreement); and the Agent shall not incur liability to
any Person by reason of so refraining. Without limiting the
foregoing, no Lender shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining
from acting hereunder in accordance with the instructions of the
Majority Lenders (or, with regard to acts for which the consent
of all of the Lenders is expressly required under the terms of
this Agreement, in accordance with the instructions of all of the
Lenders).
Section 12.06 Reliance by Agent. The Lenders agree that the
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other documentary, teletransmission or
telephone message reasonably believed by it to be genuine and
correct and to have been signed, sent or made by the proper
Person. The Lenders agree that the Agent may consult with legal
counsel (including counsel for any Lender), independent public
accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants
or experts.
Section 12.07 Indemnification of Agent. To the extent the
Agent is not reimbursed and indemnified by the Borrower, each
Lender will reimburse and indemnify the Agent, ratably according
to their respective Pro Rata Share, for, from and against any and
all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including fees of
experts, consultants and counsel and disbursements) or
disbursements of any kind or nature whatsoever that may be
imposed on, incurred by or asserted against the Agent in
performing its duties hereunder, in any way relating to or
arising out of this Agreement or the other Loan Documents;
provided that no Lender shall be liable to the Agent for any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or
willful misconduct. The obligations and indemnifications arising
under this Section 12.07 shall survive termination of this
Agreement, repayment of the Loans and indebtedness arising in
connection with the Letters of Credit and expiration of the
Letters of Credit.
Section 12.08 The Agent in its Individual Capacity. With
respect to its obligation to lend under this Agreement, the Loan
made by it and the Revolving Credit Note and Term Note issued to
it, the Agent shall have the same rights and powers hereunder as
any other Lender or holder of a Revolving Credit Note and Term
Note and may exercise the same as though it were not performing
the duties of Agent specified herein; and the terms "Lenders,"
"Majority Lenders," "holders of Revolving Credit Notes," "holders
of Term Notes," or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual
capacity. The Agent also may exercise the rights and remedies of
the Swing Line Lender. The Agent and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of
banking, trust, financial advisory or other business with the
Borrower or any Subsidiary of the Borrower as if it were not
performing the duties specified herein as Agent, and may accept
fees and other consideration from the Borrower for services in
connection with this Agreement and otherwise without having to
account for the same to the Lenders.
Section 12.09 Holders of Notes. The Agent and the Borrower
may deem and treat the payee of any Revolving Credit Notes and
any Term Notes as the owner thereof for all purposes hereof
unless and until a written notice of the assignment or transfer
thereof shall have been filed with the Agent and the Borrower.
Any request, authority or consent of any Person who, at the time
of making such request or giving such authority or consent, is
the holder of any Revolving Credit Note and any Term Note shall
be conclusive and binding on any subsequent holder, transferee or
assignee of such Revolving Credit Note any Term Note.
Section 12.10 Successor Agent. (a) The Agent may resign at
any time by giving written notice thereof to the Lenders and the
Borrower and may be removed at any time with cause by the
Majority Lenders; provided, however, the Agent may not resign or
be removed until (i) a successor Agent has been appointed and
shall have accepted such appointment, (ii) the successor Agent
has assumed all responsibility for issuance of the Letters of
Credit and the successor Agent has assumed in the place and stead
of the Agent all existing liability under outstanding Letters of
Credit, and (iii) the successor Agent has assumed in the place
and stead of the Agent all liability and responsibility of the
Swing Line Lender, including the purchase by the successor Agent
from the Agent of the Swing Line Lender's position in the Swing
Line Note. The transactions described in the immediately
preceding sentence shall be accomplished pursuant to written
agreements reasonably satisfactory to the Agent and the successor
Agent. Upon any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Agent with the
consent of Borrower, which shall not be unreasonably withheld. If
no successor Agent shall have been so appointed by the Majority
Lenders, and shall have accepted such appointment, within thirty
(30) days after the retiring Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent (with the consent of Borrower, which
will not be unreasonably withheld), which shall be a bank that
maintains an office in the United States, or a commercial bank
organized under the laws of the United States of America or any
State thereof, or any Affiliate of such bank, having a combined
capital and surplus of at least $100,000,000.
(b) Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this
Article XII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was an Agent under this
Agreement.
Section 12.11 Notice of Default or Event of Default. In the
event that the Agent or any Lender shall acquire actual
knowledge, or shall have been notified, of any Default Condition
or Event of Default (other than through a notice by one party
hereto to all other parties), the Agent or such Lender shall
promptly notify the Agent, and the Agent shall take such action
and assert such rights under this Agreement as the Majority
Lenders shall request in writing, and the Agent shall not be
subject to any liability by reason of its acting pursuant to any
such request. If, following notification by Agent to Lenders, the
Majority Lenders (or all of the Lenders if required hereunder)
shall fail to request the Agent to take action or to assert
rights under this Agreement in respect of any Default Condition
or Event of Default within five (5) Business Days after their
receipt of the notice of any Default Condition or Event of
Default from the Agent or any Lender, or shall request
inconsistent action with respect to such Default Condition or
Event of Default, the Agent may, but shall not be required to,
take such action and assert such rights (other than rights under
Article VIII hereof) as it deems in its discretion to be
advisable for the protection of the Lenders.
Section 12.12 Benefit of Agreement.
(a) Any Lender may make, carry or transfer Loans at, to or
for the account of, any of its branch offices or the office of an
Affiliate of such Lender, provided that no such action shall
increase the cost of the Loans to the Borrower.
(b) Each Lender may assign a portion of its interests,
rights and obligations under this Agreement, including all or a
portion of any of its Revolving Credit Loan Commitment (including
without limitation its commitment to participate in Letters of
Credit) and/or its Term Loan Commitment to any Eligible Assignee;
provided, however, that (i) the amount of the Revolving Credit
Loan Commitment or Term Loan Commitment of the assigning Lender
subject to each assignment (determined as of the date the
assignment and acceptance with respect to such assignment is
delivered to the Agent) shall not be less than an amount equal to
$10,000,000 or greater integral multiples thereof, and (ii) the
parties to each such assignment shall execute and deliver to the
Agent and the Borrower an Assignment and Acceptance, together
with a Revolving Credit Note(s) and Term Note(s) subject to such
assignment and, unless such assignment is to an Affiliate of such
Lender, a processing and recordation fee of $3,000. Borrower
shall not be responsible for such processing and recordation fee
or any costs or expenses incurred by any Lender or the Agent in
connection with such assignment. 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, the assignee thereunder shall be a party hereto and to
the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under
this Agreement. Notwithstanding the foregoing, the assigning
Lender must retain after the consummation of such Assignment and
Acceptance, a minimum aggregate amount of Revolving Credit Loan
Commitment and Term Loan Commitment of $10,000,000; provided,
however, no such minimum amount shall be required with respect to
any such assignment made at any time there exists an Event of
Default hereunder. Within five (5) Business Days after receipt of
the notice and the Assignment and Acceptance, Borrower, at their
own expense, shall execute and deliver to the Agent, in exchange
for the surrendered Revolving Credit Note(s) or Term Note(s), a
new Revolving Credit Note (or Revolving Credit Notes) and a New
Term Note (or Term Notes) to the order of the Eligible Assignee
in a principal amount equal to the applicable Revolving Credit
Loan Commitment and Term Loan Commitment assumed by it pursuant
to such Assignment and Acceptance, as well as a new Revolving
Credit Note (or Revolving Credit Notes) and a new Term Note (or
Term Notes) to the assigning Lender in the amount of its retained
Revolving Credit Loan Commitment and Term Loan Commitment. Such
new Revolving Credit Note(s) and Term Note(s) to the Eligible
Assignee and to the assigning Lender shall be in an aggregate
principal amount equal to the aggregate principal amount of such
surrendered Revolving Credit Note(s) or Term Note(s), shall be
dated the date of the surrendered Revolving Credit Note(s) or
Term Note(s) that they replace, and shall otherwise be in
substantially the form attached hereto as Exhibits A and B,
respectively.
(c) No assignment of all or any portion of this Agreement
by any Lender shall be permitted without compliance with the
provisions of Section 12.12(b) hereof, or if such assignment
would violate any applicable securities law. In connection with
its execution and delivery hereof each Lender represents that it
is acquiring its interest herein for its own account for
investment purposes and not with a view to further distribution
thereof, and shall require any proposed assignee to furnish
similar representations to the Agent and the Borrower.
(d) Each Lender may, without the consent of Borrower or the
Agent but subject to the provisions of Section 2.07, sell
participations in its respective Revolving Credit Loan
Commitment, Term Loan Commitment and Letter of Credit commitments
to such Lender's Affiliate(s), but sales of participations to
Persons other than such Lender's Affiliates shall be made only
with the prior written consent of the Borrower (which consent
shall not be unreasonably withheld or delayed) and in all events
subject to said Section. Provided, however, that (i) no Lender
may sell a participation in its aggregate Revolving Credit Loan
Commitment, Term Loan Commitment and Letter of Credit commitments
(after giving effect to any permitted assignment hereof) unless
it retains an aggregate exposure of at least $10,000,000 (except
that no such limitation shall be applicable to any such
participation sold at any time there exists an Event of Default
hereunder), (ii) such Lender's obligations under this Agreement
shall remain unchanged, (iii) such Lender shall remain solely
responsible to the other parties hereto for the performance of
such obligations, and (v) Borrower and the Agent and other
Lenders shall continue to deal solely and directly with each
Lender in connection with such Lender's rights and obligations as
provided in this Agreement and the other Loan Documents. Each
Lender shall promptly notify in writing the Agent of any sale of
a participation hereunder.
(e) Any Lender or participant may, in connection with the
assignment or participation or proposed assignment or
participation, pursuant to this Section 12.12, disclose to the
assignee or participant or proposed assignee or participant any
information relating to Borrower or any Subsidiary, furnished to
such Lender by or on behalf of Borrower. With respect to any
disclosure of confidential, non-public, proprietary information,
such proposed assignee or participant shall agree to use the
information only for the purpose of making any necessary credit
judgments with respect to this credit facility and not to use the
information in any manner prohibited by any law, including
without limitation, the securities laws of the United States. The
proposed participant or assignee shall agree in writing not to
disclose any of such information except (i) to directors,
employees, auditors or counsel to whom it is necessary to show
such information, each of whom shall be informed of the
confidential nature of the information and agree to maintain the
confidentiality thereof as described herein, (ii) in any
statement or testimony pursuant to a subpoena or order by any
court, governmental body or other agency asserting jurisdiction
over such entity, or as otherwise required by law (provided prior
notice is given to Borrower and the Agent unless otherwise
prohibited by the subpoena, order or law), and (iii) upon the
request or demand of any regulatory agency or authority with
proper jurisdiction. The proposed participant or assignee, and
such representatives, shall further agree to return to Borrower
all documents or other written material and copies thereof
received from any Lender, the Agent or Borrower relating to such
confidential information.
(f) Any Lender may at any time assign all or any portion of
its rights in this Agreement, the Term Notes and the Revolving
Credit Notes issued to it to a Federal Reserve Bank; provided
that no such assignment shall release the assigning Lender from
any of its obligations hereunder.
Section 12.13 Removal of Lender. In the event that any
Lender (the "Specified Lender") (a) fails to perform its
obligation to fund any portion of the Loan when required to do so
by the terms of this Agreement or excused only by Section 2.17,
(b) demands payment in respect of increased costs pursuant to
Section 2.18 in an amount the Borrower reasonably deems
materially in excess of the amounts in respect thereof demanded
by the other Lenders, or (c) refuses to consent to a proposed
amendment, modification, consent or other action requiring
unanimity among the Lenders under the terms of this Agreement, as
to which the Majority Lenders have given such consent, then, so
long as no Event of Default or Default Condition exists, the
Borrower shall have the right to seek a replacement Lender which
is reasonably satisfactory to the Agent (a "Replacement Lender").
