UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 0-12343
VICORP Restaurants, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-0511072
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 West 48th Avenue, Denver, Colorado, 80216
---------------------------------------------
(Address of principal executive offices)
(Zip Code)
(303) 296-2121
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- ---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
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 registrant had 9,051,026 shares of its $.05 par value Common Stock
outstanding as of September 12, 1996.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VICORP Restaurants, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
July 31, October 31,
1996 1995
----------- -----------
(unaudited)
ASSETS
Current assets
Cash $ 1,972 $ 3,988
Receivables 2,311 3,149
Inventories 5,602 8,597
Deferred income taxes 5,000 5,000
Prepaid expenses and other 1,465 2,003
----------- -----------
Total current assets 16,350 22,737
----------- -----------
Property and equipment, net 137,693 152,592
Deferred income taxes 41,789 39,375
Other assets 10,636 13,457
----------- -----------
Total assets $ 206,468 $ 228,161
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of
long-term debt (Note 3) $ 13,578 $ 4,480
Current maturities of
capitalized lease obligations 1,434 1,636
Accounts payable, trade 10,653 16,526
Accrued compensation 5,015 5,542
Accrued taxes 7,324 7,998
Accrued insurance 4,610 5,656
Other accrued expenses 4,170 4,984
----------- -----------
Total current liabilities 46,784 46,822
----------- -----------
Long-term debt (Note 3) 13,639 31,094
Capitalized lease obligations 9,494 11,085
Non-current accrued insurance 6,799 6,092
Other non-current liabilities and credits 8,999 9,970
Commitments and contingencies
Shareholders' equity
Series A Junior Participating
Preferred Stock, $.10 par value,
200,000 shares authorized,
no shares issued -- --
Common stock, $.05 par value,
20,000,000 shares authorized, 9,051,026
and 9,044,026 shares issued
and outstanding 453 452
Paid-in capital 84,389 84,332
Retained earnings 35,911 38,314
----------- -----------
Total shareholders' equity 120,753 123,098
----------- -----------
Total liabilities and shareholders' equity $ 206,468 $ 228,161
=========== ===========
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Twelve Nine Forty
Months Weeks Months Weeks
Ended Ended Ended Ended
---------- --------- --------- --------
July 31, August 6, July 31, August 6,
1996 1995 1996 1995
---------- ---------- --------- --------
(unaudited)
Revenues
Restaurant operations $ 85,540 $ 82,275 $ 259,247 $ 289,749
Franchise operations 905 941 2,632 2,824
---------- ---------- --------- ---------
Total revenues 86,445 83,216 261,879 292,573
---------- ---------- --------- ---------
Costs and expenses
Restaurant operations
Food 26,909 28,913 86,422 95,867
Labor 27,146 29,828 83,237 95,661
Other operating 23,085 24,597 70,592 81,768
General and administrative 6,135 6,083 18,223 19,703
Asset disposal (Note 4) 5,800 -- 5,800 --
---------- ---------- --------- --------
Operating loss (2,630) (6,205) (2,395) (426)
Interest expense 895 909 3,009 2,888
Other (income) expense, net (112) (221) (597) (672)
---------- ---------- --------- --------
Loss before income tax benefit (3,413) (6,893) (4,807) (2,642)
Income tax benefit (1,881) (2,915) (2,404) (1,321)
---------- ---------- --------- --------
Net loss $ (1,532) $ (3,978) $ (2,403) $ (1,321)
========== ========== ========= ========
Loss per common share $ (.17) $ (.44) $ (.27) $ (.14)
========== ========== ========= ========
Weighted average common shares 9,050 9,013 9,048 9,317
========== ========== ========= ========
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Forty
Months Weeks
Ended Ended
-------- --------
July 31, August 6,
1996 1995
-------- --------
(unaudited)
Operations
Net loss $ (2,403) $ (1,321)
Reconciliation to cash provided by operations
Depreciation and amortization 15,920 17,371
Deferred income tax provision (2,414) (1,346)
Loss on disposition of assets 6,019 345
Other, net (160) (31)
-------- --------
16,962 15,018
Change in assets and liabilities
Trade receivables 777 41
Inventories 2,994 4,173
Accounts payable, trade (5,872) (3,437)
Other current assets and liabilities (2,816) (3,740)
Non-current accrued insurance 707 (179)
-------- --------
Cash provided by operations 12,752 11,876
-------- --------
Investing activities
Purchase of property and equipment (5,591) (7,203)
Purchase of other assets (32) (65)
Disposition of property (25) (998)
Collection of non-trade receivables 544 6,462
-------- --------
Cash used for investing activities (5,104) (1,804)
-------- --------
Financing activities
Issuance of debt 10,000 29,750
Payment of debt and capitalized
lease obligations (19,523) (32,130)
Purchase of common stock -- (7,694)
Other, net (141) 159
-------- --------
Cash used for financing activities (9,664) (9,915)
-------- --------
Increase (decrease) in cash (2,016) 157
Cash at beginning of period 3,988 6,123
-------- --------
Cash at end of period $ 1,972 $ 6,280
======== ========
Supplemental information
Cash paid during the period for
Interest (net of amount capitalized) $ 1,061 $ 2,873
Income taxes 297 927
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. The consolidated financial statements should be read in conjunction
with the annual report to shareholders for the year ended October 31,
1995. The unaudited financial statements for the three and nine months
ended July 31, 1996, and twelve and forty weeks ended August 6, 1995,
contain all adjustments which, in the opinion of management, were
necessary for a fair statement of the results for the interim periods
presented. All of the adjustments included were of a normal and
recurring nature.
2. In fiscal 1995, the Company switched its fiscal year end to the
last day in October. Prior to that, the Company utilized a 52/53 week
fiscal year which ended on the last Sunday in October. In conjunction
with that change, fiscal quarters in 1996 and forward will consist of
three months. Previously, the Company's first fiscal quarter consisted
of sixteen weeks and all other quarters consisted of twelve weeks.
Restaurant sales in 1995 restated to a comparable time frame basis as
1996 were as follows:
Restated Reported
Fiscal 1995 Fiscal 1995
------------- -------------
1st Quarter $ 103,133,000 $ 123,041,000
2nd Quarter 89,893,000 84,433,000
3rd Quarter 90,492,000 82,275,000
4th Quarter 86,598,000 80,367,000
------------- -------------
$ 370,116,000 $ 370,116,000
============= =============
The Company determined that a significant amount of estimation
would be required to restate quarterly 1995 operating results to correspond
with the three month quarterly reporting. Therefore, restatements of results
were not made and the interim results for 1996 and 1995 are not comparable.
