UNITED STATES
SECURITIES & 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
For the fiscal year ended October 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)
Registrant's telephone number, including area code: (303) 296-2121
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock
$.05 par value per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filer pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of 7,980,896 shares of the registrant's common stock
held by non-affiliates on January 14, 1997 was approximately $ 99,761,200.
At January 14, 1997, there were 9,069,926 shares of the Company's Common Stock
$.05 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Notice of Annual Meeting of Shareholders and Proxy Statement pertaining
to the 1997 Annual Meeting of Shareholders ("the Proxy Statement") are
incorporated herein by reference into Parts I and III.
PART I
ITEM 1. BUSINESS.
VICORP Restaurants, Inc., the registrant, is referred to herein as "VICORP"
or the "Company". The Company was incorporated in 1959 and is headquartered
in Denver, Colorado.
VICORP operates family style restaurants primarily under the names "Bakers
Square" and "Village Inn" and franchises restaurants under the Village Inn
name. At October 31, 1996, VICORP operated 253 restaurants in 13 states,
of which, 154 were Bakers Squares, 98 were Village Inns and one was a
different concept. On that date, there were 108 franchised Village Inn
restaurants in 21 states. The Company has a pie manufacturing division
supporting its restaurants, which operates under the name VICOM. VICOM has
three production facilities.
Company Operations
During fiscal 1996, the Company closed 11 restaurants. The closures largely
resulted from a decision in 1996 to substantially discontinue the Angel's
concept and a 1994 plan to close and dispose of undesirable locations. The
Company did not open any new restaurants in fiscal 1996. While the Company
plans to resume growth of Company-operated restaurants, the Company's
principal focus in fiscal 1997 will be on improving existing operations.
Both of the Company's restaurant concepts serve breakfast, lunch and dinner
with a guest check average between $4 and $7. Village Inn is primarily
known for its breakfast foods while Bakers Square emphasizes lunch and
dinner and features fresh baked pies as signature items, for internal
consumption or for carryout. Each Company-operated restaurant offers a
relatively standard core menu. The standard menus are supplemented with
daily and monthly specials. Daily specials are chosen at the discretion of
the restaurant managers to provide specific locality appeal.
Store management typically consists of a general manager and two
associate/assistant managers. This management team has primary
responsibility for the efficient and profitable operation of their
restaurant and are provided incentives to do so. Additionally, the Company
employs area directors, who work closely with the restaurant general
managers in helping them meet the Company's objectives. Each area director
reports to a Vice President of Operations.
The Company believes the principal measure of success for its restaurants is
the ability to provide each customer with a satisfying experience. Hiring
and retaining the right people, making certain that employees are adequately
trained to do their jobs, clearly communicating the specific results
expected from each employee and providing relevant feedback of performance
are central factors in ensuring customer satisfaction. Training programs
are designed to meet these objectives and focus on outcome-based training,
emphasizing the acquisition of basic skills and behavior that result in
desired performance for specific positions.
Cost effective procurement of quality products is also critical to providing
a satisfying customer experience. The Company makes centralized purchasing
decisions for basic menu ingredients to gain favorable prices and ensure
uniform quality specifications. Management does not anticipate any
difficulty in obtaining food products of adequate quantity or quality at
acceptable prices.
The Company utilizes advertising where market penetration allows.
Expenditures for advertising were 2.0% of Company-operated restaurant sales
in fiscal 1996.
All of the Company-operated restaurants utilize point-of-sale computer
systems. These systems capture and record sales and payroll data which are
transmitted daily to the Company's corporate office. These systems are
supplemented with personal computer back office systems that provide
analytical and reporting tools for restaurant managers.
Franchise Operations
The Village Inn restaurants franchised by the Company generally operate for an
initial term of 20 years and require payments to the Company of an initial
franchise fee of $25,000 and a continuing royalty fee of three percent of the
franchisee's revenues. In support of its franchising activities, the Company
employs field consultants who visit the franchise restaurants regularly to
ensure that the franchisees maintain compliance with certain standards of
operations and make recommendations for improvements. A Franchise Advisory
Board, consisting of seven franchisees who are elected by their peers every
two years, meets regularly with Company personnel to discuss facets of
operations that affect the Company's franchise community.
During fiscal 1996, six new franchise restaurants were opened and four
franchise restaurants were closed. The net number of Village Inn franchise
restaurants in operation over the last five years has not changed
significantly. However, as franchising provides a profitable revenue stream
and at the same time leverages the strength of the Village Inn brand into
new markets, the Company continues to pursue franchising opportunities with
qualified applicants. Eight new franchise units are expected to open in
fiscal 1997.
Trademarks and Service Marks
The Company has acquired the right to use the marks which it considers
important to its business through various federal and state registrations.
VICORP has no reason to believe that there are any conflicting rights that
might materially impair the use of the Company's marks.
Working Capital Items
The Company is not required to maintain significant levels of working
capital because its revenues are primarily derived from cash sales while
restaurant inventories are purchased on credit and rapidly converted to cash.
Competition
The restaurant industry is highly competitive and is often affected by
changes in taste and eating habits of the public, by local and national
economic conditions affecting spending habits, and by population and traffic
patterns. The Company competes directly or indirectly with all types of
restaurants, from national and regional chains to local establishments.
Some of its competitors are corporations much larger than the Company,
having at their disposal greater capital resources and greater ability to
withstand adverse business trends.
Research and Development
No material amount was spent on Company sponsored research and development
activities during the last fiscal year. Additionally, no material amounts
were spent by the Company on customer sponsored research activities relating
to the development of new products, services or techniques or the
improvement of existing products, services or techniques.
Regulation
The Company is subject to various federal, state and local laws affecting
its business. Restaurants generally are required to comply with a variety
of regulatory provisions relating to zoning of restaurant sites, sanitation,
health and safety. With respect to the restaurants operated by the Company
which serve alcoholic beverages, VICORP is governed by the laws regulating
the sale of liquor, wine and beer.
The Company is subject to a substantial number of state laws regulating
franchise operations and sales. Those laws impose registration and
disclosure requirements on franchisors in the offer and sale of franchises
and, in certain cases, also apply substantive standards to the relationship
between franchisor and franchisee. The Company also must adhere to the
Federal Trade Commission regulations governing disclosure requirements in
the sale of franchises.
Various federal and state labor laws govern the Company's relationship with
its employees, including such matters as minimum wage requirements,
overtime, and other working conditions. Environmental requirements have not
had a material effect on the operations of the Company or those of its
franchisees.
Employees
At October 31, 1996 the Company employed approximately 12,400 persons.
Executive Officers of the Company
The following sets forth certain data concerning the executive officers of
the Company, all of whom are appointed on an annual basis. There is no
family relationship between any of the executive officers.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Charles R. Frederickson 58 Chairman of the Board
J. Michael Jenkins 50 Director, President and Chief Executive Officer
James R. Burke 48 President/Bakers Square
Robert E. Kaltenbach 51 President/Village Inn
Nicholas S. Galanos 46 Executive Vice President/Development
Richard E. Sabourin 46 Executive Vice President/Chief Financial Officer
</TABLE>
Charles R. Frederickson has been a director of the Company since 1968, and
Chairman of the Board since November 1986.
J. Michael Jenkins was appointed President in August 1994. From February
1992 until his appointment with the Company, he served as Chief Executive
Officer and Chairman of the Board for El Chico Restaurants, Inc. Mr.
Jenkins served as President and Chief Executive Officer of Metromedia
Steakhouses, Inc. from May 1989 to February 1992.
James R. Burke was appointed President/Bakers Square in March 1996 after
serving as Executive Vice President/Bakers Square since May 1995. From
November 1992 to April 1995, he served as Vice President Operations/Village
Inn. For approximately six years prior to that time, Mr. Burke served as
Vice President of Operations for Sea Galley Restaurants.
Robert E. Kaltenbach was appointed President/Village Inn in December 1994
after serving as Vice President/Franchise Operations since July 1988.
Nicholas S. Galanos joined the Company in February 1995 as President/Angel's.
In October 1995, he assumed the duties of Executive Vice President/Development.
From September 1993 until February 1995, he served as Chief Executive Officer/
Chief Operating Officer for Champps Entertainment, Inc. Mr. Galanos served as
Chief Operating Officer/Executive Vice President of T.G.I. Friday's Hospitality
Worldwide, Inc. from October 1991 to September 1993.
Richard E. Sabourin was appointed Executive Vice President/Chief Financial
Officer in August 1996. From 1989 to August 1996, Mr. Sabourin was employed by
Bestop, Inc in various positions including President, Chief Operating Officer
and Chief Executive Officer.
ITEM 2. PROPERTIES.
The following table provides information as of October 31, 1996 concerning
the land and buildings at restaurant locations operated, leased to others
or held for disposal by the Company.
Village Bakers
Inn Square Other Total
------- ------ ----- -----
Company-operated restaurants:
Properties owned in fee 7 53 -- 60
Buildings owned on leased land 5 9 -- 14
Leased locations 86 92 1 179
------- ------ ----- -----
98 154 1 253
======= ====== ===== =====
Properties leased to others:
Properties owned in fee 1 -- 4 5
Buildings owned on leased land -- -- 1 1
Leased locations 23 -- 23 46
------- ------ ----- -----
24 -- 28 52
======= ====== ===== =====
Properties held for disposal:
Properties owned in fee -- -- 7 7
Buildings owned on leased land -- -- -- --
Leased locations -- -- 19 19
------- ------ ----- -----
-- -- 26 26
======= ====== ===== =====
The restaurants operated by the Company are located primarily in Arizona,
California, Florida, the Rocky Mountain region, and the upper Midwest. The
Company considers its existing operating restaurant properties and equipment
to be in good condition. For additional information concerning the
Company's leases see Note 4 of Notes to Consolidated Financial Statements
which is included in Item 8 of Part II.
The Company intends to lease, sublease or sell the 26 properties which are
currently idle.
The Company owns its corporate office complex in Denver, Colorado. It also
owns the land and buildings comprising its bakery facilities in Oak Forest,
Illinois. It leases the land and buildings which comprise its bakery
facilities in Santa Fe Springs, California and Mounds View, Minnesota.
ITEM 3. LEGAL PROCEEDINGS.
VICORP is a party to various judicial and administrative proceedings, all of
which have risen in the ordinary course of business. None of the
proceedings are deemed to be material in light of the amounts involved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to the Company's security holders during the
three month period ended October 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Company's common stock is traded in the over-the-counter market and is
quoted on the National Association of Securities Dealers (NASDAQ) National
Market System under the symbol "VRES". As of January 14, 1997, the Company
had 517 shareholders of record. The following table sets forth for the
periods indicated the high and low closing sales quotations per share of
common stock as reported by NASDAQ:
Fiscal Quarter
---------------------------------------
First Second Third Fourth
---------------------------------------
1996
High $ 11 3/4 $ 15 1/4 $ 14 1/4 $ 15
Low 9 3/4 10 1/8 11 1/2 12 3/4
1995
High $ 18 $ 16 1/2 $ 15 3/4 $ 14 3/4
Low 15 1/2 14 13 1/2 10 1/2
The range of high and low closing sales quotations contained in the
foregoing table reflects inter-dealer prices, without retail mark-up, mark-
down or commissions, and may not represent actual transactions.
The Company has not paid cash dividends on its common stock since 1986.
Future common stock dividend payments will be dependent upon operating
results, loan agreement restrictions and other financial and business
considerations.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) 1996 1995 1994 1993 1992
-----------------------------------------------------
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
System-wide sales including franchise sales $ 456,352 $ 496,300 $ 529,982 $ 542,986 $ 527,817
Restaurant sales 339,937 370,116 409,297 425,139 414,324
Total revenues 343,280 373,838 412,644 428,505 417,518
Income (loss) before extraordinary item (929) (4,532) (6,638) 16,524 15,522
Net income (loss) (929) (4,532) (6,638) 16,524 14,940
-----------------------------------------------------
OPERATING ANALYSIS
Restaurant operating profit analysis as a
percentage of restaurant sales
Costs and expenses
Food 32.9% 33.5% 30.1% 29.8% 30.9%
Labor 32.0% 33.7% 30.2% 28.5% 27.8%
Other operating 26.7% 28.3% 28.2% 27.5% 27.2%
Restaurant operating profit 8.4% 4.5% 11.4% 14.2% 14.1%
General and administrative expense
as a percentage of revenues 7.3% 7.0% 8.7% 7.8% 7.5%
Interest expense as a percentage of revenues 1.2% 1.0% .9% .9% 1.3%
Income before income taxes and extraordinary
and unusual items as a percentage of revenues .9% (2.4%) 2.5% 6.3% 6.1%
Effective income tax rate 64.0% 50.0% 37.5% 36.2% 39.5%
-----------------------------------------------------
BALANCE SHEET DATA
Total assets $ 203,946 $ 228,161 $ 249,023 $ 254,031 $ 241,958
Long-term debt and capitalized lease obligations 33,585 42,179 42,554 40,008 43,736
Common shareholders' equity 122,269 123,098 134,866 148,318 135,445
Debt to total capitalization 21.5% 25.5% 24.0% 21.2% 24.4%
-----------------------------------------------------
CASH FLOW DATA
Net income (loss) $ (929) $ (4,532) $ (6,638) $ 16,524 $ 14,940
Depreciation and amortization 21,088 22,565 26,133 23,381 20,242
Deferred income tax provision (1,950) (4,825) (5,414) 5,932 8,145
Write-offs, extraordinary item, and other 5,877 446 24,113 4,397 2,645
-----------------------------------------------------
Subtotal 24,086 13,654 38,194 50,234 45,972
Change in current assets and liabilities (6,239) (6,345) (4,100) 636 8,196
-----------------------------------------------------
Cash provided by operations 17,847 7,309 34,094 50,870 54,168
As a percentage of revenues 5.2% 2.0% 8.3% 11.9% 13.0%
Investment in property and equipment 7,922 13,234 28,733 42,426 41,509
-----------------------------------------------------
PER COMMON SHARE
Earnings (loss) before extraordinary item $ (.10) $ (.49) $ (.69) $ 1.60 $ 1.48
Earnings (loss) (.10) (.49) (.69) 1.60 1.42
Book value 13.50 13.61 14.18 14.96 13.58
Market price at year-end 14 1/2 11 16 3/4 20 3/4 22 1/4
Weighted average common and dilutive
common equivalent shares (000's omitted) 9,050 9,246 9,656 10,301 10,519
-----------------------------------------------------
NUMBER OF RESTAURANTS AT YEAR-END
Bakers Square 154 160 189 187 181
Company-operated Village Inn 98 99 112 126 122
Franchised Village Inn 108 106 107 104 105
Other company-operated 1 5 6 -- --
-----------------------------------------------------
Total 361 370 414 417 408
-----------------------------------------------------
</TABLE>
. An asset disposal charge of $5,800,000 was included in results of
operations for 1996.
. An asset disposal, impairment and restructuring charge of $23,000,000
and income of $1,918,000 from settlement of litigation were included in
results of operations for 1994.
. Fiscal 1993 consisted of 53 weeks while the remainder of the fiscal
years presented consisted of 52 weeks. A restructuring charge of
$1,300,000 was included in results of operations for 1993.
. Pretax extraordinary debt extinguishment costs of $963,000 were
included in results of operations for 1992.
. The Company has not paid dividends on its common stock during the last
five years.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following analysis should be read in conjunction with the Selected
Financial Data (Item 6 of Part II) and the Consolidated Financial Statements
(Item 8 of Part II).
RESULTS OF OPERATIONS
The following table sets forth selected operating statistics for the last
three fiscal years.
1996 1995 1994
------------- ------------- -------------
Bakers Square
Restaurant sales $ 204,697,000 $ 226,996,000 $ 260,110,000
Average sales per restaurant 1,309,000 1,282,000 1,364,000
Restaurant operating profit (loss) 9,316,000 (9,000) 28,802,000
Restaurant operating profit % 4.6% 0.0% 11.1%
Divisional administrative costs 4,560,000 5,902,000 7,425,000
Divisional operating profit (loss) 4,756,000 (5,911,000) 21,377,000
Restaurants at year-end 154 160 189
Village Inn
Restaurant sales $ 129,442,000 $ 132,349,000 $ 145,410,000
Average sales per restaurant 1,317,000 1,251,000 1,192,000
Restaurant operating profit 19,523,000 17,930,000 17,894,000
Restaurant operating profit % 15.1% 13.5% 12.3%
Franchise income 3,343,000 3,722,000 3,347,000
Divisional administrative costs 3,059,000 3,284,000 4,854,000
Divisional operating profit 19,807,000 18,368,000 16,387,000
Restaurants at year-end 98 99 112
Angel's
Restaurant sales $ 5,798,000 $ 10,771,000 $ 3,777,000
Average sales per restaurant 1,352,000 1,539,000 2,122,000
Restaurant operating profit (loss) (626,000) (1,488,000) 12,000
Restaurant operating profit (loss) % (10.8%) (13.8%) .3%
Divisional administrative costs 278,000 956,000 796,000
Divisional operating loss (904,000) (2,444,000) (784,000)
Restaurants at year-end 1 5 6
Consolidated
Restaurant sales $ 339,937,000 $ 370,116,000 $ 409,297,000
Food cost % 32.9% 33.5% 30.1%
Labor cost % 32.0% 33.7% 30.2%
Other operating cost % 26.7% 28.3% 28.2%
Restaurant operating profit % 8.3% 4.4% 11.4%
Restaurant operating profit $ 28,213,000 $ 16,433,000 $ 46,708,000
Franchise income 3,343,000 3,722,000 3,347,000
Divisional general and
administrative costs 7,897,000 10,142,000 13,075,000
-------------------------------------------
Divisional operating profit 23,659,000 10,013,000 36,980,000
-------------------------------------------
Unallocated general and
administrative costs 17,232,000 16,119,000 22,677,000
-------------------------------------------
Operating profit (loss)(1) $ 6,427,000 $ (6,106,000) $ 14,303,000
===========================================
(1) Before asset disposal charge of $5.8 million in 1996 and asset
disposal, impairment and restructuring charge of $23 million in 1994.
Consolidated restaurant sales decreased 8.2% in 1996 compared to 1995 due to
operating, on average, approximately 31 fewer locations in 1996 as a result
of restaurant closures. Comparable consolidated same store sales decreased
1.2%, reflecting a 1.5% increase for Village Inn and a 2.8% decrease for
Bakers Square. Village Inn's comparable sales increase was due primarily to
increased average customer expenditures from menu mix changes coupled with a
modest customer count increase. Bakers Square's comparable sales decrease
was due primarily to lower customer counts. A menu price decrease for
Bakers Square taken in the middle of 1995 was offset by the addition of
higher priced "Manager's Daily Specials" in September 1995 and other menu
changes in 1996.
Consolidated restaurant sales decreased 9.6% in 1995 versus 1994. The
Company operated approximately 25 fewer restaurants in 1995 compared to 1994
due to restaurant closures. A comparable same store sales decline of 5.9%
also contributed to the overall decrease in sales. The Bakers Square
division registered the majority of the decrease which was affected by a
menu price reduction put into place in the middle of 1995, which decreased
average customer expenditures by approximately 10%. This action of reducing
prices was taken to reverse a four-year decline in customer counts in that
division. Compared to the prior year, same store customer counts for
Bakers Square decreased 8.7% in 1995 prior to the price reduction, but only
decreased 1.4% thereafter.
Consolidated restaurant operating profit increased 72% in 1996 versus 1995.
Bakers Square accounted for the majority of the improvement as a result of
programs to control waste and gain efficiencies. Also, more pronounced
costs of programs to improve customer counts in 1995, reduced advertising
costs, and the closure of unprofitable locations contributed to the
improvement. Village Inn's restaurant operating profit improved due largely
to reduced food and advertising costs.
Consolidated restaurant operating profit decreased 65% in 1995 versus 1994.
Bakers Square's restaurant operating profit decreased significantly due to
the menu price reductions, lower comparable sales in relationship to fixed
costs, and investments in food, labor and certain other restaurant related
items in order to improve customer counts. Village Inn's restaurant
operating results were essentially unchanged from the prior year, but
improved as a percentage of sales. The closure of unprofitable restaurants
and reduced advertising and insurance costs were largely offset by higher
labor costs from increased staffing. Angel's, the Company's experimental
concept, recorded a restaurant operating loss in 1995 due to preopening
costs and a higher than expected cost structure.
Franchise income decreased 10% in 1996 versus 1995 due to higher costs to
resume growth in that group. Franchise income increased 11% in 1995 versus
1994 due to lower administrative costs.
General and administrative expense decreased 4% in 1996 versus 1995 due to
cost control measures, but increased to 7.3% of revenues from 7.0% in 1995.
General and administrative expense decreased 27% in 1995 compared to 1994 as
the result of administrative office consolidations, staff reductions,
reduced incentive and legal expenses and a $1,000,000 sign-up bonus for the
Company's President paid in 1994.
Interest expense increased 4% in 1996 versus 1995 due to increased average
levels of borrowing partially offset by reduced capital lease interest.
Other income/expense in 1994 included $1,918,000 of income related to
settlement of litigation against certain of the Company's insurance carriers.
In 1996, the Company recorded a $5,800,000 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.
In 1994, the Company recorded a $23,000,000 charge related primarily to a
plan to close and dispose of underperforming restaurants and discontinue a
portion of the Company's manufacturing and distribution activities. Also,
included were charges to impair the carrying values on four properties and
to accrue for administrative restructuring costs. As of October 31, 1996,
all of the restaurants scheduled for disposition had been closed.
Operating results for the closed restaurants for the past three fiscal years
were as follows:
1996 1995 1994
---------- ------------ ------------
Bakers Square
Sales $ 2,211,000 $ 18,190,000 $ 30,511,000
Restaurant operating profit (loss) (395,000) (1,829,000) (465,000)
Village Inn
Sales 455,000 5,454,000 11,849,000
Restaurant operating profit (loss) (29,000) (144,000) (470,000)
Angel's
Sales 3,743,000 8,060,000 143,000
Restaurant operating profit (loss) (611,000) (1,312,000) (23,000)
Total
Sales 6,409,000 31,704,000 42,503,000
Restaurant operating profit (loss)(1,035,000) (3,285,000) (958,000)
In 1995, the Company discontinued internal warehousing and distribution of
grocery products for its restaurants. The Company does not anticipate
significant changes in delivered product costs as a result of the change.
Also, the Company closed its bakery facility in Phoenix, Arizona in 1995 and
its bakery facilities in Denver, Colorado and Orlando, Florida in 1996.
The effective income tax rates used for financial reporting were 64.0% in
1996, 50.0% in 1995 and 37.5% in 1994. The higher rates in 1996 and 1995
were primarily due to the greater impact of tax credits.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of funds is cash provided by operations.
Cash flow from operations increased in 1996 due primarily to higher
operating income.
The Company's working capital is generally in a deficit position because,
like most restaurant businesses, substantially all sales are for cash, while
credit is received from trade suppliers. Furthermore, the Company has not
maintained large excess cash balances, but rather has utilized available
cash for capital spending, repayment of borrowings or the repurchase of its
common stock.
The Company supplements cash provided by operations with bank borrowings and
occasional lease financing. During fiscal 1996, the Company reduced its
outstanding debt borrowings by $10,854,000. At October 31, 1996, the
Company had $24,500,000 of outstanding borrowings under its bank credit
facility, with approximately $10,600,000 available for additional direct
advances.
At October 31, 1996, the Company had 26 properties remaining which it was
trying to dispose of. Seven of these properties were owned in fee and the
rest were leased. The Company intends to sell the fee properties over the
next year and $5.3 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 to sixteen months. Cash carrying 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.
In 1995 and 1994, 949,500 shares of the Company's common stock were
repurchased for $14,976,000, under authorizations approved by the Board of
Directors. At October 31, 1996, authorization to repurchase an additional
300,500 common shares was available. Future purchases with respect to this
authorization 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 in 1996 totaled $7,922,000 and consisted of $5,127,000
for improvements to existing restaurants, $1,179,000 for the purchase of
equipment previously leased, and $1,616,000 for other support related
projects. Capital expenditures of $20,000,000 are expected for 1997. No
new restaurants are planned during 1997. Cash flow from operations, funds
available under a bank credit facility, or other financing sources are
expected to be adequate for planned capital projects and any repurchases of
common stock authorized by the Board.
At October 31, 1996, the Company had $46,324,000 of net deferred tax assets,
the majority of which relates to federal net operating loss carryforwards
totaling $211,833,000. The Company has established a valuation allowance
due to the uncertainty that the full amount of the operating loss
carryforwards will be applied against future taxable income. While a
continuation of the Company's 1996 taxable income level is not sufficient to
realize the portion of the net deferred tax asset related to the operating
loss carryforwards before the expiration periods, the Company feels that its
1996 operating results are not indicative of future performance. Historically,
the Company had taxable income in excess of the amount necessary for realization
and believes it will do so again in future years. The amount of the deferred tax
asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
Cumulative taxable income of approximately $60,000,000 for fiscal years 1997
through 1999 will be necessary to realize net deferred tax assets of
approximately $20,000,000 before expiration for a majority of the net
operating loss carryforwards before they expire.
MANAGEMENT OUTLOOK
Federal law was recently enacted that raised the hourly minimum wage by 50-
cents to $4.75 on October 1, 1996, and will raise it again by another 40-
cents to $5.15 on September 1, 1997. However, the legislation freezes the
wages of tipped employees to $2.13 an hour assuming the difference is earned
in tip income. The tipped wage is 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, the minimum wage
in California is scheduled to increase to $5.00 per hour in March 1997 and
to $5.75 per hour in March 1998, and a number of other states have indicated
that they are considering raising their minimum wage rate above the federal
level. The Company expects an annual impact from the federal minimum wage
increase of approximately $1.6 million, prior to the benefits of the
operational efficiencies that are being implemented to offset this increase.
Raising menu prices is not contemplated at this time.
The mid-scale segment of the restaurant industry remains extremely competitive.
The Company has discontinued opening new restaurants until existing operations
improve. Improvements in future operating performance will be primarily
dependent upon the Company's ability to increase comparable sales, especially
given the significant profit impact associated with incremental sales at
existing restaurants. Cost controls will also play a significant factor in
future profit growth. In addition, numerous external factors could have a
significant impact on future performance, including but not limited to food
commodity costs, labor availability, site availability, the economy, the weather
and government initiatives such as minimum wage rates, mandated benefits and
taxes.
Historically, the Company has mitigated the effects of inflation through
cost controls and periodic price increases. Management believes it will be
able to minimize the effects of future inflation through similar measures,
although such price increases will be subject to competitive constraints and
other business considerations.
Certain matters discussed in this report are "forward-looking statements"
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe
the Company's future plans, objectives or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks
and uncertainties which are described in close proximity to such statements
and which could cause actual results to differ materially from those
currently anticipated. Shareholders, potential investors and other readers
are urged to consider these factors carefully in evaluating the forward-
looking statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements made herein are
only made as of the date of this report and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-
Based Compensation". The SFAS, which will be effective for the Company's
fiscal 1997, recommends a fair value based method of accounting for an
employee stock option. However, companies may choose to continue to account
for stock options using the intrinsic value based method as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and provide proforma disclosures of net income and earnings per
share as if the fair value based method had been applied. The Company
anticipates it will continue to account for stock options using the
intrinsic value based method, and thus SFAS No. 123 will not have any impact
on its reported results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
TO OUR SHAREHOLDERS:
The preparation and integrity of the financial statements of VICORP
Restaurants, Inc. are the responsibility of its management. This
responsibility includes the selection of accounting procedures and practices
which conform with generally accepted accounting principles considered
appropriate in the circumstances. Informed judgments and estimates which
the Company believes to be reasonable are required in the determination of
certain data used in the accounting and reporting process.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that transactions are executed in accordance
with management's authorization and properly recorded in all material
respects. Adequate communication of Company policies to its employees,
segregation of responsibilities for the authorization and execution of
transactions, and proper accountability for the Company's assets are
essential elements of the system.