The Replacement Lender shall purchase the interest of the
Specified Lender in the Loan and shall assume the obligations of
the Specified Lender hereunder upon execution by the Replacement
Lender of an Assignment and Acceptance and the tender by it to
the Specified Lender of a purchase price agreed by it and the
Specified Lender (or, if they are unable to agree, a purchase
price equal to the amount of the Specified Lender's Pro Rata
Share of the Loan and all other amounts then owed by the Borrower
to the Specified Lender). Upon consummation of such assignment,
the Replacement Lender shall become a party to this Agreement as
a signatory hereto and shall have all of the rights and
obligations of the Specified Lender under this Agreement and
under the other Loan Documents, and no further consent or action
by any party shall be required. Upon the consummation of such
assignment, the Borrower, the Agent and the Specified Lender
shall make appropriate arrangements so that a new Revolving
Credit Note and a new Term Note are issued to the Replacement
Lender. The Borrower and the Guarantors shall sign such documents
and take such other actions reasonably requested by the
Replacement Lender or the Agent to enable the Replacement Lender
to share in the rights created by this Agreement and the other
Loan Documents. Until the consummation of an assignment in
accordance with the foregoing provisions of this Section 12.13,
the Company
shall continue to pay to or for the benefit of the Specified
Lender all amounts which it is required to pay pursuant to this
Agreement and the other Loan Documents, as they become due and
payable.
Article XIII. Guarantors.
Section 13.01 Guarantors. The obligations of the Borrower
under the Loan Documents shall be guaranteed jointly and
severally by each of the Guarantors pursuant to the Guarantees.
ENTERED INTO the date first above written.
BORROWER:
CRACKER BARREL OLD COUNTRY STORE,
INC.
By: /s/Michael A. Woodhouse
Title: Senior Vice President, Finance
and Chief Financial Officer
AGENT:
SUNTRUST BANK, NASHVILLE, N.A., Agent
By: /s/Allen K. Oakley
Title: Senior Vice President
LENDERS:
SUNTRUST BANK, NASHVILLE, N.A.
By: /s/Allen K. Oakley
Title: Senior Vice President
Address: 201 Fourth Avenue North
Nashville, Tennessee 37219
Pro Rata Share: 40%
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/Charles Dee O'Dell II
Title: Vice President
Address: 191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Pro Rata Share: 30%
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/Curtis A. Price
Title: As Agent
Address: One First National Plaza
Mail Suite 0324
Chicago, IL 60670
Pro Rata Share: 30%
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For each of the fiscal years ended
(In thousands except per share data)
August 1, August 2, July 28, July 29, July 30,
1997 1996 1995 1994 1993
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $1,123,851 $943,287 $783,093 $640,899 $517,616
Cost of goods sold 387,703 324,905 264,809 215,071 171,709
Expenses:
Store operations:
Labor & other
related expenses 378,117 314,157 256,253 207,227 167,909
Other store
operating expenses 162,675 138,701 114,564 92,694 74,673
Store closing costs* -- 14,199 -- -- --
General and
administrative 57,798 50,627 44,746 36,807 30,096
Total expenses 598,590 517,684 415,563 336,728 272,678
Operating income 137,558 100,698 102,721 89,100 73,229
Interest expense 2,089 369 723 2,136 2,885
Interest income 1,988 2,051 3,335 3,604 2,600
Income before income
taxes and change in
accounting principle 137,457 102,380 105,333 90,568 72,944
Provision for income
taxes 50,859 38,865 39,290 33,609 27,292
Income before change in
accounting principle 86,598 63,515 66,043 56,959 45,652
Cumulative effect of
change in accounting
principle** -- -- -- 988 --
Net income $ 86,598 $ 63,515 $ 66,043 $ 57,947 $45,652
SHARE DATA
Earnings before change
in accounting principle
per share $1.41 $1.04 $1.09 $.94 $.78
Cumulative effect of
change in accounting
principle per share** -- -- -- .02 --
Net earnings per share 1.41 1.04 1.09 .96 .78
Dividends per share $ .02 $ .02 $ .02 $.02 $.02
Weighted average
shares outstanding 61,446 60,813 60,557 60,607 58,789
FINANCIAL POSITION
Working capital $ 60,654 $ 23,289 $ 43,600 $ 60,721 $ 76,115
Total assets 828,705 676,379 604,515 530,064 469,073
Property and equipment
-net 678,167 568,573 479,518 385,960 305,596
Long-term debt 62,000 15,500 19,500 23,500 36,576
Capital lease
obligations 1,302 1,468 1,598 1,709 1,802
Stockholders' equity 660,432 566,221 496,083 429,846 366,785
===============================================================================
</TABLE>
*Represents one-time charge to close certain stores and other write-offs.
(See Note 1 to the Company's Consolidated Financial Statements.)
**The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes", effective July 31, 1993.
MARKET PRICE AND DIVIDEND INFORMATION
The following table indicates the high and low sales prices of
the Company's common stock, as reported by The Nasdaq Stock Market (National
Market) and dividends paid.
<TABLE>
<CAPTION>
Fiscal Year 1997 Fiscal Year 1996
____________________ ____________________
Prices Dividends Prices Dividends
_____________ _____________
Quarter High Low Paid High Low Paid
_________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
First $25.63 $19.63 $.005 $21.50 $17.38 $.005
Second 28.38 19.88 .005 19.25 15.75 .005
Third 29.25 24.88 .005 24.88 17.88 .005
Fourth 29.88 23.75 .005 27.38 19.38 .005
=========================================================================
</TABLE>
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table highlights operating results over the past three
fiscal years:
<TABLE>
<CAPTION>
Period to Period
Relationship to Net Sales Increase(Decrease)
_________________________ _________________
1997 1996 1995 1997 vs 1996 1996 vs 1995
______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net Sales
Restaurant 76.8% 77.8% 77.9% 18% 20%
Retail 23.2 22.2 22.1 25 21
_____________________________________________________
100.0% 100.0% 100.0% 19 20
Cost of goods sold 34.5 34.4 33.8 19 23
Expenses:
Store operations:
Labor & other
related expenses 33.7 33.3 32.7 20 23
Other store
operating expenses 14.5 14.7 14.6 17 21
Store closing costs* -- 1.5 -- -- --
General & administrative 5.1 5.4 5.7 14 13
Operating income 12.2 10.7 13.1 37 (2)
Interest expense .2 .1 .1 466 (49)
Interest income .2 .2 .4 (3) (39)
Income before income taxes 12.2 10.8 13.5 34 (3)
Provision for income taxes 4.5 4.1 5.0 31 (1)
Net income 7.7 6.7 8.4 36 (4)
===========================================================================
</TABLE>
*Represents one-time charge to close certain stores and other write-offs.
(See Note 1 to the Company's Consolidated Financial Statements.)
SAME STORE SALES ANALYSIS
<TABLE>
<CAPTION>
Period to Period Increase
_________________________
1997 vs 1996 1996 vs 1995
(214 Stores) (181 Stores)
___________________________________________________________________________
<S> <C> <C>
Restaurant 3% 2%
Retail 8 2
Restaurant & retail 4 2
===========================================================================
</TABLE>
Same store restaurant sales (which compare sales of stores open
throughout the fiscal years under comparison) increased 3% in fiscal 1997
versus the comparable 52 weeks of fiscal 1996. Same store restaurant sales
increased 2% for the comparable 52 weeks of fiscal 1996 versus fiscal 1995.
The increase in same store restaurant sales growth from fiscal 1996 to fiscal
1997 was primarily due to normal winter weather conditions in fiscal 1997
compared to the extreme winter weather experienced in fiscal 1996.
Same store retail sales increased 8% in fiscal 1997 versus the
comparable 52 weeks of fiscal 1996 while same store retail sales increased
2% for the comparable 52-week period in fiscal 1996 versus fiscal 1995. The
increase in same store retail sales growth from fiscal 1996 to fiscal 1997 was
primarily due to the introduction of three browsing books during the
Christmas, spring and summer seasons in fiscal 1997 as compared to only a
summer browsing book in fiscal 1996 and the normal winter weather conditions
in fiscal 1997 compared to the extreme winter weather experienced in fiscal
1996.
<PAGE>
In fiscal 1997 total sales (restaurant and retail) in the 214 same
stores averaged $4.06 million. Restaurant sales were 77.0% of total sales in
the same 214 stores in fiscal 1997 and 77.8% in fiscal 1996.
Total net sales, which increased 19% and 20% in fiscal 1997 and
1996, respectively, benefited from comparable store sales growth and the
opening of 50, 43 and 36 new stores in fiscal 1997, 1996 and 1995,
respectively. The total net sales increase in fiscal 1996 also benefited from
an extra week, while the total net sales increase in fiscal 1997 was
negatively affected by the extra week in fiscal 1996. (See Note 1 to the
Company's Consolidated Financial Statements.)
Cost of goods sold as a percentage of net sales increased in fiscal
1997 to 34.5% from 34.4% in 1996. This increase was primarily due to an
increasing mix of retail sales which have a higher cost than restaurant sales.
Food cost as a percentage of net sales in fiscal 1997 was unchanged from fiscal
1996 primarily due to menu increases of approximately .6% and 2.3% taken in
October 1996 and May 1997, respectively, and operational efficiencies as a
result of the normal winter weather conditions in fiscal 1997 as compared to
the extreme conditions in fiscal 1996, which together were offset by increases
in coffee, dairy and hog complex prices. Cost of goods sold as a percentage of
net sales increased in fiscal 1996 to 34.4% from 33.8% in 1995. This increase
was primarily due to a new menu, implemented in May 1995, that raised ideal
food cost as the result of a change in menu mix. Additionally, the increase
in cost of goods sold was due to operating inefficiencies in the restaurants
as a result of extreme winter weather conditions as compared to fiscal 1995 and
substantial increases in hog complex prices in the Company's fourth fiscal
quarter of 1996.
Labor and other related expenses include all direct and indirect labor
and related costs incurred in store operations. Labor expenses as a percentage
of net sales were 33.7%, 33.3% and 32.7% in fiscal 1997, 1996 and
1995, respectively. The year to year increase in fiscal 1997 versus fiscal
1996 was primarily due to the introduction of a new store-level bonus program
at the beginning of fiscal 1997 and store-level, hourly-employee wage
inflation of approximately 2.7%. These increases were partially offset by
the enhanced productivity achieved through operational changes implemented in
the fourth quarter of fiscal 1996 and throughout fiscal 1997. The year to
year increase in fiscal 1996 versus fiscal 1995 was primarily due to continuing
labor cost pressures as the costs to hire and retain employees continued to
increase, unemployment rates remained low and competition remained high in the
industry.
Other store operating expenses include all unit-level operating
costs, the major components of which are operating supplies, repairs and
maintenance, advertising expenses, utilities, depreciation and amortization.
Other store operating expenses as a percentage of net sales were 14.5%, 14.7%
and 14.6% in fiscal 1997, 1996 and 1995, respectively. The year to year
decrease in fiscal 1997 versus fiscal 1996 was primarily due to a decrease in
operating supplies expense resulting from the return to paper napkins from
linen napkins in the stores during the fourth quarter of fiscal 1996. The
year to year increase in fiscal 1996 versus fiscal 1995 was attributable to
higher depreciation related to opening 43 and 36 new stores in fiscal 1996
and 1995, respectively. The store closing costs in fiscal 1996 were due to
the one-time charge for store closings and other write-offs in the fourth
quarter of fiscal 1996. (See Note 1 to the Company's Consolidated Financial
Statements.)
General and administrative expenses as a percentage of net sales were
5.1%, 5.4% and 5.7% in fiscal 1997, 1996 and 1995, respectively. The
reductions from year to year were accomplished largely through improved
volume. The largest areas of increased spending in absolute dollars in fiscal
1997 were in manager trainee costs to support the continued growth of the
business and in corporate bonuses as a result of the improvement in pretax
income in fiscal 1997 versus fiscal 1996.
<PAGE>
Interest expense increased to $2.1 million in fiscal 1997 from $.4
million in fiscal 1996. The increase was primarily due to the Company's
drawing on a $50.0 million term loan on December 2, 1996. Interest expense
decreased to $.4 million in fiscal 1996 from $.7 million in fiscal 1995
primarily due to the scheduled principal payments on the 9.53% Senior Notes.
Interest income decreased in fiscal 1997 to $2.0 million from $2.1
million in fiscal 1996 and $3.3 million in fiscal 1995. The primary reason
for the decrease in interest income was lower average funds available for
investment.