The following table highlights the differences in time periods:
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1995
---------------------------------- ----------------------------------
Time Period Days Time Period Days
---------------------------- ---- ---------------------------- ----
<S> <C> <C> <C> <C>
1st Quarter Nov. 1, 1995 - Jan. 31, 1996 92 Oct. 31, 1994 - Feb. 19, 1995 112
2nd Quarter Feb. 1, 1996 - Apr. 30, 1996 90 Feb. 20, 1995 - May 14, 1995 84
3rd Quarter May 1, 1996 - Jul. 31, 1996 92 May 15, 1995 - Aug. 6, 1995 84
4th Quarter Aug. 1, 1996 - Oct. 31, 1996 92 Aug. 7, 1995 - Oct. 31, 1995 86
--- ---
366 366
=== ===
</TABLE>
3. As of July 31, 1996, the Company had $27,000,000 of borrowings and
$9,604,000 of letters of credit placed under its bank credit facility.
The Company's bank credit agreement, as amended, expires on September 30,
1996, when it converts to a term facility payable in eight equal quarterly
installments through June 30, 1998. The Company is currently pursuing a new
credit facility with certain lenders.
4. In the third quarter of 1996, the Company recorded a $5.8 million
asset disposal charge related to a decision to close and dispose of most
of its Angel's Diner restaurants. The Company previously converted seven
of its existing restaurants to the Angel's Diner format with the intent of
utilizing that concept to invigorate underperforming locations. Based on
the results of the test restaurants, the Company determined that this
strategy did not have merit. One Angel's restaurant will continue to be
operated and the remainder will close in the fourth quarter of 1996 with the
intent to dispose of the properties through sale or sublease over the next
fiscal year.
The asset disposal charge consisted of the following (in 000's):
Total net assets $ 6,628
Estimated net realizable value 1,957
-------
Reduction of disposal assets to net realizable value 4,671
Closure and carrying costs 1,129
-------
Total charge $ 5,800
=======
In the fourth quarter of 1994, the Company adopted a plan to dispose of
50 restaurant locations in trade areas that were no longer considered
appropriate for the Company's existing concepts. As part of the disposal
plan, the carrying value of those restaurants' assets were written down to
net realizable values. The Company also accrued for expected carrying costs
pending disposition and sublease disposition losses. As of July 31, 1996,
the Company had closed all but one of those locations, of which 35 stores
were disposed through sublease, lease termination or sale. Additionally,
in the second quarter of 1996, the Company closed two restaurants which were
not included in the 1994 disposition plan. Both properties are owned in fee
and neither property is expected to have material closure costs or
disposition losses. However, the Company expects to realize $2.3 million in
proceeds from their sale. Operating results for the closed locations and the
Angel's restaurants that will be closed were as follows:
<TABLE>
<CAPTION>
Three Twelve Nine Forty
months weeks months weeks
ended ended ended ended
------------------------ --------------------------
July 31, August 6, July 31, August 6,
1996 1995 1996 1995
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Sales $ 1,448,000 $ 6,696,000 $ 5,999,000 $ 27,564,000
Store operating profit (loss) (173,000) (1,307,000) (784,000) (2,083,000)
</TABLE>
During the nine months ended July 31, 1996, $1,721,000 of closure and
carrying related costs were charged against the liability established
for such costs. As of July 31, 1996, the Company had $11,489,000 of
reserves remaining to provide for the disposal of 23 properties,
including two closed prior to 1994 and the Angel's restaurants that will
close in the fourth quarter. The reserves consisted of $7,535,000 to
reduce the disposal properties to net realizable value and $3,954,000 to
provide for expected carrying costs and sublease costs.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of operations
The Company's quarterly financial information is subject to seasonal
fluctuation. Also, the financial data presented is not comparable
because of differences in time periods presented (see Note 2 of Notes to
the Condensed Consolidated Financial Statements). The third quarter of
1996 consisted of three months, or 92 days, while the third quarter of
1995 consisted of twelve weeks, or 84 days. The first three fiscal
quarters of 1996 consisted of nine months, or 274 days, while the first
three fiscal quarters of 1995 consisted of forty weeks, or 280 days.
Restaurant operations
The following table sets forth select operating information of the
Company's concepts and the Company as a whole.
<TABLE>
<CAPTION>
Third Quarter Year-to-Date
----------------------------- ----------------------------
Three Twelve Nine Forty
months ended weeks ended months ended weeks ended
------------ ----------- ------------ -----------
July 31, August 6, July 31, August 6,
1996 1995 1996 1995
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Bakers Square
Restaurant sales $51,432,000 $49,907,000 $156,257,000 $178,625,000
Restaurant operating profit (loss) 3,473,000 (4,325,000) 5,570,000 2,647,000
Restaurant operating profit (loss) % 6.8% (8.7)% 3.6% 1.5%
Divisional administrative costs 1,193,000 1,484,000 3,065,000 4,523,000
Divisional operating profit (loss) 2,280,000 (5,809,000) 2,505,000 (1,876,000)
Restaurants at quarter-end 155 168
Village Inn
Restaurant sales $32,487,000 $30,000,000 $ 97,959,000 $102,420,000
Restaurant operating profit 5,057,000 3,797,000 13,961,000 14,652,000
Restaurant operating profit % 15.6% 12.7% 14.3% 14.3%
Franchise income 905,000 941,000 2,632,000 2,824,000
Divisional administrative costs 791,000 707,000 2,037,000 2,448,000
Divisional operating profit 5,171,000 4,031,000 14,556,000 15,028,000
Restaurants at quarter-end 98 104
Angel's
Restaurant sales $ 1,621,000 $ 2,368,000 $ 5,031,000 $ 8,704,000
Restaurant operating loss (130,000) (535,000) (535,000) (846,000)
Restaurant operating loss % (8.0)% (22.6)% (10.6)% (9.7)%
Divisional administrative costs 47,000 197,000 226,000 684,000
Divisional operating loss (177,000) (732,000) (761,000) (1,530,000)
Restaurants at quarter-end 5 7
Consolidated
Restaurant sales $85,540,000 $82,275,000 $259,247,000 $289,749,000
Food cost % 31.5% 35.1% 33.3% 33.1%
Labor cost % 31.7% 36.3% 32.1% 33.0%
Other operating cost % 27.0% 29.9% 27.2% 28.2%
Restaurant operating profit (loss) % 9.8% (1.3)% 7.3% 5.7%
Restaurant operating profit (loss) 8,400,000 (1,063,000) 18,996,000 16,453,000
Franchise income 905,000 941,000 2,632,000 2,824,000
Divisional general and
administrative costs 2,031,000 2,388,000 5,328,000 7,655,000
------------ ----------- ------------ ------------
Divisional operating profit (loss) 7,274,000 (2,510,000) 16,300,000 11,622,000
------------ ----------- ------------ ------------
Unallocated general and
administrative costs 4,104,000 3,695,000 12,895,000 12,048,000
----------- ----------- ------------ ------------
Operating profit (loss) (1) 3,170,000 (6,205,000) 3,405,000 (426,000)
=========== =========== ============ ============
</TABLE>
(1) Before asset disposal charge of $5.8 million recorded in the
third quarter of 1996.