Each year the Board of Directors appoints an Audit Committee comprised of
directors who are not employees of the Company. The principal responsibilities
of this Committee are to recommend an independent auditor for the Company and
to periodically meet with representatives of the independent auditors and with
management to obtain reasonable assurances that the auditors are properly
discharging their responsibilities and that the Company's financial reporting
to stockholders and others is adequate and appropriate.
Arthur Andersen LLP has conducted an independent examination in order to
render their opinion on the Company's financial statements.
Charles R. Frederickson J. Michael Jenkins Richard E. Sabourin
Chairman of the Board President and Executive Vice President/
Chief Executive Officer Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF VICORP RESTAURANTS, INC.:
We have audited the accompanying consolidated balance sheets of VICORP
Restaurants, Inc. (a Colorado corporation) and subsidiary as of October 31, 1996
and October 31, 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VICORP Restaurants, Inc.
and subsidiary as of October 31, 1996 and October 31, 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended October 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
December 6, 1996.
VICORP Restaurants, Inc.
CONSOLIDATED BALANCE SHEETS
October 31, October 31,
(in thousands) 1996 1995
----------- -----------
ASSETS
Cash (Note 1) $ 1,406 $ 3,988
Receivables (Notes 1 and 2) 3,221 3,149
Inventories (Note 1) 6,517 8,597
Deferred income taxes (Notes 1 and 9) 5,000 5,000
Prepaid expenses and other (Note 1) 1,202 2,003
----------- -----------
Total current assets 17,346 22,737
----------- -----------
Property and equipment, net (Notes 1 and 3) 134,653 152,592
Deferred income taxes (Notes 1 and 9) 41,324 39,375
Long-term receivables (Notes 1 and 2) 2,541 3,032
Other assets (Note 1) 8,082 10,425
----------- -----------
Total assets $ 203,946 $ 228,161
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt and
capitalized lease
obligations (Notes 1, 4 and 5) $ 1,592 $ 6,116
Accounts payable, trade 11,131 16,526
Accrued compensation 5,686 5,542
Accrued taxes 6,941 7,998
Accrued insurance (Note 10) 4,524 5,656
Other accrued expenses 4,776 4,984
----------- -----------
Total current liabilities 34,650 46,822
Long-term debt (Notes 1 and 5) 24,642 31,094
Capitalized lease obligations (Note 4) 8,943 11,085
Non-current accrued insurance (Note 10) 5,349 6,092
Other non-current liabilities and credits 8,093 9,970
Commitments and contingencies (Notes 4, 5 and 10)
Shareholders' equity (Note 6)
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, 9,055,026 and 9,044,026
shares issued 453 452
Paid-in capital 84,431 84,332
Retained earnings 37,385 38,314
----------- -----------
Total shareholders' equity 122,269 123,098
----------- -----------
Total liabilities and shareholders' equity $ 203,946 $ 228,161
=========== ===========
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended
-------------------------------------
October 31, October 31, October 30,
(in thousands, except per share data) 1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Revenues
Restaurant operations $ 339,937 $ 370,116 $ 409,297
Franchise operations (Note 1) 3,343 3,722 3,347
-------------------------------------
343,280 373,838 412,644
-------------------------------------
Costs and expenses
Restaurant operations
Food 111,954 124,028 123,280
Labor 108,929 124,792 123,718
Other operating 90,841 104,863 115,591
General and administrative 25,129 26,261 35,752
Asset disposal, impairment, restructuring
and related costs (Note 8) 5,800 -- 23,000
-------------------------------------
Operating profit (loss) 627 (6,106) (8,697)
Interest expense 4,014 3,855 3,867
Other (income) expense, net (Note 2) (804) (897) (1,944)
-------------------------------------
Loss before income taxes (2,583) (9,064) (10,620)
Provision for income taxes (Note 9) (1,654) (4,532) (3,982)
-------------------------------------
Net loss $ (929) $ (4,532) $ (6,638)
=====================================
Loss per common and dilutive
common equivalent share (Note 1) $ (.10) $ (.49) $ (.69)
</TABLE>
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
---------------------------------------
October 31, October 31, October 30,
(in thousands) 1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net loss $ (929) $ (4,532) $ (6,638)
Reconciliation to cash provided by operations
Depreciation and amortization 21,088 22,565 26,133
Deferred income tax provision (1,950) (4,825) (5,414)
Asset disposal, restructuring and
related costs 6,173 436 24,788
Other, net (296) 10 (675)
---------------------------------------
24,086 13,654 38,194
Change in assets and liabilities
Trade receivables (289) 250 (1,855)
Inventories 2,080 1,962 1,240
Accounts payable, trade (5,395) (2,720) (1,423)
Other current assets and liabilities (1,891) (4,180) (1,379)
Non-current accrued insurance (744) (1,657) (683)
---------------------------------------
Cash provided by operations 17,847 7,309 34,094
---------------------------------------
INVESTING ACTIVITIES
Purchase of property and equipment (7,922) (13,234) (28,733)
Purchase of other assets (425) (14) (1,568)
Disposition of property (651) (768) (16)
Additions to non-trade receivables -- -- (1,088)
Collection of non-trade receivables 804 6,582 1,617
---------------------------------------
Cash used for investing activities (8,194) (7,434) (29,788)
---------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of debt 45,500 41,250 17,750
Payments of debt and capital lease
obligations (57,889) (35,984) (14,471)
Purchase of common stock -- (7,694) (7,282)
Other, net 154 418 532
---------------------------------------
Cash used for financing activities (12,235) (2,010) (3,471)
---------------------------------------
Increase (decrease) in cash (2,582) (2,135) 835
Cash at beginning of year 3,988 6,123 5,288
---------------------------------------
Cash at end of year (Note 1) $ 1,406 $ 3,988 $ 6,123
=======================================
Supplemental information
Cash paid during the year for
Interest (net of amount capitalized) $ 4,102 $ 3,933 $ 3,792
Income taxes 313 968 1,217
</TABLE>
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations
VICORP operates family style restaurants primarily under the names "Bakers
Square" and "Village Inn" and franchises restaurants under the Village Inn
name. At October 31, 1996, VICORP operated 253 restaurants in 13 states, of
which, 154 were Bakers Squares, 98 were Village Inns and one was a different
concept. On that date, there were 108 franchised Village Inn restaurants in
21 states. The restaurants operated by the Company are located primarily in
Arizona, California, Florida, the Rocky Mountain region, and the upper
Midwest. The Company has a pie manufacturing division supporting its
restaurants, which operates under the name VICOM. VICOM has three
production facilities.
Basis of presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual
results could differ from these estimates.
Principles of consolidation
The consolidated financial statements include the accounts of VICORP
Restaurants, Inc. and the accounts of its wholly-owned subsidiary through
March 1996, the date of its dissolution. Prior to its dissolution, VICORP's
subsidiary transfered all of its assets and liabilities to the Company.
All significant intercompany transactions and accounts have been eliminated.
Fiscal year
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.
Inventories
Inventories are valued at the lower of first-in, first-out cost or market
value. Inventories consisted of the following (in thousands):
October 31, October 31,
1996 1995
----------- -----------
Food at production facilities
Raw materials $ 2,171 $ 2,828
Finished goods 2,067 3,252
----------- -----------
4,238 6,080
Food at restaurants 2,279 2,517
----------- -----------
$ 6,517 $ 8,597
=========== ===========
Prepaid expenses
Prepaid expenses consist primarily of supplies, prepaid contract costs and
restaurant preopening costs. Preopening costs are amortized over a one-year
period following restaurant opening. At October 31, 1996 and 1995, no
material amounts of preopening costs were reported as assets.
Depreciation and amortization
Depreciation and amortization of property and equipment are provided using
principally the straight-line method at rates based upon estimated useful
lives of the assets, ranging from 20 to 40 years for buildings and 3 to 15
years for equipment and improvements. Amortization of leasehold rights and
excess of cost over net assets acquired in purchase transactions is provided
using the straight-line method, primarily over the remaining lives of
location leases or assets acquired, generally 5 to 25 years. Deferred loan
fees ($300,000 and $0, net of amortization at October 31, 1996, and 1995,
respectively) are included in other assets and are amortized over the 3 year
loan commitment period using the straight-line method (Note 5).
Franchise revenues
Initial franchise fees are deferred when received and recognized as income
when the franchisee has commenced operations and the Company has performed
all material services and conditions related to the sale of the franchise.
Continuing service fees, which are a percentage of the gross sales of
franchised operations, are accrued as income when earned except for situations
in which collectibility is in doubt. In those situations, continuing service
fees and rental income are recognized when received, and gains on property sales
are recorded using the cost recovery method.
Net franchise revenues consisted of the following (in thousands):
1996 1995 1994
-------------------------
Continuing service fees $ 4,216 $ 4,192 $ 3,968
Initial and renewal fees 169 167 166
Property rental income 206 269 319
Interest income on franchisee notes 247 293 263
Equipment sales income 42 50 64
Administrative expense (1,537) (1,249) (1,433)
-------------------------
Franchise revenues $ 3,343 $ 3,722 $ 3,347
=========================
Advertising costs
The Company expenses the production costs of advertising the first time the
advertising takes place. Costs of communicating advertising are expensed
when incurred, generally when airtime or print media is used. Direct response
advertising is seldom used by the Company and is expensed when incurred.
Advertising expense for 1996, 1995 and 1994 was $6,653,000, $11,106,000 and
$14,043,000, respectively. At October 31, 1996 and 1995, no material
amounts of advertising were reported as assets.
Fair value of financial instruments
The Company has notes receivable carried on its balance sheets at values
approximating estimated fair market value. Because these instruments are not
publicly traded, the Company estimates the value based on the respective
facts and circumstances of each instrument. The fair value of the Company's
long-term debt approximates carrying value because of its variable, market-
based interest rate feature.
Income taxes
Based on enacted tax laws, deferred income tax assets and liabilities are
recognized for the expected future income tax consequences of carryforwards
and temporary differences between the financial reporting and tax bases of
assets and liabilities. Deferred tax assets are reduced, if deemed
necessary, by a valuation allowance for the amount of any tax benefits
which, more likely than not based on current circumstances, are not expected
to be realized.
Earnings per common and common equivalent share
Earnings per common and common equivalent share is based upon earnings
attributable to common shareholders and the weighted average number of
common and dilutive common equivalent shares for stock options outstanding
during the year. Common equivalent shares for fiscal years 1996, 1995 and
1994 were anti-dilutive due to the net losses recorded in those years. The
weighted average number of common and common equivalent shares used for the
1996, 1995 and 1994 calculations were as follows:
1996 1995 1994
--------- --------- ---------
Weighted average common shares outstanding 9,049,501 9,246,439 9,656,094
Common equivalent shares outstanding -- -- --
--------- --------- ---------
9,049,501 9,246,439 9,656,094
========= ========= =========
Statements of cash flows
The Company considers all highly liquid investments and debt instruments
with original maturities of three months or less to be cash equivalents.
NOTE 2. RECEIVABLES
Receivables consisted of the following:
October 31, October 31,
(in thousands) 1996 1995
----------- -----------
Trade receivables $ 2,826 $ 3,391
Notes receivable 4,327 5,808
Discounts (687) (750)
Allowance for doubtful accounts (704) (2,268)
----------- -----------
Receivables, net 5,762 6,181
Current portion 3,221 3,149
----------- -----------
Long-term portion $ 2,541 $ 3,032
=========== ===========
The Company's receivables arose primarily from contracts and property
transactions with its franchisees and other sublessees. The ability of
these parties to honor their obligations is largely dependent on cash flows
generated from their restaurant operations. The trade receivables are
generally unsecured but the related contracts are cancelable if the debtor
fails to perform. Under Company policy, the notes receivable are generally
secured with security agreements on the property that gave rise to the
transaction.
In November 1994, the Company settled a lawsuit against certain of its
insurance carriers. The litigation arose in April 1992 when the Company
claimed the defendants breached their contract of insurance by withholding
payments to fund a $6,500,000 court approved settlement arising from prior
litigation against the Company. The Company recorded income of $1,918,000
in the fourth quarter of 1994, representing the excess recovery over the net
carrying value of the receivable. This receivable was collected in the
first quarter of 1995.
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
October 31, October 31,
(in thousands) 1996 1995
----------- -----------
Property and equipment used in operations
Land $ 20,801 $ 21,982
Buildings and improvements 120,464 122,533
Equipment 107,477 104,856
Construction in progress 740 1,829
Restaurant property leased to others 4,505 4,339
Accumulated depreciation (128,608) (111,339)
----------- -----------
125,379 144,200
----------- -----------
Capitalized lease buildings 8,575 10,091
Accumulated amortization (4,017) (5,091)
----------- -----------
4,558 5,000
----------- -----------
Properties held for disposal, net 10,271 10,011
Allowance for loss on disposal (5,555) (6,619)
----------- -----------
Property and equipment, net $ 134,653 $ 152,592
=========== ===========
Depreciation and amortization expense charged to operations for property and
equipment was $20,555,000 in 1996, $22,018,000 in 1995 and $25,509,000 in 1994.
At October 31, 1996, all of the Company's fee owned properties were free of
mortgages, pledges or other liens.
NOTE 4. LEASES
The Company is the prime lessee under various land and building leases for
restaurants operated by it and certain of its franchisees. Additionally,
the Company leases certain bakery production facilities. The leases have
initial terms generally ranging from 15 to 35 years and in certain
instances, provide for renewal options ranging from 5 to 20 years. Some of
the leases contain purchase options at the end of the lease terms. Many of
the leases contain escalation clauses, either predetermined or based upon
inflation. Most of the leases require additional (contingent) rental
payments by the Company if sales volumes at the related restaurants exceed
specified levels. Most of the agreements require payment of taxes,
insurance and maintenance costs. The implicit interest rates range from
7.2% to 14.0% for capital leases.
The Company as prime lessee has entered into sublease agreements with
franchisees and others on certain locations that are not operated by the
Company. These leases generally have terms similar to the prime lease with
the sublessee assuming the Company's obligations to pay taxes, insurance and
maintenance costs.
Following is a summary as of October 31, 1996, of future minimum lease
payments under capital and operating leases having an initial or remaining
non-cancelable term of one year or more:
Lease and
Capital Operating sublease
(in thousands) leases leases rentals
---------------------------------
1997 $ 2,709 $ 14,546 $ (2,467)
1998 2,524 14,079 (2,324)
1999 2,371 13,478 (2,086)
2000 2,144 12,359 (1,913)
2001 1,953 11,584 (1,652)
Later years 3,448 40,941 (4,889)
--------------------------------
Total minimum lease payments 15,149 $ 106,987 $ (15,331)
======================
Less amount representing interest 4,692
-------
Present value of mininum lease
payments 10,457
Current maturities of capitalized
lease obligations 1,514
-------
Capitalized lease obligations $ 8,943
=======
Net rental expense consisted of the following:
(in thousands) 1996 1995 1994
-------------------------------
Restaurant land and buildings
Minimum rentals $ 14,239 $ 14,714 $ 15,243
Contingent rentals 2,441 2,685 2,922
Equipment 742 1,346 3,293
-------------------------------
Rental expense 17,422 18,745 21,458
Less lease and sublease rental income 3,198 3,368 3,152
-------------------------------
Net rental expense $ 14,224 $ 15,377 $ 18,306
===============================
NOTE 5. DEBT
Long-term debt consisted of the following:
October 31, October 31,
(in thousands) 1996 1995
-------------------------
Advances under bank credit agreement $ 24,500 $ 35,250
Other long-term debt 220 324
-------------------------
24,720 35,574
Current maturities 78 4,480
-------------------------
Long-term debt $ 24,642 $ 31,094
=========================
On October 31, 1996, the Company canceled its existing credit facility and
entered into two new unsecured revolving credit agreements which together
provide up to $40,000,000 for direct advances and letters of credit with a
sublimit of $10,000,000 on letters of credit. The available commitments
will be reduced by $10,000,000 on October 31, 1997 and $5,000,000 on October
31, 1998 and expire entirely on October 31, 1999 unless otherwise extended.
Initial fees on the agreements totaled approximately $300,000. The Company
is required to pay a quarterly agent's fee of $7,500, 3/8% per annum on
unused commitments and 1 1/8% on issued letters of credit. Advances bear
interest at the higher of the Federal Funds rate plus 1/2% or the lender's
prime rate; or, the Company may elect to borrow at the lender's Eurodollar
rate plus 1 1/2%. The Eurodollar and unused commitment rates are adjustable
based on the Company's debt to capitalization ratio. During 1996, the
largest aggregate outstanding balance under the Company's bank facilities
was $40,000,000. The average balance outstanding was $32,995,000 and the
average interest rate was 6.9%. At October 31, 1996, the Company had placed
letters of credit totaling $4,916,000 in connection with its insurance
programs and the interest rate charged on its outstanding advances was 8 1/4%.
The agreements contain various restrictive covenants which include, among
others, maintenance of certain financial ratios, maintenance of a minimum
balance of tangible net worth and limitations on annual capital expenditures,
indebtedness, dividends, dispositions and acquisitions.
At October 31, 1996, principal amounts of long-term debt due during each of
the five succeeding fiscal years were $78,000 in 1997, $4,570,000 in 1998,
$20,072,000 in 1999, and none in both 2000 and 2001.
The Company incurred $4,014,000, $3,864,000 and $3,956,000 of interest
charges in 1996, 1995 and 1994, respectively. Of these amounts, none,
$9,000 and $89,000 were capitalized in each respective year.
NOTE 6. SHAREHOLDERS' EQUITY
The Company's authorized preferred stock consists of 5,000,000 $.10 par
value shares to be issued in series. The rights of each series are to be
determined by the Company's Board of Directors.
The Company has outstanding one right for each outstanding common share of
the Company. When exercisable, each right will entitle its holder to buy
1/100th of a share of the Company's Series A Junior Participating Preferred
Stock at an exercise price of $40. If, among other things, the Company is
acquired in a merger or other business combination transaction, including
one in which the Company is the surviving corporation, each right will
entitle its holder to purchase, at the then current exercise price of the
right, that number of shares of common stock of the surviving company which
at the time of such transaction would have a market value of twice the
exercise price of the right. The rights are exercisable only if, without
the Company's prior consent, a party acquires, or obtains the right to
acquire, 25% or more of the Company's outstanding voting securities or
announces a tender offer which would result in such ownership. At the
Company's option, the rights are redeemable at two cents per right at any
time before a 25% position has been acquired and under limited circumstances
thereafter. The rights expire May 26, 1997.
At various times since August 1992, the Company's Board of Directors has
authorized the purchase of shares of the Company's common stock. At October
31, 1996, authorization to purchase an additional 300,500 common shares was
available.
Under Colorado law, repurchased shares of capital stock are considered
authorized and unissued shares and have the same status as shares which have
never been issued.
Under the most restrictive covenants of the Company's bank credit agreement,
approximately $2,100,000 of consolidated retained earnings were unrestricted
at October 31, 1996, as to the declaration of cash dividends and the
acquisition of the Company's common stock.
The following table summarizes shareholders' equity activity:
<TABLE>
<CAPTION>
Common stock Total
--------------- Paid-in Retained shareholders'
(in thousands, except share data) Shares Amount capital earnings equity
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at October 31, 1993 9,911,563 $ 496 $ 98,338 $ 49,484 $ 148,318
Net loss -- -- -- (6,638) (6,638)
Common stock options exercised
including income tax benefit 39,513 2 466 -- 468
Purchase of common shares (441,650) (22) (7,260) -- (7,282)
---------------------------------------------------------
Balances at October 30, 1994 9,509,426 476 91,544 42,846 134,866
Net loss -- -- -- (4,532) (4,532)
Common stock options exercised
including income tax benefit 42,600 1 457 -- 458
Purchase of common shares (508,000) (25) (7,669) -- (7,694)
---------------------------------------------------------
Balances at October 31, 1995 9,044,026 452 84,332 38,314 123,098
Net loss -- -- -- (929) (929)
Common stock options exercised
including income tax benefit 11,000 1 99 -- 100
---------------------------------------------------------
Balances at October 31, 1996 9,055,026 $ 453 $ 84,431 $ 37,385 $ 122,269
=========================================================
</TABLE>
NOTE 7. STOCK OPTION, STOCK PURCHASE AND PROFIT-SHARING PLANS
The Company has stock option plans which generally provide for the granting
of options to all employees and non-employee directors of the Company at
exercise prices not less than the market value of the common stock on the
date of the grant. The options generally vest over three years and expire
ten years after the date of grant or three months after employment termination,
whichever occurs first.
In 1994, the Company entered into a stock option agreement with J. Michael
Jenkins, a Director, Chief Executive Officer and President of the Company.
Under the agreement, Mr. Jenkins was granted an option to purchase 300,000
shares of the Company's stock. These options were canceled in 1996, and the
Company entered into a new stock option agreement with Mr. Jenkins. Under
the new agreement, Mr. Jenkins was granted an option to purchase 300,000
shares of the Company's stock at a price of $13.00. The options vest
100,000 in August 1996, 100,000 in October 1999 and 100,000 in October 2002
and are exercisable until August 2006, unless accelerated under certain
conditions.
In August 1996, the Company entered into stock option agreements with Craig
Held and Rick Sabourin, Executive Vice President/Chief Marketing Officer and
Executive Vice President/Chief Financial Officer, respectively. Each
individual was granted options to purchase 100,000 common shares. Mr. Held's
employment with the Company was terminated in November 1996 and his options
were canceled at that time. Mr. Sabourin's options have a grant price of
$11.50 per share, vest evenly over a four year period and expire in August
2006, unless earlier canceled.
The following table summarizes stock option activity:
Shares Option price
- ----------------------------------------------------------------------
Outstanding at October 31, 1993
(554,516 shares exercisable) 635,514 $ 5.63 - 26.00
Granted 338,809 14.25 - 30.17
Exercised (39,513) 5.63 - 14.75
Canceled (87,500) 5.63 - 23.50
- ----------------------------------------------------------------------
Outstanding at October 30, 1994
(508,336 shares exercisable) 847,310 5.63 - 30.17
Granted 19,882 15.25 - 17.00
Exercised (42,600) 5.63 - 15.00
Canceled (146,694) 9.88 - 25.50
- ----------------------------------------------------------------------
Outstanding at October 31, 1995
(356,607 shares exercisable) 677,898 5.63 - 30.17
Granted 534,000 11.50 - 14.88
Exercised (11,000) 5.63 - 9.88
Canceled (332,598) 5.63 - 30.17
- ----------------------------------------------------------------------
Outstanding at October 31, 1996
(459,140 shares exercisable) 868,300 $ 5.63 - 26.00
======================================================================
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-
Based Compensation". The SFAS, which would be effective for the Company's
fiscal 1997, recommends a fair value based method of accounting for an
employee stock option. However, companies may choose to continue to account
for stock options using the intrinsic value based method as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and provide proforma disclosures of net income and earnings per
share as if the fair value based method had been applied. The Company
anticipates it will continue to account for stock options using the
intrinsic value based method, and thus SFAS No. 123 will not have any impact
on its reported results.
In October 1996, the Company adopted an Employee Stock Purchase Plan under
which any eligible employee who has completed 12 months of employment may
contribute up to $25,000 of their annual earnings toward the quarterly
purchase of the Company's common stock. The common stock will be purchased from
the Company at 85% of the quarter-end market value. There are no charges or
credits to income in connection with the plan. The Company has reserved 500,000
common shares for issuance under the plan which terminates on September 30,
2001. No common shares were issued in fiscal 1996 under this plan.
The Company also has an Outstanding Common Stock Purchase Plan under which
eligible participants may elect to utilize incentive compensation that
otherwise would be paid in cash to purchase the Company's common stock in
the open market at prevailing prices. If the participant still owns these
shares and is still employed by the Company after two years from the
purchase of the common shares, then a cash bonus equal to 25% of the
incentive compensation used to purchase the shares will be paid to the
participant. The plan expires the earlier of October 31, 1999 or when
100,000 common shares have been purchased by plan participants. No material
expense under this plan was incurred during the last three fiscal years.
The Company has an employees' profit-sharing plan, established under Section
401(k) of the Internal Revenue Code of 1986, which provides for annual
contributions by the Company to be determined by the Board of Directors.
The Company's annual contribution, if the Company is profitable (as defined
in the plan), must be equal to at least 2% and may not exceed 15% of the
aggregate compensation of the participants while participating. Any full-
time employee 21 years of age or older who has completed one year of service
with the Company is eligible to participate. Assets of the profit-sharing
plan can be invested in the Company's common stock, or among several other
alternatives. The Company's expenses related to contributions to the plan
in 1996, 1995 and 1994 were $473,000, $455,000 and $829,000, respectively.
NOTE 8. ASSET DISPOSAL, IMPAIRMENT, RESTRUCTURING AND RELATED COSTS
In 1996, the Company recorded a $5,800,000 asset disposal charge related to
a decision to close and dispose of most of its Angel's Diner restaurants.
The Company had 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 closed
in the fourth quarter of fiscal 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 1994, a $23,000,000 charge was recorded principally related to a plan to
close and dispose of 50 restaurants that had declining sales and profits and
that were in trade areas no longer considered appropriate for the Company's
operating concepts. The disposition plan also included a portion of the
Company's manufacturing and distribution operations which were no longer
economical to operate. The disposal charge consisted of estimates to reduce
the carrying amounts of assets to net realizable value, accruals for closure
and carrying costs, and losses on sublease dispositions where it was
expected that sublease rentals would be lower than the Company's obligations
under the prime lease.
Included in the 1994 charge was an impairment of assets of $2,287,000 for
four restaurant properties with projected cash flows insufficient to recover
remaining investments and a $1,291,000 restructuring charge related to the
elimination of 27 administrative positions that were redundant or non-
essential to ongoing operations.
As of the end of fiscal 1996, the Company had closed all the restaurants
related to the above mentioned disposal plans. Additionally, in 1996 the
Company closed two restaurants which were not included in the disposal
plans. Both properties are owned in fee and neither property is expected to
incur material disposition costs or losses. In 1995 the Company
discontinued the internal distribution and warehousing of grocery products
for its restaurants and closed its bakery facility in Phoenix, Arizona. In
1996, the Company closed its bakery facilities in Denver, Colorado and
Orlando, Florida.
Operating results for the closed restaurants for the past three fiscal years
were as follows (in thousands):
1996 1995 1994
---------------------------
Sales $ 6,409 $31,704 $42,503
Restaurant operating profit (loss) (1,035) (3,285) (958)
As of October 31, 1996, the Company had $9,031,000 of reserves remaining to
provide for the disposal of 26 properties, including six closed prior to
1994. The reserves consisted of $5,806,000 to reduce the disposal property
to net realizable value and $3,225,000 to provide for carrying costs and
sublease losses. The Company believes that these reserves are adequate to
cover the remaining costs and losses associated with the remaining disposal
properties. During 1996, $2,500,000 of closure and carrying costs were
charged against the established liability.