Provision for income taxes as a percent of pretax income was 37.0%
for fiscal 1997, 38.0% for fiscal 1996 and 37.3% for fiscal 1995. The
primary reasons for the decrease in the tax rate in fiscal 1997 were decreases
in the effective state tax rates and the institution of the Work Opportunity Tax
Credit by the federal government to replace the expired Targeted Jobs Tax
Credit. The primary reason for the increase in the tax rate in fiscal
1996 was the expiration of the Targeted Jobs Tax Credit program and increases
in state rates.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
The Company will adopt SFAS No. 128, "Earnings per Share", in the
second quarter of fiscal 1998. The Company is still evaluating the effect of
adopting SFAS No. 128, but does not expect the adoption to have a material
effect on the Company's consolidated financial statements. SFAS No. 130,
"Reporting Comprehensive Income", and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", become effective for the
Company in the first quarter of fiscal 1999. The Company is still evaluating
the effects of adopting SFAS No. 130 and SFAS No. 131, but does not expect
the adoption of either pronouncement to have a material effect on the
Company's consolidated financial statements. (See Note 1 to the Company's
Consolidated Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash generated from operating activities was $124.2
million in fiscal 1997. Most of this cash was provided by net income
adjusted by depreciation and amortization. Increases in accrued employee
compensation and deferred income taxes were partially offset by increases in
inventories and prepaid expenses and decreases in accounts payable.
Capital expenditures were $148.6 million in fiscal 1997. Land
purchases and cost of new stores accounted for substantially all of these
expenditures.
The Company's internally generated cash and short-term and long-
term investments were sufficient to finance all of its growth in fiscal 1997,
but not to meet its seasonal cash needs. As planned, the Company established
a $50.0 million term loan in the second quarter of fiscal 1997 to meet its
seasonal cash needs in fiscal 1997 and its planned needs in fiscal 1998.
The Company estimates that its capital expenditures for fiscal 1998
will be approximately $190 million, substantially all of which will be land
purchases and construction of new stores. On December 2, 1996 the Company
received the proceeds from a $50.0 million 5-year term loan bearing interest at
a three-month LIBOR-based rate ("London Interbank Offered Rate").
Concurrently, the Company entered into a swap agreement with a bank to fix the
interest rate at 6.36% for the life of the term loan. This $50.0 million term
loan is part of a $125.0 million bank credit facility that also includes a
$75.0 million revolver. Management believes that cash and short-term
investments at August 1, 1997, along with cash generated from the
Company's operating activities and its available $75.0 million revolver, will
be sufficient to finance its continued expansion plans through fiscal 1999.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(In thousands except share data)
August 1, August 2,
ASSETS 1997 1996
____________________________________________________________________
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 64,933 $ 28,971
Short-term investments 1,666 4,735
Receivables 4,836 2,803
Inventories 73,269 61,470
Prepaid expenses 4,707 1,485
Deferred income taxes -- 6,972
____________________________________________________________________
Total current assets 149,411 106,436
____________________________________________________________________
Property and Equipment:
Land 192,258 165,376
Buildings and improvements 423,260 346,479
Buildings under capital leases 3,289 3,289
Restaurant and other equipment 176,959 151,018
Leasehold improvements 12,646 12,343
Construction in progress 22,985 13,738
____________________________________________________________________
Total 831,397 692,243
Less: Accumulated depreciation and
amortization of capital leases 153,230 123,670
____________________________________________________________________
Property and equipment-net 678,167 568,573
____________________________________________________________________
Long-term Investments -- 565
____________________________________________________________________
Other Assets 1,127 805
____________________________________________________________________
Total $828,705 $676,379
====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________________________________________
Current Liabilities:
Accounts payable $ 27,422 $ 30,565
Current maturities of
long-term debt 3,500 4,000
Current portion of capital lease
obligations 166 130
Taxes withheld and accrued 13,969 12,475
Income taxes payable 2,429 4,123
Deferred income taxes 2,362 --
Accrued employee compensation 22,374 15,647
Accrued employee benefits 9,961 9,692
Other accrued expenses 6,574 6,515
____________________________________________________________________
Total current liabilities 88,757 83,147
____________________________________________________________________
Long-term Debt 62,000 15,500
____________________________________________________________________
Capital Lease Obligations 1,302 1,468
____________________________________________________________________
Deferred Income Taxes 16,214 10,043
____________________________________________________________________
Commitments and Contingencies (Note 9)
Stockholders' Equity:
Common stock - 150,000,000 shares of $.50
par value authorized; shares issued and
outstanding: 1997, 61,065,306; 1996,
60,594,353 30,533 30,297
Additional paid-in capital 211,850 202,951
Retained earnings 418,049 332,973
____________________________________________________________________
Total stockholders' equity 660,432 566,221
____________________________________________________________________
Total $828,705 $676,379
====================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(In thousands except per share data)
Fiscal years ended
August 1, August 2, July 28,
1997 1996 1995
___________________________________________________________________________
<S> <C> <C> <C>
Net sales $1,123,851 $943,287 $783,093
Cost of goods sold 387,703 324,905 264,809
___________________________________________________________________________
Gross profit on sales 736,148 618,382 518,284
___________________________________________________________________________
Expenses:
Store operations:
Labor & other related
expenses 378,117 314,157 256,253
Other store operating
expenses 162,675 138,701 114,564
Store closing costs -- 14,199 --
General and administrative 57,798 50,627 44,746
___________________________________________________________________________
Total expenses 598,590 517,684 415,563
___________________________________________________________________________
Operating income 137,558 100,698 102,721
Interest expense 2,089 369 723
Interest income 1,988 2,051 3,335
___________________________________________________________________________
Income before income taxes 137,457 102,380 105,333
Provision for income taxes 50,859 38,865 39,290
___________________________________________________________________________
Net income $ 86,598 $ 63,515 $ 66,043
===========================================================================
Net earnings per share $1.41 $1.04 $1.09
===========================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In thousands except per share data)
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
___________________________________________________________________________
<S> <C> <C> <C> <C>
Balances at July 29, 1994 $29,950 $194,074 $205,822 $429,846
Cash dividends - $.02 per
share -- -- (1,199) (1,199)
Exercise of stock options 46 969 -- 1,015
Tax benefit realized upon
exercise of stock options -- 378 -- 378
Net income -- -- 66,043 66,043
___________________________________________________________________________
Balances at July 28, 1995 29,996 195,421 270,666 496,083
Cash dividends - $.02 per
share -- -- (1,208) (1,208)
Exercise of stock options 301 4,865 -- 5,166
Tax benefit realized upon
exercise of stock options -- 2,665 -- 2,665
Net income -- -- 63,515 63,515
___________________________________________________________________________
Balances at August 2, 1996 30,297 202,951 332,973 566,221
Cash dividends - $.02 per
share -- -- (1,522) (1,522)
Exercise of stock options 236 7,288 -- 7,524
Tax benefit realized upon
exercise of stock options -- 1,611 -- 1,611
Net income -- -- 6,598 86,598
___________________________________________________________________________
Balances at August 1, 1997 $30,533 $211,850 $418,049 $660,432
===========================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
Fiscal years ended
August 1, August 2, July 28,
1997 1996 1995
___________________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 86,598 $ 63,515 $66,043
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 35,735 31,433 26,488
Loss (gain) on disposition of
property and equipment 135 14,689 (66)
Changes in assets and liabilities:
Receivables (2,033) 390 (199)
Inventories (11,799) (9,955) (9,525)
Prepaid expenses (3,222) (573) 182
Other assets (436) (212) (60)
Accounts payable (3,143) 814 3,985
Taxes withheld and accrued 1,494 1,651 3,416
Income taxes payable (1,694) (1,465) 548
Accrued employee compensation 6,727 1,965 494
Accrued employee benefits 269 2,590 (780)
Other accrued expenses 59 806 1,428
Deferred income taxes 15,505 (1,978) 418
_______________________________________________________________________________
Net cash provided by
operating activities 124,195 103,670 92,372
_______________________________________________________________________________
Cash flows from investing activities:
Purchase of short-term investments (603) (4,011) (7,169)
Proceeds from maturities of
short-term investments 4,237 13,852 38,994
Purchase of property and
equipment (148,649) (137,633) (121,052)
Proceeds from sale of property and
equipment 3,299 2,456 1,073
_______________________________________________________________________________
Net cash used in investing
activities (141,716) (125,336) (88,154)
_______________________________________________________________________________
Cash flows from financing activities:
Proceeds from issuance of
long-term debt 50,000 -- --
Proceeds from exercise of
stock options 7,524 5,166 1,015
Tax benefit realized upon
exercise of stock options 1,611 2,665 378
Principal payments under
long-term debt and capital
lease obligations (4,130) (4,110) (3,594)
Dividends on common stock (1,522) (1,208) (1,199)
_______________________________________________________________________________
Net cash provided by (used in)
financing activities 53,483 2,513 (3,400)
_______________________________________________________________________________
Net increase (decrease) in cash
and cash equivalents 35,962 (19,153) 818
Cash and cash equivalents,
beginning of year 28,971 48,124 47,306
______________________________________________________________________________
Cash and cash equivalents,
end of year $ 64,933 $ 28,971 $48,124
===============================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,349 $ 2,084 $ 2,513
Income taxes 35,664 39,642 37,945
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal year - The Company's fiscal year ends on the Friday nearest
July 31st and each quarter consists of thirteen weeks. The Company's fiscal
year ended August 2, 1996 consisted of 53 weeks and the fourth quarter of fiscal
1996 consisted of 14 weeks.
Principles of consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany transactions and balances have been
eliminated.
Cash and cash equivalents - The Company's policy is to consider all
highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents. Cash equivalents consist primarily of auction
preferred stocks and commercial paper. The carrying value of these
instruments approximates market value due to their very short maturities.
Short-term investments - Short-term investments, primarily
consisting of federal government agency securities and commercial paper
which the Company intends to hold to maturity, are stated at amortized cost
in accordance with Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities".
(See Note 3.)
Inventories - Inventories are stated at the lower of cost or market.
Cost is determined by the first-in, first-out (FIFO) method.
Property and equipment - Property and equipment are stated at cost.
For financial reporting purposes depreciation and amortization on these assets
are computed by use of the straight-line and double-declining balance methods
over the estimated useful lives of the respective assets, as follows:
<TABLE>
<CAPTION>
Years
______________________________________________________________________________
<S> <C>
Buildings and improvements 20-45
Buildings under capital leases 20-25
Restaurant and other equipment 5-10
Leasehold improvements 3-35
______________________________________________________________________________
</TABLE>
Accelerated depreciation methods are generally used for income
tax purposes.
Interest is capitalized in accordance with SFAS No. 34, "Capitalization of
Interest Costs". Capitalized interest was $2,093, $2,010 and $2,072 for fiscal
years 1997, 1996 and 1995, respectively.
Gain or loss is recognized upon disposal of property and equipment,
and the asset and related accumulated depreciation and amortization amounts are
removed from the accounts.
Maintenance and repairs, including the replacement of minor items,
are charged to expense, and major additions to property and equipment
are capitalized.
Advertising - The Company generally expenses the costs of producing
and communicating advertising the first time the advertising takes place.
Net advertising expense was $25,178, $20,404 and $16,198 for the fiscal years
1997, 1996 and 1995, respectively.
Income taxes - The Company accounts for income taxes in accordance
with SFAS No. 109, "Accounting for Income Taxes." Targeted jobs tax credits
and employer tax credits for FICA taxes paid on tip income are accounted for by
the flow-through method. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. (See Note 7.)
Earnings per share - The computation of earnings per share is based
on the weighted average number of outstanding common shares and equivalents
(stock options) adjusted for stock splits. The weighted average number of
outstanding common shares and equivalents was 61,446,185, 60,813,172 and
60,556,977 for 1997, 1996 and 1995, respectively.
Long-term investments - Long-term investments, primarily
consisting of federal government agency securities and commercial paper
which the Company intends to hold to maturity, are stated at amortized cost
in accordance with SFAS No. 115. (See Note 3.)
<PAGE>
Stock-based compensation - SFAS No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require, companies to adopt the fair
value method of accounting for stock-based employee compensation. The Company
has chosen to continue to account for stock-based employee compensation in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations.
Start-up costs - Start-up costs of a new store are expensed in the
month in which the store opens.