Consolidated restaurant sales increased 4.0%, or $3.3 million, during the
third quarter and decreased 10.5%, or $30.5 million, for the first three
fiscal quarters of 1996 in comparison to last year. $8.2 million of the
quarter increase was attributable to eight more operating days in 1996's
third quarter versus 1995's third quarter. $6.2 million of the first
three quarters decrease was attributable to six fewer operating days in
1996's first three quarters versus 1995's first three quarters. Also
affecting the sales comparison was the reduced number of operating
restaurants in 1996 compared to 1995 due to store closures. The Company
operated approximately 29 and 35 fewer restaurants in the third quarter
and first three fiscal quarters of 1996, respectively, compared to the
prior year.
For the third quarter, comparable consolidated store sales increased 1.3%.
Same store sales for Village Inn increased 2.4% while Bakers Square's same
store sales increased .5%. The sales increase for Village Inn was largely
due to customer count increases while the sales increase for Bakers Square
was due to increased customer expenditures from menu mix changes partially
offset by customer count declines.
For the first three quarters of fiscal 1996, comparable consolidated store
sales decreased .9%, reflective of a 2.7% decrease for Bakers Square and a
1.9% increase for Village Inn. The comparable sales decrease in Bakers
Square was due largely to lower prices. In the middle of fiscal 1995, the
Company reduced menu prices in its Bakers Square group which decreased
average customer expenditures approximately 10 to 12% in an effort to
reverse its four-year customer count decline. However, in September 1995,
Bakers Square refined its menu to include a "Manager's Daily Specials"
section for which restaurant managers choose six to eight menu items each
day from approximately 80 alternatives. Besides allowing for locality
appeal, the specials generally have higher menu prices than other menu
items. This change, combined with a price increase on whole pies in early
January 1996, partially mitigated the price decrease taken in the middle
of 1995. Village Inn's year-to-date comparable sales increase was largely
due to higher average customer expenditures from menu mix changes.
Consolidated restaurant operating profit increased both in total and as a
percentage of sales for the third quarter of 1996 compared to last year's
third quarter. Bakers Square accounted for most of the improvement as a
result of certain programs to control waste and gain efficiencies. Also,
more pronounced costs of programs to improve customer counts in 1995's
third quarter contributed to the improvement. Village Inn's restaurant
operating profits increased due to lower labor and advertising costs.
Consolidated restaurant operating profit increased for the first three
fiscal quarters of 1996 compared to 1995's first three quarters due
primarily to higher Bakers Square restaurant operating profits. The
improvement occured due to waste and operational controls and higher costs
incurred last year to improve customer counts. Village Inn's operating
profits decreased in absolute dollars but as a percentage of sales were
same as last year.
The following presents select quarterly trend data related to the
operations of Bakers Square and Village Inn:
Bakers Square Village Inn
---------------------- ----------------------
Comparable Store Comparable Store
Store Operating Store Operating
Sales Margin Sales Margin
---------- --------- ---------- ---------
1995:
1st Qtr (5.4)% 7.8% 0.3% 13.8%
2nd Qtr (11.2)% 1.9% (2.4)% 16.6%
3rd Qtr (10.1)% (8.7)% (2.1)% 12.7%
4th Qtr (8.6)% (5.5)% (1.4)% 11.0%
1996:
1st Qtr (7.6)% 0.1% 0.0% 13.5%
2nd Qtr 1.1% 4.0% 4.4% 13.7%
3rd Qtr .5% 6.8% 2.4% 15.6%
Asset disposals
In the third quarter of 1996, the Company recorded a $5.8 million asset
disposal charge related to its decision to close almost all of its Angel's
Diner restaurants after determining that its strategy of using that
concept to invigorate underperforming restaurants was not economically
feasible. The charge reduced the carrying values of related assets to net
realizable value and provided for closure and carrying costs. The Company
expects that the future cash impact from these asset disposals will not be
material as cash proceeds from selling the properties will exceed cash
closure/carrying costs and cash losses that would be incurred if the
Company continued to operate the locations.
As of July 31, 1996, the Company had closed 49 of the 50 restaurants
scheduled for disposition under a plan adopted in fiscal 1994. Also, the
Company closed two additional restaurants in the second quarter of 1996.
The following tables detail sales and operating results for those closure
locations and the Angel's closure restaurants.
Third quarter ended: July 31, 1996 August 6, 1995
------------------------- -------------------------
Operating Operating
Sales Loss Sales Loss
---------- --------- ---------- -----------
Bakers Square $ 131,000 $ (45,000) $3,561,000 $ (730,000)
Village Inn 199,000 (8,000) 1,315,000 (90,000)
Angel's 1,118,000 (120,000) 1,820,000 (487,000)
- -------------------------------------------------------------------------------
Total $1,448,000 $(173,000) $6,696,000 $(1,307,000)
===============================================================================
Year-to-date ended: July 31, 1996 August 6, 1995
-------------------------- ---------------------------
Operating Operating
Sales Loss Sales Profit (Loss)
---------- --------- ----------- ------------
Bakers Square $1,516,000 $(263,000) $15,742,000 $(1,341,000)
Village Inn 1,062,000 (4,000) 5,316,000 11,000
Angel's 3,421,000 (517,000) 6,506,000 (753,000)
- -------------------------------------------------------------------------------
Total $5,999,000 $(784,000) $27,564,000 $(2,083,000)
===============================================================================
Other revenues and expenses
Average daily franchise revenue decreased 12.2% in the third quarter of
1996 versus the same quarter last year. For the first nine months of
1996, average daily franchise revenue decreased 4.8%. The decrease in
revenues was due to higher costs incurred to resume growth in that group
and decreases in net sublease rental and equipment sale income.