NOTE 9. INCOME TAXES
The total provisions for income taxes consisted of the following:
(in thousands) 1996 1995 1994
------------------------------
Current
Federal $ 75 $ -- $ 414
States 205 200 929
------------------------------
280 200 1,343
-----------------------------
Deferred
Federal (2,063) (4,316) (3,613)
States 113 (509) (1,801)
------------------------------
(1,950) (4,825) (5,414)
------------------------------
$ (1,670) $ (4,625) $ (4,071)
The components of the income tax provision were as follows:
(in thousands) 1996 1995 1994
---------------------------
Current
Taxes on income before carryforwards $ 280 $ 200 $ 6,177
Less benefit of loss carryforwards utilized -- -- (4,834)
---------------------------
$ 280 200 1,343
---------------------------
Deferred
Tax effect of net change in temporary differences 858 3,866 (9,659)
Utilization of (addition to) tax net operating loss
carryforward (1,734) (7,609) 4,834
FICA tax credit (999) (780) (749)
Targeted jobs tax credit and AMT credit (75) (302) --
Expiration of tax credit carryforwards -- -- 2,160
Change in valuation allowance -- -- (2,000)
---------------------------
(1,950) (4,825) (5,414)
---------------------------
Tax effect of deduction for exercised stock
options credited to paid-in capital 16 93 89
---------------------------
Income tax benefit $(1,654) $(4,532) $(3,982)
===========================
The provisions for income taxes differ from the amounts computed by applying
the federal income tax rate to income before income taxes as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 % 1995 % 1994 %
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed federal income taxes using
statutory rate $ (904) (35.0%) $(3,172) (35.0%) $(3,717) (35.0%)
FICA tax credit (999) (38.7) (780) (8.6) (749) (7.0)
Targeted jobs tax credit and AMT credit (75) (2.9) (302) (3.3) -- --
State income taxes net of federal
income tax effect 207 8.0 (201) (2.2) (567) (5.3)
Expiration of tax credit carryforwards -- -- -- -- 2,160 20.3
Change in valuation allowance -- -- -- -- (2,000) (18.8)
Effect of change in federal tax rate -- -- -- -- -- --
Other 117 4.6 (77) (.9) 891 8.4
------------------------------------------------
$(1,654) (64.0%) $(4,532) (50.0%) $(3,982) (37.5%)
================================================
</TABLE>
The Company had taxable loss for federal income tax purposes and book income
(loss) before income taxes as follows:
(in thousands) 1996 1995 1994
-------------------------------
Federal taxable income (loss) $ (4,033) $ (17,588) $ 14,589
Book loss before income taxes (2,583) (9,064) (10,620)
Federal taxable income is generally less than book income before income
taxes due to state income taxes, differences in depreciation rates, and
employee stock option exercises. In 1994, such differences were more than
offset by the asset disposal charge of $23,000,000 a majority of which was
not deductible for tax purposes in that year.
The components of the net deferred tax assets were as follows:
(in thousands) 1996 1995
------------------
Deferred tax assets
Tax effect of net operating loss carryforwards $ 81,002 $ 79,268
Tax credit carryforwards 4,206 4,206
FICA tax credit 2,528 1,529
Alternative minimum tax credits 2,240 2,165
Accrued insurance claims not yet deductible 3,789 4,512
Leasing transactions 3,614 3,598
Property and equipment 356 543
Other 4,289 4,782
------------------
102,024 100,603
Valuation allowance (53,000) (53,000)
------------------
Deferred tax asset, net 49,024 47,603
------------------
Deferred tax liability (2,700) (3,228)
------------------
Net deferred tax asset 46,324 44,375
Current portion 5,000 5,000
------------------
Long-term portion $ 41,324 $ 39,375
==================
As of October 31, 1996, the Company had federal net operating loss
carryforwards totaling $211,833,000 which expire $71,186,000 in 1998,
$112,880,000 in 1999, $6,146,000 in 2001, $17,588,000 in 2010 and
$4,033,000 in 2011. The Company also has investment tax credit
carryforwards of $3,506,000 expiring from 1997 through 2000. The Company
has established a valuation allowance due to the uncertainty that the full
amount of those credits and operating loss carryforwards will be applied
against future taxable income. This allowance was reduced by $2,000,000 in
1994 due to the expiration of investment tax credits to which a portion of
the allowance applied. While a continuation of the Company's 1996 taxable
income level is not sufficient to realize the portion of the net deferred
tax assets related to the operating loss carryforwards before the expiration
periods, the Company feels that its 1996 operating results are not
indicative of future performance. Historically, the Company had taxable
income in excess of the amount necessary for realization and believes it
will do so again in future years. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are
reduced. Cumulative taxable income of approximately $60,000,000 for fiscal
years 1997 through 1999 will be necessary to realize net deferred tax assets
of approximately $20,000,000 for a majority of the net operating loss
carryforwards before they expire. Future adjustments to the valuation
allowance deemed appropriate due to changed circumstances will be recognized
as a separate component of the provision for income taxes.
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company retains a significant portion of certain insurable risks
primarily in the medical, dental, workers' compensation, general liability
and property areas. Traditional insurance coverage is obtained for
catastrophic losses. Provisions for losses expected under these programs
are recorded based upon the Company's estimates of liabilities for claims
incurred, including those not yet reported. Such estimates utilize prior
Company history and actuarial assumptions followed in the insurance
industry. The Company has provided letters of credit totaling $4,916,000 in
connection with certain of these insurance programs.
The Company is involved in various lawsuits and claims arising from the
conduct of its business and has guaranteed certain indebtedness and leases
of its franchisees and others. Management believes the ultimate disposition
of these matters will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
At October 31, 1996, the Company had contractual commitments for restaurant
construction of approximately $1,340,000.
NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's quarterly results of operations are summarized as follows (in
thousands, except per share data):
Quarter ended (a)
------------------------------------------------
January 31, April 30, July 31, October 31,
1996 1996 1996 1996
(92 days) (90 days) (92 days) (92 days)
------------------------------------------------
Revenue $ 89,281 $ 86,153 $ 86,445 $ 81,401
Restaurant operating income 4,156 6,440 8,400 9,217
Net income (loss) (916) 45 (1,532) (b) 1,474
Net income (loss) per common and
dilutive common equivalent share (.10) .00 (.17) .16
================================================
Quarter ended (a)
------------------------------------------------
February 19, May 14, August 6, October 31,
1995 1995 1995 1995
(112 days) (84 days) (84 days) (86 days)
------------------------------------------------
Revenues $124,033 $ 85,324 $ 83,216 $ 81,265
Restaurant operating income (loss)11,706 5,810 (1,063) (20)
Net income (loss) 2,499 158 (3,978) (3,211)
Net income (loss) per common and
dilutive common equivalent share .26 .02 (.44) (.36)
================================================
(a) In fiscal 1995, the Company switched its year-end to the last day in
October. In conjunction with that change, each fiscal quarter in 1996
consisted of three months. Previously, the Company's first fiscal quarter
consisted of sixteen weeks and all other quarters consisted of twelve
weeks. 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 fiscal
years 1996 and 1995 are not comparable.
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
=============================
(b) Includes pre-tax asset disposal charge of $5,800,000.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company will file a definitive proxy statement pursuant to Regulation
14A for its 1997 Annual Meeting of Shareholders. Such statement will be
filed no later than 120 days after the close of the fiscal year covered by
this Form 10-K. Except for certain information concerning executive
officers of the Company which is included in Part I of this Form 10-K, the
information called for by the above items will be included in such
definitive proxy statement under "Election of Directors", "Certain
Transactions", "Compensation of Directors and Executive Officers" and
"Voting Securities and Principal Holders Thereof", which is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) The following Consolidated Financial Statements of VICORP
Restaurants, Inc. are filed as part of this report:
Management's Report on Financial Statements.
Report of Independent Public Accountants.
Consolidated Balance Sheets - October 31, 1996 and October 31, 1995.
Consolidated Statements of Operations - Years ended October 31, 1996,
October 31, 1995 and October 30, 1994.
Consolidated Statements of Cash Flows - Years ended October 31, 1996,
October 31, 1995 and October 30, 1994.
Consolidated Statements of Shareholders' Equity - Years ended October
31, 1996, October 31, 1995 and October 30, 1994 as presented in Note 6
of Notes to Consolidated Financial Statements.
(a) (2) The following financial statement schedule for VICORP Restaurants,
Inc., as listed in the Index below, is included herein beginning on
page 28.
Report of Independent Public Accountants on Financial Statement
Schedule.
Schedule II - Valuation and Qualifying Accounts for the years ended
October 31, 1996, October 31, 1995 and October 30, 1994.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
(a) (3) The exhibits filed in response to Item 601 of Regulation S-K are
listed in the Exhibit Index on Page 30.
For the purpose of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act
of 1933, the undersigned registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into registrant's
currently effective Registration Statements on Form S-8:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to any statute, charter
provisions, bylaws, contract, or other arrangements, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceedings) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(b) Reports on Form 8-K filed in fourth quarter of 1996:
None.
(c) Exhibits filed with this report are attached hereto.
(d) Financial statement schedules filed with this report follow:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of VICORP Restaurants, Inc. and
subsidiary included in this form 10-K and have issued our report thereon
dated December 6, 1996. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule
listed in the attached index is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Denver, Colorado,
December 6, 1996.
VICORP Restaurants, Inc.
Schedule II - VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended October 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- ---------- ---------- ------------ -----------
Additions
-----------------------
Balance at Charged Charged Balance
beginning to costs to other at end
Description of period and expenses accounts Deductions of period
- ----------- ---------- ------------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1996:
Allowance for doubtful accounts $ 2,268 $ 32 $ 189 (4) $ 1,785 (1) $ 704
Discounts 750 (63) -- -- 687
Allowance for loss on disposal 6,852 2,915 -- 3,961 (1) 5,806
Accumulated amortization 5,674 642 -- 278 (3) 6,038
---------- ----------- --------- ----------- -----------
$ 15,544 $ 3,526 $ 189 $ 6,024 $ 13,235
========== =========== ========= =========== ===========
Year ended October 31, 1995:
Allowance for doubtful accounts $ 3,037 $ 25 $ 234 (4) $ 1,028 (1) $ 2,268
Discounts 1,170 (63) -- 357 (5) 750
Allowance for loss on disposal 12,427 -- -- 5,575 (1) 6,852
Accumulated amortization 6,215 689 -- 1,230 (3) 5,674
---------- ----------- --------- ----------- -----------
$ 22,849 $ 651 $ 234 $ 8,190 $ 15,544
========== =========== ========= =========== ===========
Year ended October 30, 1994:
Allowance for doubtful accounts $ 4,657 $ 185 $ 295 (4) $ 2,100 (1) $ 3,037
Discounts 1,019 (115) 266 (2) -- 1,170
Allowance for loss on disposal 2,615 10,675 -- 863 (1) 12,427
Accumulated amortization 5,549 813 -- 147 (3) 6,215
---------- ----------- --------- ----------- -----------
$ 13,840 $ 11,558 $ 561 $ 3,110 $ 22,849
========== =========== ========= =========== ===========
</TABLE>
(1) Charges to the accounts for purposes for which the reserves were created.
Deductions to the allowance for doubtful accounts in 1994 includes
$1,918,000 reversal of previously established allowance due to settlement
of litigation in excess of the net receivable previously recognized for
the claim.
(2) Establishment of discounts on receivables.
(3) Asset dispositions and write-offs of fully amortized assets.
(4) Establishment of reserves by charges directly to income.
(5) Recognition of deferred gains.
Year-end balances are reflected in the Consolidated Balance Sheets as follows:
October 31, October 31,
1996 1995
----------- -----------
Deducted from current receivables $ 330 $ 1,067
Deducted from property and equipment 5,555 6,619
Deducted from long-term receivables 1,061 1,951
Deducted from other assets 6,289 5,907
----------- -----------
$ 13,235 $ 15,544
=========== ===========
EXHIBIT INDEX
The following documents are filed as a part of this report. Those exhibits
previously filed and incorporated herein by reference are identified below
by an asterisk (*). For each such exhibit there is shown below the filing
and exhibit number of the document in the previous filing. The registration
statements were filed by the Company unless otherwise indicated. Exhibits
which are not required for this report are omitted.
Exhibit Description of Document
- ------- -----------------------
3 - * (i) Articles of Incorporation, as Amended - Form 10-K for the year
ended October 29, 1989.
- *(ii) Bylaws - Form 10-K for the year ended October 29, 1989.
4 - * (i) Specimen Stock Certificate - Form 10-K for the year ended
October 30, 1988.
- *(ii) Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock of VICORP
Restaurants, Inc. - Current Report of VICORP Restaurants, Inc.
on Form 8-K dated May 26, 1987.
- *(iii) Rights Agreement dated as of May 12, 1987 between VICORP
Restaurants, Inc. and Bank of America National Trust &
Savings Association as Rights Agent - Current Report of VICORP
Restaurants, Inc. on Form 8-K dated May 26, 1987.
10 - Material Contracts
*(i) Franchise Operating Agreement - Registration Statement 2-83326,
Exhibit 10(b).
(ii) U.S. $35,000,000 Credit Agreement dated October 31, 1996,
between VICORP Restaurants, Inc. and NationsBank of Texas, N.A.
and Colorado National Bank.
(iii) U.S. $5,000,000 Credit Agreement dated October 31, 1996,
between VICORP Restaurants,Inc. and NationsBank of Texas, N.A.
(iv) Executive Compensation Plans and Arrangements
*(a) 1982 Incentive Stock Option Plan - Registration Statement
2-78250, Exhibit 10(c).
*(b) Amendment to 1982 Incentive Stock Option Plan - Form 10-Q for
the quarter ended May 10, 1987, Exhibit 10(i).
*(c) Amendment to 1982 Incentive Stock Option Plan - Form 10-Q for
the quarter ended August 2, 1987, Exhibit 10.
*(d) Amendment to 1982 Incentive Stock Option Plan - Form 10-Q for
the quarter ended May 8, 1988, Exhibit 10.
*(e) Amendment to 1982 Incentive Stock Option Plan - Form 10-K for
the year ended October 25, 1992, Exhibit 10(ix).
*(f) Amendment to 1982 Incentive Stock Option Plan dated April 11,
1995 - Form 10-K for the year ended October 31, 1995, Exhibit
10(x)(f).
*(g) 1983 Non-Qualified Stock Option Plan - Registration Statement
2-83326, Exhibit 10(c).
*(h) Amendment to 1983 Non-Qualified Stock Option Plan - Form 10-Q
for the quarter ended May 10, 1987, Exhibit 10(ii).
*(i) Amendment to 1983 Non-Qualified Stock Option Plan - Form 10-K
for the year ended October 25, 1992, Exhibit 10(x).
*(j) Amendment to 1983 Non-Qualified Stock Option Plan dated April
11, 1995 - Form 10-K for the year ended October 31, 1995,
Exhibit 10(x)(j).
*(k) VICORP Restaurants, Inc. Outstanding Stock Purchase Plan (1989)
- Registration Statement 33-32608, Exhibit 4(h).
*(l) VICORP Restaurants, Inc. Stock Purchase Plan - Registration
Statement 333-11003 , Form S-8 dated August 28, 1996.
*(m) Deferred Compensation Plan of VICORP Restaurants, Inc. dated
May 1, 1996 - Form 10-Q/A for the quarter ended July 31, 1996,
Exhibit 10(iii).
*(n) Form Severance Agreement (Executive Officers excluding
Frederickson and Jenkins) - Form 10-K for the year ended
October 31, 1993, Exhibit 10(vi).
*(o) Severance Agreement Charles R. Frederickson - Form 10-K for the
year ended October 31, 1993, Exhibit 10(vi).
*(p) Employment Agreement of J. Michael Jenkins dated August 26,
1994 - Form 10-K for year ended October 30, 1994,
Exhibit 10 (vi)(n).
*(q) Employment Agreement of Nicholas Galanos dated February 3, 1995
- Form 10-K for the year ended October 31, 1995,
Exhibit 10(x) (s).
*(r) Employment Agreement for Richard E. Sabourin dated July 25,
1996 - form 10-Q for the quarter ended July 31, 1996,
Exhibit 10(ii)(b).
*(s) Stock Option Agreement of Richard E. Sabourin dated August 19,
1996 - Form 10-Q for the quarter ended July 31, 1996,
Exhibit 10(ii)(d).
(t) Stock Option Agreement of J. Michael Jenkins dated August 19,
1996.
23 - Consents of Accountants
24 - Power of Attorney
27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the
14th day of January, 1997.
VICORP Restaurants, Inc. (Registrant)
By /s/ Charles R. Frederickson
-----------------------
Charles R. Frederickson, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on January 14, 1997 on
behalf of the registrant and in the capacities indicated.
Signature Title
--------- -----
/s/ Charles R. Frederickson Chairman of the Board
-----------------------
(Charles R. Frederickson)
/s/ J. Michael Jenkins Director, President and Chief Executive
------------------ Officer
(J. Michael Jenkins)
/s/ Richard E. Sabourin Executive Vice President/Chief Financial
------------------- Officer
(Richard E. Sabourin) (Principal Financial and Accounting Officer)
/s/ Charles R. Frederickson
-----------------------
(Charles R. Frederickson)*
* Charles R. Frederickson, as attorney-in-fact for Carole Lewis Anderson,
Bruce B. Brundage, John C. Hoyt, Robert T. Marto, Dudley C. Mecum, Dennis B.
Robertson, Hunter Yager, and Arthur Zankel, constituting a majority of the Board
of Directors of the registrant.
U.S. $35,000,000
CREDIT AGREEMENT
Dated as of October 31, 1996
By and Among
VICORP RESTAURANTS, INC.
as the Borrower
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
NATIONSBANK OF TEXAS, N.A.
as the Agent for the Lenders
and
COLORADO NATIONAL BANK
as a Lender
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1
1.01 Certain Defined Terms 1
1.02 Computation of Time Periods 9
1.03 Accounting Terms; Fiscal Periods 9
1.04 Other Definitional Provisions 9
ARTICLE II THE FACILITIES AND COMMITMENTS 9
2.01 The Facilities 9
2.02 The Advance Commitment 9
2.03 The Letter of Credit Commitment 9
2.04 Fees 10
2.05 Reduction of the Commitment 10
2.06 Payments and Computations 10
2.07 Increased Capital or Costs and Reduced Return 11
2.08 Interest Rate Contracts 11
ARTICLE III THE ADVANCE FACILITY 11
3.01 The Advances 11
3.02 Making the Advances 12
3.03 Conversion or Continuation of Advances 13
3.04 Additional Provisions Applicable to Eurodollar Rate
Advances 13
3.05 Notes; Repayment 15
3.06 Interest 15
3.07 AdditionalInterest on Eurodollar Rate Advances 15
3.08 Pre-payments 16
3.09 Maximum Interest Rate 16
3.10 Interest Recapture 16
3.11 Extension of Maturity 16
ARTICLE IV THE LETTER OF CREDIT FACILITY 17
4.01 The Letters of Credit 17
4.02 Amounts and Terms 17
4.03 Conditions 17
4.04 Issuing Letters of Credit 17
4.05 Paying under Letters of Credit 18
4.06 Reimbursement Obligations 18
4.07 Compensation for Letters of Credit 18
4.08 Sharing of Payments 18
4.09 Documentation 19
4.10 Indemnification; Exoneration 19
4.11 Termination of Letters of Credit; Cash Collateral 19
ARTICLE V CONDITIONS OF EXTENSIONS OF CREDIT 20
5.01 Conditions Precedent to Initial Extension of Credit 20
5.02 Conditions Precedent to Each Extension of Credit,
Conversion or Continuation 20
ARTICLE VI REPRESENTATIONS AND WARRANTIES 21
6.01 Representations and Warranties of the Borrower 21
ARTICLE VII COVENANTS OF THE BORROWER 23
7.01 Affirmative Covenants 23
7.02 Negative Covenants 25
7.03 Financial Covenants 28
ARTICLE VIII EVENTS OF DEFAULT 29
8.01 Events of Default 29
ARTICLE IX MISCELLANEOUS 31
9.01 Amendments, Etc. 31
9.02 Notices, Etc. 31
9.03 No Waiver; Remedies 31
9.04 Payments Set Aside 31
9.05 Costs, Expenses and Taxes 31
9.06 Right of Set-Off 32
9.07 Sharing of Payments 32
9.08 Indemnification 32
9.09 Change in Accounting Principles 33
9.10 The Agent's Performance of Defaulted Acts 33
9.11 Binding Effect; Assignments; Participations 33
9.12 CHOICE OF LAW 34
9.13 CONSENT TO JURISDICTION 34
9.14 WAIVER OF JURY TRIAL 34
9.15 Term 34
9.16 Execution in Counterparts 35
9.17 Lenders' Creation of Security Interest 35
ARTICLE X THE AGENT 35
10.01 Appointment 35
10.02 Agent's Reliance. Etc. 35
10.03 NationsBank and Affiliates 35
10.04 Lender Credit Decision 35
10.05 Indemnification 36
10.06 Successor Agent 36
10.07 Invalidated Payments 36
CREDIT AGREEMENT
This Credit Agreement is made as of October 31, 1996 by and
among VICORP Restaurants, Inc., a Colorado corporation with an
office located at 400 West 48th Avenue, P.O. Box 16601, Denver,
Colorado 80216 (the "Borrower"), the banks or other financial
institutions listed on the signature pages hereof (such banks or
other financial institutions and their respective successors and
assigns being referred to collectively as the "Lenders"), and
NationsBank of Texas, N.A., a national banking association
("NationsBank"), as agent for the Lenders (in such capacity, the
"Agent") (said Credit Agreement, as the same may be amended,
modified or supplemented from time to time, being hereinafter
referred to as the "Agreement").
PRELIMINARY STATEMENT
---------------------
The Borrower, the Lenders and the Agent have entered into
this Agreement in order to set forth the terms and conditions
under which the Lenders will, from time to time, make loans and
extend other financial accommodations to or for the benefit of
the Borrower.
NOW, THEREFORE, the Borrower, the Lenders and the Agent
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following capitalized terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural form of the terms defined):
"Adjusted Consolidated EBITDAR" means, for any period with
respect to the Borrower and its subsidiaries, the sum of the
amounts for such period, of (i) Operating Income, plus (ii)
depreciation, amortization and other non-cash charges deducted in
computing operating income, plus (iii) Consolidated Rental
Payments.
"Adjusted Debt" means, as of the last day of any fiscal
quarter, with respect to the Borrower and its subsidiaries, the
sum of (i) Consolidated Funded Debt, plus (ii) Capital Lease
Obligations, minus (iii) the aggregate outstanding principal
balance of any subordinated debt, plus (iv) the product of
Operating Lease expense for the four fiscal quarters ending on
the date of determination times eight.
"Advance" means an advance by any Lender to the Borrower
pursuant to Article III, and refers to a Base Rate Advance or a
Eurodollar Rate Advance (each of which shall be a "Type" of
Advance).
"Advance Commitment" has the meaning specified in Section 2.02.
"Advance Facility" has the meaning specified in Section 2.01.
"Affiliate" means, with respect to any Person, any other
Person controlled by, controlling or under common control with
such Person, or having similar shareholders owning at least five
percent (5%) of such Person and such other Person, whether such
control be direct or indirect. All of the Borrower's officers,
shareholders holding in excess of five percent (5%) of any class
of capital stock of the Borrower, directors, subsidiary corporations,
joint ventures and partners shall be deemed to be the Borrower's
Affiliates for purposes of this Agreement.
"Aggregate Commitment" means, at any time, the lesser of
$35,000,000 through October 31, 1997, $30,000,000 from November 1, 1997,
through October 31, 1998, and $25,000,000 from November 1, 1998,
through October 31, 1999, as such amounts may be reduced from
time to time pursuant to the terms of this Agreement.
"Aggregate Outstandings" means, at any time, the sum of (i)
the aggregate principal amount of the Advances outstanding at
such time, plus (ii) the aggregate Letter of Credit Obligations
at such time.
"Alternate Base Rate" means, for any day, the greater of (a)
the sum of the Federal Funds Rate plus 0.5%, or (b) the annual
interest rate most recently announced by Agent as its prime rate
(or, if the Person then acting as Agent under this Agreement is
not a bank organized under the Laws of the United States or any
State, then the rate announced by NationsBank of Texas, N.A. as
its prime rate) in effect at its principal office, automatically
fluctuating upward and downward with and as specified in each
announcement without special notice to Borrower or any other
Person (which prime rate may not necessarily represent the lowest
or best rate actually charged to a customer).
"Applicable Commitment Fee" means, on any day, the commitment
fee percentage based on the ratio of debt to capitalization,
calculated as set forth in the definition of "Applicable Margin",
as follows:
Applicable
Commitment
Fee
Ratio of debt to capitalization Percentage
- -------------------------------------- ----------
Greater than or equal to 0.35 to 1.0 0.500%
Less than 0.35 to 1.0 but greater than 0.500%
or equal to 0.30 to 1.0
Less than 0.30 to 1.0 but greater than 0.375%
or equal to 0.20 to 1.0
Less than 0.20 to 1.0 0.250%
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office, in the case of a
Base Rate Advance, and such Lender's Eurodollar Lending Office,
in the case of a Eurodollar Rate Advance.
"Applicable Margin" means, on any day, the interest margin
over the Eurodollar Rate, based on a ratio of debt to capitalization,
as follows:
Applicable
Margin for
Eurodollar
Ratio of debt to capitalization Rate
Advances
- -------------------------------------- ----------
Greater than or equal to 0.35 to 1.0 1.750%
Less than 0.35 to 1.0 but greater than 1.625%
or equal to 0.30 to 1.0
Less than 0.30 to 1.0 but greater than 1.500%
or equal to 0.20 to 1.0
Less than 0.20 to 1.0 1.250%
For purposes of determining the Applicable Margin, (i) the ratio
of debt to capitalization shall be the ratio of (i) the sum of
(A) Consolidated Funded Debt, plus (B) Capital Lease Obligations
of the Borrower and its subsidiaries, to (ii) the sum of (x)
Consolidated Funded Debt, plus (y) Consolidated Net Worth, plus
(z) Capital Lease Obligations of the Borrower and its subsidiaries,
and shall be calculated quarterly as of the last day of the fiscal
quarter for which the most recent quarterly financial statements have
been delivered pursuant to Section 7.01(b), and shall apply to all
Advances made on or after the date such financial statements are delivered,
until recalculated in accordance with this paragraph. If Borrower
fails to furnish Agent any such financial statements (or the
related compliance certificate) when required pursuant to Section
7.02(b), then the highest applicable margin identified above
shall apply to all subsequent Advances until Borrower furnishes
the required financial statements and compliance certificate.
The initial calculation as of the Closing Date shall be based
upon the financial statements dated as of July 31, 1996.
"Bankruptcy Code" means Title 11 of the United States Code
(11 U.S.C. 101 et seq.), as amended from time to time.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 3.06(a).
"Benefit Plan" means an employee benefit plan as defined in
Section 3(35) of ERISA (other than a Multi-employer Plan) in
respect of which the Borrower or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer"
as defined in Section 3(5) of ERISA.
"Borrowing" means a borrowing consisting of one or more
Advances of the same Type made on the same day by the Lenders.
"Business Day" means a day of the year on which banks are
not required or authorized to close in Dallas, Texas, and if the
applicable Business Day relates to any Eurodollar Rate Advance, a
day of the year on which dealings are carried on in the London
interbank market.
"Capital Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) by that Person
as lessee that, in conformity with GAAP, is or should be
accounted for as a capital lease on the balance sheet of such
Person.
"Capital Lease Obligations" means, as applied to any Person,
the obligations of such Person as lessee under leases that are
Capital Leases.
"Commitment" means, with respect to each Lender at any time,
such Lender's Pro Rata Share of the Aggregate Commitment at such
time.
"Consolidated Capital Expenditures" means, for any period,
the aggregate of all Permitted Asset Acquisitions and other
expenditures (whether paid in cash or accrued as liabilities
during that period and including that portion of Capital Leases
that is capitalized on the consolidated balance sheet of the
Borrower and its subsidiaries) by the Borrower or any of its
subsidiaries during such period that, in conformity with GAAP,
are required to be included in the property, plant and equipment
or similar fixed asset accounts in the consolidated balance sheet
of the Borrower and its subsidiaries (including equipment which
is purchased simultaneously with the trade-in of existing
equipment owned by the Borrower or any such subsidiary to the
extent of the gross amount of such purchase price less the book
value (net of accumulated depreciation) of the equipment being
traded in at such time), but excluding expenditures made in
connection with the replacement or restoration of assets, to the
extent reimbursed or financed from insurance proceeds paid on
account of the loss of or damage to the assets being replaced or
restored or from awards of compensation arising from the taking
by condemnation or eminent domain of such assets being replaced.