Store closing costs - Upon the decision to close a store,
estimated unrecoverable costs are charged to expenses. Such costs include
buildings and improvements, leasehold improvements and restaurant and other
equipment, net of salvage value, and a provision for the present value of
future lease obligations, less estimated sub-rental income. The Company
recognized $14,199 in pretax costs for the closings of the Appleton, WI, the
Fond du Lac, WI and the Eagan, MN stores, the closings of the three Corner
Market stores in the middle Tennessee area and replacing the Company's
point-of-sale system in the fourth quarter of fiscal 1996. These
costs represent a one-time charge of $8,806 net of taxes, or $.15 per share.
Use of estimates - Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Recent accounting pronouncements not yet adopted - In February 1997,
SFAS No. 128, "Earnings per Share", was issued. SFAS No. 128 specifies
the computation, presentation and disclosure requirements for earnings per
share. This statement is effective for both interim and annual periods
ending after December 15, 1997, with restatement of all prior periods
shown. Earlier application is not permitted. The effective date of SFAS
No. 128 for the Company is for the quarter and six-month period ending
January 30, 1998. The Company estimates that SFAS No. 128 will have no
material effect on the Company's consolidated financial statements upon
adoption. In June 1997, SFAS No. 130, "Reporting Comprehensive Income", was
issued. SFAS No. 130 specifies how to report and display comprehensive
income and its components. This statement is effective for fiscal years
beginning after December 15, 1997, with restatement of all prior periods shown.
The Company will adopt SFAS No. 130 in the first quarter of fiscal 1999.
The Company is currently evaluating the effect that SFAS No. 130 will have
on the Company's consolidated financial statements upon adoption. In June
1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", was issued. SFAS No. 131 requires the disclosure of certain
information about operating segments in the financial statements. This
statement is effective for fiscal years beginning after December 15, 1997,
with restatement of all prior periods shown if not impracticable to do so.
The Company will adopt SFAS No. 131 in the first quarter of fiscal 1999.
The Company is currently evaluating the effect that SFAS No. 131 will have on
the Company's consolidated financial statements upon adoption. The Company does
not expect the adoption of SFAS Nos. 128, 130 or 131 to have a material effect
on the Company's consolidated financial statements.
2. INVENTORIES
Inventories were composed of the following at:
<TABLE>
<CAPTION>
August 1, August 2,
1997 1996
_______________________________________________________________________
<S> <C> <C>
Retail $58,199 $50,474
Restaurant 11,214 9,472
Supplies 3,856 1,524
_______________________________________________________________________
Total $73,269 $61,470
=======================================================================
</TABLE>
<PAGE>
3. SHORT-TERM AND LONG-TERM INVESTMENTS
The amortized costs and fair values of held-to-maturity securities at
August 1, 1997 were as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
______________________________________________________________________
<S> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government Agencies $ 501 -- -- $ 501
Corporate debt
securities 603 $ 5 -- 608
Other securities 562 128 -- 690
______________________________________________________________________
Short-term investments $1,666 $133 -- $1,799
======================================================================
</TABLE>
The amortized costs and fair values of held-to-maturity securities at
August 2, 1996 were as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
______________________________________________________________________
<S> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government Agencies $2,544 -- $ 9 $2,535
Corporate debt
securities 499 -- 3 496
Other securities 2,257 $1 -- 2,258
______________________________________________________________________
Short-term and long-term
investments $5,300 $1 $12 $5,289
======================================================================
</TABLE>
The following table shows the maturity distribution of the Company's
investment securities at August 1, 1997:
<TABLE>
<CAPTION>
Amortized Fair
Maturity (Fiscal Year) Cost Value
_______________________________________________________________________
<S> <C> <C>
1998 $1,666 $1,799
_______________________________________________________________________
Short-term investments $1,666 $1,799
=======================================================================
</TABLE>
4. DEBT
Long-term debt consisted of the following at:
<TABLE>
<CAPTION>
August 1, August 2,
1997 1996
___________________________________________________________________________
<S> <C> <C>
6.36% Term Loan payable on or before
December 1, 2001 $50,000 --
9.53% Senior Notes Payable in annual
installments of varying amounts from
January 15, 1994 to January 15, 2002,
with a final installment of $2,000
due January 15, 2003 15,500 $19,500
Less current maturities 3,500 4,000
___________________________________________________________________________
Long-term debt $62,000 $15,500
===========================================================================
</TABLE>
The financial covenants related to the 6.36% Term Loan require that
the Company maintain an interest coverage ratio of 3.0 to 1.0 and a lease
adjusted funded debt to total capitalization ratio not to exceed 0.4 to 1.0.
The note agreements relating to the 9.53% Senior Notes placed in
January, 1991 in the original amount of $30,000 include, among other
provisions, requirements that the Company maintain minimum tangible net worth
of $70,000. The agreements also contain certain other restrictions related to
the payment of cash dividends and the purchase of treasury stock. Retained
earnings not restricted under the provisions of the agreements were
approximately $382,175 at August 1, 1997.
<PAGE>
Based on discounted cash flows of future payment streams, assuming
rates equivalent to the Company's incremental borrowing rate on similar
liabilities, the fair value of the 6.36% Term Loan and the 9.53% Senior Notes
approximates carrying value as of August 1, 1997.
The Company has a revolving credit facility with a maximum principal
amount of $75,000. No amounts were outstanding under the revolving credit
facility at August 1, 1997.
At August 1, 1997 and August 2, 1996, the Company was in compliance
with all covenants.
The aggregate maturities of long-term debt subsequent to August 1,
1997 are as follows:
<TABLE>
<CAPTION>
Fiscal year
___________________________________________________________________________
<S> <C>
1998 $ 3,500
1999 2,500
2000 2,500
2001 3,000
2002 52,000
Later years 2,000
___________________________________________________________________________
Total $65,500
===========================================================================
</TABLE>
5. COMMON STOCK
The Board of Directors granted certain executive officers hired in
fiscal 1996 a total of 37,000 restricted shares which vest over five
years. The Company's compensation expense for these restricted shares was $150
and $144 in fiscal 1997 and 1996, respectively. The weighted average fair
value of the restricted shares granted during fiscal 1996 was $20.27 per share.
6. STOCK OPTION PLANS
During fiscal 1997, the Company amended and restated the 1987 Option
Plan and retitled it as the Amended and Restated Stock Option Plan ("the New
Plan"), to allow flexibility to extend the duration of certain options under
the New Plan, to modify the option terms of certain retired, terminated,
disabled or deceased optionees, to make only non-qualified options available
for grant under the New Plan and to allow for the possibility of
transferability and assignability of options under the New Plan. With the
exception of the aforementioned items, the New Plan is substantially the same
as the 1987 Plan.
The New Plan, like the 1987 Plan and the 1982 Plan, is administered
by the Stock Option Committee (the "Committee"). Members of the
Committee are appointed by the Board and consist of members of the Board. The
Committee is authorized to determine, at time periods within its discretion
and subject to the direction of the Board, which key employees shall be
granted options, the number of shares covered by the options granted to each,
and within applicable limits, the terms and provisions relating to the exercise
of such options.
The Committee is currently authorized to grant options to purchase an
aggregate of 14,025,702 shares of the Company's common stock under all employee
stock option plans. The option price per share under the New Plan must be at
least 100% of the fair market value of a share of the Company's common stock
based on the closing price on the day next preceding the day the option is
granted. Options are generally exercisable each year on a cumulative basis
at a rate of 33% of the total number of shares covered by the option beginning
one year from the date of grant, expire ten years from the date of grant and
are non-transferrable. At August 1, 1997, there were 3,382,389 shares of
unissued common stock reserved for issuance under the New Plan.
<PAGE>
In fiscal 1989, the Board of Directors adopted the 1989 Non-employee
Plan ("Directors Plan") for non-employee directors. The stock options were
granted with an exercise price equal to the fair market value of the Company's
common stock as of the date of grant and expire one year from the retirement
of the director from the board. An aggregate of 1,518,750 shares of the
Company's common stock is authorized to be issued under this plan. Due to
the overall plan limit, no shares have been granted under this plan since fiscal
1994.
Stock Options: A summary of the status of the Company's stock option
plans for fiscal 1997, 1996 and 1995, and changes during those years is
presented below:
<TABLE>
<CAPTION>
(Shares in thousands) 1997 1996 1995
___________________________________________________________________________
Weighted- Weighted- Weighted-
Average Average Average
Fixed Options Shares Price Shares Price Shares Price
____________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year 5,342 $21.34 4,831 $20.63 4,041 $19.48
Granted 1,297 22.80 1,449 19.35 1,133 25.21
Exercised (464) 16.14 (602) 8.49 (91) 11.43
Forfeited or canceled (528) 23.51 (336) 25.61 (252) 25.98
_____ _____ _____
Outstanding,
end of year 5,647 21.90 5,342 21.34 4,831 20.63
===== ===== =====
Options exercisable
at year-end 3,751 22.13 3,749 21.81 4,067 19.75
Weighted-average fair
value per share of
options granted
during the year $13.52 $11.18
</TABLE>
The following table summarizes information about fixed stock
options outstanding at August 1, 1997:
<TABLE>
<CAPTION>
(Shares in thousands) Options Outstanding Options Exercisable
_________________________________________________________________________
Weighted-Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 8/1/97 Life Price at 8/1/97 Price
_________________________________________________________________________
<S> <C> <C> <C> <C> <C>
$ 3.33-10.00 374 2.54 $ 6.20 374 $ 6.20
10.01-20.00 1,488 6.92 18.19 848 17.53
20.01-29.50 3,785 7.18 24.91 2,529 26.03
_____ _____
$ 3.33-29.50 5,647 6.81 21.90 3,751 22.13
===== =====
</TABLE>
Had the fair value of options granted under these plans beginning in fiscal
1996 been recognized as compensation expense on a straight-line basis over
the vesting period of the grant, the Company's net earnings and earnings per
share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
_____________________________________________________________
<S> <C> <C>
Net income:
As reported $86,598 $63,515
Pro forma 76,767 61,001
Net earnings per share:
As reported 1.41 1.04
Pro forma 1.25 1.00
</TABLE>
<PAGE>
The pro forma effect on net income for 1997 and 1996 is not
representative of the pro forma effect on net income in future years because it
does not take into consideration pro forma compensation expense related to
grants made prior to 1995.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in fiscal 1997 and 1996: dividend yield of
.1% for all years; expected volatility of 35 and 36 percent, respectively;
risk-free interest rate ranges of 6.3% to 6.7% and 5.3% to 6.3%,
respectively; and expected lives of six years.
The Company recognizes a tax deduction upon exercise of non-qualified
stock options in an amount equal to the difference between the option price
and the fair market value of the common stock. These tax benefits are
credited to Additional Paid-In Capital.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's net deferred tax
liability consisted of the following at:
<TABLE>
<CAPTION>
August 1, August 2,
1997 1996
___________________________________________________________________________
<S> <C> <C>
Deferred tax assets:
Financial accruals without
economic performance $ 6,328 $ 6,304
Other 2,727 2,364
___________________________________________________________________________
Deferred tax assets 9,055 8,668
___________________________________________________________________________
Deferred tax liabilities:
Excess tax depreciation over book 17,068 10,756
Other 10,563 983
___________________________________________________________________________
Deferred tax liabilities 27,631 11,739
___________________________________________________________________________
Net deferred tax liability $18,576 $ 3,071
===========================================================================
</TABLE>
The Company provided no valuation allowance against deferred tax
assets recorded as of August 1, 1997 and August 2, 1996, as the "more-likely-
than-not" valuation method determined all deferred assets to be fully
realizable in future taxable periods.
The components of the provision for income taxes for each of the
three fiscal years were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
___________________________________________________________________________
<S> <C> <C> <C>
Current:
Federal $30,398 $34,965 $31,284
State 4,956 5,878 7,588
Deferred 15,505 (1,978) 418
___________________________________________________________________________
Total income tax provision $50,859 $38,865 $39,290
===========================================================================
</TABLE>
<PAGE>
A reconciliation of the provision for income taxes as reported and
the amount computed by multiplying the income before the provision for income
taxes by the U.S. federal statutory rate of 35% was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
___________________________________________________________________________
<S> <C> <C> <C>
Provision computed at federal
statutory income tax rate $48,110 $35,833 $36,867
State and local income taxes,
net of federal benefit 3,753 4,126 4,199
Jobs credit (195) (33) (787)
Employer tax credits for FICA taxes
paid on tip income (1,403) (1,328) (1,194)
Other-net 594 267 205
___________________________________________________________________________
Total income tax provision $50,859 $38,865 $39,290
===========================================================================
</TABLE>
8. SEGMENT INFORMATION
The Company operates stores which provide a combination of restaurant
and retail services to the motoring public. The Company considers this
combination of services to be one industry segment.