General and administrative expense decreased to 7.1% of revenues in the
third quarter of 1996 from 7.3% last year and were essentially the same in
absolute dollars despite the eight more operating days in 1996. As a
percentage of revenues, general and administrative costs for the first
three quarters of 1996 were 7.0% compared to 6.7% in the first 40 weeks
last year, but had decreased $1.5 million due largely to cost control
measures.
Average daily interest expense decreased 10.1% for the third quarter due
to reduced capitalized lease interest. Year-to-date, average daily
interest expense increased 6.5% due to higher levels of credit line
borrowing in the first half of 1996, partially offset by reduced
capitalized lease interest.
The Company's effective tax rate applied to year-to-date results was 50%
for both 1996 and 1995. The higher than statutory rates resulted
primarily from the affect of FICA tax credits.
Liquidity and capital resources
Cash provided by operations increased 7.4% in the first three quarters of
1996 compared to the same period in 1995 due largely to improved operating
results when the impact of the non-cash asset disposal charge is excluded.
As of July 31, 1996, $27,000,000 of advances were outstanding under the
Company's bank credit facility and approximately $18,400,000 was available
for additional direct advances and letters of credit. The Company had
reduced its outstanding borrowings by $8.3 million during the first three
quarters of 1996. The Company's bank credit agreement as amended expires
on September 30, 1996, when it converts to a term facility payable in
eight equal installments through June 30, 1998. The Company is currently
pursuing a new revolving credit facility with certain lenders and is
optimistic that a new facility will be in place prior to the current
revolving facility's expiration.
During the first three quarters of 1996, the Company disposed of twenty
properties, three through sale, twelve through lease termination and five
through sublease. Also during that time frame, cash closure and carrying
costs of $1.7 million were charged against the liability established for
such and cash proceeds of $1.7 million were realized from the disposition
of properties.
At July 31, 1996, the Company had 23 properties remaining which it was
trying to dispose of. Six of these properties were owned in fee and the
rest were leased. The Company hopes to sell the fee properties over the
next year and $4.5 million of proceeds are expected to be realized from
their sale. The Company does not anticipate significant proceeds from the
disposition of the leased properties. It is expected that the majority of
the leased properties will be disposed of through sublease over the next
twelve months. Cash carrying and closure costs of approximately $2.0
million are expected to be incurred over that period. The Company expects
to sublease five of the properties at rentals lower than the Company's
obligations under the prime leases. Those sublease losses will be
incurred over the remaining years of the leases and the Company does not
anticipate that the losses will materially affect the Company's liquidity.
As of July 31, 1996, authorizations granted by the Board for the purchase
of 300,500 common shares of the Company's common stock remained available.
No shares were purchased in the first three quarters of 1996. Future
purchases with respect to the authorizations may be made from time to time
in the open market or through privately negotiated transactions and will
be dependent upon various business and financial considerations.
Capital expenditures approximating $2.0 million are expected during the
remainder of the fiscal year. These expected expenditures are largely
related to routine replacements and maintenance. Cash provided by
operations and from the unused portion of a bank credit facility are
expected to be adequate to fund these expenditures.
Outlook
Federal law was recently enacted that will raise the mandated minimum
wage. The law raises the hourly minimum wage by 50-cents to $4.75 on
October 1, 1996, and by another 40-cents to $5.15 on September 1, 1997.
However, the legislation freezes the wages of tipped employees at $2.13 an
hour assuming the difference is earned in tip income. The tipped wage
will be higher in certain states in which the Company operates that either
do not allow tip credit or provide for a smaller tip credit than allowed
under federal law. Also, a number of states have indicated that they are
considering raising their minimum wage rates above the federal level. The
Company expects an annual impact from the minimum wage increase of
approximately $1.8 million, prior to the benefits of the operational
efficiencies that are being implemented to offset this increase. Raising
menu prices is not one of the operational efficiencies being contemplated
at this time.
Except for the historical information contained herein, the matters
discussed are forward looking statements that involve risks and
uncertainties. Such factors that could influence future performance
include, but are not limited to, the effect of economic conditions,
government initiatives such as the minimum wage increase discussed above,
food commodity prices and availability, competition, labor availability
and the weather.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of VICORP Restaurants, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
VICORP RESTAURANTS, INC. (a Colorado corporation) as of July 31, 1996, and
the related condensed consolidated statements of operations for the 3-
month period ended July 31, 1996 and the 12-week period ended August 6,
1995 and for the 9-month period ended July 31, 1996 and the 40-week period
ended August 6, 1995 and the condensed consolidated statements of cash
flows for the 9-month period ended July 31, 1996 and the 40-week period
ended August 6, 1995. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of VICORP Restaurants, Inc. and
subsidiary as of October 31, 1995 (not presented herein), and in our
report dated December 12, 1995, we expressed an unqualified opinion on
that statement. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of October 31, 1995,
is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
August 28, 1996.
PART II - OTHER INFORMATION
Item 5. Other information.
On August 19, 1996, Mr. Richard Sabourin assumed the position of
Executive Vice President/Chief Financial Officer. Previously, Mr.
Sabourin was President/Chief Executive Officer for Bestop, Inc.
On August 26, 1996, Mr. Craig Held assumed the position of Executive
Vice President/Chief Marketing Officer and President Non-Traditional
and resigned from the Company's board of directors. Mr. Held previously
was President/Chief Operating Officer for Paramount Farms, Inc.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(10) Material Contracts.
(i) Amendment No. 6 Dated as of July 31, 1996 to Second
Amendment and Restated Credit Agreement Dated as of
June 18, 1993.
(ii) Executive Compensation Plans & Arrangements.
(a) Employment Agreement of Craig Held dated as of
July 19, 1996.