"Consolidated Fixed Charges" means, for any period, (i)
consolidated gross cash payments of interest expense (including
the interest component of Capital Leases) of the Borrower and its
subsidiaries, including, without limitation, all commissions,
discounts and other fees and charges owed with respect to letters
of credit, all as determined in conformity with GAAP, plus (ii)
Consolidated Rental Payments for such period, plus (iii) all
scheduled principal payments required to be made by the Borrower
or any of its subsidiaries during such period with respect to any
Debt.
"Consolidated Funded Debt" means, as at any date of
determination, all interest bearing indebtedness, obligations and
other liabilities of the Borrower and its subsidiaries for
borrowed money or evidenced by bonds, debentures, acceptances,
notes or other similar instruments (whether such interest arises
as a result of accrual or accretion).
"Consolidated Net Worth" means, as at any date of
determination, the amount by which consolidated total assets of
the Borrower and its subsidiaries, determined in conformity with
GAAP, exceed consolidated total liabilities of the Borrower and
its subsidiaries, determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the
aggregate amount of all rents paid or accrued (net of sublease
rents paid or accrued) under all Operating Leases of the Borrower
or any of its consolidated subsidiaries as lessee, as determined
in conformity with GAAP.
"Consolidated Tangible Net Worth" means at any time, the sum
of(i) Consolidated Net Worth, at such time, minus (ii) the
aggregate amount, at such time (on a consolidated basis for the
Borrower and its subsidiaries), of any intangible assets,
including, without limitation, patents, trademarks, service
marks, good will, rights and claims against carriers and
shippers, trade names, rights to refunds and indemnification, and
any other asset that would be classified as an intangible under
GAAP other than leasehold rights.
"Contaminant" means any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special waste,
petroleum or petroleum-derived substance or waste, or any
constituent of any such substance or waste.
"Conversion Date" means, with respect to any Advance, the
date that such Advance, if a Base Rate Advance, is converted into
a Eurodollar Rate Advance, or, if a Eurodollar Rate Advance, is
converted into a Base Rate Advance, in either case in accordance
with the procedures described in Section 3.03.
"Costs and Expenses" has the meaning specified in Section 9.05.
"Debt" means, as applied to any Person, (i) indebtedness for
borrowed money of such Person, (ii) obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments,
(iii) obligations of such Person to pay the deferred purchase price
of property or services, except trade accounts payable and accrued
expenses arising in the ordinary course of business but only if and
so long as the same are payable on available trade terms, (iv) Capital
Lease Obligations of such Person, (v) obligations of such Person under
direct or indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i)
through (iv) above, and (vi) liabilities of such Person in
respect of unfunded vested benefits under Benefit Plans.
"Default" means an event which with the lapse of time or the
giving of notice or both would constitute an Event of Default.
"Domestic Lending Office" means, with respect to each
Lender, the office of such Lender specified as such Lender's
"Domestic Lending Office" on the signature pages hereof or such
other office as such Lender may from time to time specify to the
Borrower and the Agent.
"DOL" means the United States Department of Labor and any
Person succeeding to the functions thereof.
"Eligible Interest Rate Contract" has the meaning specified
in Section 2.08.
"ERISA" means the Employee Retirement Income Security Act of
1974, any amendments thereto, any successor statute, and any
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means any (i) corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the IRC) as the Borrower, (ii)
partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of Section
414(c) of the IRC) with the Borrower, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of
the IRC) as the Borrower, any corporation described in clause (i)
above or any partnership or trade or business described in clause
(ii) above.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to each
Lender, the office of such Lender specified as such Lender's
"Eurodollar Lending Office" on the signature pages hereof, or
such other office as such Lender may from time to time specify to
the Borrower and the Agent.
"Eurodollar Rate" means, for any Eurodollar Rate Advance for
any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, the term
"Eurodollar Rate" shall mean, for any Eurodollar Rate Advance for
any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period;
provided, however, that if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates.
"Eurodollar Rate Advance" means an Advance which bears
interest as provided in Section 3.06(b).
"Eurodollar Rate Reserve Percentage" means, with respect to
each Lender, for any Interest Period for any Eurodollar Rate
Advance, the reserve percentage applicable during such Interest
Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days
in such Interest Period during which any such percentage shall be
so applicable), with respect to such Lender, under regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement),
if any, for such Lender, with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a term
equal to such Interest Period.
"Event of Default" has the meaning specified in Section 8.01.
"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 members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the immediately preceding Business
Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average
of the quotations for such day on such transactions received by
the Agent from three federal funds brokers of recognized standing
selected by it.
"Final Order" has the meaning specified in Section 9.08(a).
"GAAP" means generally accepted accounting principles set
forth in the rules, regulations, statements, opinions and
pronouncements of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board (or
agencies with similar functions and of comparable stature and
authority within the accounting profession), which are applicable
to the circumstances as of the date of determination.
"Governmental Acts" has the meaning specified in Section 4.10(a).
"Governmental Authority" means any nation or government, any
federal, state, city, town, municipality, county, local or other
political subdivision thereof or thereto and any department,
commission, board, bureau, instrumentality, agency or other
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Indemnified Parties" has the meaning specified in Section 9.08(a).
"Interest Period" means, for each Eurodollar Rate Advance, a
period of one (1), two (2) or three (3) months, as the Borrower
may select, upon notice received by the Agent not later than noon
(Dallas time) on the third Business Day prior to the first day of
such period, and commencing on the date of such Advance, the date
of continuation of such Advance pursuant to Section 3.03 or the
date of conversion of a Base Rate Advance pursuant to Section
3.03; provided, however, that:
(i) the aggregate principal amount of all Advances having
Interest Periods ending after any Principal Repayment Date shall
not exceed the principal amount of all Advances permitted to be
outstanding after giving effect to the principal payments to be
made on or prior to such Principal Repayment Date;
(ii) the Borrower may not select any Interest Period that
ends after the Maturity Date;
(iii) Interest Periods commencing on the same date for
Advances shall be of the same duration; and
(iv) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that if such extension
would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such
interest Period shall occur on the next preceding Business Day.
"Interest Period Expiration Date" means the last day of
any Interest Period for any Eurodollar Rate Advance.
"Interest Rate Contracts" means interest rate swap
agreements, interest rate collar agreements, options on any of
the foregoing, or any other agreements or arrangements designed
to provide protection against fluctuations in interest rates.
"IRC" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any
successor statute and any regulations or guidance promulgated
thereunder.
"IRS" means the Internal Revenue Service and any Person
succeeding to the functions thereof.
"Letter of Credit" means any letter of credit issued
under this Agreement upon the application of, and for the account
of, the Borrower.
"Letter of Credit Application" means, with respect to a
Letter of Credit, such form of application therefor and form of
reimbursement agreement therefor (whether in a single or several
documents) as the Agent may employ in the ordinary course of its
business for its own account without requirement of collateral
security.
"Letter of Credit Commitment" has the meaning specified in Section 2.03.
"Letter of Credit Facility" has the meaning specified in Section 2.01.
"Letter of Credit Fee" has the meaning specified in Section 4.07.
"Letter of Credit Obligations" means, at any time, the
sum of (i) the aggregate Reimbursement Obligations at such time,
plus (ii) the maximum aggregate amount available for drawing
under Letters of Credit at such time.
"Letter of Credit Rate" has the meaning specified in Section 4.07.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security
arrangement, security interest, encumbrance for the payment of
money, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or
nature whatsoever.
"Loan Documents" means this Agreement, the Notes, the
Credit Agreement of even date herewith between NationsBank and
the Borrower, and each of the other instruments, documents and
agreements executed and/or delivered by the Borrower in
connection herewith and therewith (including, without limitation,
Letter of Credit Applications).
"Majority Lenders" means those Lenders whose Pro Rata
Shares aggregate 66 2/3%.
"Maturity Date" means October 31, 1999.
"Maximum Amount" and "Maximum Rate" respectively mean,
for a Lender, the maximum non-usurious amount and the maximum non-
usurious rate of interest that, under applicable law, such Lender
is permitted to contract for, charge, take, reserve or receive on
the Obligations.
"Multiemployer Plan" means a Plan maintained pursuant
to a collective bargaining agreement or any other arrangement to
which the Borrower or any ERISA Affiliate is a party and to which
more than one employer is obligated to make contributions.
"Net Equity Issuance Proceeds" means the net cash
proceeds received by the Borrower or any of its subsidiaries from
the issuance and sale of equity securities.
"Note" has the meaning specified in Section 3.05.
"Notice of Borrowing" has the meaning specified in Section 3.02(a).
"Notice of Continuation or Conversion" has the meaning
specified in Section 3.03(b).
"Obligations" means and includes all loans, advances,
debts, liabilities, obligations, covenants and duties owing to
the Agent or any of the Lenders from the Borrower of any kind or
nature, present or future, arising under any of the Loan
Documents, whether or not for the payment of money, whether
arising by reason of an extension of credit, opening of a letter
of credit, loan, guaranty, indemnification or in any other
manner, whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising and the
performance obligations of the Borrower under any Eligible
Interest Rate Contracts. The term "Obligations" includes,
without limitation, the principal amount of all Advances and
Reimbursement Obligations, interest, charges, expenses, fees,
attorneys' and paralegals' fees and any other sums chargeable to
the Borrower under this Agreement.
"Operating Income" means earnings before interest expenses,
taxes and extraordinary gains and losses, calculated in accordance
with GAAP.
"Operating Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) by that
Person as lessee which is not a Capital Lease.
"PBGC" means the Pension Benefit Guaranty Corporation
and any Person succeeding to the functions thereof.
"Permitted Asset Acquisition" means (a) any acquisition
in any fiscal year by the Borrower from any of the Borrower's
franchisees of the franchise granted by the Borrower to such
franchisee and all or substantially all of the assets of such
franchisee associated with such franchise, (b) any acquisition by
the Borrower of all or substantially all of the assets of any
Person, other than a subsidiary of the Borrower, in any fiscal
year, and (c) any acquisition by the Borrower of the capital
stock or ownership interests of any other Person in any fiscal
year, provided that the aggregate consideration paid by the
Borrower in connection with all acquisitions permitted pursuant
to clauses (a), (b) and (c) above in such fiscal year may not
exceed $5,000,000, and shall be included in Consolidated Capital
Expenditures for such fiscal year.
"Permitted Existing Debt" means the Debt of the Borrower
or any of its subsidiaries reflected on Schedule 7.02(b).
"Permitted Existing Liens" means the Liens against
property of the Borrower or any of its subsidiaries reflected on
Schedule 7.02(a).
"Permitted Franchisee Guarantees" means any guarantee
by the Borrower of obligations of any of the Borrower's
franchisees arising in connection with the operation or
maintenance of such franchisee's franchise so long as the
aggregate amount of all such franchisee obligations guaranteed by
the Borrower at any time does not exceed $10,000,000.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Plan" means an employee pension benefit plan that is
covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the IRC as to which the Borrower
or any ERISA Affiliate may have any liability.
"Principal Repayment Date" means any date on which an
installment of the aggregate outstanding principal amount of the
Advances is due under the Notes.
"Prior Agreement" means the Second Amended and Restated
Credit Agreement dated as of June 18, 1993, among Borrower, the
financial institutions named therein as lenders, and Citibank,
N.A., as agent for such lenders, as amended.
"Pro Rata Share" means, with respect to any Lender, the
percentage specified on the signature pages hereto or as
hereafter specified in the documentation governing any
assignments of such Lender's Commitment.
"Rate Adjustment Period" means a period (i) commencing
on the first day of the month next succeeding the date that the
Agent receives internal financial statements acceptable to it
demonstrating that the Borrower has maintained, for two (2)
consecutive fiscal quarters, the Required Rate Adjustment Level,
and (ii) continuing for so long as the Borrower continues to
maintain such Required Rate Adjustment Level.
"Reimbursement Obligation" has the meaning specified in
Section 4.06.
"Reportable Event" means any of the events described in
Section 4043 of ERISA or the regulations issued thereunder.
"Request for Letters of Credit" has the meaning
specified in Section 4.04.
"Required Rate Adjustment Level" means a ratio of
Adjusted Consolidated EBITDAR to Consolidated Fixed Charges,
measured as of the end of the most recently ended fiscal quarter
for the period of four fiscal quarters ending on such date, of at
least 1.75 to 1.
"SEC" means the Securities and Exchange Commission and
any successor agency.
"Single Employer Plan" means a Plan maintained by the
Borrower or any ERISA Affiliate for employees of the Borrower or
such ERISA Affiliate.
"Taxes" means, for any Person, taxes, assessments or
other governmental charges or levies imposed upon it, its income,
or any of its properties, franchises or assets.
"Termination Date" means the earliest to occur of (i)
the Maturity Date, (ii) the termination in whole of the
Commitments pursuant to Section 8.01, or (iii) the termination in
whole of the Advance Commitment pursuant to Section 2.05.
"Termination Event" means (i) with respect to a Benefit
Plan, a Reportable Event, or (ii) the withdrawal of the Borrower
or any ERISA Affiliate from a Benefit Plan during a plan year in
which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (iii) the imposition of an obligation on
the Borrower or any ERISA Affiliate under Section 4041 of ERISA
to provide affected parties written notice of intent to terminate
a Benefit Plan in a distress termination described in Section
4041(c) of ERISA, or (iv) the institution of proceedings to
terminate a Benefit Plan by the PBGC, or (v) any other event or
condition that might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan, or (vi) the partial or complete
withdrawal of the Borrower or any ERISA Affiliate from a Multi-
employer Plan.
"Unfunded Liabilities" means, (i) in the case of a
Single Employer Plan, the amount, if any, by which the present
value of all vested nonforfeitable benefits under such Plan
exceeds the fair market value of all Plan assets allocable to
such benefits, all determined as of the most recent valuation
date for such Plan, and (ii) in the case of a Multiemployer Plan,
the withdrawal liability of the Borrower or any ERISA Affiliate
under such Plan.
"Unused Commitment" means, at any time, the excess of
the Aggregate Commitment at such time over the Aggregate
Outstandings at such time.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"
and the words "to" and "until" each means "to but excluding."
SECTION 1.03. Accounting Terms; Fiscal Periods. Except as
otherwise permitted pursuant to Section 9.09 all accounting terms
not specifically defined herein shall be construed in accordance
with GAAP. All references in this Agreement to any fiscal period
shall refer to a fiscal period of the Borrower, unless otherwise
specified.
SECTION 1.04. Other Definitional Provisions. References to
"Sections", "Articles", "Schedules" and "Exhibits" shall be to
Sections, Articles, Schedules and Exhibits, respectively, of
this Agreement unless otherwise specifically provided.
ARTICLE II
THE FACILITIES AND COMMITMENTS
SECTION 2.01. The Facilities. On and subject to the terms and
conditions hereinafter set forth each Lender severally agrees to
extend credit and other financial accommodations of the kind
described below to the Borrower, from time to time, on any
Business Day during the period from the date hereof until the
Termination Date by (i) making Advances to the Borrower pursuant
to Article III (the "Advance Facility"); and (ii) issuing Letters
of Credit for the account of the Borrower pursuant to Article IV
(the "Letter of Credit Facility").
SECTION 2.02. The Advance Commitment. The credit extended by
the Lenders by making Advances under the Advance Facility shall
be in an aggregate principal amount of Advances not to exceed at
any time outstanding the excess of the Aggregate Commitment over
the Letter of Credit Obligations outstanding at such time, as
such amount may be reduced pursuant to Section 2.05, during the
period from the date hereof to the Termination Date (the "Advance
Commitment").
SECTION 2.03. The Letter of Credit Commitment. The credit extended
by the Lenders by issuing Letters of Credit under the Letter of
Credit Facility shall be in an aggregate amount of Letter of
Credit Obligations outstanding at any time not to exceed the
lesser of (a) $10,000,000 and (b) the excess of the Aggregate
Commitment over the aggregate principal amount of Advances
outstanding at such time, as such amount may be reduced pursuant
to Section 2.05, during the period from the date hereof to the
Termination Date (the "Letter of Credit Commitment").
SECTION 2.04. Fees. The Borrower agrees to pay (i) to the
Agent, for the account of each Lender, the upfront fees described
in the fee letter agreement of even date herewith between the
Borrower and NationsBank, (ii) to NationsBank, for its own
account, the fees described in the second fee letter agreement of
even date herewith, and (iii) to NationsBank, for its own account
and the account of the Lenders, as applicable, the Letter of
Credit fees described in Section 4.07. The Borrower also agrees
to pay to the Agent, for the account of each Lender, a commitment
fee on such Lender's Pro Rata Share of the average daily Unused
Commitment from the date of this Agreement until the Termination
Date equal to the Applicable Commitment Fee per annum. Such
commitment fee shall be payable on the last day of each March,
June, September and December, commencing December 31, 1996,
during the term of this Agreement, and on the Termination Date.
SECTION 2.05. Reduction of the Commitment. The Borrower shall
have the right, upon at least thirty (30) Business Days' notice
to the Agent, to terminate in whole or reduce in part the
Aggregate Commitment by an amount not exceeding the Unused
Commitment, each such reduction to be allocated among the unused
portions of the Advance Commitment and the Letter of Credit
Commitment, as the Borrower shall specify, in accordance with
each Lender's Pro Rata Share thereof; provided, however, that
each partial reduction shall be in the amount of $1,000,000 and
in integral multiples of $1,000,000 in excess of that amount.
SECTION 2.06. Payments and Computations.
(a) The Borrower shall make each payment hereunder by
wire transfer of immediately available funds not later than Noon
(Dallas time) on the day when due in United States Dollars to the
Agent, for the account of the Lenders, at the Agent's address
referred to in Section 9.02. The Agent will promptly thereafter
cause to be distributed like funds relating to the payment of
principal or interest or commitment fees ratably (other than
amounts payable pursuant to Section 2.07, 3.07, or 9.05(b)) to
the Lenders for the account of their respective Applicable
Lending office, and like funds relating to the payment of any
other amount payable to any Lender to such Lender for the account
of its Applicable Lending office, in each case to be applied in
accordance with the terms of this Agreement.
(b) The Borrower hereby authorizes each Lender, if and
to the extent payment owed to such Lender is not made when due
hereunder, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due, or, upon
notice to the Borrower, to make Base Rate Advances in the amount
of and in payment of such amounts.
(c) All computations of interest on Base Rate Advances
shall be made by the Agent, on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest is payable. All computations
of interest on Eurodollar Rate Advances and of fees (including,
without limitation, all computations of interest pursuant to
Section 3.07) shall be made by the Agent, on the basis of a year
of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest or fees are payable. Each
determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder shall be stated to
be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment
of interest or fees, as the case may be; provided, however, that
if such extension would cause payment of interest on or principal
of Eurodollar Rate Advances to be made in the next following
calendar month, such payment shall be made on the immediately
preceding Business Day.
(e) Unless the Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the
Lenders hereunder that the Borrower will not make such payment in
full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each
Lender on such date an amount equal to the amount then due such
Lender. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, each Lender shall repay to the
Agent forthwith on demand such amount distributed to such Lender
together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender
repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.07. Increased Capital or Costs and Reduced Return.
(a) If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of
reserve requirements included in the Eurodollar Rate Reserve
Percentage) 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 (whether or not
having the force of law), there shall be any increase in the cost
to any Lender of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances, by an amount deemed by such
Lender to be material, then the Borrower shall, from time to
time, promptly following demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent, for the account of
such Lender, such additional amount or amounts as will compensate
such Lender for such increased cost.
(b) If after the date hereof, any Lender shall have
determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by such Lender (or its Applicable Lending Office) with any
request or directive regarding capital adequacy (whether or not
having the force of law) of any such Governmental Authority,
central bank or comparable agency, has or would have the effect
of reducing the rate of return on such Lender's capital as a
consequence of its obligations hereunder to a level below that
which such Lender could have achieved but for such adoption,
change or compliance by an amount deemed by such Lender to be
material, then the Borrower shall, from time to time, promptly
following demand by such Lender (with a copy of such demand to
the Agent), pay to the Agent, for the account of such Lender,
such additional amount or amounts as will compensate such Lender
for such reduction.
(c) Each Lender agrees to promptly notify the Borrower
and Agent of any event of which such Lender has knowledge,
occurring after the date hereof, which will entitle such Lender
to compensation pursuant to this Section 2.07 and will designate
a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender. A certificate of the Lender
claiming compensation under this Section 2.07 and setting forth
the additional amount or amounts to be paid to such Lender
hereunder, submitted to the Borrower and the Agent
contemporaneously, shall be conclusive in the absence of manifest
error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
SECTION 2.08. Interest Rate Contracts. At any time a Lender
may, but shall have no obligation to, enter into Interest Rate
Contracts with respect to the Advances, provided that the notional
amount for all such Interest Rate Contracts in effect at any time
shall not exceed $35,000,000 in the aggregate. The Borrower and the
Lender entering into an Interest Rate Contract shall give written
notice to the Agent, at least three (3) Business Days prior to
entering into any Interest Rate Contract, specifying the term
thereof and the notional amount thereof. The Agent shall, within
two (2) Business Days of such notice, notify the applicable
Lender and the Borrower whether the sum of (A) the aggregate
notional amount of all Interest Rate Contracts then in effect
plus (B) the notional amount of the proposed Interest Rate
Contract, is within the limit set forth above, and if the sum of
the notional amounts described in clauses (A) and (B) above is
within such limit at such time, then the proposed Interest Rate
Contract shall be deemed an "Eligible Interest Rate Contract"
(whether or not the aggregate notional amount subsequently
exceeds such limit).
ARTICLE III
THE ADVANCE FACILITY
SECTION 3.01. The Advances. Each Lender severally agrees, on
the terms and conditions hereinafter set forth, to make Advances
to the Borrower from time to time on any Business Day during the
period from the date hereof until the Termination Date in an
amount not to exceed the excess of (i) such Lender's Pro Rata
Share of the Advance Commitment at such time over (ii) the
aggregate principal amount of all Advances made by such Lender
and outstanding at such time. Each Advance made by a Lender
shall be in an amount not less than such Lender's Pro Rata Share
of $250,000. Each Borrowing shall consist of Advances made on
the same day by the Lenders, each Lender's Advance as part of a
Borrowing to be in an amount equal to its Pro Rata Share of such
Borrowing. Within the limits of the Advance Commitment in effect
from time to time, the Borrower may borrow pursuant to this
Section 3.01, prepay pursuant to Section 3.08, and reborrow under
this Section 3.01.
SECTION 3.02. Making the Advances.
(a) Each Borrowing shall be made on notice by the Borrower
to the Agent, given not later than 12:00 noon (Dallas time)(i)
in the case of a Borrowing comprised of Base Rate Advances, on
the date of the proposed Borrowing; and (ii) in the case of a
Borrowing comprised of Eurodollar Rate Advances, on the third
Business Day prior to the date of the proposed Borrowing;
provided, however, that (x) in the case of any requested
Borrowing to be comprised of Base Rate Advances, the proceeds of
which Base Rate Advances are to be applied toward the Borrower's
Reimbursement Obligations under a Letter of Credit, the notice
effecting such request may be given at or prior to 2:00 P.M. on
the date of the drawing giving rise to such Reimbursement
Obligation for a Borrowing comprised of Base Rate Advances to be
made on such date in the amount of such Reimbursement Obligation;
and (y) if a Default or an Event of Default has occurred and is
continuing, the Borrower shall not be entitled to request
Borrowings comprised of Eurodollar Rate Advances and the Lenders
shall not be required to make any Advances. Each such notice of
a borrowing (a "Notice of Borrowing") shall be by telephone,
confirmed immediately in writing (whether by telecopy, telex,
cable or otherwise), in substantially the form of Exhibit A,
specifying therein the requested (i) date of such Borrowing
(which shall be a Business Day); (ii) Type of Advances comprising
such Borrowing; (iii) amount of such Borrowing; and (iv) Interest
Period for such Advance in the case of a requested Borrowing
comprised of Eurodollar Rate Advances. Promptly after receipt of
a Notice of Borrowing under this Section 3.02 (or telephonic
notice in lieu thereof), the Agent shall notify each Lender by
telex, telecopy, telegram, telephone or other similar form of
transmission of the proposed Borrowing, and in each case of a
proposed Borrowing comprised of Eurodollar Rate Advances, of the
applicable interest rate. Each Lender shall, before Noon (Dallas
time) on the date of such Borrowing, make available to the Agent
at its address referred to in Section 9.02, in same day funds,
such Lender's Pro Rata Share of such Borrowing. After the
Agent's receipt of such funds, and upon fulfillment of the
applicable conditions set forth in Article V, the Agent will make
same day funds available to the Borrower at the Agent's address
referred to in Section 9.02 in an amount equal to the amount
requested by the Borrower for such Borrowing on the date
requested by the Borrower therefor.
(b) Each Notice of Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Borrowing that the
related Notice of Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender
as a result of any failure by the Borrower to fulfill, on or
before the date specified in such Notice of Borrowing for such
Borrowing, the applicable conditions set forth in Article V,
including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
by such Lender to fund the Advance to be made by such Lender as
part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
(c) Unless the Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will
not make available to the Agent such Lender's Pro Rata Share of
such Borrowing, the Agent may assume that such Lender has made
such portion available to the Agent on the date of such Borrowing
in accordance with and to the extent provided in subsection (a)
of this Section 3.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a
corresponding amount; provided, however, that if the Agent has
received such notice from such Lender, the Agent may not make
such assumption and may not make available to the Borrower on
such date such corresponding amount. If and to the extent such
Lender shall not have so made such Pro Rata Share available to
the Agent, such Lender and the Borrower severally agree to repay
to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such
amount is made available to the Borrower until the date such
amount is repaid to the Agent, at the Federal Funds Rate for such
day. If such Lender shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Lender's
Advance as part of such Borrowing for purposes of this Agreement.
(d) The failure of a Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender
of its obligation, if any, hereunder to make its Advance on the
date of such Borrowing, but no Lender shall be responsible for
the failure of any other Lender to make the Advance to be made by
such other Lender on the date of any Borrowing.
SECTION 3.03. Conversion or Continuation of Advances.
(a) The Borrower shall have the option (i) to convert at
any time all or any part of the outstanding Base Rate Advances
comprising the same Borrowing into one or more Eurodollar Rate
Advances, each for an Interest Period commencing on the
applicable Conversion Date; (ii) to convert on any Interest
Period Expiration Date all of the outstanding Eurodollar Rate
Advances comprising the same Borrowing into one or more Base Rate
Advances; or (iii) to continue on any Interest Period Expiration
Date all or any part of outstanding Eurodollar Rate Advances
comprising the same Borrowing as one or more Eurodollar Rate
Advances, each for an Interest Period commencing on such Interest
Period Expiration Date; provided, however, that (A) if the
Borrower shall not have exercised its options set forth in either
clauses (ii) or (iii) of this Section 3.03(a) with respect to any
Eurodollar Rate Advances comprising a Borrowing by delivery to
the Agent of a Notice of Continuation or Conversion in accordance
with the terms of Section 3.03(b), the Borrower shall be deemed
to have irrevocably elected to convert such Eurodollar Rate
Advances into Base Rate Advances on the Interest Period
Expiration Date for such Advances, and (B) if a Default or an
Event of Default has occurred and is continuing the Borrower
shall not be entitled to convert Base Rate Advances or continue
Eurodollar Rate Advances.