9. COMMITMENTS AND CONTINGENCIES
The Company has been involved in various legal matters during fiscal
1997 which are being defended and handled in the ordinary course of business.
While the ultimate results of such matters cannot be determined or
predicted, management does not believe that they will have a material adverse
effect on the Company's results of operations or financial position.
The Company operates seventeen stores from leased facilities and
also leases certain land and advertising billboards. These leases have
been classified as either capital or operating leases in accordance with the
criteria contained in SFAS No. 13, "Accounting for Leases". The interest
rates for capital leases vary from 10% to 17%. Amortization of capital leases
is included with depreciation expense. A majority of the Company's lease
agreements provide for renewal options and some of these options contain
escalation clauses. Certain store leases provide for contingent lease
payments based upon sales volume in excess of specified minimum levels.
The following is a schedule by years of future minimum lease payments
under capital leases together with the present value of the minimum lease
payments as of August 1, 1997:
<TABLE>
<CAPTION>
Fiscal year
_________________________________________________________________________
<S> <C>
1998 $ 368
1999 371
2000 371
2001 321
2002 214
Later years 693
_________________________________________________________________________
Total minimum lease payments 2,338
Less amount representing interest 870
_________________________________________________________________________
Present value of minimum lease payments 1,468
Less current portion 166
_________________________________________________________________________
Long-term portion of capital lease obligations $1,302
=========================================================================
</TABLE>
<PAGE>
The following is a schedule by years of the future minimum rental
payments required under noncancelable operating leases as of August 1, 1997:
<TABLE>
<CAPTION>
Fiscal year
_________________________________________________________________________
<S> <C>
1998 $12,890
1999 7,489
2000 2,988
2001 971
2002 1,307
Later years 5,184
_________________________________________________________________________
Total $30,829
=========================================================================
</TABLE>
Rent expense under operating leases for each of the three fiscal years was:
<TABLE>
<CAPTION>
Minimum Contingent Total
_________________________________________________________________________
<S> <C> <C> <C>
1997 $14,163 $787 $14,950
1996 12,134 764 12,898
1995 9,717 685 10,402
</TABLE>
10. EMPLOYEE SAVINGS PLAN
The Company has an employee savings plan, which provides for
retirement benefits for eligible employees. The plan is funded by
elective employee contributions up to 16% of their compensation and the Company
matches 25% of employee contributions for each participant up to 6% of
the employee's compensation. The Company contributed $1,188, $864 and $714 for
fiscal 1997, 1996 and 1995, respectively.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for fiscal 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
___________________________________________________________________________
<S> <C> <C> <C> <C>
1997
Net sales $258,902 $267,854 $275,062 $322,033
Gross profit on
sales 169,587 170,282 182,615 213,664
Income before income
taxes 30,403 25,459 32,672 48,923
Net income 18,850 15,988 20,518 31,242
Net earnings per share .31 .26 .33 .51
___________________________________________________________________________
1996
Net sales $221,011 $219,484 $220,579 $282,213
Gross profit on
sales 147,404 138,855 146,566 185,557
Income before income
taxes* 27,086 20,217 26,212 28,865
Net income* 16,794 12,535 16,251 17,935
Net earnings per share* .28 .21 .27 .29
</TABLE>
*Fiscal 1996 included $14,199 in pre-tax costs ($8,806 after tax or $.15
per share) related to a one-time charge for store closings and other write-
offs. (See Note 1).
<PAGE>
Subsidiaries of the Registrant
The following is a list of the significant subsidiaries of
the Registrant as of August 1, 1997, all of which are wholly-
owned:
State of
Parent Incorporation
______ _____________
Cracker Barrel Old Country Store, Inc. Tennessee
Subsidiaries
____________
CBOCS Distribution, Inc. Tennessee
CBOCS Limited Partnership Michigan
CBOCS Michigan, Inc. Michigan
CBOCS West, Inc. Nevada
Rocking Chair, Inc. Nevada
CRACKER BARREL OLD COUNTRY STORE, INC.
305 Hartmann Drive
Lebanon, Tennessee 37087
-----------------
Notice of Annual Meeting of Shareholders
to be held on Tuesday, November 25, 1997
-----------------
Notice is hereby given that the Annual Meeting of Shareholders
of Cracker Barrel Old Country Store, Inc.(the "Company") will be
held at the offices of the Company located on Hartmann Drive,
Lebanon, Tennessee, on Tuesday, November 25, 1997 at 10:00 a.m.,
local time, for the following purposes:
(1) to elect 13 directors to serve until the next Annual Meeting and
until their successors are duly elected and qualified;
(2) to consider and vote upon the adoption of a proposed amendment
to the Cracker Barrel Old Country Store, Inc. Amended and Restated
Stock Option Plan to increase the number of shares of Company
Common Stock available under the Plan from 14,025,702 to 17,525,702;
(3) to approve the selection of Deloitte & Touche LLP as the
Company's independent auditors for the 1998 fiscal year;
(4) to consider and take action on a shareholder proposal
requesting that the Compensation and Stock Option
Committees link executive compensation to social policy
goals; and
(5) to transact such other business as may properly be brought
before the meeting or any adjournment of the meeting.
The Board of Directors has fixed the close of business on
September 29, 1997 as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting.
Your attention is directed to the Proxy Statement accompanying
this notice for a more complete statement regarding matters to be
acted upon at the Annual Meeting.
By Order of the Board of Directors
James F. Blackstock, Secretary
Lebanon, Tennessee
October 24, 1997
YOUR REPRESENTATION AT THE MEETING IS IMPORTANT. TO ENSURE YOUR
REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD. SHOULD YOU
DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AS PROVIDED IN THE
ACCOMPANYING PROXY STATEMENT, AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
CRACKER BARREL OLD COUNTRY STORE, INC.
305 Hartmann Drive
Lebanon, Tennessee 37087
--------------------
PROXY STATEMENT
--------------------
The accompanying proxy is solicited by, and on behalf of,
the Board of Directors of Cracker Barrel Old Country Store, Inc.
(the "Company") for use at the Annual Meeting of Shareholders to
be held on November 25, 1997, and any adjournment of that
meeting. Notice of the Annual Meeting is attached to this Proxy
Statement.
This Proxy Statement, and the Annual Report of the Company
for the fiscal year ended August 1, 1997, have been mailed on or
about October 24, 1997, to all shareholders of record on
September 29, 1997.
The purpose of the Annual Meeting is to elect 13 directors,
to adopt an amendment to the Cracker Barrel Old Country Store,
Inc. Amended and Restated Stock Option Plan to increase the
number of shares authorized under the Plan, to approve the
selection of Deloitte & Touche LLP as the Company's independent
auditors for the next fiscal year, and to vote on a shareholder
proposal requesting that the Compensation and Stock Option
Committees link executive compensation to social policy goals.
A shareholder of record who signs and returns a proxy in the
accompanying form may revoke the proxy at any time before the
designated proxy holder votes, by attending the Annual Meeting
and electing to vote in person, by filing with the Secretary of
the Company a written revocation or by duly executing a written
proxy bearing a later date. Unless duly revoked, the shares
represented by the proxy will be voted at the Annual Meeting.
Where a choice is specified on the proxy, the represented shares
will be voted in accordance with the specifications. If no
specification is made, proxy shares will be voted FOR the
election of all director nominees, FOR the adoption of the
amendment to the Amended and Restated Stock Option Plan, FOR the
approval of Deloitte & Touche LLP as the Company's independent
auditors for the 1998 fiscal year, and AGAINST the shareholder
proposal.
Directors shall be elected by a plurality of the votes cast
in the election by the holders of Company Common Stock
represented and entitled to vote at the Annual Meeting, if a
quorum is present. Assuming the existence of a quorum, every
other proposal submitted to the shareholders shall be approved if
the votes cast favoring the proposal exceed the votes cast
opposing it. Abstentions will be counted as present for purposes
of determining the existence of a quorum and for determining the
total number of votes cast. Abstentions are disregarded in
determining if a director receives a plurality of the votes cast
or whether votes cast for a proposal exceed votes cast against
it. Broker non-votes are disregarded for the purpose of
determining the total number of votes cast with respect to a
proposal.
<PAGE> 1
The Board of Directors knows of no other matters which are
to be brought to a vote at the Annual Meeting. However, if any
other matters properly come before the meeting, the persons
appointed in the proxy or their substitutes will vote in
accordance with their best judgment on those matters.
The Board of Directors has fixed the close of business on
September 29, 1997 as the record date for the Annual Meeting.
The Company's only class of securities is its Common Stock, with
a par value of $0.50 per share. On September 29, 1997, the
Company had outstanding 61,395,068 shares of Common Stock. Only
shareholders of record at the close of business on that date will
be entitled to vote at the Annual Meeting. For each share held,
those shareholders will be entitled to one vote which may be
given in person or by proxy authorized in writing.
The cost of solicitation of proxies will be borne by the
Company, including expenses in connection with preparing,
assembling and mailing this Proxy Statement. The solicitation
will be made by mail, and may also be made by the Company's
officers or employees personally or by telephone or telegram. No
officers or employees of the Company will receive additional
compensation for soliciting proxies. The Company may reimburse
brokers, custodians and nominees for their expenses in sending
proxies and proxy material to beneficial owners. The Company
retains Corporate Communications, Inc., 523 Third Avenue South,
Nashville, Tennessee to assist in the management of the Company's
investor relations and other shareholder communications issues.
As part of its duties, Corporate Communications, Inc. may assist
in the solicitation of proxies. Corporate Communications, Inc.
receives a fee of approximately $2,000 per month, plus
reimbursement of out-of-pocket expenses. See "Other Transactions
and Relationships" later in this document.
As it has done previously, the Company will continue to
employ an independent tabulator to receive and tabulate the
proxies, and independent inspectors of election to certify the
results. The Company will also continue its practice of holding
the votes of all shareholders in confidence from Company
directors, officers and employees, except (i) to allow the
independent inspectors of election to certify the results of the
vote, (ii) as necessary to meet applicable legal requirements and
to assert or defend claims for or against the Company, (iii) in
case of a contested proxy solicitation, or (iv) when a
shareholder makes a written comment on the proxy card or
otherwise communicates his or her vote to management.
<PAGE> 2
PROPOSAL 1. ELECTION OF DIRECTORS
The Company Bylaws provide that the Board of Directors shall
consist of not more than 15 persons. The Board of Directors has
established Board size at 13 directors. Proxies cannot be voted
for more than 13 persons. The terms of all present directors
will expire upon the election of new directors at the Annual
Meeting. The Board of Directors proposes the election of the
nominees listed below to serve until the next Annual Meeting and
until their successors are duly elected and qualified. All of the
nominees are presently directors of the Company and were elected
at the Annual Meeting held on November 26, 1996. Unless contrary
written instructions are received, it is intended that the shares
represented by proxies solicited by the Board of Directors will
be voted in favor of the election of all named nominees as
directors. If for any reason any nominee is unable to serve, the
persons named in the proxy have advised that they will vote for a
substitute nominee as proposed by the Company Board of Directors.
Each nominee has consented to act as a director, if elected, and
the Board of Directors has no reason to expect that any nominee
will fail to be a candidate at the meeting. Therefore, it does
not at this time have any substitute nominees under
consideration. The information relating to the 13 nominees set
forth below has been furnished to the Company by the named
individuals.
Directors shall be elected by a plurality of the votes cast
by the shares entitled to vote in the election at the Annual
Meeting. The Board of Directors recommends that shareholders
vote "FOR" the nominees listed below. Proxies, unless they
contain contrary written instructions, will be voted "FOR" the
listed nominees.