(b) Employment Agreement of Richard Sabourin dated as of
July 25, 1996.
(c) Stock Option Agreement of Craig Held dated as of
August 19, 1996.
(d) Stock Option Agreement of Richard Sabourin dated as
of August 19, 1996.
(15) Letter regarding unaudited interim financial information.
(27) Financial data schedule.
(b) Reports on Form 8-K.
None.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
VICORP Restaurants, Inc.
------------------------
(Registrant)
September 12, 1996 /s/ J. Michael Jenkins
-------------------
J. Michael Jenkins, President and
Chief Executive Officer
September 12, 1996 /s/ Richard E. Sabourin
-------------------
Richard E. Sabourin, Executive Vice President
and Chief Financial Officer
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Option Agreement") dated as of
August 19, 1996, provides for the grant of stock options by VICORP
Restaurants, Inc., a Colorado Corporation (the "Company"), to Craig Held, an
employee of the Company (the "Optionee").
The Company has determined that the Optionee is to be granted options
to buy shares of the Company's common stock, par value $.05 per share ("Common
Stock"), on the terms and subject to the conditions hereinafter provided.
I. NUMBER OF SHARES, OPTION PRICE, AND VESTING.
A. The Company hereby grants to the Optionee the options (the
"Options") to purchase 100,000 shares of Common Stock for the exercise price
of $12.25 per share. The Optionee shall not have any rights as a shareholder
with respect to the shares unless and until one or more certificates for such
shares are delivered to him upon the exercise of one or more of the Options.
B. The options shall be vested according to the following schedule:
25,000 shares will vest on September 1, 1997
25,000 shares will vest on September 1, 1998
25,000 shares will vest on September 1, 1999; and
25,000 shares will vest on September 1, 2000
C. Upon a change of control of the Company, all of the Options
shall immediately vest and become exercisable in full. Change in control for
purposes of this Agreement shall be deemed to have occurred if:
1. Any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended)
becomes the beneficial owner, directly or indirectly, of
securities of the Company representing greater than or equal to
fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities;
2. During any period of twelve (12) months, individuals who at
the beginning of such period constitute the Board of Directors of
the Company cease for any reason to constitute a majority thereof
unless the election, or the nomination for election by the
Company's shareholders of each new director was approved by a
vote of at least a majority of the directors then still in office
who were directors at the beginning of the period; or
3. A person (as defined in clause (1) above) acquires (or,
during the twelve (12) month period ending on the date of the
most recent acquisition by such person or group of persons, has
acquired) gross assets of the Company that have an aggregate fair
market value greater than or equal to over fifty percent (50%) of
the fair market value of all of the gross assets of the Company
immediately prior to such acquisition or acquisitions.
D. Optionee acknowledges that the shares which are to be
reserved for issuance upon the exercise of the Options are not at
this time registered in accordance with applicable securities
laws. The Company agrees that upon receipt of a written request
by Optionee, it will, consistent with applicable securities laws
and regulations, promptly prepare and file with the Securities
and Exchange Commission an appropriate registration statement on
Form S-8 and/or Form S-3, depending upon whether the Options have
then been exercised (or any successor forms to such form subsequently
promulgated by the Securities and Exchange Commission) pertaining to
the shares covered by the Options and will use its reasonable good faith
efforts to cause such registration statement to be declared effective as
soon as practical thereafter. The Company will bear the expense to
prepare and file such registration statement.
II. TERM.
Each option granted shall expire on August 20, 2006, unless
canceled or terminated earlier in accordance with the terms of
this Agreement.
III. EXERCISE OF OPTIONS.
Only options which are vested may be exercised.
IV. MANNER OF EXERCISE.
A. Notice to the Company: Each exercise of an option shall be
made by the delivery by the Optionee of written notice of such
election to the Company, either in person or by certified mail,
stating the number of shares with respect to which the option is
being exercised and specifying a date on which the shares will be
taken and payment made therefor. The date shall be at least
fifteen (15) days after the giving of such notice.
B. Issuance of Stock: Subject to any law or regulation of the
Securities and Exchange Commission or other body having jurisdiction requiring
an action to be taken in connection with the shares specified in a notice of
election before the shares can be delivered to the Optionee, on the date
specified in the notice of election, the Company shall deliver, or cause to be
delivered to the Optionee stock certificates for the number of
shares with respect to which the option is being exercised,
against payment therefor. In the event of any failure to take
and pay, on the date stated, for the full number of shares
specified in the notice of election, the option shall become
inoperative only as to those shares which are not taken, but
shall continue with respect to any remaining shares subject to
the option as to which exercise has not yet been made.
V. ASSIGNMENT.
Any option granted under this Agreement shall not be assigned,
pledged, or hypothecated in any way, shall not be subject to
execution, and shall not be transferable other than by will or
the laws of descent and distribution. Any attempted assignment
or other prohibited disposition shall be null and void.
VI. TERMINATION.
A. Termination Other Than At Death Or Disability: If the
Optionee terminates his position as an Employee of the Company
for any reason other than death or disability, any unexercised
granted options shall be canceled three (3) months after the
effective date of the Optionee's termination. No options shall
vest subsequent to the date of termination of employment.
B. Termination At Death Or Disability: In the event of the
death of the Optionee, any option held by him at the time of his
death shall be transferred as provided in his will or by the laws
of descent and distribution, and may be exercised by such
transferee at any time within twelve months after the date of
death, to the extent the option is exercisable on the date of
death, and provided it is exercised within the time prescribed in
Article II hereof. In the event of the disability of the Optionee,
any option held by him may be exercised in whole or in part, by the
Optionee or his personal representative at any time within twelve
months after the date of disability, to the extent the option is
exercisable on the date of disability, and provided that it is exercised
within the time prescribed in Article II hereof. Disability and time of
disability shall be determined by the Board.
VII. CHANGES IN CAPITAL STRUCTURE.
The number of shares granted to Optionee will be subject to
adjustment in the case of stock splits, combinations, stock dividends,
reorganization and similar events.
VIII. FAILURE TO ENFORCE NOT A WAIVER.
The failure of the Company to enforce at any time any provision
of this Option Agreement shall in no way be construed to be a waiver of
such provision or of any other provision hereof.