(b) Each continuation or conversion of Advances pursuant to
this Section 3.03 shall be made on notice by the Borrower to the
Agent given not later than Noon (Dallas time) on (i) in the case
of the conversion of one or more Eurodollar Rate Advances into
Base Rate Advances, the first Business Day prior to the date of
the proposed conversion, and (ii) in every other instance, the
third Business Day prior to the date of the proposed conversion
or continuation. Each such notice of continuation or conversion
(a "Notice of Continuation or Conversion") shall be by telephone,
confirmed immediately in writing (whether by telecopy, telex,
cable or otherwise), in substantially the form of Exhibit B,
specifying therein the requested (i) date of such continuation or
conversion (which shall be a Business Day); (ii) amount of the
Advances to be converted or continued; (iii) nature of such
conversion or continuation; and (iv) Interest Periods for such
Advances, in the case of a conversion of one or more Base Rate
Advances to a Eurodollar Rate Advance or a continuation of one or
more Eurodollar Rate Advances. Promptly after receipt of a
notice of Continuation or Conversion (or telephonic notice in
lieu thereof), the Agent shall notify each Lender by telex,
telecopy, telegram, telephone or other similar form of
transmission, of the proposed continuation or conversion.
(c) Each Notice of Continuation or Conversion shall be
irrevocable and binding upon the Borrower. In the case of any
Advance which the related Notice of Continuation or Conversion
specifies is to be a Eurodollar Rate Advance, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred
by such Lender as a result of any failure to fulfill on or before
the date of the continuation or conversion specified in such
Notice of Continuation or conversion for such Advance the
applicable conditions set forth in Article V, including, without
limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender
to fund such Advance when such Advance is not converted or
continued, as the case may be, on such date.
SECTION 3.04. Additional Provisions Applicable to Eurodollar
Rate Advances. Anything in Section 3.02 or 3.03 above to the
contrary notwithstanding:
(a) If any Lender shall notify the Borrower (with a
copy of such notice to the Agent) that the introduction of or any
change in or in the interpretation of any law or regulation makes
it unlawful, or that any central bank or other Governmental
Authority asserts that it is unlawful, for such Lender or its
Eurodollar Lending Office to perform its obligations hereunder to
make Eurodollar Rate Advances or to fund or maintain Eurodollar
Rate Advances hereunder, the right of the Borrower to select
Eurodollar Rate Advances for any Borrowing or to convert any Base
Rate Advances to Eurodollar Rate Advances shall be suspended
until such Lender shall notify the Borrower (with a copy of such
notice to the Agent) that the circumstances causing such
suspension no longer exist. Upon any Lender's giving of the
notice to the Borrower referred to in this Section 3.04(a), the
Borrower shall, upon at least one (1) Business Day's written
notice to such Lender (with a copy of such notice to the Agent),
or if permitted by applicable law no later than the date
permitted thereby, in the Borrower's sole discretion, either (i)
prepay, notwithstanding the provisions of Section 3.08 hereof,
the principal amount of all outstanding Eurodollar Rate Advances
of such Lender together with accrued interest thereon to the date
of payment; or (ii) convert, notwithstanding the provisions of
Section 3.03, all Eurodollar Rate Advances of all Lenders then
outstanding into Base Rate Advances. Upon any such prepayment or
conversion of a Eurodollar Rate Advance, the Borrower shall
reimburse the applicable Lender in respect thereof pursuant to
Section 9.05(b).
(b) If the Agent shall, on the date of the making of
any requested Borrowing comprised of Eurodollar Rate Advances,
the continuation pursuant to Section 3.03 of any Eurodollar Rate
Advances or the conversion pursuant to Section 3.03 of any Base
Rate Advances, notify the Borrower that it is unable, for any
reason whatsoever, to obtain timely information for determining
the Eurodollar Rate for such Advances, the right of the Borrower
to select Eurodollar Rate Advances for such Borrowing or any
Borrowing subsequently made, converted or continued shall be
suspended until the Agent shall notify the Borrower that the
circumstances causing such suspension no longer exist and each
Advance requested to be converted into or made or continued as a
Eurodollar Rate Advance shall be a Base Rate Advance.
(c) If any Lender shall, at least one (1) Business Day
prior to the date of the making of any requested Borrowing to be
comprised of Eurodollar Rate Advances, the continuation pursuant
to Section 3.03 of any Eurodollar Rate Advances or the conversion
pursuant to Section 3.03 of any Base Rate Advances, notify the
Borrower (with a copy of such notice to the Agent) that the
Eurodollar Rate for such Advances will not adequately reflect the
cost to such Lender of making or funding such Advances, the right
of the Borrower to select Eurodollar Rate Advances for such
Borrowing or any Borrowing subsequently made, converted or
continued shall be suspended until such Lender shall notify the
Borrower (with a copy of such notice to the Agent) that the
circumstances causing such suspension no longer exist and each
Advance by such Lender requested to be converted into or made or
continued as a Eurodollar Rate Advance shall be a Base Rate
Advance.
(d) Any Taxes payable by the Agent or any Lender or
ruled (by a Governmental Authority) payable by the Agent or any
Lender in respect of any Loan Document shall, if permitted by
law, be paid by the Borrower, together with interest and
penalties, if any (except for (i) (1) Taxes imposed on or
measured by the overall net income of the Agent or that Lender,
(2) franchise or similar taxes of the Agent or that Lender, and
(3) amounts requested to be withheld for Taxes pursuant to the
last sentence of Section 3.04(f) and (ii) interest and penalties
incurred as a result of the gross negligence or willful
misconduct of the Agent or any Lender). The Agent or that Lender
(through the Agent) shall notify the Borrower and deliver to the
Borrower a certificate setting forth in reasonable detail the
calculation of the amount of payable Taxes, which certificate is
conclusive and binding (absent manifest error), and the Borrower
shall promptly pay that amount to the Agent for its account or
the account of that Lender, as the case may be. If the Agent or
that Lender subsequently receives a refund of the Taxes paid to
it by the Borrower, then the recipient shall promptly pay the
refund to the Borrower.
(e) THE BORROWER AGREES TO INDEMNIFY EACH LENDER
AGAINST, AND PAY TO IT UPON DEMAND, ANY FUNDING LOSSES, COSTS OR
EXPENSES DESCRIBED IN SECTION 3.02(b), 3.03(c) OR 9.05(b) WITH
RESPECT TO EURODOLLAR RATE ADVANCES. The provisions of and
undertakings and indemnification set forth in this paragraph
shall survive the satisfaction and payment of the Obligations and
termination of this Agreement.
(f) Each Lender that is organized under the laws of
any jurisdiction other than the United States of America or any
State thereof (a) represents to the Agent and the Borrower that
(i) no Taxes are required to be withheld by the Agent or the
Borrower with respect to any payments to be made to it in respect
of the Obligations and (ii) it has furnished to the Agent and the
Borrower two duly completed copies of U.S. Internal Revenue
Service Form 4224, Form 1001, Form W-8, or any other tax form
acceptable to the Agent (wherein it claims entitlement to
complete exemption from U.S. federal withholding tax on all
interest payments under the Loan Papers), and (b) covenants to
(i) provide the Agent and the Borrower a new tax form upon the
expiration or obsolescence of any previously delivered form
according to law, duly executed and completed by it, and (ii)
comply from time to time with all laws with regard to the
withholding tax exemption. If any of the foregoing is not true
or the applicable forms are not provided, then the Borrower and
the Agent (without duplication) may deduct and withhold from
interest payments under the Loan Documents United States federal
income tax at the full rate applicable under law.
SECTION 3.05. Notes; Repayment. Each Lender's Advances shall be
evidenced by a Revolving Loan Note executed by the Borrower and
delivered to such Lenders pursuant to Article V (each such
Revolving Loan Note, as the same may be amended, modified,
substituted or supplemented from time to time being hereinafter
referred to individually as a "Note" and collectively as the
"Notes"), substantially in the form of Exhibit C, in an original
principal amount equal to such Lender's Pro Rata Share of the
maximum Advance Commitment on the date hereof. Unless the
Termination Date shall have earlier occurred, the Borrower shall
repay the principal amount of the Advances outstanding on the
Maturity Date.
SECTION 3.06. Interest. The Borrower shall pay interest on the
unpaid principal amount of each Advance from the date of such
Advance until such principal amount shall be paid in full, at the
following rates specified below:
(a) Base Rate Advances. If such Advance is a Base Rate
Advance, at a rate per annum equal at all times to the Alternate
Base Rate in effect from time to time, payable monthly in arrears
on the last Business Day of each calendar month and on the date
such Base Rate Advance shall be paid in full; provided, however,
that any amount of principal which is not paid when due (whether
at stated maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until such
amount is paid in full, payable on demand, at a rate per annum
equal at all times to two percent (2.0%) per annum above the
Alternate Base Rate in effect from time to time.
(b) Eurodollar Rate Advances. If such Advance is a
Eurodollar Rate Advance, at a rate per annum equal at all times
during any Interest Period for such Advance to the sum of the
Applicable Margin plus the Eurodollar Rate for such Advance for
such Interest Period, payable in arrears on the last day of such
Interest Period; provided, however, that any amount of principal
which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the date on
which such amount is due until such amount is paid in full,
payable on demand, at a rate per annum equal at all times to two
percent (2.0%) per annum above the Alternate Base Rate in effect
from time to time.
(c) Default Interest. Notwithstanding anything to the
contrary in Sections 3.06(a) and 3.06(b), effective upon the
occurrence of an Event of Default and for as long thereafter as
such Event of Default shall be continuing, all amounts
outstanding under the Loan Documents shall bear interest at a
rate per annum equal at all times to two percent (2.0%) per annum
above the Alternate Base Rate in effect from time to time,
payable on demand and, absent demand, at the times specified in
Section 3.06(a) with respect to Base Rate Advances and at the
times specified in Section 3.06(b) with respect to Eurodollar
Rate Advances.
(d) Rate Adjustment Periods. Notwithstanding anything to
the contrary in Sections 3.06(a) and 3.06(b) but subject to
Section 3.06(c) above, at all times during a Rate Adjustment
Period, interest on each Eurodollar Rate Advance shall be at a
rate of one-quarter of one percent (0.25%) below the rate that
would otherwise be payable under Section 3.06(b), provided,
however, that (A) no reduction in the interest rate applicable to
any Eurodollar Rate Advance outstanding on the commencement of a
Rate Adjustment Period shall take effect until such Eurodollar
Rate Advance has been continued or converted pursuant to Section
3.03; (B) no reduction in the interest rate applicable to any
Eurodollar Rate Advance shall reduce such rate below the sum of
1.25% plus the Eurodollar Rate for such Advance for such Interest
Period; and (C) interest on any amount of principal which is not
paid when due (whether at stated maturity, by acceleration or
otherwise) shall continue to be paid at the rates otherwise
specified in Section 3.06(a) or 3.06(b) for such past due
amounts.
SECTION 3.07. Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to each Lender (or to the Agent for the
account of such Lender) so long as such Lender shall be required
under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each
Eurodollar Rate Advance of such Lender, from the date of such
Advance until such principal amount is paid in full, at an
interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the Eurodollar Rate for the Interest
Period for such Advance from (ii) the rate obtained by dividing
such Eurodollar Rate by a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage of such Lender for such
Interest Period, payable on each date on which interest is
payable on such Advance. Such additional interest so notified to
the Borrower (with a copy to the Agent) by such Lender shall be
payable to such Lender (or to the Agent for the account of such
Lender) on the dates specified for payment of interest for such
Advance in Section 3.06.
SECTION 3.08. Pre-payments. The Borrower may prepay the
outstanding amount of any Advance in whole or in part with
accrued interest to the date of such prepayment on the amount
prepaid; provided, however, that (i) notice of any prepayment of
a Eurodollar Rate Advance must be given at least three (3)
Business Days prior to the date of prepayment; (ii) notice of any
prepayment of a Base Rate Advance must be given not later than
12:00 noon (Dallas time) on the date of prepayment; (iii) any
prepayment of any Eurodollar Rate Advance shall be made on, and
only on, the last day of an Interest Period for such Advance; and
(iv) each partial prepayment shall be in a principal amount of
$250,000 and integral multiples of $50,000 in excess of that
amount and, if made after the Termination Date, shall be applied
to the principal installments on each Lender's Note in the
inverse order of their maturities.
SECTION 3.09. Maximum Interest Rate. Regardless of any
provision contained in any Loan Document or any document related
thereto, it is the intent of the parties to this Agreement that
neither the Agent nor any Lender contract for, charge, take,
reserve, receive or apply, as interest on all or any part of the
Obligations any amount in excess of the Maximum Rate or the
Maximum Amount or receive any unearned interest in violation of
any applicable law, and, if the Lenders ever do so, then any
excess shall be treated as a partial repayment or prepayment of
principal and any remaining excess shall be refunded to the
Borrower. In determining if the interest paid or payable exceeds
the Maximum Rate, the Borrower and the Lenders shall, to the
maximum extent permitted under applicable law, (a) treat all
Borrowings as but a single extension of credit (and the Lenders
and the Borrower agree that is the case and that provision in
this Agreement for multiple Borrowings is for convenience only),
(b) characterize any nonprincipal payment as an expense, fee or
premium rather than as interest, (c) exclude voluntary repayments
or prepayments and their effects, and (d) amortize, prorate,
allocate and spread the total amount of interest throughout the
entire contemplated term of the Obligations. However, if the
Obligations are paid in full before the end of their full
contemplated term, and if the interest received for its actual
period of existence exceeds the Maximum Amount, the Lenders shall
refund any excess (and the Lenders may not, to the extent
permitted by law, be subject to any penalties provided by any
laws for contracting for, charging, taking, reserving or
receiving interest in excess of the Maximum Amount). If the laws
of the State of Texas are applicable for purposes of determining
the "Maximum Rate" or the "Maximum Amount," then those terms mean
the "indicated rate ceiling" from time to time in effect under
Article 5069-1.04, Title 79, Revised Civil Statutes of Texas, as
amended. The Borrower agrees that Chapter 15, Subtitle 79,
Revised Civil Statutes of Texas, 1925, as amended (which
regulates certain revolving credit loan accounts and revolving
tri-party accounts), does not apply to the Obligations, other
than Article 15.10(b).
SECTION 3.10. Interest Recapture. If the designated interest
rate applicable to any Borrowing exceeds the Maximum Rate, the
interest rate on that the Borrowing is limited to the Maximum
Rate, but any subsequent reductions in the designated rate shall
not reduce the interest rate thereon below the Maximum Rate until
the total amount of accrued interest equals the amount of
interest that would have accrued if that designated rate had
always been in effect. If at maturity (stated or by
acceleration), or at final payment of the Notes, the total
interest paid or accrued is less than the interest that would
have accrued if the designated rates had always been in effect,
then, at that time and to the extent permitted by applicable law,
the Borrower shall pay an amount equal to the difference between
(a) the lesser of the amount of interest that would have accrued
if the designated rates had always been in effect and the amount
of interest that would have accrued if the Maximum Rate had
always been in effect, and (b) the amount of interest actually
paid or accrued on the Notes.
SECTION 3.11. Extension of Maturity. If no Default or Event of
Default exists, the Borrower may request one-year extensions of
the then-existing Maturity Date by making such request to the
Agent and each Lender between 90 and 60 days preceding each
anniversary of the date of this Agreement. The then-existing
Maturity Date shall be extended for one year only if (a) the
Agent and each Lender consent in writing to such extension within
30 days following the Borrower's request (with a failure to
respond by the Agent or any Lender being deemed a denial of such
consent by such party), and (b) the Borrower pays to the Agent,
for the account of the Lenders, within 10 days after its receipt
of such consent, an extension fee equal to one-eighth of one
percent (1/8%) of the then-existing Aggregate Commitment.
ARTICLE IV
THE LETTER OF CREDIT FACILITY
SECTION 4.01. The Letters of Credit. The Agent agrees, on the
terms and conditions hereinafter set forth, to issue for the
account of the Borrower one or more Letters of Credit in
accordance with this Article IV, from time to time on any
Business Day during the period from the date hereof to the
Termination Date in an aggregate face amount not to exceed the
excess of (a) the Letter of Credit Commitment at such time over
(b) the Letter of Credit Obligations at such time. Within the
limits of the Letter of Credit Commitment, the Borrower may
obtain credit by having the Agent issue the Letters of Credit
being requested by the Borrower at such time, pay its Obligations
with respect to such Letters of Credit pursuant to Section 4.06,
and again obtain credit by having the Agent issue Letters of
Credit under this Section 4.01.
SECTION 4.02. Amounts and Terms. The Agent shall not have any
obligation to issue any Letter of Credit at any time if the
aggregate maximum amount then available for drawing under Letters
of Credit theretofore issued, after giving effect to the Letter
of Credit requested hereunder, shall exceed any limit imposed by
law or regulation upon the Agent.
SECTION 4.03. Conditions. In addition to being subject to the
satisfaction of the conditions contained in Article V, the
obligation of the Agent to issue any Letter of Credit is subject
to the satisfaction in full of the following conditions:
(a) the proposed Letter of Credit (including, without
limitation, the level of detail and specificity with respect to
the documents, certificates and drafts to be presented
thereunder) shall be reasonably satisfactory to the Agent as to
form and content;
(b) as of the date of issuance, no order, judgment or
decree of any Governmental Authority shall purport by its terms
to enjoin or restrain the Agent from issuing the Letter of
Credit, and no law, rule or regulation applicable to the Agent
and no request or directive (whether or not having the force of
law) from any Governmental Authority with jurisdiction over the
Agent shall prohibit or request that the Agent refrain from the
issuance of Letters of Credit generally or the issuance of that
Letter of Credit; and
(c) the proposed Letter of Credit shall be governed by The
Uniform Customs and Practice for Documentary Credits, 1993
Revision, International Chamber of Commerce Publication No. 500,
or any successor thereto, and, as to matters not covered thereby,
shall be governed by the internal laws and decisions (as
distinguished from conflict of laws principles) of the State of
Texas.
SECTION 4.04. Issuing Letters of Credit.
(a) Letters of Credit shall be issued upon written
notice by the Borrower to the Agent, given not later than 10:00
A.M. (Dallas time) on the second Business Day prior to the
Business Day on which such Letters of Credit are requested to be
issued, or such lesser time prior to the requested issuance date
as is acceptable to the Agent. Each such notice (a "Request for
Letters of Credit") shall be in substantially the form of Exhibit D
hereto, specifying therein (i) the aggregate stated amount of
the Letters of Credit requested, (ii) the effective date (which
day shall be a Business Day) of issuance of such requested
Letters of Credit, (iii) the date on which such requested Letters
of Credit are to expire (which date shall be a Business Day no
more than 18 months following such effective date and shall in no
event be later than the Maturity Date unless the Borrower
deposits with and pledges to the Agent cash or cash equivalent
investments acceptable to the Agent in an amount equal to the
face amount of such Letter of Credit as collateral security for
the Borrower's Obligations in connection with such Letter of
Credit), and (iv) the Person for whose benefit the requested
Letters of Credit are to be issued. At the time such request is
made, the Borrower shall also provide the Agent with completed
and executed Letter of Credit Applications and copies of the
forms the Letters of Credit which the Borrower has requested the
Agent to issue. Each Request for Letters of Credit shall be
irrevocable and binding on the Borrower.
(b) Promptly after receipt of a Request for Letters of
Credit together with all supporting documentation, the Agent
shall notify each Lender by telex, telecopy, telegram, telephone
or other similar form of transmission of the proposed issuance of
Letters of Credit. Subject to the satisfaction of the terms and
conditions of this Article IV and upon fulfillment of the
applicable conditions set forth in Article V, the Agent shall, on
the requested date, issue its Letter of Credit on behalf of the
Borrower.
SECTION 4.05. Paying under Letters of Credit. In determining
whether to pay under any Letter of Credit, the Agent shall have
no obligation other than to confirm that documents that appear to
comply on their face with the requirements of such Letter of
Credit have been delivered to it.
SECTION 4.06. Reimbursement Obligations. The Borrower is
obligated, and hereby unconditionally agrees, to pay in
immediately available funds to the Agent the amount of each
drawing made under each Letter of Credit on the date of such
drawing (the obligation of the Borrower under this Section 4.06
with respect to any drawing being the "Reimbursement Obligation"
with respect to such drawing). Any Reimbursement Obligation with
respect to any Letter of Credit that is not paid by the Borrower
to the Agent with respect to a Letter of Credit at or prior to
1:00 P.M. (Dallas time) on the date of the drawing giving rise
thereto shall bear interest, payable on demand, from the date of
such drawing until repaid in full to the Agent at a rate per
annum equal at all times to two and one-half percent (2.50%) per
annum above the Alternate Base Rate in effect from time to time.
In the event of any conflict between the terms of this Agreement
and any Letter of Credit Application the terms of this Agreement
shall control.
SECTION 4.07. Compensation for Letters of Credit.
(a) The Borrower agrees to pay to the Agent, for the
benefit of each Lender, a letter of credit fee ("Letter of Credit
Fee") with respect to each Letter of Credit issued under this
Article IV, payable on the date of issuance, renewal or extension
of such Letter of Credit, and thereafter in advance at such
intervals as are agreed upon by the Borrower and the Lenders
during the period in which such Letter of Credit is outstanding,
at a per annum rate equal to one percent (1%), in the case of
commercial Letters of Credit, and the Applicable Margin, in the
case of standby Letters of Credit (the "Letter of Credit Rate")
for the actual number of days to elapse from such date to the
earlier to occur of (i) the stated expiration date of such Letter
of Credit, or (ii) the last day of the immediately following
interval agreed to by the Lenders and the Borrower.
(b) The Borrower shall also pay to the Agent, for the
benefit of each Lender, on the date of any modification of a
Letter of Credit which increases the maximum amount available for
drawing thereunder, an additional fee calculated on the same
basis as that set forth in Section 4.07(a) with respect to any
such additional amount. The Borrower shall, in addition, pay to
the Agent for its own account with respect to each Letter of
Credit issued hereunder (i) upon its issuance, a fronting fee
equal to one-eighth percent (1/8%) of its face amount, (ii) upon
any drawing under such Letter of Credit, a negotiation fee with
respect to such drawing equal in amount to $250, and (ii) upon
any transfer of or amendment to such Letter of Credit, a
transaction fee equal in amount to $100.
(c) Notwithstanding the foregoing, effective immediately
upon the occurrence of an Event of Default and for as long
thereafter as such Event of Default shall be continuing, the
Letter of Credit Rate shall be increased to three and one-eighth
percent (3.125%) per annum, payable on demand and, absent demand,
at the times specified in Section 4.07(a).
SECTION 4.08. Sharing of Payments. Immediately upon the Agent's
issuance of any Letter of Credit, the Agent shall be deemed to
have sold and transferred to each Lender, and each Lender shall
be deemed irrevocably and unconditionally to have purchased and
received from the Agent, without recourse or warranty, an
undivided interest and participation (to the extent of such
Lender's Pro Rata Share) in the Letter of Credit and all
applicable rights of the Agent in the Letter of Credit, including
rights to cash collateral pledged under Section 4.11 (other than
rights to receive the fees provided for in the last sentence of
Section 4.07(b)). If the Borrower does not timely pay any
Reimbursement Obligation, the Agent is irrevocably authorized to
fund the Reimbursement Obligation as a Base Rate Borrowing and
the proceeds of the Base Rate Borrowing shall be advanced
directly to the Agent to pay the Reimbursement Obligation. If
the Borrower fails to reimburse the Agent as provided in Section
4.06 and funds are not advanced to satisfy the Reimbursement
Obligation, the Agent shall promptly notify each Lender of the
Borrower's failure, of the date and amount paid, and of each
Lender's Pro Rata Share of the unreimbursed amount. Each Lender
shall promptly and unconditionally make available to the Agent in
immediately available funds its Pro Rata Share of the unpaid
Reimbursement Obligation. Such funds are due and payable to the
Agent before the close of business on (i) the Business Day the
Agent gives notice to each Lender of the Borrower's reimbursement
failure if the notice is received by a Lender before 2:00 p.m. in
the time zone where such Lender's Domestic Lending Office is
located, or (ii) on the next succeeding Business Day after the
Business Day the Agent gives notice to each Lender of the
Borrower's reimbursement failure, if such notice is received
after 2:00 p.m. All amounts payable by any Lender accrue
interest at the Federal Funds Rate from the day the applicable
draft or draw is paid by the Agent to (but not including) the
date the amount is paid by the Lender to the Agent.
SECTION 4.09. Documentation. Upon the request of any Lender,
the Agent shall furnish to such Lender copies of any Letters of
Credit, Letter of Credit Reimbursement Agreements, and applications
for any Letter of Credit to which the Agent is party and such other
documentation as may reasonably be requested by such Lender.
SECTION 4.10. Indemnification; Exoneration.
(a) In addition to amounts payable as elsewhere
provided in this Article IV, and without limitation of the
Borrower's obligations pursuant to Section 9.05, the Borrower
hereby agrees to protect, indemnify, pay and save the Agent and
each Lender harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' and paralegals' fees)
which the Agent or any of the Lenders may incur or be subject to
as a consequence, direct or indirect, of the failure of the Agent
to honor a drawing under any Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present or
future de jure or de facto Governmental Authority (all such acts
or omissions being hereinafter referred to collectively as
"Governmental Acts").
(b) As among the Borrower, the Agent and any of the
Lenders, the Borrower assumes all risks of the acts and omissions
of, or misuse of any of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not
in limitation of the foregoing, the Agent and the Lenders shall
not be responsible for: (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted
by any Person in connection with the application for and issuance
of any of the Letters of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder
or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the
beneficiary of any Letter of Credit to comply fully with the
conditions required in order to draw upon such Letter of Credit,
other than conditions expressly stated in such Letter of Credit;
(iv) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (v) errors in inter
pretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit or of the proceeds
thereof; (vii) the misapplication by the beneficiary of a Letter
of Credit of the proceeds of any drawing under such Letter of
Credit; or (viii) any consequences arising from causes beyond the
control of the Agent or any of the Lenders, including, without
limitation, any Government Acts. None of the above shall affect,
impair, or prevent the vesting of the Agent's or any Lender's
rights or powers under this Section 4.10.
(c) In furtherance and extension, and not in limita
tion, of the specific provisions set forth above, any action
taken or omitted by the Agent under or in connection with any of
the Letters of Credit issued by the Agent or any related certificates,
if taken or omitted in good faith shall not result in any liability
of the Agent to the Borrower.
SECTION 4.11. Termination of Letters of Credit; Cash Collateral.
The Agent may, at any time upon or following the occurrence of an
Event of Default at its sole option, request that the Borrower
deposit with the Agent, and upon any such request the Borrower
shall forthwith deposit with and pledge to the Agent, cash or
cash equivalent investments acceptable to the Agent in an amount
equal to the undrawn face amount of any Letters of Credit that
remain outstanding from time to time thereafter as collateral
security for the Borrower's Obligations in connection with such
Letters of Credit. The right of the Agent to require, and the
Obligation of the Borrower to provide, collateral security shall
continue to exist notwithstanding the release of any other
collateral security by the Agent or any of the Lenders at any
time. If the Borrower does not immediately deposit such
collateral security with the Agent upon any such request, the
Agent is hereby irrevocably authorized by the Borrower to fund
such collateral security by making a Base Rate Advance in the
amount thereof and depositing the proceeds of such Advance in a
cash collateral account with the Agent.