<TABLE>
<CAPTION>
Name, Age, Position First Became Business Experience
with the Company a Director During the Past Five Years
______________________ ____________ _________________________________
<S> <C> <C>
James C. Bradshaw, 66 1970 Practicing physician, Lebanon,
Director Tennessee
Robert V. Dale, 61 1986 President of Windy Hill Pet Food
Director Company, Nashville, Tennessee
since March 1995; Partner in PFB
Partnership, Nashville, Tennessee
from August 1994 to March 1995;
President of Martha White Foods,
Inc., Nashville, Tennessee from
October 1985 to August 1994
Dan W. Evins, 62 1970 Chairman and Chief Executive
Director, Chairman Officer of the Company; President
and Chief Executive of the Company until August 1995;
Officer (1) Member of Board of Directors of
Clayton Homes, Inc.
Edgar W. Evins, 65 1970 Retired in June 1987; President,
Director (1) DeKalb County Bank and Trust
Company, Alexandria, Tennessee
from 1958 until June 1987
<PAGE>
William D. Heydel, 68 1970 Retired in 1987; for the previous
Director five years, Tennessee manager of
American Family Life Assurance
Company, Nashville, Tennessee
Robert C. Hilton, 60 1981 Chairman, President and CEO of Home
Director Technology Healthcare, Inc., Nashville,
Tennessee since October 1991
Charles E. Jones, Jr., 52 1981 President, Corporate Communications,
Director Inc., a financial public relations
firm, Nashville, Tennessee
Charles T. Lowe, Jr., 65 1970 Retired in 1993; previously President
Director of Travel World, Inc., a travel agency,
Lebanon, Tennessee
B. F. Lowery, 60 1971 Attorney; President and Chairman,
Director LoJac Companies, asphalt paving,
highway construction and building
materials supplier and contractor,
Lebanon, Tennessee
Ronald N. Magruder, 50 1995 President and Chief Operating Officer
Director, President and of the Company since August 1995;
Chief Operating Officer Vice-Chairman of Darden Restaurants
from December 1994 to August 1995;
Executive Vice President, General Mills
Restaurants and President of Olive
Garden from 1987 to 1994
Gordon L. Miller, 63 1974 Dentist, Lebanon, Tennessee
Director
Martha M. Mitchell, 57 1993 Senior Vice President (since January
Director 1987) and Partner (since January 1993)
of Fleishman-Hillard, a public
relations firm, St. Louis, Missouri
Jimmie D. White, 56 1993 Retired on December 11, 1995;
Director Senior Vice President - Finance and
Chief Financial Officer of the
Company from 1985 to 1995
______________________________
</TABLE>
(1) Dan W. Evins and Edgar W. Evins are brothers.
Committees and Meetings
During the fiscal year ended August 1, 1997, the Board of Directors
held five meetings. No incumbent director attended fewer than 75% of the
Board meetings in fiscal 1997.
The Executive Committee is currently composed of Robert V. Dale, Dan
W. Evins, Charles E. Jones, Jr., B. F. Lowery, Ronald N. Magruder, Charles
T. Lowe, Jr. and Martha M. Mitchell. The Executive Committee has all the
duties and powers of the Board of Directors, subject to the general
direction, approval and control of the Board. The Executive Committee met
six times in fiscal year 1997.
<PAGE> 4
The Stock Option Committee is currently composed of Robert C. Hilton,
James C. Bradshaw and William D. Heydel. This committee, which met once
during the fiscal year ended August 1, 1997, is responsible for the
administration of the Company's Incentive Stock Option Plan of 1982, its
1987 Stock Option Plan and its Amended and Restated Stock Option Plan.
The Audit Committee is currently composed of Robert C. Hilton, James
C. Bradshaw, Robert V. Dale and Gordon L. Miller. This committee, which
met three times during the fiscal year ended August 1, 1997, reviews the
Company's internal accounting controls and systems, the results of the
Company's annual audit and the Company's accounting policies and any change
in those policies.
The Compensation Committee is currently composed of Robert V. Dale,
Edgar W. Evins, William D. Heydel and Robert C. Hilton. This committee,
which met once during the fiscal year ended August 1, 1997, reviews and
recommends to the Board of Directors the salaries, bonuses and other cash
compensation of the executive officers of the Company.
The Nominating Committee is currently composed of Robert V. Dale, B.F.
Lowery, Charles E. Jones, Jr., Martha M. Mitchell, Dan W. Evins, Edgar W.
Evins, and Robert C. Hilton. The Nominating Committee reviews director
nominees and makes recommendations to the Board of Directors prior to each
Annual Meeting of shareholders. The Nominating Committee will consider
nominees recommended in writing by shareholders who submit director
nominations to the Company prior to the deadline for shareholder proposals
as further described under "Proposals of Shareholders" later in this
document.
The Company pays to each of its outside directors an annual retainer
of $20,000 plus $1,000 as a director's fee for each Board meeting attended.
Outside directors who are members of the Executive Committee, Audit
Committee, Compensation Committee and Stock Option Committee receive a fee
of $1,000 for each committee meeting attended. The chairperson of these
committees receives an additional fee of $200 for each committee meeting
attended. All outside directors are reimbursed by the Company for out-of-
pocket expenses incurred in connection with attendance at meetings. No
director's fees are paid to directors who are also employees of the
Company.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following information pertains to Company Common Stock
beneficially owned, directly or indirectly, by 5% or greater shareholders
as reported to the Company by NASD.
Percent
Name and Address Amount and Nature of of Class
of Beneficial Owner Beneficial Ownership (Common Stock)
___________________ ____________________ ______________
Montag & Caldwell Inc. 4,985,000 8.1%
3343 Peachtree Rd. N.E.
Atlanta, GA 30326
Security Ownership of Management
The following information pertains to Company Common Stock
beneficially owned, directly or indirectly, by all directors and nominees
and by all directors and officers as a group, as of September 29, 1997.
Unless otherwise noted, the named persons may be contacted at the Company's
executive offices and they have sole voting and investment power with
respect to the shares indicated.
Percent
Names of Amount and Nature of Of Class
Beneficial Owners Beneficial Ownership (1) (Common Stock)
__________________ ________________________ ______________
James C. Bradshaw 545,719 (2) *
Robert V. Dale 104,728 *
Dan W. Evins 696,666 1.1%
Edgar W. Evins 69,157 (3) *
William D. Heydel 543,327 (2) *
Robert C. Hilton 99,299 *
Charles E. Jones, Jr. 102,761 *
Charles T. Lowe, Jr. 914,025 (4) 1.5%
B. F. Lowery 240,125 *
Ronald N. Magruder 344,134 *
Gordon L. Miller 167,167 *
Martha M. Mitchell 41,872 *
Jimmie D. White 30,290 *
All Officers and Directors
as a group (39 persons) 4,686,333 7.1%
*Less than one percent
- ----------------------
<PAGE> 6
(1) Includes the following number of shares subject to options exercisable
by the named holders within 60 days:
James C. Bradshaw 142,670 Charles T. Lowe, Jr. 66,734
Robert V. Dale 92,046 B. F. Lowery 142,670
Dan W. Evins 256,666 Ronald N. Magruder 273,334
Edgar W. Evins 66,734 Gordon L. Miller 66,734
William D. Heydel 142,670 Martha M. Mitchell 41,422
Robert C. Hilton 92,046 Jimmie D. White -
Charles E. Jones, Jr. 92,046
All Officers and Directors as a group 2,104,681
The shares described in this note are deemed to be outstanding for the
purpose of computing the percentage of outstanding Common Stock owned
by each named individual and by the group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Includes shares owned jointly with spouse, with whom voting and
investment power is shared: Dr. Bradshaw 403,049 and Mr. Heydel
400,657.
(3) Includes 223 shares owned by Mr. Evins' wife in her SEP, for which
voting and investment power is shared.
(4) Voting and investment power with respect to 43,491 shares is shared by
Mr. Lowe and his wife, the owner of these shares.
REPORT OF THE COMPENSATION COMMITTEE AND THE
STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Company's compensation policies for its executive officers are
administered by two committees of the Board of Directors - the Compensation
Committee and the Stock Option Committee. All members of these committees
are outside, non-employee directors.
The primary components of executive compensation are base salary,
bonus and longer-term incentives such as stock options. The Compensation
Committee recommends to the Board of Directors the salaries and bonus plan
for the executive officers. The Stock Option Committee administers the
stock option plans pursuant to which all employee stock options are
granted.
Base Salary
In setting the fiscal 1997 base salary for each executive officer, the
Compensation Committee reviewed the then-current salary for each of the
officers in relation to average salaries within the industry for comparable
<PAGE> 7
areas of responsibility as presented in a report prepared for the Company
by independent executive compensation consultants. In addition, the
Compensation Committee considered the contribution made by each executive
officer during fiscal 1996, as reported by the Chief Executive Officer, as
well as salary recommendations from management for the executive officers
other than the Chairman and Chief Executive Officer, Dan W. Evins. The
Compensation Committee employed procedures similar to those used for each
of the other executive officers to determine the fiscal 1997 salary for Dan
W. Evins.
Bonus
The Compensation Committee has determined that the financial
performance of the Company should be a significant factor in rewarding its
executive officers. Therefore, in July of each year, the Compensation
Committee reviews the expected financial performance of the Company for the
concluding fiscal year and considers the internal budget established for
the next fiscal year in setting certain financial goals and criteria for
executive officer bonuses.
In fiscal 1997, the Company operated pursuant to a Management
Incentive Plan affecting executive officers and senior managers. The
purpose of the Management Incentive Plan is to link individual job
performance and resulting compensation to the financial performance of the
Company. This ensures that all participants achieve individual goals while
remaining focused on the Company's overall financial results. The Plan is
also designed to ensure that participants' financial interests remain
directly tied to those of Cracker Barrel's shareholders. A participant's
target bonus percentage varies based on salary grade level.
Generally, bonus awards are calculated based on the following factors:
(i) Company financial results compared to the Company's business plan, (ii)
individual performance against his or her stated goals, (iii) the
individual's fiscal year base salary amount, and (iv) the individual's
target bonus percentage. Maximum bonus percentages available to executive
officers range from 75% to 225% of base salary (225% for Mr. Evins, 180%
for Mr. Magruder, and Mr. Woodhouse, 135% for Mr. Adkins and Mr. Parsons,
105% for all other senior officers, and from 75% to 105% for all other
executive officers.) Bonuses earned for fiscal 1997, as a percent of total
salary and bonuses, were 146% for Mr. Evins, 117% for Mr. Magruder, 117%
for Mr. Woodhouse, 91% for Mr. Adkins, and 90% for Mr. Parsons.
Stock Options
In contrast to salary and bonus awards, which are generally for past
work performance, stock options are based on future performance which
contributes to stock price appreciation. They are granted at an exercise
price which is equal to the closing market price of the Company's Common
Stock on the day before the date of grant, and therefore have no value
until the stock trading price increases.
The Stock Option Committee has generally granted nonqualified stock
options annually. In recent years, the Committee has extended option
grants down into the organization as far as the top hourly level positions
in the stores. See "Stock Option Plans" later in this document.