IX. SEVERABILITY.
If any provision of this Option Agreement shall be held to be
illegal, invalid or unenforceable under any applicable law, then
such contravention or invalidity shall not invalidate the entire
Option Agreement. Such provision shall be deemed to be modified
to the extent necessary to render it legal, valid and enforceable,
and if no such modification shall render it legal, valid and
enforceable, then this Option Agreement shall be construed as if
not containing the provision held to be invalid, and the rights and
obligations of the parties shall be construed and enforced accordingly.
X. COMPLETE AGREEMENT.
This Option Agreement between Optionee and the Company embodies
the complete agreement and understandings with respect to the
subject matter hereof between the parties and supersede and
preempt any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
XI. GOVERNING LAW.
This Option Agreement shall be governed by and construed
according to the laws of the State of Colorado.
IN WITNESS WHEREOF, the Company has executed this Option on the
day and year first above-written.
VICORP Restaurants, Inc.
a Colorado corporation
By /s/ Charles R. Frederickson
-----------------------
Charles R. Frederickson, Chairman
The undersigned hereby accepts and agrees to all terms and
provisions of the foregoing Option Agreement.
/s/ Craig Held
----------
Craig Held, Optionee
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Option Agreement") dated as
of August 19, 1996, provides for the grant of stock options by VICORP
Restaurants, Inc., a Colorado Corporation (the "Company"), to Richard E.
Sabourin, an employee of the Company (the "Optionee").
The Company has determined that the Optionee is to be granted
options to buy shares of the Company's common stock, par value $.05 per
share ("Common Stock"), on the terms and subject to the conditions
hereinafter provided.
I. NUMBER OF SHARES, OPTION PRICE, AND VESTING.
A. The Company hereby grants to the Optionee the options
(the "Options") to purchase 100,000 shares of Common Stock for the
exercise price of $11.50 per share. The Optionee shall not have any
rights as a shareholder with respect to the shares unless and until
one or more certificates for such shares are delivered to him upon the
exercise of one or more of the Options.
B. The options shall be vested according to the following schedule:
25,000 shares will vest on September 1, 1997
25,000 shares will vest on September 1, 1998
25,000 shares will vest on September 1, 1999; and
25,000 shares will vest on September 1, 2000
C. Upon a change of control of the Company, all of the Options
shall immediately vest and become exercisable in full. Change in control
for purposes of this Agreement shall be deemed to have occurred if:
1. Any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended) becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing greater than or equal to fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities;
2. During any period of twelve (12) months, individuals
who at the beginning of such period constitute the Board of Directors
of the Company cease for any reason to constitute a majority thereof
unless the election, or the nomination for election by the Company's
shareholders of each new director was approved by a vote of at least a
majority of the directors then still in office who were directors at
the beginning of the period; or
3. A person (as defined in clause (1) above) acquires
(or, during the twelve (12) month period ending on the date of the
most recent acquisition by such person or group of persons, has acquired)
gross assets of the Company that have an aggregate fair market value
greater than or equal to over fifty percent (50%) of the fair market value
of all of the gross assets of the Company immediately prior to such
acquisition or acquisitions.
D. Optionee acknowledges that the shares which are to
be reserved for issuance upon the exercise of the Options are not at
this time registered in accordance with applicable securities laws.
The Company agrees that upon receipt of a written request by Optionee,
it will, consistent with applicable securities laws and regulations,
promptly prepare and file with the Securities and Exchange Commission an
appropriate registration statement on Form S-8 and/or Form S-3, depending
upon whether the Options have then been exercised (or any successor forms
to such form subsequently promulgated by the Securities and Exchange
Commission) pertaining to the shares covered by the Options and will use
its reasonable good faith efforts to cause such registration statement to
be declared effective as soon as practical thereafter. The Company will
bear the expense to prepare and file such registration statement.
II. TERM.
Each option granted shall expire on August 20, 2006, unless canceled
or terminated earlier in accordance with the terms of this Agreement.
III. EXERCISE OF OPTIONS.
Only options which are vested may be exercised.
IV. MANNER OF EXERCISE.
A. Notice to the Company: Each exercise of an option
shall be made by the delivery by the Optionee of written notice of
such election to the Company, either in person or by certified mail,
stating the number of shares with respect to which the option is being
exercised and specifying a date on which the shares will be taken and
payment made therefor. The date shall be at least fifteen (15) days
after the giving of such notice.
B. Issuance of Stock: Subject to any law or regulation of the
Securities and Exchange Commission or other body having jurisdiction requiring
an action to be taken in connection with the shares specified in a notice of
election before the shares can be delivered to the Optionee, on the date
specified in the notice of election, the Company shall deliver, or cause to
be delivered to the Optionee stock certificates for the number of shares with
respect to which the option is being exercised, against payment therefor.
In the event of any failure to take and pay, on the date stated, for the
full number of shares specified in the notice of election, the option shall
become inoperative only as to those shares which are not taken, but shall
continue with respect to any remaining shares subject to the option as to
which exercise has not yet been made.
V. ASSIGNMENT.
Any option granted under this Agreement shall not be assigned,
pledged, or hypothecated in any way, shall not be subject to execution, and
shall not be transferable other than by will or the laws of descent and
distribution. Any attempted assignment or other prohibited disposition
shall be null and void.
VI. TERMINATION.
A. Termination Other Than At Death Or Disability: If the Optionee
terminates his position as an Employee of the Company for any reason other
than death or disability, any unexercised granted options shall be canceled
three (3) months after the effective date of the Optionee's termination.
No options shall vest subsequent to the date of termination of employment.
B. Termination At Death Or Disability: In the event of the death
of the Optionee, any option held by him at the time of his death shall be
transferred as provided in his will or by the laws of descent and distribution,
and may be exercised by such transferee at any time within twelve months
after the date of death, to the extent the option is exercisable on the date
of death, and provided it is exercised within the time prescribed in Article II
hereof. In the event of the disability of the Optionee, any option held by
him may be exercised in whole or in part, by the Optionee or his personal
representative at any time within twelve months after the date of disability,
to the extent the option is exercisable on the date of disability, and
provided that it is exercised within the time prescribed in Article II hereof.
Disability and time of disability shall be determined by the Board.
VII. CHANGES IN CAPITAL STRUCTURE.
The number of shares granted to Optionee will be subject to
adjustment in the case of stock splits, combinations, stock dividends,
reorganization and similar events.