ARTICLE V
CONDITIONS OF EXTENSIONS OF CREDIT
SECTION 5.01. Conditions Precedent to Initial Extension of
Credit. The obligation of each Lender to make its Pro Rata Share
of the initial extension of credit under this Agreement (whether
in the form of an Advance or a Letter of Credit) is subject to
the following conditions precedent:
(a) The Agent shall have received on or before the day of
the initial extension of credit under this Agreement the
following, each dated such day, in form and substance satisfactory
to the Agent:
(i) A Note payable to the order of each Lender in an amount
equal to such Lender's Pro Rata Share of the maximum Advance
Commitment on the date hereof;
(ii) Certified copies of (A) the resolutions of the Board of
Directors of the Borrower approving this Agreement, the Notes and
each of the other Loan Documents; and (B) all documents
evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement, the Notes and
each of the other Loan Documents;
(iii) A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign
this Agreement, the Notes and each of the other Loan Documents,
and the accuracy and currency of the Borrower's Articles of
Incorporation and By-Laws attached thereto;
(iv) A favorable opinion of counsel to the Borrower,
substantially in the form of Exhibit E hereto and as to such
other matters as the Agent may reasonably request;
(v) Payment instructions from the Borrower with respect to
its obligations under the Prior Agreement and evidence that the
Borrower has cancelled the financing commitments under the Prior
Agreement; and
(vi) Such other documents, instruments and agreements in
furtherance of the financing transaction contemplated in the Loan
Documents, each in form and substance satisfactory to the Agent
and its counsel, as the Agent shall reasonably request,
including, without limitation, the documents, instruments and
agreements described on the List of Closing Documents attached
hereto as Exhibit F.
(b) No law or regulation affecting the Agent's or any
Lender's entering into the financing transaction contemplated by
the Loan Documents shall impose upon the Agent or any of the Lenders
any material obligation, fee, liability, cost, expense or damages.
SECTION 5.02. Conditions Precedent to Each Extension of Credit,
Conversion or Continuation. The obligation of each Lender to
make any Advance, to issue any Letter of Credit, or to convert or
continue any Advance as described in Section 3.03 on the occasion
of each such extension of credit (including the initial extension
of credit hereunder), conversion or continuation shall be subject
to the further conditions precedent that on the date of such
extension of credit, conversion or continuation:
(a) The following statements shall be true (and each of the
giving of the applicable Notice of Borrowing, Request for Letter
of Credit or Notice of Continuation or Conversion, as applicable,
and the acceptance by the Borrower of the proceeds or other benefits
of the requested extension of credit, conversion or continuation
shall constitute a representation and warranty by the Borrower that
on the date of such extension of credit, conversion or continuation
such statements are true):
(i) The representations and warranties contained in Section
6.01 are correct on and as of the date of such extension of
credit, conversion or continuation before and immediately after
giving effect to such extension of credit, conversion or
continuation and to the application of the proceeds or other
benefits thereof, as though made on and as of such date; and
(ii) No event has occurred and is continuing, or would
result from such extension of credit, conversion or continuation
or from the application of the proceeds or other benefits
thereof, that constitutes a Default or an Event of Default.
(b) The Lenders shall have received such other approvals,
opinions or documents as the Lenders may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants to the Agent and each Lender
that the following statements are true, correct and complete as
of the date of this Agreement and as of the date of each
reaffirmation thereof made pursuant to Section 5.02(a)(i):
(a) The Borrower (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Colorado, and is duly qualified to do business, and is in good
standing as a foreign corporation, in each jurisdiction in which
such qualification is necessary or proper in view of its business
and operations or the ownership of its properties; (ii) does not
own any material amount of capital stock of, or have any other
material equity investment in, any Person other than its wholly-
owned subsidiary, Vicorp Restaurants, Inc., a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, and the Borrower's ownership of 100,004
shares of Preferred Stock issued by a single issuer in
replacement of a subordinated debenture in the original principal
amount of $10,000,000 and (iii) has not (nor has any subsidiary)
used or transacted business under any other corporate or trade
name in the past five years, except as disclosed on Schedule
6.01(a).
(b) The execution, delivery and performance by the Borrower
of this Agreement, the Notes and each of the other Loan Documents
are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, and do not
contravene (i) the Borrower's charter or by-laws; or (ii) any law
or any contractual restriction binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or regulatory
body is required for the due execution, delivery and performance by
the Borrower of this Agreement, the Notes or any of the other Loan
Documents.
(d) This Agreement is, and the Notes and each of the other
Loan Documents when delivered hereunder will be, legal, valid and
binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
(e) The consolidated balance sheet of the Borrower and its
subsidiaries as at July 31, 1996, and the related consolidated
statement of income and retained earnings of the Borrower and its
subsidiaries for the three fiscal quarters then ended, copies of
which have been furnished to the Agent and each Lender, fairly
present the financial condition of the Borrower and its
subsidiaries on a consolidated basis as at such date and the
results of the operations of the Borrower and its subsidiaries an
a consolidated basis for the period ended on such date, all in
accordance with GAAP consistently applied, and since July 31,
1996, there has been no material adverse change in such condition
or operations, or in the financial condition or operations of the
Borrower and its subsidiaries.
(f) Except as set forth on Schedule 6.01(f), there is no
pending or threatened action or proceeding affecting the Borrower
or any of its subsidiaries before any Governmental Authority or
arbitrator, which action or proceeding (i) may materially
adversely affect the financial condition or operations of the
Borrower and its subsidiaries on a consolidated basis or (ii)
purports to affect the legality, validity or enforceability of
any Loan Document; and since the date hereof there has been no
development in any action or proceeding described on Schedule
6.01(f) as a result of which such action or proceeding, if
adversely determined, would give rise to an effect of the kind
described in the foregoing clause (i) or clause (ii).
(g) Neither the Borrower nor any of its subsidiaries is in
violation of (i) any applicable statute, regulation, rule, ordinance
or permit of any Governmental Authority or (ii) any patent, patent
application, copyright, trademark, trademark application, trade name,
or license of any Governmental Authority, in each case, in any respect
that may materially adversely affect the financial condition or
operations of the Borrower and its subsidiaries on a consolidated
basis. The Borrower possesses adequate licenses, permits and other
governmental approvals and authorization and adequate patents, trademarks,
copyrights, trade names and licenses to continue to conduct its business
as heretofore conducted by it.
(h) Neither the Borrower nor any of its subsidiaries is in
default with respect to any note, indenture, loan agreement,
mortgage, lease, deed or other similar agreement relating to the
borrowing of monies to which it is a party or by which it is
bound, which default may materially adversely affect the financial
condition or operations of the Borrower or any of its subsidiaries.
(i) All of the Borrower's and its subsidiaries' respective
property, tangible and intangible, is free and clear of all
Liens, except as specifically permitted by Section 7.02(a).
(j) The Borrower and each of its subsidiaries have filed
all Tax returns and other reports they are required by law to
file and have paid all Taxes that are due and payable, other than
those being contested in good faith by appropriate proceedings
diligently conducted and for which adequate cash and financial
reserves have been established.
(k) Without limiting the representations and warranties set
forth in Section 6.01(g), and except as otherwise set forth on
Schedule 6.01(k), neither the Borrower nor any of its subsidiaries
has received notice to the effect or is otherwise aware that its
operations are not in material compliance with all of the requirements
of applicable federal, state and local environmental, health and
safety statutes and regulations or the subject of or likely to
become the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release of any
Contaminant into the environment, which non-compliance or remedial
action could have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise)
of the Borrower or any of its subsidiaries.
(l) No Plan has any Unfunded Liabilities. Except as
otherwise set forth on Schedule 6.01(1), each Plan complies in
all material respects with all applicable requirements of law and
regulations; no Reportable Event has occurred with respect to any
Plan; neither the Borrower nor any of its subsidiaries has
withdrawn from any Plan or initiated steps to do so; and no steps
have been taken to terminate any Plan.
(m) None of the Borrower or any of its ERISA Affiliates
maintains any employee welfare benefit plans within the meaning
of Section 3(l) of ERISA that provides benefits to employees
after termination of employment other than as required by Section
601 of ERISA.
(n) The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of any
extension of credit hereunder will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
ARTICLE VII
COVENANTS OF THE BORROWER
SECTION 7.01. Affirmative Covenants. The Borrower covenants
to Agent and each Lender that, so long as any Obligation shall remain
unpaid or any Lender shall have any Commitment hereunder, the Borrower will,
unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of
its subsidiaries to comply, in all material respects with all
applicable laws, rules, regulations, orders, ordinances and
decrees, such compliance to include, without limitation, paying
before the same become delinquent all Taxes, recordation charges,
rates, dues, fees, fines, impositions, liabilities, obligations
and encumbrances imposed upon it or upon any of its property
except to the extent contested in good faith and with respect to
which adequate (as determined by independent public accountants
having a national reputation) reserves shall have been
established. Without limiting the generality of the foregoing,
the Borrower (i) will conduct, and will cause each of its
subsidiaries to conduct, its business so as to comply in all
material respects with all applicable environmental, health and
safety laws and regulations in all jurisdictions in which it is
or may at any time be doing business, including, without
limitation, the Federal Resource Conservation and Recovery Act,
the federal Comprehensive Environmental Response, Compensation
and Liability Act, the federal Clean Water Act, the federal Clean
Air Act and the federal Occupational Safety and Health Act; and
(ii) will establish, maintain and operate, and will cause each
ERISA Affiliate to establish, maintain and operate, all Plans to
comply in all material respects with the provisions of ERISA,
IRC, all other applicable laws and all regulations and interpretations
thereunder.
(b) Reporting Requirements. Furnish to each Lender:
(i) as soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter of the Borrower,
consolidated (and, if the Borrower at any time has any operating
subsidiaries, consolidating) balance sheets of the Borrower and
its subsidiaries as of the end of such quarter consolidated (and,
if the Borrower at any time has any operating subsidiaries,
consolidating) statements of income and retained earnings of the
Borrower and its subsidiaries for such quarter and for the period
commencing at the end of the previous fiscal year and ending with
the end of such quarter, all in accordance with GAAP consistently
applied, certified by the chief financial officer of the Borrower
on behalf of the Borrower and, in the case of quarter-end
statements with respect to which a review shall have been
undertaken by public accountants, accompanied by a summary of the
review report rendered by such accountants;
(ii) as soon as available and in any event within ninety
(90) days after the end of each fiscal year of the Borrower, a
copy of the annual report for such year for the Borrower and its
subsidiaries, containing consolidated financial statements for
such year all in accordance with GAAP consistently applied,
certified by independent public accountants having a national
reputation in a manner acceptable to the Agent;
(iii) together with the financial statements required to
be delivered under Sections 7.01(b)(i) and (ii), a certificate of
the president, chief financial officer or treasurer of the
Borrower demonstrating compliance with the financial covenants
set forth in Section 7.03 for and as at the end of such quarter
or year, as applicable, setting forth the calculations made by
such officer to determine such compliance, and certifying on
behalf of the Borrower that no Default or Event of Default shall
have occurred during such quarter or year, as applicable (or as
of the end of such quarter or year, as applicable, in the case of
a Default or Event of Default consisting of a breach of the
financial covenants set forth in Section 7.03), or, if any
Default or Event of Default shall have occurred for or during
such quarter or year, as applicable, describing the nature
thereof and the procedures that the Borrower shall have taken or
proposes to take with respect thereto;
(iv) as soon as possible and in any event within five (5)
days after the occurrence of each Default, Event of Default or
other development, financial or otherwise, which might materially
adversely affect the business, properties or affairs of the
Borrower or any of its subsidiaries or the ability of the
Borrower to repay the Obligations, a statement of the chief financial
officer of the Borrower setting forth details of such
Default, Event of Default or other development and the action
which the Borrower has taken and proposes to take with respect
thereto;
(v) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to any of its security
holders, and copies of all reports and registration statements
which the Borrower or any subsidiary files with the SEC or any
national securities exchange;
(vi) before the beginning of each fiscal year of the
Borrower, financial and operations projections with respect to
such fiscal year, including, without limitation, pro forma
financial statements prepared on a basis consistent with the most
recent financial statements delivered to the Lenders in
accordance with Sections 7.01(b)(i) and (ii), all in such detail
as the Agent may reasonably request;
(vii) within two hundred seventy (270) days after the
close of each fiscal year, a statement of the Unfunded
Liabilities of each Plan, certified as correct, to the extent
applicable, by any actuary enrolled under ERISA;
(viii) as soon as possible and in any event within ten
(10) days after the Borrower or any of its subsidiaries knows
that any Reportable Event has occurred with respect to any Plan,
a statement, signed by the chief financial officer of the
Borrower, describing such Reportable Event and the action which
the Company proposes to take with respect thereto;
(ix) as soon as possible and in any event within ten (10)
days after receipt thereof by the Borrower or any of its
subsidiaries, a copy of (i) any notice or claim to the effect
that the Borrower or any such subsidiary is or may be liable to
any Person as a result of the release by the Borrower, any of its
subsidiaries, or any other Person of any toxic or hazardous waste
or substance into the environment, and (ii) any notice alleging
any violation of any federal, state or local environmental,
health or safety law or regulation by the Borrower or any of its
subsidiaries; provided, however, that the Borrower shall not be
required to furnish to the Agent any such notice resulting from
any routine OSHA or health inspection to which the Borrower or
any of its subsidiaries is subject by virtue of its respective
activities in the food service industry, unless any violation
described in such notice might have a material adverse effect on
the financial condition or operations of the Borrower or any
subsidiary; and
(x) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
subsidiaries as the Agent may from time to time reasonably
request, all in such detail as the Agent may reasonably request.
(c) Preservation of Corporation Existence, Etc. Except as
otherwise permitted under Subsection 7.02(d), preserve and
maintain, and cause each of its subsidiaries to preserve and
maintain, its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation, and qualify and
remain qualified and in good standing, and cause each of its
subsidiaries to qualify and remain qualified and in good
standing, as a foreign corporation in each jurisdiction in which
such qualification is necessary or proper in view of its business
and operations or the ownership of its properties.
(d) Maintenance of Insurance. Maintain, and cause each of
its subsidiaries to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts as
are usually carried, and covering such risks as are ordinarily
insured against, by Persons engaged in similar businesses and
owning similar properties in the same general areas in which the
Borrower and each such subsidiary operate; and comply, and cause
each subsidiary to comply, with all conditions and requirements
necessary to maintain such insurance in effect.
(e) Maintenance of Properties, Etc. Maintain and preserve,
and cause each of its subsidiaries to maintain and preserve, all
of its properties, necessary or useful in the proper conduct of
its business, in good working order and condition, ordinary wear
and tear excepted, and maintain all assets, permits, licenses,
privileges, franchises, concessions, privileges, patents,
trademarks, copyrights, and trade names necessary to conduct its
business as heretofore conducted by it.
(f) Visitation Rights. At any reasonable time and from
time to time, permit the Lenders or any agent or representative
thereof to visit and inspect any of the properties of the
Borrower or any of its subsidiaries, to examine and make copies
of and abstracts from the records and books of account of the
Borrower or any of its subsidiaries, and to visit and discuss the
affairs, finances and accounts of the Borrower or any of its
subsidiaries with any of their respective officers or with any of
those of their respective directors that are involved in the
operations of the Borrower's or such subsidiary's business.
(g) Maintenance of Records. Maintain, and cause each of
its subsidiaries to maintain, books and records with respect to
accounting matters in accordance with generally accepted
accounting principles consistently applied and in detail
sufficient to provide the Lenders the information required
pursuant to Section 7.01(b).
(h) Condemnation. Notify the Agent, immediately upon
learning of the institution of any proceeding for the
condemnation or other taking of all or any part of any of the
Borrower's real property or interests in real property if the
property or interests involved have a book value in excess of
$500,000 (regardless of the value of the specific portion subject
to such proceeding), of the pendency of such proceeding, permit
the Agent to participate in any such proceeding and deliver to
the Agent all instruments reasonably requested by the Agent to
permit such participation.
(i) Destruction of Real Property. Notify the Agent
immediately of any material damage to or material loss or
destruction of the Borrower's real property or interests in real
property with a book value in excess of $250,000, setting forth
the nature and extent of such destruction.
(j) Use of Proceeds. The Borrower will use the proceeds of
the Advances only to repay its obligations under the Prior
Agreement and for general corporate purposes.
SECTION 7.02. Negative Covenants. The Borrower covenants to
Agent and each Lender that, so long as any Obligation shall
remain unpaid or any Lender shall have any Commitment hereunder,
the Borrower will not, unless the Majority Lenders shall
otherwise consent in writing:
(a) Liens, Etc.
(i) Enter into or suffer to exist, or permit any of its
subsidiaries to enter into or suffer to exist, any arrangement
that directly or indirectly prohibits the Borrower or any of its
subsidiaries from creating or incurring any Lien upon or with
respect to any of its property, other than the Loan Documents,
leases that prohibit Liens on the property leased and documents
governing transactions described in clause (a)(ii)(C) below that
prohibit Liens on the property or asset which is the subject of
such transaction; or
(ii) Create or suffer to exist, or permit any of its
subsidiaries to create or suffer to exist, any Lien (other than
the interest of the lessor under any Operating Lease) upon or
with respect to any of its property, whether now owned or
hereafter acquired, or assign, or permit any of its subsidiaries
to assign, any right to receive income, in each case to secure or
provide for the payment of any Debt of any Person, other than:
(A) Liens securing Taxes or the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and
other like persons, which in any such case (1) are not delinquent
or (2) are being contested diligently and in good faith, provided
that in the latter case the Borrower or the applicable subsidiary
has established adequate reserves therefor and that neither the
Borrower's nor any subsidiary's title to and right to use its
property is materially and adversely affected by the nonpayment
of such Tax, claim or demand;
(B) Permitted Existing Liens;
(C) Liens existing on such property at the time of its
acquisition (other than any such Liens created in contemplation
of such acquisition), and Liens on fixed assets of the Borrower
or any of its subsidiaries acquired, constructed or improved
after the date of this Agreement which are created
contemporaneously with such acquisition, construction or
improvement to secure the purchase price of such property or the
cost of such construction or improvement, and Liens on fixed
assets of the Borrower or any of its subsidiaries arising in
connection with sale and leaseback transactions entered into by
the Borrower or any of its subsidiaries after the date of this
Agreement; provided, however, that no Lien of the kind described
in this clause (C) shall extend to or cover any property or asset
of the Borrower or any subsidiary of the Borrower other than the
property or asset so acquired or the construction or improvement
so procured; and
(D) any extension, renewal or replacement, in whole or in
part of any of the Liens referred to in the foregoing clauses (A)
through (C), inclusive; provided, however, that the amount of
Debt secured by any such extension, renewal or replacement Lien
shall not exceed the amount of such Debt secured immediately
prior to such extension, renewal or replacement and such
extended, renewed, or replaced Lien shall be limited to the
property or assets covered by the Lien existing immediately prior
to such extension, renewal or replacement;
provided, however, that notwithstanding anything to the contrary in
this Section 7.02(a), the aggregate amount of Debt of the Borrower
or any of its subsidiaries (including, without limitation, Capital
Lease Obligations of the Borrower or any of its subsidiaries) secured
by any of the Liens referred to in the foregoing clauses (B) and (C),
plus all Guarantees permitted by Section 7.02(e) (whether or not secured)
shall not at any time exceed $20,000,000.
(b) Debt. (i) Prepay or permit any of its subsidiaries to
prepay, any of its Debt, other than (A) the Obligations and (B)
Debt other than as described in the foregoing clause (i)(A) in an
amount not to exceed $5,000,000 in any fiscal year; or (ii)
create, incur, assume or suffer to exist, or permit any of its
subsidiaries to incur, assume or suffer to exist, any Debt,
except for (A) the Obligations, (B) Permitted Existing Debt, (C)
Debt secured by Liens upon the property of the Borrower or any of
its subsidiaries permitted pursuant to Section 7.02(a), and (D)
Permitted Franchise Guarantees.
(c) Dividends, Etc. Declare or make any dividend payment
or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class
of capital stock of the Borrower, or purchase, redeem or
otherwise acquire for value (or permit any of its subsidiaries to
do so) any shares of any class of capital stock of the Borrower
or any warrants, rights or options to acquire any such shares,
now or hereafter outstanding, or make any other distribution in
respect of any shares of such capital stock, or agree to any of
the foregoing, if immediately after giving effect to such
proposed action, a Default or Event of Default would exist.
(d) Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially
all of its assets (whether now owned or hereafter acquired) to,
or acquire all or substantially all of the assets or capital
stock of, any Person, or enter into an agreement to do any of the
foregoing, or permit any of its subsidiaries to do so, except
that (i) the Borrower may acquire the assets of any Person
pursuant to a Permitted Asset Acquisition, (ii) any subsidiary of
the Borrower may merge or consolidate with or into, or transfer
assets to, or acquire assets of, any other subsidiary of the
Borrower, and (iii) any subsidiary of the Borrower may merge into
or transfer assets to the Borrower; provided, however, that at
the time of any transaction permitted under any of the foregoing
clauses (i), (ii) and (iii), and immediately after giving effect
to such transaction, no Default or Event of Default would exist.
(e) Guarantees; Assumption of Obligations; Contingent
Liabilities. Guarantee or assume the obligations of any Person,
including any subsidiaries of the Borrower, or create or suffer
to exist any other contingent liability, or permit any subsidiary
of the Borrower to do any of the foregoing, other than (i)
guarantees by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business, and (ii) Permitted Franchisee Guarantees of up to
$10,000,000.
(f) Transactions with Affiliates or Stockholders. Enter
into, or be a party to any transaction with one of the Borrower's
Affiliates or stockholders, except in the ordinary course of
business and pursuant to the reasonable requirements of the
Borrower's business and upon fair and reasonable terms which are
no less favorable to the Borrower than the Borrower would obtain
in a comparable arm's-length transaction with a Person not the
Borrower's Affiliate or stockholder.
(g) Transactions Detrimental to Business, Etc. Enter into
any transaction which materially and adversely affects its
business, property, assets, operation, condition (financial or
otherwise), any collateral security for the Obligations or the
Borrower's ability to perform its obligations under this
Agreement or to repay the Obligations.
(h) Dispositions of Assets.
(i) Sell, lease, assign, transfer or otherwise dispose of
any real property (or enter into an agreement to do any of the
foregoing), or permit any of its subsidiaries to sell, lease,
assign, transfer or otherwise dispose of any real property (or
enter into an agreement to do any of the foregoing), except for
the properties described on Schedule 7.02(h), without the prior
written consent of all of the Lenders; or
(ii) Sell, lease, assign, transfer or otherwise dispose of
any other asset (or enter into an agreement to do any of the
foregoing), or permit any of its subsidiaries to sell, lease,
assign, transfer or otherwise dispose of any other asset (or
enter into an agreement to any of the foregoing), other than:
(A) the sale of inventory in the ordinary course of the
Borrower's or such subsidiary's business;
(B) the sale or other disposition of assets of the Borrower
or such subsidiary which are obsolete or no longer used or usable
in the business of the Borrower or such subsidiary; and
(C) the sale or other disposition of assets of the Borrower
or such subsidiary other than of the kind described in clause (A)
or (B) above; provided, however, that the value of all such other
assets sold or otherwise disposed of during any fiscal year
pursuant to this clause (C) shall not exceed $10,000,000, and
provided further that in the event that the proceeds of such
dispositions exceed $500,000 in the aggregate during any fiscal
year, the Aggregate Commitment shall be permanently reduced by
such excess and the Borrower shall make an immediate mandatory
prepayment of the Obligations equal to the amount by which the
Aggregate Outstandings exceed such reduced Aggregate Commitment.
(i) ERISA. (i) Engage, or permit any ERISA Affiliate to
engage, in any prohibited transaction described in Section 406 of
ERISA or 4975 of the IRC for which a statutory or class exemption
is not available or a private exemption has not been previously
obtained from the DOL; (ii) permit to exist any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412
of the IRC), whether or not waived; (iii) fail, or permit any
ERISA Affiliate to fail, to pay timely required contributions or
annual installments due with respect to any waived funding
deficiency to any Benefit Plan; (iv) terminate, or permit any
ERISA Affiliate to terminate, any Benefit Plan which would result
in any liability of the Borrower or any ERISA Affiliate under
Title IV of ERISA; (v) fail, or permit any ERISA Affiliate to
fail, to make any contribution or payment to any Multiemployer
Plan which the Borrower or any ERISA Affiliate may be required to
make under any agreement relating to such Multiemployer Plan, or
any law pertaining thereto; (vi) fail, or permit any ERISA
Affiliate to fail, to pay any required installment or any other
payment required under Section 412 of the IRC on or before the
due date for such installment or other payment; (vii) amend, or
permit any ERISA Affiliate to amend, a Plan resulting in an
increase in current liability for the plan year such that the
Borrower or any ERISA Affiliate is required to provide security
to such Plan under Section 401(a)(29) of the IRC.
(j) Restrictions on Operating Leases. Become, or permit
any of its subsidiaries to become, liable in any way whatsoever
under any Operating Lease in any fiscal year, unless, immediately
after giving effect to the incurrence of liability with respect
to such Operating Lease, projected Consolidated Rental Payments
for such fiscal year and each succeeding fiscal year do not
exceed $20,000,000 per fiscal year.
(k) Loans, Advances and Investments. Not make and not
permit any subsidiary to make any loan, advance, extension of
credit or capital contribution to, make any investment in, or
purchase or commit to purchase any stock or other securities or
evidences of Debt of, or interests in, any other Person, other
than: (i) expense accounts for and other advances to its
directors, officers and employees in the ordinary course of
business up to an aggregate amount of $500,000 outstanding at any
time; (ii) marketable obligations issued or unconditionally
guaranteed by the United States Government or issued by any of
its agencies and backed by the full faith and credit of the
United States of America, in each case maturing within one year
from the date of acquisition (and investments in mutual funds
investing primarily in those obligations); (iii) short-term
investment grade domestic and eurodollar certificates of deposit
or time deposits that are fully insured by the Federal Deposit
Insurance Corporation or are issued by commercial banks organized
under the Laws of the United States of America or any of its
states having combined capital, surplus, and undivided profits of
not less than $100,000,000 (as shown on its most recently
published statement of condition); (iv) commercial paper and
similar obligations rated "P-1" or better by Moody's Investors
Services, Inc., or "A-1" or better by Standard & Poors Ratings
Group (a division of McGraw Hill, Inc.); (v) investments in, and
advances to, wholly-owned subsidiaries, or by a wholly-owned
subsidiary in or to its parent; (vi) readily marketable tax-free
municipal bonds of a domestic issuer rated "aaa" or better by
Moody's Investors Service, Inc., or "AAA" or better by Standard &
Poors Ratings Group (a division of McGraw Hill, Inc.), and
maturing within one year from the date of issuance (and
investments in mutual funds investing primarily in those bonds);
(vii) promissory notes up to an aggregate amount of $3,000,000
outstanding at any time accepted as consideration for the
disposition of properties described on Schedule 7.02(h); (viii)
demand deposit accounts maintained in the ordinary course of
business; and (ix) current trade and customer accounts receivable
that are for goods furnished or services rendered in the ordinary
course of business and that are payable in accordance with
customary trade terms.
SECTION 7.03. Financial Covenants. The Borrower covenants to
the Agent and each Lender that so long as any Obligation shall
remain unpaid or any Lender shall have any obligation hereunder,
the Borrower will, unless the Majority Lenders shall otherwise
consent in writing:
(a) Maximum Adjusted Debt to EBITDAR Ratio. Maintain a
ratio, determined as of the last day of each fiscal quarter, of
(i) Adjusted Debt as of such date to (ii) Adjusted Consolidated
EBITDAR for the four fiscal quarters ending on such date of no
more than the amount set out below opposite such date:
Date Maximum Ratio
October 31, 1996 3.75 to 1
January 31, 1997, April 30, 1997, 3.50 to 1
July 31, 1997, and October 31, 1997
January 31, 1998 and thereafter 3.00 to 1
(b) Minimum Consolidated Tangible Net Worth. Maintain
Consolidated Tangible Net Worth, determined as of the last day of
each fiscal quarter, of at least (i) $115,000,000, plus (ii) an
amount equal to the greater of zero (0) and fifty percent (50%)
of the consolidated net earnings after taxes of the Borrower and
its subsidiaries determined in accordance with GAAP for the
period (taken as a single accounting period) from and including
November 1, 1996, to and including such day, plus (iii) an amount
equal to seventy-five percent (75%) of any Net Equity Issuance
Proceeds for the period (taken as a single accounting period)
from and including November 1, 1996, to and including such day.