<PAGE> 8
Stock Performance Graph
The following graph sets forth the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock during
the preceding five fiscal years, ended August 1, 1997, compared with the
Standard & Poor's 400 MidCap Index and a Total Return Index comprised of
all NASDAQ companies with the same two-digit SIC (Standard Industrial
Classification) code (58 - Eating and Drinking Places) as the Company.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
_____________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Cracker Barrel Old Country Store, Inc. 100 117 104 94 99 130
NASDAQ 100 117 106 119 115 105
S & P 400 MIDCAP 100 117 121 150 162 236
_____________________________________________________________________________
</TABLE>
<PAGE> 9
Summary Compensation Table
The following table sets forth information concerning the compensation
of the Chief Executive Officer and the four other most highly compensated
executive officers who served in such capacities as of August 1, 1997.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Securities Other
Underlying Restricted Annual
Principal Fiscal Options Stock Compensa-
Name Position Year Salary(1) Bonus Granted Awards(1) tion(2)
____ ________ ____ _________ _____ _______ _________ _______
<S> <C> <C> <C> <C> <C> <C> <C>
Dan W. Evins Chairman of the 1997 $385,000 $545,613 40,000 - $ 31,439
Board and Chief 1996 385,000 299,330 40,000 - 30,754
Executive Officer 1995 385,000 661,495 40,000 - 28,541
Ronald N. Magruder President and Chief 1997 350,000 396,809 35,000 - 104,814
Operating Officer 1996 344,697 217,694 285,000 $656,000 1,740
1995 - - - - -
Michael A. Woodhouse Senior Vice President/ 1997 231,000 261,894 25,000 - 95,762
Finance and Chief 1996 141,667 110,000 25,000 93,750 10,310
Financial Officer 1995 - - - - -
Michael D. Adkins Senior Vice President/ 1997 165,000 158,776 20,000 - 6,096
Restaurant Operations 1996 150,000 46,649 12,000 - 5,792
1995 125,000 85,908 12,000 - 5,606
Richard G. Parsons Senior Vice President/ 1997 167,400 146,442 20,000 - 7,835
Merchandising 1996 155,000 48,204 12,000 - 7,522
1995 155,000 106,526 12,000 - 7,596
</TABLE>
(1) On August 7, 1995, the effective date of Mr. Magruder's
employment with the Company, he received a restricted stock
award of 32,000 shares worth $656,000 based on the value of
Company Common Stock on July 5, 1995. The shares vest at a rate
of 20% per annum, and based on the value of Company Common Stock
at the end of fiscal 1997, were worth $926,000. On December 11,
1995, the effective date of Mr. Woodhouse's employment with the
Company, he received a restricted stock award of 5,000 shares
worth $93,750 based on the value of Company Common Stock on
December 8, 1995. These shares vest at a rate of 20% per annum,
and based on the value of Company Common Stock at the end of fiscal
1997, were worth $144,688. No dividends are paid on these
restricted shares until the shares actually vest.
(2) Includes premiums paid on Life and Disability insurance for
coverage above that available to all salaried employees of
$29,893 for Mr. Evins, $1,740 for Mr. Magruder, $18,117 for Mr.
Woodhouse, $4,418 for Mr. Adkins, and $6,663 for Mr. Parsons; the
Company's contributions to its 401(k) Employee Savings Plan for
each named officer, and moving expenses paid or accrued by the
Company in fiscal 1997 of $100,157 for Mr. Magruder and $77,645
for Mr. Woodhouse.
<PAGE> 10
Options Granted During Fiscal Year Ended August 1, 1997
The following table sets forth all options to acquire shares of
Company Common Stock granted to the named executive officers during the
fiscal year ended August 1, 1997.
<TABLE>
<CAPTION>
Individual Grants (1)
___________________________________________
Potential Realizable Value
% of Total at Assumed Annual Rates
Options Exercise of Stock Price Appreciation
# Granted to or Base for Option Term (2)
Options Employees in Price Expiration ___________________________
Name Granted Fiscal Year $/Share Date 5% 10%
____ _______ ___________ _______ ____ __ ___
<S> <C> <C> <C> <C> <C> <C>
Dan W. Evins 40,000 3.1% $22.75 08-29-06 $572,294 $1,450,306
Ronald N. Magruder 35,000 2.7% 22.75 08-29-06 500,757 1,269,017
Michael A. Woodhouse 25,000 1.9% 22.75 08-29-06 357,684 906,441
Michael D. Adkins 20,000 1.5% 22.75 08-29-06 286,147 725,153
Richard M. Parsons 20,000 1.5% 22.75 08-29-06 286,147 725,153
</TABLE>
(1) The exercise price of the options granted is equal to the closing market
price of the Company's Common Stock on the day before the date of grant.
Options are exercisable as to not more than 1/3 of the total number of
shares under the option during each 12-month period following one year from
the date of grant for all options granted during the fiscal year ended
August 1, 1997. To the extent any optionee does not exercise an option as
to all shares for which the option was exercisable during any 12-month
period, the balance of the unexercised options shall accumulate and the
option with respect to those shares will be exercisable at any later time
before expiration. Options expire 10 years from the date of the grant.
(2) The potential realizable values illustrate values that might be realized
upon exercise immediately prior to the expiration of the term of these
options using 5% and 10% appreciation rates, as required by the Securities
and Exchange Commission, compounded annually. These values do not, and
are not intended to, forecast possible future appreciation, if any, of the
Company's stock price. Additionally, these values do not take into
consideration the provisions of the options providing for vesting over a
period of years or termination of options following termination of
employment.
<PAGE> 11
Option Exercises and Fiscal Year End Values
The following table sets forth all stock options exercised during the
fiscal year ended August 1, 1997 by the named executive officers and
the number and value of unexercised options held by these executive officers
at fiscal year end.
<TABLE>
<CAPTION>
Value of Unexercised
#Shares Number of Unexercised In-The-Money Options at
Acquired on Value Options at FY-End FY-End (2)
Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
________ ___________ ___________ _____________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C>
Dan W. Evins 0 0 243,333 66,667 $1,651,455 $ 509,170
Ronald N. Magruder 0 0 178,334 141,666 1,499,901 1,138,224
Michael A. Woodhouse 0 0 8,333 41,667 84,892 324,483
Michael D. Adkins 0 0 41,125 28,000 230,742 202,250
Richard M. Parsons 12,000 $327,362 176,780 28,000 2,903,076 202,250
</TABLE>
(1) Value realized is calculated based on the difference between the option
exercise price and the actual sales price of shares sold, and the market
value of Company Common Stock on the date of exercise for 3,500 shares
acquired upon exercise but not sold by Mr. Parsons.
(2) The last trade of the Company's Common Stock as reported by NASDAQ on
August 1, 1997 was $28.9375. That price was used in calculating the value
of unexercised options.
Executive Employment Agreements
An employment agreement has been granted to Dan W. Evins
(Chairman of the Board and Chief Executive Officer) which, upon
the occurrence of certain events, authorizes a severance payment
approximately equal to three times his annual salary in effect on
the date of termination. Although not intended primarily as a
standard employment contract, the agreement does provide for
payment of a specified annual salary which shall not be
decreased, and which may be increased from time to time. This
agreement does not preclude Mr. Evins' from participating in any
other Company benefit plans or arrangements. Under the agreement,
Mr. Evins may terminate his employment and receive the three-year
severance payment if there is a "change in control of the
Company" (as defined in the agreement), accompanied by: (1) a
decrease in his base salary or bonus percentage; or (2) a
reduction in the importance of his job responsibilities; or (3) a
geographical relocation without his consent. The three-year
severance payment shall also be made to Mr. Evins if the Company
breaches the terms of the agreement. The employment agreement
also describes rights to compensation if Mr. Evins' employment is
terminated or suspended due to death, disability, poor
performance or wrongful activities.
<PAGE> 12
Effective August 7, 1995, the Company employed Mr. Ron Magruder
as its Chief Operating Officer. On the date he signed his offer
of employment, July 5, 1995, he was awarded an option under the
1987 Stock Option Plan for 250,000 shares of Company Common Stock
at the market closing price on the previous day. These options
vest at a rate of 1/3 each year and expire 10 years from the date
of grant. To remedy Mr. Magruder's loss of non-vested options in
the stock of his former employer, the Company provided him 32,000
shares of restricted Common Stock which vests at 20% each year.
If Mr. Magruder's employment is involuntarily terminated for
performance rather than for cause, the Company will provide him a
severance package consisting of one year's base salary and
estimated bonus, as well as $600,000. That amount decreases by
20% per year from the date of employment. Mr. Magruder was also
provided with funds to pay for his relocation to Tennessee, which
accrued in the amount of $100,157 in fiscal 1997.
Effective December 11, 1995, the Company employed Mr. Michael
Woodhouse as Senior Vice President of Finance and Chief Financial
Officer. Mr. Woodhouse was granted an option under the 1987
Stock Option Plan for 25,000 shares of Company Common Stock on
his start date, with the option vesting at a rate of 1/3 each
year following one year from the grant date and expiring 10 years
after the date of grant. To remedy Mr. Woodhouse's loss of non-
vested options in the stock of his former employer, the Company
granted him 5,000 shares of restricted Common Stock which vests
at 20% per year. Mr. Woodhouse was also provided with funds to
pay for his relocation to Tennessee, which accrued in the amount
of $77,645 in fiscal 1997.
Stock Option Plans
On February 25, 1982, the Company's Board of Directors adopted
an incentive stock option plan, which was approved by the
shareholders of the Company on November 23, 1982. The 1982 Plan
authorized the Stock Option Committee to issue options to certain
key employees for 2,475,095 shares of the Company's Common Stock,
which were all granted prior to adoption of the 1987 Stock Option
Plan and have been exercised. In 1986, Congress adopted the Tax
Reform Act of 1986, and in response to the 1986 Code amendments,
the Company's Board of Directors voted to discontinue the 1982
Plan and adopt in its place the 1987 Stock Option Plan. The
shareholders adopted the 1987 Plan at the 1987 Annual Meeting of
shareholders.
The 1987 Plan would have expired on June 25, 1997. The
Company's Board of Directors proposed that the 1987 Plan be
amended and that it be retitled the Cracker Barrel Old Country
Store, Inc. Amended and Restated Stock Option Plan (the "Current
Plan"). The Board of Directors approved the adoption of the
Current Plan on August 29, 1996 and the Company's shareholders
approved the Current Plan on November 26, 1996. The Current Plan
makes only non-qualified options available for grant, allows for
the possibility of transferability and assignability of options,
and is designed to facilitate continued compliance with Section
16 of the Securities Exchange Act of 1934, particularly Rule 16b-
3.
<PAGE> 13
The Current Plan, like the 1987 Plan and the 1982 Plan, is
administered by the Stock Option Committee. Members of that
Committee are directors appointed by the Board. Options may be
granted only to key executive personnel and other employees who
hold responsible positions with the Company. The Stock Option
Committee is authorized to determine, at time periods within its
discretion and subject to the direction of the Board, which key
employees shall be granted options, the number of shares covered
by each option granted, and within applicable limits, the terms
and conditions relating to the exercise of options. The Stock
Option Committee may impose on the option, or its exercise,
restrictions it deems reasonable and which are within the
restrictions authorized by the Current Plan. The option price per
share under the Current Plan must be at least 100% of the fair
market value of a share of the Company's Common Stock at the
close of business on the trading day immediately preceding the
day the option is granted, and options must be exercised not
later than 10 years after the grant date.
The Stock Option Committee is authorized to grant options to
purchase an aggregate of 14,025,702 shares of Company Common
Stock under the Current Plan. For information concerning the
proposed increase in the number of shares available under the
Current Plan, see: "Proposal 2. Increase Number of Shares of
Common Stock Available Under Amended and Restated Stock Option
Plan" later in this document. During fiscal 1997, the aggregate
number of shares subject to options granted was 1,296,600,
including 262,000 shares granted to the Company's executive
officers as a group, which includes the individuals named in the
Summary Compensation Table. These options were granted at prices
ranging from $21.875 to $28.375 per share, pursuant to the
Current Plan and are exercisable as to not more than 1/3 of the
total number of shares granted during each 12-month period
following one year from the date of the grant. To the extent,
however, that any optionee does not exercise an option as to all
shares for which the option was exercisable during any 12-month
period, the balance of unexercised options shall accumulate and
the option will be exercisable with respect to those shares until
the option expires.
The aggregate number of shares exercised pursuant to all
employee stock option plans during fiscal 1997 was 422,131,
including 37,000 exercised by the Company's executive officers as
a group. The net value of shares purchased (market value less
option exercise price) or cash realized upon exercise of options
was $4,290,520 in the aggregate, including $700,762 relating to
options exercised by the Company's executive officers as a group.
In 1989, the directors and shareholders of the Company adopted
the 1989 Stock Option Plan for Non-Employee Directors (the "1989
Plan"). The total number of shares of Company Common Stock
issuable upon the exercise of all options granted under the 1989
Plan could not, in the aggregate, exceed 1,518,750 shares. Under
the 1989 Plan, all non-employee directors of the Company
automatically received an annual stock option grant for 25,312
shares of the Company's Common Stock. There are no shares now
available to be granted under the 1989 Plan. 1989 Plan options
became exercisable 6 months after the date of each grant. The
stock options were granted at an exercise price equal to the fair
market value of the underlying stock on the date of grant and
expire one year from the date of a director's retirement from the
Board. Mr. James H. Stewart, who retired from the Board of
Directors on November 26, 1996, exercised options under the 1989
Plan on 41,422 shares of Common Stock in fiscal 1997. The net
value from those exercised options (market value less option
exercise price) was $140,663.