VIII. FAILURE TO ENFORCE NOT A WAIVER.
The failure of the Company to enforce at any time any provision of
this Option Agreement shall in no way be construed to be a waiver of such
provision or of any other provision hereof.
IX. SEVERABILITY.
If any provision of this Option Agreement shall be held to be
illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Option Agreement.
Such provision shall be deemed to be modified to the extent necessary to render
it legal, valid and enforceable, and if no such modification shall render
it legal, valid and enforceable, then this Option Agreement shall be
construed as if not containing the provision held to be invalid, and
the rights and obligations of the parties shall be construed
and enforced accordingly.
X. COMPLETE AGREEMENT.
This Option Agreement between Optionee and the Company embodies the
complete agreement and understandings with respect to the subject matter hereof
between the parties and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
XI. GOVERNING LAW.
This Option Agreement shall be governed by and construed according to
the laws of the State of Colorado.
IN WITNESS WHEREOF, the Company has executed this Option on the day and
year first above-written.
VICORP Restaurants, Inc.
a Colorado corporation
By /s/ Charles R. Frederickson
-----------------------
Charles R. Frederickson, Chairman
The undersigned hereby accepts and agrees to all terms and provisions
of the foregoing Option Agreement.
/s/ Richard E. Sabourin
-------------------
Richard E. Sabourin, Optionee
July 18, 1996
Craig Held
1809 Beech Street
Bakersfield, California 93301
Re: Offer of Employment
Dear Mr. Held:
This letter will confirm the terms of an offer of employment to
you by VICORP Restaurants, Inc. ("VICORP"). The offer is:
1. VICORP hereby offers to employ you into a position as an officer of VICORP
(title to be mutually agreed upon by you and VICORP).
2. Your employment is to commence by no later than September 1, 1996 and shall
continue thereafter on an at-will basis indefinitely.
3. In your position, you will be responsible for the marketing and the
non-traditional development of VICORP. Non-traditional development
includes but is not limited to outside sales of VICOM, VICORP's production
and distribution division. You will additionally be responsible to perform
such other duties and services of an executive, administrative and
managerial nature as shall be specified and designated from time to time by
the President of VICORP.
4. Your immediate supervisor will be the President of VICORP.
5. The compensation package you will receive is:
(a) A bi-weekly base salary of $10,576.93 (representing an annualized base
salary of $275,000).
(b) You will be eligible to participate in the incentive program for
officers and directors of VICORP as approved by the Board of Directors
commencing with VICORP's 1997 fiscal year.
(c) VICORP will grant to you an option to purchase 100,000 shares of
VICORP's common stock at an exercise price of $12.25 per share. The
options shall vest in 25,000-share increments on September 1, 1997, 1998,
1999, and 2000, subject to your continued employment with VICORP on the
applicable vesting dates.
(d) You will be eligible to participate in VICORP`s standard benefit
programs consistent with the terms of those programs that are offered to
other officers of VICORP. You will receive complete information on each of
the benefits offered to officers of VICORP upon your request.
(e) The company will reimburse you for all travel and other business
expenses in accordance with VICORP's business expense reimbursement
guidelines except, however, when first-class travel is available, VICORP
agrees to pay for upgrade stickers.
(f) VICORP shall reimburse you for reasonable and necessary expenses
incurred in relocating from Bakersfield, California to Denver, Colorado.
In addition to the actual costs of relocation, the company shall gross-up
the amounts of the payment to you so that the net amount received by you
after the payment of all federal, state and local taxes that you are
obligated to pay as a result of the receipt of the moving expenses
reimbursement is equal to the amount of your moving expenses but in no
event shall the total amount paid by the company for moving expenses exceed
$20,000.
(g) VICORP shall reimburse you for the real estate commissions, if any,
you pay on the sale of your home in California. In addition to the
commissions, VICORP shall gross up the amount of such payment to you so
that the net amount received by you after the payment of all federal, state
and local taxes that you are obligated to pay as the result of the receipt
of the real estate commission reimbursement is equal to the amount of the
stated commission, but in no event shall the total amount paid by VICORP
for such commissions exceed $30,000.
6. In the event your employment is terminated by VICORP for other than cause,
VICORP will pay to you as severance an amount equal to one year's base
salary calculated as of the time of termination, plus such other severance
benefits, if any, in accordance with VICORP's severance policy for
executives.
Hopefully, the above is a correct expression of your understanding of the terms
of employment which we have been discussing verbally. To the extent, however,
you have additional questions or concerns, please feel free to contact me so
that we might clarify any confusion.
To the extent that this is a correct expression, I would request that you
reflect your acceptance of this offer of employment by executing the enclosed
copy of this letter and returning the same to VICORP on or before July 23, 1996.
Sincerely,
/s/ J. Michael Jenkins Acknowledged and agreed to this
------------------ 19th day of July, 1996.
J. Michael Jenkins
President
/s/ Craig Held
----------
Craig Held
July 23, 1996
Richard E. Sabourin
4547 South Meadow Drive
Boulder, Colorado 80301
Re: Offer of Employment
Dear Mr. Sabourin:
This letter will confirm the terms of an offer of employment to you by VICORP
Restaurants, Inc. ("VICORP"). The offer is:
1. VICORP hereby offers to employ you into as an officer of VICORP. Your
title would be Chief Financial Officer.
2. Your employment is to commence by no later than August 19, 1996 and shall
continue thereafter on an at-will basis indefinitely.
3. In your position, you will be responsible for the functions normally
performed by a Chief Financial Officer. You will be directly responsible
for finance, accounting, treasury, tax, M.I.S., purchasing, distribution,
and VICOM (the production division of VICORP). You will additionally be
responsible to perform such other duties and services of an executive,
administrative and managerial nature as shall be specified and designated
from time to time by the President of VICORP.
4. Your immediate supervisor will be the President of VICORP.
5. The compensation package you will receive is:
(a) A bi-weekly base salary of $9,615.38 (representing an annualized base
salary of $250,000).
(b) You will be eligible to participate in the incentive program for
officers and directors of VICORP as approved by the Board of Directors
commencing with VICORP's 1997 fiscal year.
(c) VICORP will grant to you an option to purchase 100,000 shares of
VICORP's common stock at an exercise price equal to the closing price of
VICORP's stock as of the date you sign this letter and return it to the
undersigned. The options shall vest in 25,000-share increments on
September 1, 1997, 1998, 1999, and 2000, subject to your continued
employment with VICORP on the applicable vesting dates.