(c) Maximum Consolidated Capital Expenditures. Not make
or incur, and not permit any of its consolidated subsidiaries to
make or incur, Consolidated Capital Expenditures, in any fiscal
year in excess of $25,000,000; provided that in the event the
actual Consolidated Capital Expenditures made or incurred during
the applicable fiscal year are less than $25,000,000 (such
difference being referred to as a "Carry-Over Amount"), the
permitted amount solely with respect to the immediately
succeeding fiscal year shall be increased by the lesser of (i)
$5,000,000 and (ii) such Carry-Over Amount.
(d) Minimum Fixed Charge Coverage Ratio. Maintain a ratio
of (i) Adjusted Consolidated EBITDAR to (ii) Consolidated Fixed
Charges, determined as of the last day of each fiscal quarter for
the twelve month period ending on such day, of at least the
amount set out below opposite the period in which such financial
quarter ends:
Date Minimum Ratio
October 31, 1996, January 31, 1.50 to 1
1997, April 30, 1997, July 31,
1997, and October 31, 1997
January 31, 1998 and thereafter 1.75 to 1
(e) Maximum Debt to Capitalization Ratio. Maintain a ratio
of (i) the sum of (A) Consolidated Funded Debt, plus (B) Capital
Lease Obligations of the Borrower and its subsidiaries to (ii)
the sum of (X) Consolidated Funded Debt, plus (Y) Consolidated
Net Worth, plus (Z) Capital Lease Obligations of the Borrower and
its subsidiaries, in each case, determined as of the last day of
each fiscal quarter, of no more than the amount set out below
opposite such date:
Date Maximum Ratio
October 31, 1996, January 31, 1997, 0.40 to 1
April 30, 1997, July 31, 1997,
October 31, 1997, January 31, 1998,
April 30, 1998, July 31,
1998, and October 31, 1998
January 31, 1999 and thereafter 0.35 to 1
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) either (i) the Borrower shall fail to make any payment
of principal on the Advances when the same becomes due, or (ii)
the Borrower shall fail to make any other payment on the
Obligations when the same becomes due and such failure shall
continue for five (5) days; or
(b) any representation or warranty made by the Borrower
herein or in any other Loan Document or by the Borrower (or any
of its officers) in connection with any Loan Document shall prove
to have been incorrect or misleading in any material respect when
made; or
(c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 7.02 on its part to be
performed or observed; or
(d) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document on its
part to be performed or observed and any such failure shall
remain unremedied for the earliest of (i) ten (10) business days
after written notice thereof shall have been given to the
Borrower by the Agent, (ii) ten (10) business days after the date
the Borrower discovers, or should have discovered, such failure,
and (iii) if such failure has existed for more that sixty (60)
days, five (5) business days after the earlier of (A) the date of
delivery by the Agent to the Borrower of written notice thereof,
and (B) the date that the Borrower discovers, or should have
discovered, such failure; or
(e) with respect to any Debt (other than Debt constituting
Obligations) of the Borrower or any subsidiary of the Borrower in
an aggregate principal amount outstanding in excess of $500,000,
the Borrower or such subsidiary shall fail to pay any principal
of or premium or interest on such Debt when the same becomes due
and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or any other
event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to cause
the holders of such Debt to accelerate, or to permit the holders
of such Debt to accelerate, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(f) (i) the Borrower or any of its subsidiaries shall
generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Borrower or
any of its subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or
other similar official for it or for any substantial part of its
property; or (ii) the Borrower or any of its subsidiaries shall
take any corporate action to authorize any of the actions set
forth in clause (i) above; or
(g) any judgment or order for the payment of money in
excess of $1,000,000 above any insurance coverage therefor shall
be rendered against the Borrower or any of its subsidiaries by
any Governmental Authority or quasi-governmental authority, and
either (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order, or (ii) there shall be
any period of thirty (30) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(h) any Plan shall have any Unfunded Liabilities, or any
Reportable Event shall occur in connection with any Plan; or
(i) the Borrower or any of its subsidiaries shall be the
subject of any proceeding or investigation pertaining to the
release by the Borrower, any of its subsidiaries, or any other
Person of any toxic or hazardous waste or substance into the
environment, or any violation of any federal, state or local
environmental, health or safety law or regulation, which would,
in either case, have a material adverse effect upon the
operations of the Borrower or any of its subsidiaries; or
(j) the acquisition by any Person, or two or more Persons
acting in concert (other than any Person or Persons who own,
prior to that acquisition, 20% or more of the outstanding shares
of the Borrower's voting stock), of beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or
more of the outstanding shares of the Borrower's voting stock; or
(k) the occurrence of an "Event of Default" as defined in
the Credit Agreement of even date herewith between NationsBank
and the Borrower;
then, and in any such event, the Agent shall, at the direction of
the Majority Lenders, by notice to the Borrower (i) declare the
Advance Commitment and the Letter of Credit Commitment and the
Advance Facility and the Letter of Credit Facility and the
obligations of each Lender under each of the Loan Documents, to be
terminated, whereupon the same shall forthwith terminate, and
(ii) declare the Obligations to be forthwith due and payable,
whereupon such Obligations shall become and be forthwith due and
payable, without presentment, demand, protest or further notice
of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that upon the occurrence of any Event
of Default described in Section 8.01(f)(i) above, (A) the Advance
Commitment and the Letter of Credit Commitment, and the obligations
of each Lender under each of the Advance Facility and the Letter
of Credit Facility, shall automatically be terminated, and (B) the
Obligations shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of any Loan Document, nor consent to any departure by
the Borrower therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Majority Lenders,
and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given,
provided that no amendment or waiver which (i) increases the
amount of any Lender's Commitment; (ii) decreases the interest
rates specified in Sections 3.06 or any fees payable to the
Lenders in Sections 2.04 and 4.07; (iii) extends the due date or
decreases the amount of any payments required hereunder; (iv)
changes the definition of "Majority Lenders" or "Pro Rata
Shares"; or (v) changes the provisions of this Section 9.01,
shall be effective unless the same is signed by all of the Lenders.
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telegraphic, telecopy, telex or cable communication)
and mailed, telegraphed, telexed, cabled or delivered, if to the
Borrower, at its address at 400 West 48th Avenue, P.O. Box 16601,
Denver, Colorado 80216, Attention: Stanley Ereckson, Jr.; and if
to the Agent, at its address at 901 Main Street, Dallas, Texas
75202, Attention: Kimberley Knop, with a copy to Porter & Hedges,
L.L.P., 700 Louisiana, 35th Floor, Houston, Texas 77002, Attention:
F. Walter Bistline, Jr.; or, as to each party, at such other address
as shall be designated by such party in a written notice to the other
party. All such notices and communications shall be effective upon
receipt, or if mailed, four (4) days after deposit in the United States
mails; if telegraphed, when delivered to the telegraph company; if
telexed, when confirmed by telex answerback; if telecopied, when verbally
confirmed by telephone; or if cabled, when delivered to the cable company,
except that notices and communications to the Agent pursuant to
Article II, III or IV shall not be effective until received by the Agent.
SECTION 9.03. No Waiver; Remedies. No failure on the part of
the Agent or any Lender to exercise, and no delay in exercising,
any right under any Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such
right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Payments Set Aside. To the extent that the
Borrower makes a payment or payments to the Agent or any of the
Lenders, or the Agent or any of the Lenders exercise their rights
of set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other
party under any bankruptcy law, real estate or federal law,
common law or equitable cause, then to the extent of such
recovery, the Obligation or part thereof originally intended to
be satisfied, and all such Liens, rights and remedies therefor,
shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or set-off had
not occurred.
SECTION 9.05. Costs, Expenses and Taxes.
(a) The Borrower agrees to pay on demand all "Costs and
Expenses," as hereinafter defined. "Costs and Expenses," as used
in this Agreement, shall mean (A) all costs, expenses, fees and
charges incurred by the Agent or its Affiliates (including,
without limitation, NationsBanc Capital Markets, Inc.) and all
fees for services (including disbursements) of the attorneys,
accountants, valuation experts and all professionals (and all
paraprofessionals and other staff employed by such professionals)
employed by the Agent or any such Affiliate from time to time in
any way or for any purpose arising out of, or relating to, the
Obligations of the Borrower, any of the Loan Documents or the
Agent's or such Affiliate's relationship or transactions with the
Borrower, including, without limitation, (i) the development,
preparation, negotiation, execution, delivery, syndication,
modification, review and administration of the Loan Documents,
(ii) the commencement, defense of or intervention in any court
proceeding in any way related to the Obligations of the Borrower
or the Loan Documents, or any other agreements contemplated by
the terms of this Agreement, (iii) the filing of a petition,
complaint, answer, motion or other pleadings, or the taking of
any other action in or with respect to any suit or proceeding
(bankruptcy or otherwise) relating to the Borrower or any Loan
Document, (iv) the enforcement of any of the Agent's or any
Lender's rights to collect any of the Obligations, (v) all costs
and expenses incurred by the Agent or any Affiliate internally
including, but not limited to, travel, food and lodging expenses
for employees, duplicating and document processing costs, and
internal auditing service expenses, and (vi) all audit costs,
appraisal costs and costs of searches, recordings and filings,
all recording and filing fees, all Taxes and all other similar
fees and disbursements; and (B) all costs, expenses, fees and
charges incurred by each Lender (including fees and disbursements
for services of attorneys and paralegals) in connection with the
matters described in clauses (ii), (iii) and (iv) above. The
Borrower also agrees to pay, and to save harmless the Agent and
the Lenders from any delay in paying, any tangibles, intangibles,
documentary stamp and other Taxes, if any, which may be payable
in connection with the execution and delivery of this Agreement
or any of the Loan Documents, or the recording of any hereof or
thereof, or in connection with any modification hereof or
thereof, any of which Taxes payable by the Agent or the Lenders
are to be part of the Costs and Expenses. All Costs and Expenses
provided for in this Section 9.05 may, at the option of the
Lenders, be charged and treated as a Borrowing comprised of Base
Rate Advances made by each Lender in accordance with its Pro Rata
Share.
(b) If any payment of principal of any Eurodollar Rate
Advance is made other than on the last day of the Interest Period
for such Advance, as a result of acceleration of the maturity of
the Notes pursuant to Section 8.01 or for any other reason, or if
any Eurodollar Rate Advance is converted to a Base Rate Advance
pursuant to Section 3.04(a), the Borrower shall, upon demand by
the Agent, pay to each Lender any amounts required to compensate
such Lender for any additional losses, costs or expenses which
such Lender may reasonably incur as a result of such payment
including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
by such Lender to fund or maintain such Advance.
SECTION 9.06. Right of Set-Off. Subject to the provisions of
Section 9.07, the Agent, each Lender and each Affiliate of each
Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by the Agent, such Lender or such Affiliate to or for the credit
or the account of the Borrower against any and all of the
Obligations, irrespective of whether or not any demand shall have
been made under any Loan Document and although such Obligations
may be contingent and unmatured. Each Lender agrees to promptly
notify the Agent after any such setoff and application made by
such Lender and the Agent shall promptly thereafter notify the
Borrower of such set-off and application. The Agent agrees
promptly to notify the Borrower after any set-off and application
made by the Agent; provided, however, that the Agent's failure to
notify the Borrower as set forth in this sentence and the
immediately preceding sentence shall not affect the validity of
such set-off and application. The rights of the Agent and each
Lender under this Section 9.06 are in addition to other rights
and remedies (including, without limitation, other rights of
set-off) which the Agent or any Lender may have.
SECTION 9.07. Sharing of Payments. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of the Advances
made by it (other than pursuant to Section 3.08 and Section
9.05(b)) in excess of its Pro Rata share of payments on account
of the Advances obtained by the other Lenders, such Lender shall
forthwith purchase from the other Lenders a participation in the
Advances made by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with the
other Lenders; provided; however, that if all or any portion of
such excess payment is thereafter received from such purchasing
Lender, such purchase from the other Lenders shall be rescinded
to the extent of such recovery and the other Lenders shall repay
to the purchasing Lender that proportion of the purchase price
received by it equal to (A) the amount recovered from the
purchasing Lender, divided by (B) the total amount of the
participation purchased by the purchasing Lender, together with
an amount equal to each such Lender's Pro Rata Share of any
interest or other amount payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees
that any Lender so purchasing a participation from any other
Lender pursuant to this Section 9.07 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 9.08. Indemnification.
(a) The Borrower hereby indemnifies and holds the Agent and
its Affiliates and each Lender, their respective attorneys and
agents (individually and collectively referred to for purposes of
this Section 9.08 as the "Indemnified Parties") harmless from and
against any and all claims (including, without limitation, causes
of action, cross-claims, counterclaims, rights of set-off and
recoupment), whether by any Affiliate or shareholder of the
Borrower, or by any creditor of the Borrower, or any Affiliate
thereof, which are at any time asserted against the Indemnified
Parties (together with all Costs and Expenses relating to the
defense of such claims) arising out of, or relating to, the
Indemnified Parties' relationship or transactions with the
Borrower or any of its Affiliates, including, without limitation,
(i) any claim for funds received by the Agent or any of the
Lenders and applied to the Obligations; (ii) any claims
contesting the validity or priority of the Liens granted to the
Agent for the benefit of the Lenders pursuant to the terms and
provisions of any of the Loan Documents; and (iii) any claims for
actions taken or not taken by any of the Indemnified Parties in
connection with, or otherwise resulting from, whether directly or
indirectly, the negotiation, structuring, funding, issuance or
administration of the Advances, Letters of Credit and all other
extensions of credit by the Lenders to or on behalf of the
Borrower; provided, however, that the Agent and each Lender
hereby agrees to refund to the Borrower any amounts paid to the
Agent or such Lender by the Borrower pursuant to the foregoing
indemnity to the extent that a court of competent jurisdiction
has found, pursuant to a "Final Order," as hereinafter defined,
that the liability asserted against the Indemnified Parties for
which such indemnity payment was made resulted primarily from the
Indemnified Parties' own willful misconduct or knowing and
intentional violation (individually and not as a co-conspirator
with the Borrower or any of its Affiliates) of any applicable
law, rule or statute, which violation is punishable as a criminal
offense. As used herein, a "Final Order" shall mean an order
entered by a court of competent jurisdiction which is not
interlocutory and as to which (i) the time to appeal or petition
for a writ of certiorari has expired with no appeals or petitions
for a writ of certiorari from such order having been taken, or
(ii) all appeals and petitions for writs of certiorari prosecuted
from such order have been exhausted. An used herein, "knowing
and intentional" violation of a law, rule or statute shall be
interpreted to mean that an Indemnified Party had knowledge both
of the applicable law, rule or statute which it violated and that
its act was a violation of such law, rule or statute.
(b) The Borrower hereby agrees to reimburse the Indemnified
Parties for all Costs and Expenses incurred by the Indemnified
Parties at any time from and after the date of this Agreement
relating in any way to any and all claims which fall within the
scope of the Borrower's indemnity obligations pursuant to Section
9.08(a). All such Costs and Expenses shall be payable by the
Borrower upon demand. At each Lender's option, such Lender may
reimburse itself for any such Costs and Expenses, and the amount
of any such reimbursement shall constitute additional Obligations
of the Borrower under this Agreement.
SECTION 9.09. Change in Accounting Principles. If any changes
in accounting principles from those used in the preparation of
the financial statements referred to in Section 6.01(e) are
hereafter required or permitted by GAAP, and are adopted by the
Borrower with the agreement of its independent certified public
accountants, and such changes result in a change in the method of
calculation or the interpretation of any of the financial
covenants, standards or terms found in Article VII or any other
provision of this Agreement, the Borrower agrees to amend any
such affected terms and provisions to reflect such changes in
GAAP with the result that the criteria for evaluating the
financial condition of the Borrower and its consolidated
subsidiaries shall be the same after such changes in GAAP as if
such changes had not been made.
SECTION 9.10. The Agent's Performance of Defaulted Acts. The
Agent may, but need not, following five (5) days prior notice to
the Borrower and so long as the Borrower shall have failed to
have made such payment or perform such act in a manner satisfactory
to the Lenders, make any payment or perform any act herein required
of the Borrower in any form and manner deemed expedient by the Lenders.
All monies paid for any of the purposes herein authorized and all
expenses paid or incurred in connection therein, including reasonable
attorney's fees shall constitute Obligations and bear interest at
the rate provided herein for Base Rate Advances.
SECTION 9.11. Binding Effect; Assignments; Participations.
This Agreement shall become effective when it shall have been executed
by the Borrower, the Agent and each Lender and thereafter shall
be binding upon and inure to the benefit of the Borrower, the
Agent, the Lenders and their respective successors and assigns,
except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written
consent of the Lenders. Each Lender may assign (in minimum
amounts of $5,000,000 and with the consent of the Borrower and
the Agent) to one or more banks or other entities all or any part
or portion of, or may grant participations to one or more banks
or other entities in all or any part or portion of its rights and
obligations hereunder (including, without limitation, its
Commitment, its Note, its Advances or its Letters of Credit).
Upon, and to the extent of, any assignment (unless otherwise
stated therein) made by a Lender hereunder and payment of a
processing fee in the amount of $3,000 to Agent for its own
account, the assignee or purchaser of such assignment shall be a
Lender hereunder for all purposes of this Agreement. Without
limiting the foregoing, each assignee and each purchaser of an
assignment or participation shall, to the fullest extent
permitted by law, have the same rights and benefits hereunder
with respect to the rights and benefits so assigned or
participated as it would have if it were a Lender hereunder.
SECTION 9.12. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS. ANY DISPUTE BETWEEN THE BORROWER, THE AGENT OR
ANY OF THE LENDERS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH ANY OF THE LOAN DOCUMENTS AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS AND NOT THE
CONFLICTS OF LAW PROVISIONS OF THE STATE OF TEXAS.
SECTION 9.13. CONSENT TO JURISDICTION.
(a) EXCEPT AS PROVIDED IN SECTION 9.13(b), THE BORROWER,
THE AGENT AND EACH LENDER AGREE THAT ALL DISPUTES BETWEEN THEM
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH ANY OF
THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS
RELATED THERETO AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS
LOCATED IN DALLAS COUNTY, TEXAS, BUT THE BORROWER, THE AGENT AND
EACH LENDER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF DALLAS COUNTY,
TEXAS. THE BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(b) THE BORROWER AGREES THAT THE AGENT AND EACH LENDER
SHALL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS
PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH
PERSON. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE AGENT
OR ANY LENDER TO REALIZE ON THE BORROWER'S PROPERTY, THE BORROWER
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH
PERSON. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE AGENT OR ANY LENDER HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH.
SECTION 9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT
AND EACH LENDER EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN OR AMONG THE BORROWER, THE AGENT OR ANY OF THE
LENDERS ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
ANY OF THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE
TRANSACTIONS RELATED THERETO. THE BORROWER, THE AGENT AND EACH
LENDER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
JURY.
SECTION 9.15. Term. This Agreement shall remain in full force
and effect until the later to occur of (i) the Termination Date,
and (ii) the repayment in full of all the Obligations and the
extinguishment of all Letters of Credit issued hereunder.
SECTION 9.16. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 9.17. Lenders' Creation of Security Interest.
Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or
any portion of its rights under this Agreement (including,
without limitation, Obligations owing to it and the Note held by
it) in favor of any Federal Reserve bank in accordance with
Regulation A of the Federal Reserve Board.
ARTICLE X
THE AGENT
SECTION 10.01. Appointment. Each Lender hereby designates and
appoints NationsBank as its Agent under the Loan Documents, and
each Lender hereby irrevocably authorizes the Agent to take such
action on its behalf under the provisions of the Loan Documents
and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or
collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the
Majority Lenders, and such instructions shall be binding upon all
Lenders and all holders of Notes; provided, however, that the
Agent shall not be required to take any action which exposes the
Agent to personal liability or which is contrary to any Loan
Document or applicable law.
SECTION 10.02. Agent's Reliance. Etc. Neither the Agent nor any
of its Affiliates, directors, officers, agents or employees shall
be liable for any action taken or omitted to be taken by it or
then under or in connection with any Loan Document, except for
its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (a) may
treat the payee of any Note as the holder thereof until the Agent
has received written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to the Agent
(together with the processing fee described in Section 9.11); (b)
may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or
representations made in or in connection with any Loan Document;
(d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or
conditions of any Loan Document or to inspect the property
(including the books and records) of the Borrower; (e) shall not
be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of
any Loan Document or collateral covered thereby or any other
instrument or document furnished pursuant thereto; and (f) shall
incur no liability under or in respect of any Loan Document by
acting upon any notice, consent, certificate or other instrument
or writing (which may be by telegram, cable, telecopy or telex)
believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 10.03. NationsBank and Affiliates. With respect to its
Commitment, the Advances made by it, the Note issued to it and
the Letters of Credit by it, NationsBank shall have the same
rights and powers under the Loan Documents as any other Lender
and may exercise the same as though it were not the Agent, and
the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include NationsBank in its individual capacity.
NationsBank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally
engage in any kind of business with, the Borrower and any person
or entity who may do business with or own securities of the
Borrower, all as if NationsBank were not the Agent and without
any duty to account therefor to the Lenders.
SECTION 10.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or
any of its Affiliates or any other Lender and based on the
financial statements referred to in Section 6.01 and such other
documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any of its Affiliates or any
other Lender and based on such documents and information an it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan
Documents.
SECTION 10.05. Indemnification. The Lenders agree to indemnify
the Agent and its Affiliates (to the extent not reimbursed by the
Borrower) ratably according to their Pro Rata Shares, from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Agent or any of
its Affiliates in any way relating to or arising out of any Loan
Document, or any action taken or omitted by the Agent or any of
its Affiliates pursuant to the Loan Document, provided that no
Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the
Agent's or any of its Affiliates' gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender
agrees to reimburse the Agent and its Affiliates promptly upon
demand for its Pro Rata Share of any reasonable out-of-pocket
expenses (including counsel fees) incurred by the Agent or any of
its Affiliates in connection with the preparation, execution,
administration, or enforcement of, or legal advice in respect of
rights or responsibilities under, the Loan Documents, or any of
them, to the extent that the Agent or such Affiliate is not
reimbursed for such expenses by the Borrower.
SECTION 10.06. Successor Agent. The Agent may resign at any time
as Agent under the Loan Documents by giving written notice
thereof to the Lenders and the Borrower. Upon any such
resignation, all of the Lenders shall have the right to appoint a
successor Agent thereunder. If no successor Agent shall have
been so appointed by all of the Lenders, and shall have accepted
such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance
of any appointment as Agent under the Loan Documents 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 the Loan
Documents. After any retiring Agent's resignation or removal as
Agent under the Loan Documents, the provisions of this Article X
shall continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under the Loan Documents.
SECTION 10.07. Invalidated Payments. If any amounts distributed
by the Agent to a Lender are subsequently returned or repaid by
the Agent to the Borrower or any of its representatives or
successors in interest, whether by court order, settlement or
otherwise, such Lender shall, promptly upon its receipt of notice
thereof from the Agent, pay to the Agent such amount. If any
such amounts are recovered by the Agent from the Borrower or any
of its representatives or successors in interest, the Agent shall
redistribute such recovered amounts to the Lenders on the same
basis as such amounts were originally distributed. The obligations
of the Lenders and the Agent under this Section 10.07 shall survive
the repayment of the Notes and the termination of the Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
VICORP RESTAURANTS, INC.
By: /s/ Michael R. Kinnen
---------------------
Name: Michael R. Kinnen
Title: Treasurer
Pro Rata Share: 71.42857% NATIONSBANK OF TEXAS, N.A., as Agent and a
Lender
By: /s/ Frank M. Johnson
--------------------
Frank M. Johnson
Senior Vice President
Domestic Lending Office:
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Frank M. Johnson
Eurodollar Lending Office:
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Frank M. Johnson
Pro Rata Share: 28.57143% COLORADO NATIONAL BANK, as a Lender
By: /s/ Andrea C. Koeneke
---------------------
Andrea C. Koeneke
Vice President
Domestic Lending Office:
950 17th Street, Suite 300
Denver, Colorado 80202
Attn: Andrea C. Koeneke
Eurodollar Lending Office:
950 17th Street, Suite 300
Denver, Colorado 80202
Attn: Andrea C. Koeneke
U.S. $5,000,000
CREDIT AGREEMENT
Dated as of October 31, 1996
By and Between
VICORP RESTAURANTS, INC.
as the Borrower
and
NATIONSBANK OF TEXAS, N.A.
as the Lender
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1
1.01 Certain Defined Terms 1
1.02 Computation of Time Periods 7
1.03 Accounting Terms; Fiscal Periods 7
1.04 Other Definitional Provisions 7
ARTICLE II THE FACILITY AND COMMITMENT 7
2.01 The Advance Facility 7
2.02 The Advance Commitment 7
2.03 Fees 8
2.04 Reduction of the Advance Commitment 8
2.05 Payments and Computations 8
2.06 Increased Capital or Costs and Reduced Return 8
2.07 Interest Rate Contracts 9
ARTICLE III THE ADVANCE FACILITY 9
3.01 The Advances 9
3.02 Making the Advances 9
3.03 Conversion or Continuation of Advances 9
3.04 Additional Provisions Applicable to Eurodollar
Rate Advances 10
3.05 Note; Repayment 11
3.06 Interest 11
3.07 Additional Interest on Eurodollar Rate Advances 12
3.08 Pre-payments 12
3.09 Maximum Interest Rate 12
3.10 Interest Recapture 13
ARTICLE IV CONDITIONS OF EXTENSIONS OF CREDIT 13
4.01 Conditions Precedent to Initial Extension of Credit 13
4.02 Conditions Precedent to Each Extension of Credit,
Conversion or Continuation 13
ARTICLE V REPRESENTATIONS AND WARRANTIES 14
5.01 Representations and Warranties of the Borrower 14
ARTICLE VI COVENANTS OF THE BORROWER 14
6.01 Affirmative Covenants 14
6.02 Negative Covenants 14
6.03 Financial Covenants 14
ARTICLE VII EVENTS OF DEFAULT 15
7.01 Events of Default 15
ARTICLE VIII MISCELLANEOUS 16
8.01 Amendments, Etc. 16
8.02 Notices, Etc. 16
8.03 No Waiver; Remedies 16
8.04 Payments Set Aside 16
8.05 Costs, Expenses and Taxes 17
8.06 Right of Set-Off 17
8.07 Indemnification 17
8.08 Change in Accounting Principles 18
8.09 The Lender's Performance of Defaulted Acts 18
8.10 Binding Effect; Assignments; Participations 18
8.11 CHOICE OF LAW 19
8.12 CONSENT TO JURISDICTION 19
8.13 WAIVER OF JURY TRIAL 19
8.14 Term 19
8.15 Execution in Counterparts 19
8.16 Lender's Creation of Security Interest 19
CREDIT AGREEMENT
This Credit Agreement is made as of October 31, 1996 by and
between VICORP Restaurants, Inc., a Colorado corporation with an
office located at 400 West 48th Avenue, P.O. Box 16601, Denver,
Colorado 80216 (the "Borrower"), and NationsBank of Texas, N.A.,
a national banking association (the "Lender"), said Credit
Agreement, as the same may be amended, modified or supplemented
from time to time, being hereinafter referred to as the "Agreement").
PRELIMINARY STATEMENT
---------------------
The Borrower and the Lender have entered into this Agreement
in order to set forth the terms and conditions under which the
Lender will, from time to time, make loans and extend other
financial accommodations to or for the benefit of the Borrower.