<PAGE> 14
Employee Savings Plans
401(k) Employee Savings Plan - On September 24, 1996, the Board of
Directors adopted the Godwins, Booke & Dickenson Prototype Profit-
Sharing and Employee Savings Plan and Trust (the "401(k) Plan")
as an Employee Savings Plan which provides for retirement
benefits for employees, and which is qualified under Section
401(k) of the Internal Revenue Code. Generally, all Company
employees who have completed one year of service, who have worked
in excess of 1,000 hours with the Company, and who have reached
the age of 21, are eligible to participate. Eligible employees
may elect to participate in the 401(k) Plan as of the beginning
of each calendar month.
Eligible employees who choose to participate may elect to have
up to 16% (not to exceed $9,500 in calendar 1997) of their
compensation contributed to the 401(k) Plan. The Company matches
25% of employee contributions for each participant, up to 6% of
the employee's compensation. In addition to these limits,
employee contributions and the Company match for highly
compensated participants are limited by a special annual
nondiscrimination test imposed under Section 401(k) of the
Internal Revenue Code. This test uses the percentages of
compensation contributed by, and matched for, rank and file
participants to limit the contributions of, and Company match
for, highly compensated participants.
Participants in the 401(k) Plan have a fully-vested interest in
their contributions. A participant's interest in Company
matching contributions begins to vest one year from the date of
employment and continues to vest at the rate of 20% per year
until fully vested. Generally participants may self-direct
investments in one or more available mutual funds, but they may
not withdraw either their contributions or their vested interest
in Company matching contributions prior to retirement or
termination of their employment with the Company. Limited
hardship withdrawals are tightly controlled by the provisions of
the 401(k) Plan and the Internal Revenue Code.
Deferred Compensation Plan - Effective January 1, 1994, the
Company's Board of Directors adopted a Deferred Compensation Plan
to provide retirement and incidental benefits for certain
executive employees and outside directors of the Company. At the
beginning of each calendar year, participants in this plan may
make an election to defer a portion of their compensation.
Interest is credited to each participant's account quarterly at a
rate equal to the 10-year Treasury Bill rate in effect as of the
beginning of the quarter, plus 1.5%. The total interest credited
to all participants' accounts during fiscal 1997 was $48,365.
Non-Qualified Savings Plan - On December 21, 1995, the Company's
Board of Directors adopted a Non-Qualified Savings Plan (the
"Savings Plan") which became effective January 1, 1996. The
Savings Plan is intended primarily to encourage savings on the
part of a small group of management and highly compensated
Company employees, who typically receive refunds from the
Company's 401(k) Plan due to the required annual
nondiscrimination test imposed under Section 401(k) of the
Internal Revenue Code. In the discretion of the Company's
Compensation Committee, other Company employees may also
participate in the Savings Plan. Fundamentally, the Savings Plan
allows participants to annually defer from 1% to 50% of their
salary and bonus. Employee contributions are placed in a Company
trust and are invested in a selection of mutual funds. The
Company may in its discretion match employee contributions for
each participant, up to 6% of the employee's compensation.
Employees are at all times fully vested in their savings
<PAGE> 15
contributions, but only become vested in any Company match in
increments of 20% per year. Currently, there is no Company
matching contribution.
OTHER TRANSACTIONS AND RELATIONSHIPS
The Company leases its stores in Clarksville, Tennessee and
Macon, Georgia from B. F. Lowery, a director of the Company.
Under the terms of an August 1981 agreement, Mr. Lowery purchased
the land, constructed the restaurant buildings and facilities to
the Company's specifications and leased the stores to the Company
for a 15-year term. The annual rent for the Macon store is the
greater of (i) 12% of the total initial cost of the land,
buildings and improvements, or (ii) 5% of the total restaurant
sales plus 3% of the gift shop sales. The annual rent for the
Clarksville store is the greater of (i) 12% of the total initial
cost of the land, building and improvements, or (ii) 5% of the
total restaurant sales plus 3% of the gift shop sales, if the
total of those percentages exceeds $65,000. Taxes, insurance and
maintenance are paid by the Company. The Company has options to
extend the Clarksville and Macon leases for up to 20 years.
During the fiscal year ended August 1, 1997, the Company paid a
total of $373,801 in lease payments to Mr. Lowery. During the
fiscal year ended August 1, 1997, the Company paid $75,000 as a
retainer to Mr. Lowery for corporate legal services. The Company
also rented Mr. Lowery's personal jet for Company use throughout
the year while the Company jet was undergoing maintenance or
repairs. The cost for the aircraft rental was $22,750.
The Company uses the services of Corporate Communications,
Inc., a financial public relations firm in Nashville, Tennessee,
of which Charles E. Jones, Jr., a director of the Company, is
president and the major shareholder. During the past fiscal
year, the Company paid $24,000 to Corporate Communications, Inc.
for services and $423,924 for reimbursement of direct expenses
including preparation, distribution and design of the Company's
annual report, proxy materials, and quarterly reports.
The foregoing transactions were negotiated by the Company on an
arms-length basis, and management believes that these
transactions are fair and reasonable and on terms no less
favorable than those which could be obtained from unaffiliated
parties.
<PAGE> 16
PROPOSAL 2. INCREASE NUMBER OF SHARES OF COMMON
STOCK AVAILABLE UNDER AMENDED AND RESTATED
STOCK OPTION PLAN
On September 25, 1997, the Board of Directors approved an
amendment to the Cracker Barrel Old Country Store, Inc. Amended
and Restated Stock Option Plan, increasing the number of shares
authorized under that Plan from 14,025,702 to 17,525,702, subject
to shareholder approval. Options under this Stock Option Plan
may be granted to key executive personnel and to other employees
holding responsible positions with the Company, which includes
store-level management and the highest level of hourly employees
in the stores. The proposed increase in the number of shares
authorized is to ensure the existence and availability of
sufficient shares for the granting of options under this Stock
Option Plan in the future.
For adoption of this proposal, the votes cast favoring the
proposal must exceed the votes cast opposing it. The Board of
Directors recommends that shareholders vote "FOR" the proposal.
Proxies, unless they contain contrary written instructions, will
be voted "FOR" the proposal.
PROPOSAL 3. APPROVAL OF APPOINTMENT OF AUDITORS
The Board of Directors has selected and appointed Deloitte &
Touche LLP as independent auditors of the Company for the 1998
fiscal year, subject to shareholder approval. Deloitte & Touche
LLP have served as the Company's independent auditors since the
fiscal year ended July 31, 1973. A representative of Deloitte &
Touche LLP is expected to be present at the Annual Meeting with
the opportunity to make a statement, if the representative
desires, and to be available to respond to appropriate questions.
For adoption of this proposal, the votes cast favoring the
proposal must exceed the votes cast opposing it. The Board of
Directors recommends that shareholders vote "FOR" the proposal.
Proxies, unless they contain contrary written instructions, will
be voted "FOR" the proposal.
PROPOSAL 4. SHAREHOLDER PROPOSAL
Mercy Consolidated Asset Management Program, 20 Washington
Square North, New York, NY, has stated that it is the beneficial
owner of 2,000 shares of Company Common Stock, and the New York
City Employees' Retirement System, Office of the Comptroller, 1
Centre Street, New York, NY 10007, has stated that it is the
beneficial owner of 156,984 shares of Company Common Stock and
they have each informed the Company that they intend to present
the following proposal at the Annual Meeting:
WHEREAS, recruitment of employees from the widest possible
talent pool available can help promote efficiency in corporate
operations,
<PAGE> 17
WHEREAS, hiring policies based on non-job related criteria can
lead to less efficient operations, and
WHEREAS, lower efficiency in corporate operations can in turn
lead to a loss in shareholder value,
RESOLVED, that shareholders hereby request that the
Compensation and Stock Option committees in determining levels of
executive compensation, consider corporate progress towards
ensuring that management policies are designed to recruit workers
from the broadest possible talent pool, without regard to race,
color, creed, gender, age, or sexual orientation.
For adoption of this proposal, the votes cast favoring it must
exceed the votes cast opposing it. The Board of Directors
recommends a vote "AGAINST" this proposal for the reasons cited
below. Proxies, unless they contain contrary written
instructions, will be voted "AGAINST" the proposal.
The Company's Position
The Company's compensation policies for its executive officers
are administered by two committees of the Board of Directors -
the Compensation Committee and the Stock Option Committee. To
help ensure impartiality, the members of these committees are
outside, non-employee directors. A survey prepared by outside,
independent executive compensation consultants, Alexander &
Alexander, in fiscal 1997 is used to review the Company's
executive salaries and bonuses in relation to those of other
selected companies in the restaurant and food service industry.
In addition, executive officers participate in the Company's
Management Incentive Program which is designed to substantially
tie individual compensation to actual Company financial
performance. The Board of Directors believes that this process
of setting executive compensation addresses overall job
performance and serves to enhance company profitability and
shareholder value. While an executive's ability to recruit the
most capable workers, from whatever sector of society, is
certainly an asset which may be considered in the compensation
evaluation process, since the company hires from geographically
and demographically distinct areas, since the Company already
adheres to equal opportunity hiring policies, and since
"progress" is impossible to measure unless some quantifiable but
undefined numerical or similar goals were to be established, the
Board does not feel that social issues should be specifically
singled out for separate consideration within the context of the
business judgment involved in setting executive compensation.
The Board of Directors for these reasons, recommends a vote
"AGAINST" this shareholder proposal.
<PAGE> 18
PROPOSALS OF SHAREHOLDERS
Shareholders intending to submit proposals for presentation at
the Company's 1998 Annual Meeting of Shareholders, and for
inclusion in the Proxy Statement and form of proxy for that
meeting, should forward their proposals to the Corporate
Secretary, Cracker Barrel Old Country Store, Inc., P.O. Box 787,
Hartmann Drive, Lebanon, Tennessee 37088-0787. Shareholder
proposals must be in writing, should be sent to the Company by
certified mail, return receipt requested, and must be received by
the Company prior to June 26, 1998.
ANNUAL REPORT AND FINANCIAL INFORMATION
A copy of the Company's Annual Report to Shareholders for fiscal
year 1997 is being mailed to each shareholder with this Proxy
Statement. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K,
AND A LIST OF ALL ITS EXHIBITS, WILL BE SUPPLIED WITHOUT CHARGE
TO ANY SHAREHOLDER UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES: CRACKER BARREL OLD COUNTRY STORE,
INC. ATTENTION: INVESTOR RELATIONS, PO BOX 787, LEBANON,
TENNESSEE 37088-0787. EXHIBITS TO THE FORM 10-K ARE AVAILABLE
FOR A REASONABLE FEE.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement Nos. 2-86602, 33-15775, 33-37567 and 33-45482 of
Cracker Barrel Old Country Store, Inc. on Form S-8 and
Registration Statement No. 33-59582 on Form S-3 of our
report dated September 10, 1997, incorporated by reference
in the Annual Report on Form 10-K of Cracker Barrel Old
Country Store, Inc. for the year ended August 1, 1997.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
October 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF CRACKER BARREL OLD COUNTRY STORE, INC. AND
SUBSIDIARIES FOR THE YEAR ENDED AUGUST 1, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-1-1997
<PERIOD-START> AUG-3-1996
<PERIOD-END> AUG-1-1997
<CASH> 64,933
<SECURITIES> 1,666
<RECEIVABLES> 4,836
<ALLOWANCES> 0
<INVENTORY> 73,269
<CURRENT-ASSETS> 149,411
<PP&E> 831,397
<DEPRECIATION> 153,230
<TOTAL-ASSETS> 828,705
<CURRENT-LIABILITIES> 88,757
<BONDS> 62,000
0
0
<COMMON> 30,533
<OTHER-SE> 629,899
<TOTAL-LIABILITY-AND-EQUITY> 828,705
<SALES> 1,123,851
<TOTAL-REVENUES> 1,123,851
<CGS> 387,703
<TOTAL-COSTS> 540,792
<OTHER-EXPENSES> 57,798
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,089
<INCOME-PRETAX> 137,457
<INCOME-TAX> 50,859
<INCOME-CONTINUING> 86,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,598
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