(d) You will be eligible to participate in VICORP`s standard benefit
programs consistent with the terms of those programs that are offered to
other officers of VICORP. You will receive complete information on each
of the benefits offered to officers of VICORP upon your request.
6. In the event your employment is terminated by VICORP for other than cause,
VICORP will pay to you as severance an amount equal to one year's base
salary calculated as of the time of termination, plus such other severance
benefits, if any, in accordance with VICORP's severance policy for
executives.
Hopefully, the above is a correct expression of your understanding of the terms
of employment which you and Mike Jenkins have been discussing verbally. To the
extent, however, you have additional questions or concerns, please feel free to
contact me or Mike so that we might clarify any confusion.
To the extent that this is a correct expression, I would request that you
reflect your acceptance of this offer of employment by executing the enclosed
copy of this letter and returning the same to VICORP on or before July 30, 1996.
Sincerely,
/s/ Patricia M. Luzier Acknowledged and agreed to this
------------------ 25th day of July, 1996.
Patricia M. Luzier
Senior Vice President/
Human Resources
/s/ Richard E. Sabourin
-------------------
Richard E. Sabourin
Amendment No. 6
Dated as of July 31, 1996
to
Second Amendment and Restated Credit Agreement
Dated as of June 18, 1993
This AMENDMENT No. 6 ("Amendment") dated as of July 31, 1996 is entered
into by and among VICORP Restaurants, Inc., a Colorado corporation (the
"Borrower"), Citibank, N.A. and NationsBank of Texas, N.A., as lenders (the
"Lenders"), and Citibank, N.A., as agent for the Lenders (in such capacity, the
"Agent").
RECITALS
A. The Borrower, the Lenders and the Agent are parties to that certain
Second Amended and Restated Credit Agreement dated as of June 18, 1993 (as
amended, the "Loan Agreement"). Terms defined in the Loan Agreement and not
otherwise defined herein are used herein as defined in the Loan Agreement.
B. The Borrower has requested that the Lenders and the Agent amend, and
the Lenders and the Agent have agreed to amend, certain provisions of the Loan
Agreement as set forth below.
NOW, THEREFORE, the Borrower, the Lenders and the Agent agree as follows:
SECTION 1. Amendment. Subject to the conditions set forth in Section 2
herein, the Borrower, the Lenders and the Agent hereby amend the Loan Agreement
as follows:
(a) Section 7.03(c) of the Loan Agreement is amended to provide that
clause (i) will be "$124,000,000" for the fiscal quarter ended July 31, 1996,
and that clause (i) will be "$125,000,000" for each fiscal quarter thereafter;
and
(b) Section 7.03(e) of the Loan Agreement is amended to provide that the
Borrower is required to maintain a fixed charge coverage ratio (as set forth in
such Section 7.03(e)) greater than or equal to 1.1 to 1 for the fiscal quarter
ending on July 31, 1996; and to maintain a fixed charge coverage ratio greater
than or equal to 1.75 to 1 as of the last day of each fiscal quarter thereafter.
SECTION 2. Conditions Precedent to Amendment. This Amendment shall be
deemed to be effective as of July 31, 1996 upon the satisfaction of each of the
following conditions precedent: (a) the receipt by the Agent of four (4)
original copies of this Amendment duly executed and delivered by a duly
authorized officer of the Borrower and of each Lender; and (b) the absence of
any Default or Event of Default under the Loan Agreement after giving effect to
this Amendment.
SECTION 3. Representations and Warranties of the Borrower. (a) Upon the
effectiveness of this Amendment, the Borrower hereby reaffirms all covenants,
representations and warranties made in the Loan Agreement and agrees that all
such covenants, representations and warranties shall be deemed to have been
re-made as of the effective date of this Amendment.
(b) The Borrower hereby represents and warrants that this Amendment
constitutes the legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and general principles
of equity which may limit the availability of equitable remedies.
SECTION 4. Reference to and Effect on the Loan Agreement. (a) The
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of the Lenders and the Agent under the Loan
Agreement or any other document, instrument or agreement executed in connection
therewith, nor constitute a waiver of any provision contained therein, except as
specifically set forth herein.
(b) Upon the effectiveness of this Amendment, each reference in the Loan
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import shall mean and be a reference to the Loan Agreement as amended hereby,
and each reference to the Loan Agreement in any other document, instrument or
agreement executed and/or delivered in connection with the Loan Agreement shall
mean and be a reference to the Loan Agreement as amended hereby.
(c) Except as specifically amended hereby, the Loan Agreement and any
other document, instrument or agreement executed in connection therewith shall
remain in full force and effect and are hereby ratified and confirmed.
SECTION 5. Governing Law. This Amendment shall be governed by and
construed in accordance with the other remaining terms of the Loan Agreement and
the internal laws (as opposed to conflict of law provisions) of the State of
New York.
SECTION 6. Section Titles. The section titles contained in this Amendment
are and shall be without substance, meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
SECTION 7. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
VICORP RESTAURANTS, INC.
By: /s/ Charles R. Frederickson
-----------------------
Name: Charles R. Frederickson
-----------------------
Title: Chairman
-----------------------
By: /s/ Richard E. Sabourin
-----------------------
Name: Richard E. Sabourin
-----------------------
Title: Executive V.P./CFO
-----------------------
CITIBANK, N.A.
By: /s/ James J. Sheridan
-----------------------
Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Frank Johnson
-----------------------
Vice President
CITIBANK, N.A., as Agent
By: /s/ James J. Sheridan
-----------------------
Vice President
EXHIBIT 15: LETTER REGARDING UNAUDITED INTERIM
FINANCIAL INFORMATION
September 4, 1996
To VICORP Restaurants, Inc.:
We are aware that VICORP Restaurants, Inc. has incorporated by reference into
the Company's previously filed Registration Statement File Nos. 33-26650,
33-32608, 33-34447, 33-48205, 33-49166 and 33-11003,its Form 10-Q for the
quarter ended July 31, 1996, which includes our report dated August 28, 1996,
covering the unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statements prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
-------------------
Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VICORP
RESTAURANTS, INC. CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS
AS OF JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<NAME> VICORP RESTAURANTS, INC.
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