NOW, THEREFORE, the Borrower and the Lender agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following capitalized terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural form of the terms defined):
"Adjusted Consolidated EBITDAR" means, for any period with
respect to the Borrower and its subsidiaries, the sum of the
amounts for such period, of (i) Operating Income, plus (ii)
depreciation, amortization and other non-cash charges deducted in
computing operating income, plus (iii) Consolidated Rental Payments.
"Advance" means an advance by the Lender to the Borrower
pursuant to Article III, and refers to a Base Rate Advance or a
Eurodollar Rate Advance (each of which shall be a "Type" of Advance).
"Advance Commitment" has the meaning specified in Section 2.02.
"Advance Facility" has the meaning specified in Section 2.01.
"Affiliate" means, with respect to any Person, any other
Person controlled by, controlling or under common control with
such Person, or having similar shareholders owning at least five
percent (5%) of such Person and such other Person, whether such
control be direct or indirect. All of the Borrower's officers,
shareholders holding in excess of five percent (5%) of any class
of capital stock of the Borrower, directors, subsidiary corporations,
joint ventures and partners shall be deemed to be the Borrower's
Affiliates for purposes of this Agreement.
"Aggregate Outstandings" means, at any time, the aggregate
principal amount of the Advances outstanding at such time.
"Alternate Base Rate" means, for any day, the greater of (a)
the sum of the Federal Funds Rate plus 0.5%, or (b) the annual
interest rate most recently announced by the Lender as its prime
rate in effect at its principal office, automatically fluctuating
upward and downward with and as specified in each announcement
without special notice to the Borrower or any other Person (which
prime rate may not necessarily represent the lowest or best rate
actually charged to a customer).
"Applicable Commitment Fee" means, on any day, the commitment
fee percentage based on the ratio of debt to capitalization, calculated
as set forth in the definition of "Applicable Margin", as follows:
Applicable
Commitment
Fee
Ratio of debt to capitalization Percentage
- ------------------------------------- -----------
Greater than or equal to 0.35 to 1.0 0.500%
Less than 0.35 to 1.0 but greater than
or equal to 0.30 to 1.0 0.500%
Less than 0.30 to 1.0 but greater than
or equal to 0.20 to 1.0 0.375%
Less than 0.20 to 1.0 0.250%
"Applicable Lending Office" means the Lender's Domestic Lending
Office, in the case of a Base Rate Advance, and the Lender's Eurodollar
Lending Office, in the case of a Eurodollar Rate Advance.
"Applicable Margin" means, on any day, the interest margin
over the Eurodollar Rate, based on a ratio of debt to capitalization,
as follows:
Applicable
Margin for
Eurodollar
Rate
Ratio of debt to capitalization Advances
- ------------------------------- ----------
Greater than or equal to 0.35 to 1.0 1.750%
Less than 0.35 to 1.0 but greater than
or equal to 0.30 to 1.0 1.625%
Less than 0.30 to 1.0 but greater than
or equal to 0.20 to 1.0 1.500%
Less than 0.20 to 1.0 1.250%
For purposes of determining the Applicable Margin, (i) the ratio
of debt to capitalization shall be the ratio of (i) the sum of
(A) Consolidated Funded Debt, plus (B) Capital Lease Obligations
of the Borrower and its subsidiaries, to (ii) the sum of (x)
Consolidated Funded Debt, plus (y) Consolidated Net Worth, plus
(z) Capital Lease Obligations of the Borrower and its subsidiaries,
and shall be calculated quarterly as of the last day of the fiscal
quarter for which the most recent quarterly financial statements have
been delivered pursuant to Section 7.01(b) of the Multi-Bank Credit
Agreement, and shall apply to all Advances made on or after the date
such financial statements are delivered, until recalculated in accordance
with this paragraph. If Borrower fails to furnish such financial
statements (or the related compliance certificate) when required
pursuant to Section 7.02(b) of the Multi-Bank Credit Agreement,
then the highest appplicable margin identified above shall apply
to all subsequent Advances until the Borrower furnishes the
required financial statements and compliance certificate. The
initial calculation as of the Closing Date shall be based upon
the financial statements dated as of July 31, 1996.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
101 et seq.), as amended from time to time.
"Base Rate Advance" means an Advance that bears interest as provided in
Section 3.06(a).
"Benefit Plan" means an employee benefit plan as defined in
Section 3(35) of ERISA (other than a Multi-employer Plan) in
respect of which the Borrower or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer"
as defined in Section 3(5) of ERISA.
"Borrowing" means a borrowing consisting of one or more
Advances of the same Type made on the same day by the Lender.
"Business Day" means a day of the year on which banks are
not required or authorized to close in Dallas, Texas, and if the
applicable Business Day relates to any Eurodollar Rate Advance, a
day of the year on which dealings are carried on in the London
interbank market.
"Capital Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) by that Person
as lessee that, in conformity with GAAP, is or should be
accounted for as a capital lease on the balance sheet of such Person.
"Capital Lease Obligations" means, as applied to any Person,
the obligations of such Person as lessee under leases that are
Capital Leases.
"Consolidated Fixed Charges" means, for any period, (i)
consolidated gross cash payments of interest expense (including
the interest component of Capital Leases) of the Borrower and its
subsidiaries, including, without limitation, all commissions,
discounts and other fees and charges owed with respect to letters
of credit, all as determined in conformity with GAAP, plus (ii)
Consolidated Rental Payments for such period, plus (iii) all
scheduled principal payments required to be made by the Borrower
or any of its subsidiaries during such period with respect to any Debt.
"Consolidated Funded Debt" means, as at any date of
determination, all interest bearing indebtedness, obligations and
other liabilities of the Borrower and its subsidiaries for
borrowed money or evidenced by bonds, debentures, acceptances,
notes or other similar instruments (whether such interest arises
as a result of accrual or accretion).
"Consolidated Net Worth" means, as at any date of
determination, the amount by which consolidated total assets of
the Borrower and its subsidiaries, determined in conformity with
GAAP, exceed consolidated total liabilities of the Borrower and
its subsidiaries, determined in conformity with GAAP.
"Consolidated Rental Payments" means, for any period, the
aggregate amount of all rents paid or accrued (net of sublease
rents paid or accrued) under all Operating Leases of the Borrower
or any of its consolidated subsidiaries as lessee, as determined
in conformity with GAAP.
"Conversion Date" means, with respect to any Advance, the
date that such Advance, if a Base Rate Advance, is converted into
a Eurodollar Rate Advance, or, if a Eurodollar Rate Advance, is
converted into a Base Rate Advance, in either case in accordance
with the procedures described in Section 3.03.
"Costs and Expenses" has the meaning specified in Section 8.05.
"Debt" means, as applied to any Person, (i) indebtedness for
borrowed money of such Person, (ii) obligations of such Person
evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts
payable and accrued expenses arising in the ordinary course of
business but only if and so long as the same are payable on
available trade terms, (iv) Capital Lease Obligations of such
Person, (v) obligations of such Person under direct or indirect
guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i)
through (iv) above, and (vi) liabilities of such Person in
respect of unfunded vested benefits under Benefit Plans.
"Default" means an event which with the lapse of time or the
giving of notice or both would constitute an Event of Default.
"Domestic Lending Office" means the office of the Lender
specified as its "Domestic Lending Office" on the signature pages
hereof or such other office as the Lender may from time to time
specify to the Borrower.
"Eligible Interest Rate Contract" has the meaning specified
in Section 2.07.
"ERISA" means the Employee Retirement Income Security Act of
1974, any amendments thereto, any successor statute, and any
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means any (i) corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the IRC) as the Borrower, (ii)
partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of Section
414(c) of the IRC) with the Borrower, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of
the IRC) as the Borrower, any corporation described in clause (i)
above or any partnership or trade or business described in clause
(ii) above.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Eurodollar Lending Office" means the office of the Lender
specified as its "Eurodollar Lending Office" on the signature
pages hereof, or such other office as the Lender may from time to
time specify to the Borrower.
"Eurodollar Rate" means, for any Eurodollar Rate Advance for
any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, the term
"Eurodollar Rate" shall mean, for any Eurodollar Rate Advance for
any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period;
provided, however, that if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates.
"Eurodollar Rate Advance" means an Advance which bears interest
as provided in Section 3.06(b).
"Eurodollar Rate Reserve Percentage" means, for any Interest
Period for any Eurodollar Rate Advance, the reserve percentage
applicable during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which
any such percentage shall be so applicable), with respect to the
Lender, under regulations issued from time to time by the Board
of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement), if any, for the Lender, with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 7.01.
"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 members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the immediately preceding Business
Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average
of the quotations for such day on such transactions received by
the Lender from three federal funds brokers of recognized
standing selected by it.
"Final Order" has the meaning specified in Section 8.07.
"GAAP" means generally accepted accounting principles set
forth in the rules, regulations, statements, opinions and
pronouncements of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board (or
agencies with similar functions and of comparable stature and
authority within the accounting profession), which are applicable
to the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any
federal, state, city, town, municipality, county, local or other
political subdivision thereof or thereto and any department,
commission, board, bureau, instrumentality, agency or other
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Indemnified Parties" has the meaning specified in Section 8.07(a).
"Interest Period" means, for each Eurodollar Rate Advance, a
period of one (1), two (2) or three (3) months, as the Borrower
may select, upon notice received by the Lender not later than
noon (Dallas time) on the third Business Day prior to the first
day of such period, and commencing on the date of such Advance,
the date of continuation of such Advance pursuant to Section 3.03
or the date of conversion of a Base Rate Advance pursuant to
Section 3.03; provided, however, that:
(i) the aggregate principal amount of all Advances having
Interest Periods ending after any Principal Repayment Date shall
not exceed the principal amount of all Advances permitted to be
outstanding after giving effect to the principal payments to be
made on or prior to such Principal Repayment Date;
(ii) the Borrower may not select any Interest Period that
ends after the Maturity Date;
(iii) Interest Periods commencing on the same date for
Advances shall be of the same duration; and
(iv) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that if such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such
interest Period shall occur on the next preceding Business Day.
"Interest Period Expiration Date" means the last day of
any Interest Period for any Eurodollar Rate Advance.
"Interest Rate Contracts" means interest rate swap
agreements, interest rate collar agreements, options on any of
the foregoing, or any other agreements or arrangements designed
to provide protection against fluctuations in interest rates.
"IRC" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any
successor statute and any regulations or guidance promulgated
thereunder.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security
arrangement, security interest, encumbrance for the payment of
money, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or
nature whatsoever.
"Loan Documents" means this Agreement, the Note, the
Multi-Bank Credit Agreement, and each of the other instruments,
documents and agreements executed and/or delivered by the
Borrower in connection herewith and therewith.
"Maturity Date" means October 30, 1997.
"Maximum Amount" and "Maximum Rate" respectively mean
the maximum non-usurious amount and the maximum non-usurious rate
of interest that, under applicable law, the Lender is permitted
to contract for, charge, take, reserve or receive on the Obligations.
"Multi-Bank Credit Agreement" means the Credit
Agreement of even date herewith among the Borrower, the financial
institutions named therein, and NationsBank of Texas, N.A., as
agent for itself and such other financial institutions, evidencing
a total line of credit up to $35,000,000, consisting of (i) a revolving
credit facility and (ii) a letter of credit facility, as such Credit
Agreement may be amended from time to time with the consent of the Lender
hereunder.
"Multiemployer Plan" means a Plan maintained pursuant
to a collective bargaining agreement or any other arrangement to
which the Borrower or any ERISA Affiliate is a party and to which
more than one employer is obligated to make contributions.
"Note" has the meaning specified in Section 3.05.
"Notice of Borrowing" has the meaning specified in Section 3.02(a).
"Notice of Continuation or Conversion" has the meaningspecified
in Section 3.03(b).
"Obligations" means and includes all loans, advances,
debts, liabilities, obligations, covenants and duties owing to
the Lender from the Borrower of any kind or nature, present or
future, arising under any of the Loan Documents, whether or not
for the payment of money, whether arising by reason of an
extension of credit, opening of a letter of credit, loan,
guaranty, indemnification or in any other manner, whether direct
or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising and the performance obligations of
the Borrower under any Eligible Interest Rate Contracts. The
term "Obligations" includes, without limitation, the principal
amount of all Advances and interest, charges, expenses, fees,
attorneys' and paralegals' fees and any other sums chargeable to
the Borrower under this Agreement.
"Operating Lease" means, as applied to any Person, any
lease of any property (whether real, personal or mixed) by that
Person as lessee which is not a Capital Lease.
"PBGC" means the Pension Benefit Guaranty Corporation
and any Person succeeding to the functions thereof.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Plan" means an employee pension benefit plan that is
covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the IRC as to which the Borrower
or any ERISA Affiliate may have any liability.
"Principal Repayment Date" means any date on which an
installment of the aggregate outstanding principal amount of the
Advances is due under the Note.
"Prior Agreement" means the Second Amended and Restated
Credit Agreement dated as of June 18, 1993, among Borrower, the
financial institutions named therein as lenders, and Citibank,
N.A., as agent for such lenders, as amended.
"Rate Adjustment Period" means a period (i) commencing
on the first day of the month next succeeding the date that the
Lender receives internal financial statements acceptable to it
demonstrating that the Borrower has maintained, for two (2)
consecutive fiscal quarters, the Required Rate Adjustment Level,
and (ii) continuing for so long as the Borrower continues to
maintain such Required Rate Adjustment Level.
"Reportable Event" means any of the events described in
Section 4043 of ERISA or the regulations issued thereunder.
"Required Rate Adjustment Level" means a ratio of
Adjusted Consolidated EBITDAR to Consolidated Fixed Charges,
measured as of the end of the most recently ended fiscal quarter
for the period of four fiscal quarters ending on such date, of at
least 1.75 to 1.
"Single Employer Plan" means a Plan maintained by the
Borrower or any ERISA Affiliate for employees of the Borrower or
such ERISA Affiliate.
"Taxes" means, for any Person, taxes, assessments or
other governmental charges or levies imposed upon it, its income,
or any of its properties, franchises or assets.
"Termination Date" means the earliest to occur of (i)
the Maturity Date, or (ii) the termination in whole of the
Advance Commitment pursuant to Section 7.01.
"Unfunded Liabilities" means, (i) in the case of a
Single Employer Plan, the amount, if any, by which the present
value of all vested nonforfeitable benefits under such Plan
exceeds the fair market value of all Plan assets allocable to
such benefits, all determined as of the most recent valuation
date for such Plan, and (ii) in the case of a Multiemployer Plan,
the withdrawal liability of the Borrower or any ERISA Affiliate
under such Plan.
"Unused Commitment" means, at any time, the excess of
the Advance Commitment over the Aggregate Outstandings at such time.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"
and the words "to" and "until" each means "to but excluding."
SECTION 1.03. Accounting Terms; Fiscal Periods. Except as
otherwise permitted pursuant to Section 8.08 all accounting terms
not specifically defined herein shall be construed in accordance
with GAAP. All references in this Agreement to any fiscal period
shall refer to a fiscal period of the Borrower, unless otherwise
specified.
SECTION 1.04. Other Definitional Provisions. References to
"Sections", "Articles", and "Exhibits" shall be to Sections,
Articles, and Exhibits, respectively, of this Agreement unless
otherwise specifically provided. Certain defined terms used in
sections which are incorporated herein by reference to the Multi-
Bank Credit Agreement shall have the meanings assigned to such
terms in the Multi-Bank Credit Agreement.
ARTICLE II
THE FACILITY AND COMMITMENT
SECTION 2.01. The Advance Facility. On and subject to the
terms and conditions hereinafter set forth the Lender agrees to extend
credit and other financial accommodations of the kind described
below to the Borrower, from time to time, on any Business Day
during the period from the date hereof until the Termination Date
by making Advances to the Borrower pursuant to Article III (the
"Advance Facility").
SECTION 2.02. The Advance Commitment. The credit extended by
the Lender by making Advances under the Advance Facility shall be
in an aggregate principal amount of Advances not to exceed
$5,000,000 at any time outstanding (the "Advance Commitment"),
during the period from the date hereof to the Termination Date.
The Borrower also agrees to pay to the Lender a commitment fee on
the average daily Unused Commitment from the date of this
Agreement until the Termination Date equal to the Applicable
Commitment Fee per annum. Such commitment fee shall be payable
on the last day of each March, June, September and December,
commencing December 31, 1996, during the term of this Agreement,
and on the Termination Date.
SECTION 2.03. Fees. The Borrower agrees to pay the Lender the
upfront fee described in the fee letter agreement of even date
herewith between the Borrower and the Lender.
SECTION 2.04. Reduction of the Advance Commitment. The Borrower
shall have the right, upon at least thirty (30) Business Days'
notice to the Lender, to terminate in whole or reduce in part the
Advance Commitment by an amount not exceeding the Unused Commitment;
provided, however, that each partial reduction shall be in the amount
of $1,000,000 and in integral multiples of $1,000,000 in excess of that
amount.
SECTION 2.05. Payments and Computations.
(a) The Borrower shall make each payment hereunder by
wire transfer of immediately available funds not later than Noon
(Dallas time) on the day when due in United States Dollars to the
Lender, at the Lender's address referred to in Section 8.02.
(b) The Borrower hereby authorizes the Lender, if and
to the extent payment owed to the Lender is not made when due
hereunder, to charge from time to time against any or all of the
Borrower's accounts with the Lender any amount so due, or, upon
notice to the Borrower, to make Base Rate Advances in the amount
of and in payment of such amounts.
(c) All computations of interest on Base Rate Advances
shall be made by the Lender, on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest is payable. All computations
of interest on Eurodollar Rate Advances and of fees (including,
without limitation, all computations of interest pursuant to
Section 3.07) shall be made by the Lender, on the basis of a year
of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in
the period for which such interest or fees are payable. Each
determination by the Lender of an interest rate hereunder shall
be conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder shall be stated to
be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment
of interest or fees, as the case may be; provided, however, that
if such extension would cause payment of interest on or principal
of Eurodollar Rate Advances to be made in the next following
calendar month, such payment shall be made on the immediately
preceding Business Day.
SECTION 2.06. Increased Capital or Costs and Reduced Return.
(a) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve
requirements included in the Eurodollar Rate Reserve Percentage)
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 (whether or not having the force of
law), there shall be any increase in the cost to the Lender of
agreeing to make or making, funding or maintaining Eurodollar
Rate Advances, by an amount deemed by the Lender to be material,
then the Borrower shall, from time to time, promptly following
demand by the Lender, pay to the Lender such additional amount or
amounts as will compensate the Lender for such increased cost.
(b) If after the date hereof, the Lender shall have
determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by the Lender (or its Applicable Lending Office) with any request
or directive regarding capital adequacy (whether or not having
the force of law) of any such Governmental Authority, central
bank or comparable agency, has or would have the effect of
reducing the rate of return on the Lender's capital as a
consequence of its obligations hereunder to a level below that
which the Lender could have achieved but for such adoption,
change or compliance by an amount deemed by the Lender to be
material, then the Borrower shall, from time to time, promptly
following demand by the Lender, pay to the Lender, such
additional amount or amounts as will compensate the Lender for
such reduction.
(c) The Lender agrees to promptly notify the Borrower
of any event of which the Lender has knowledge, occurring after
the date hereof, which will entitle the Lender to compensation
pursuant to this Section 2.06 and will designate a different
Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in
the judgment of the Lender, be otherwise disadvantageous to the
Lender. A certificate of the Lender claiming compensation under
this Section 2.06 and setting forth the additional amount or
amounts to be paid to the Lender hereunder, submitted to the
Borrower, shall be conclusive in the absence of manifest error.
In determining such amount, the Lender may use any reasonable
averaging and attribution methods.
SECTION 2.07. Interest Rate Contracts. At any time the Lender
may, but shall have no obligation to, enter into Interest Rate
Contracts with respect to the Advances, provided that the
notional amount for all such Interest Rate Contracts in effect at
any time shall not exceed $5,000,000 in the aggregate, and each
such Interest Rate Contract shall be deemed an "Eligible Interest
Rate Contract" (whether or not the aggregate notional amount
subsequently exceeds such limit).
ARTICLE III
THE ADVANCE FACILITY
SECTION 3.01. The Advances. The Lender agrees, on the terms and
conditions hereinafter set forth, to make Advances to the
Borrower from time to time on any Business Day during the period
from the date hereof until the Termination Date in an amount not
to exceed the Advance Commitment. Each Advance made by the
Lender shall be in an amount not less than $250,000. Each
Borrowing shall consist of Advances made on the same day by the
Lender. Within the limits of the Advance Commitment, the
Borrower may borrow pursuant to this Section 3.01, prepay
pursuant to Section 3.08, and reborrow under this Section 3.01.
SECTION 3.02. Making the Advances.
(a) Each Borrowing shall be made on notice by the Borrower
to the Lender, given not later than 12:00 noon (Dallas time) (i)
in the case of a Borrowing comprised of Base Rate Advances, on
the date of the proposed Borrowing; and (ii) in the case of a
Borrowing comprised of Eurodollar Rate Advances, on the third
Business Day prior to the date of the proposed Borrowing;
provided, however, that if a Default or an Event of Default has
occurred and is continuing, the Borrower shall not be entitled to
request Borrowings comprised of Eurodollar Rate Advances and the
Lender shall not be required to make any Advances. Each such
notice of a borrowing (a "Notice of Borrowing") shall be by
telephone, confirmed immediately in writing (whether by telecopy,
telex, cable or otherwise), in substantially the form of Exhibit A,
specifying therein the requested (i) date of such Borrowing
(which shall be a Business Day); (ii) Type of Advances comprising
such Borrowing; (iii) amount of such Borrowing; and (iv) Interest
Period for such Advance in the case of a requested Borrowing
comprised of Eurodollar Rate Advances. Upon fulfillment of the
applicable conditions set forth in Article IV, the Lender will
make same day funds available to the Borrower at the Lender's
address referred to in Section 8.02 in an amount equal to the
amount requested by the Borrower for such Borrowing on the date
requested by the Borrower therefor.
(b) Each Notice of Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Borrowing that the
related Notice of Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify the Lender
against any loss, cost or expense incurred by the Lender as a
result of any failure by the Borrower to fulfill, on or before
the date specified in such Notice of Borrowing for such
Borrowing, the applicable conditions set forth in Article V,
including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
by the Lender to fund the Advance to be made by the Lender as
part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
SECTION 3.03. Conversion or Continuation of Advances.
(a) The Borrower shall have the option (i) to convert at
any time all or any part of the outstanding Base Rate Advances
comprising the same Borrowing into one or more Eurodollar Rate
Advances, each for an Interest Period commencing on the applicable
Conversion Date; (ii) to convert on any Interest Period Expiration
Date all of the outstanding Eurodollar Rate Advances comprising the
same Borrowing into one or more Base Rate Advances; or (iii) to
continue on any Interest Period Expiration Date all or any part of
outstanding Eurodollar Rate Advances comprising the same Borrowing
as one or more Eurodollar Rate Advances, each for an Interest Period
commencing on such Interest Period Expiration Date; provided, however,
that (A) if the Borrower shall not have exercised its options set
forth in either clauses (ii) or (iii) of this Section 3.03(a) with
respect to any Eurodollar Rate Advances comprising a Borrowing by
delivery to the Lender of a Notice of Continuation or Conversion in
accordance with the terms of Section 3.03(b), the Borrower shall
be deemed to have irrevocably elected to convert such Eurodollar
Rate Advances into Base Rate Advances on the Interest Period
Expiration Date for such Advances, and (B) if a Default or an
Event of Default has occurred and is continuing the Borrower
shall not be entitled to convert Base Rate Advances or continue
Eurodollar Rate Advances.
(b) Each continuation or conversion of Advances pursuant to
this Section 3.03 shall be made on notice by the Borrower to the
Lender given not later than Noon (Dallas time) on (i) in the case
of the conversion of one or more Eurodollar Rate Advances into
Base Rate Advances, the first Business Day prior to the date of
the proposed conversion, and (ii) in every other instance, the
third Business Day prior to the date of the proposed conversion
or continuation. Each such notice of continuation or conversion
(a "Notice of Continuation or Conversion") shall be by telephone,
confirmed immediately in writing (whether by telecopy, telex,
cable or otherwise), in substantially the form of Exhibit B,
specifying therein the requested (i) date of such continuation or
conversion (which shall be a Business Day); (ii) amount of the
Advances to be converted or continued; (iii) nature of such
conversion or continuation; and (iv) Interest Periods for such
Advances, in the case of a conversion of one or more Base Rate
Advances to a Eurodollar Rate Advance or a continuation of one or
more Eurodollar Rate Advances.
(c) Each Notice of Continuation or Conversion shall be
irrevocable and binding upon the Borrower. In the case of any
Advance which the related Notice of Continuation or Conversion
specifies is to be a Eurodollar Rate Advance, the Borrower shall
indemnify the Lender against any loss, cost or expense incurred
by the Lender as a result of any failure to fulfill on or before
the date of the continuation or conversion specified in such
Notice of Continuation or conversion for such Advance the
applicable conditions set forth in Article IV, including, without
limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Lender to
fund such Advance when such Advance is not converted or
continued, as the case may be, on such date.
SECTION 3.04. Additional Provisions Applicable to Eurodollar
Rate Advances. Anything in Section 3.02 or 3.03 above to the
contrary notwithstanding:
(a) If the Lender shall notify the Borrower that the
introduction of or any change in or in the interpretation of any
law or regulation makes it unlawful, or that any central bank or
other Governmental Authority asserts that it is unlawful, for the
Lender or its Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, the right of the Borrower to
select Eurodollar Rate Advances for any Borrowing or to convert
any Base Rate Advances to Eurodollar Rate Advances shall be suspended
until the Lender shall notify the Borrower that the circumstances
causing such suspension no longer exist. Upon the Lender's giving
of the notice to the Borrower referred to in this Section 3.04(a),
the Borrower shall, upon at least one (1) Business Day's written
notice to the Lender, or if permitted by applicable law no later
than the date permitted thereby, in the Borrower's sole discretion,
either (i) prepay, notwithstanding the provisions of Section 3.08
hereof, the principal amount of all outstanding Eurodollar Rate
Advances together with accrued interest thereon to the date of
payment; or (ii) convert, notwithstanding the provisions of Section 3.03,
all Eurodollar Rate Advances then outstanding into Base Rate
Advances. Upon any such prepayment or conversion of a Eurodollar
Rate Advance, the Borrower shall reimburse the Lender in respect
thereof pursuant to Section 8.05(b).
(b) If the Lender shall, on the date of the making of
any requested Borrowing comprised of Eurodollar Rate Advances,
the continuation pursuant to Section 3.03 of any Eurodollar Rate
Advances or the conversion pursuant to Section 3.03 of any Base
Rate Advances, notify the Borrower that it is unable, for any
reason whatsoever, to obtain timely information for determining
the Eurodollar Rate for such Advances, the right of the Borrower
to select Eurodollar Rate Advances for such Borrowing or any
Borrowing subsequently made, converted or continued shall be
suspended until the Lender shall notify the Borrower that the
circumstances causing such suspension no longer exist and each
Advance requested to be converted into or made or continued as a
Eurodollar Rate Advance shall be a Base Rate Advance.
(c) If the Lender shall, at least one (1) Business Day
prior to the date of the making of any requested Borrowing to be
comprised of Eurodollar Rate Advances, the continuation pursuant
to Section 3.03 of any Eurodollar Rate Advances or the conversion
pursuant to Section 3.03 of any Base Rate Advances, notify the
Borrower that the Eurodollar Rate for such Advances will not
adequately reflect the cost to the Lender of making or funding
such Advances, the right of the Borrower to select Eurodollar
Rate Advances for such Borrowing or any Borrowing subsequently
made, converted or continued shall be suspended until the Lender
shall notify the Borrower that the circumstances causing such
suspension no longer exist and each Advance by the Lender
requested to be converted into or made or continued as a
Eurodollar Rate Advance shall be a Base Rate Advance.
(d) Any Taxes payable by the Lender or ruled (by a
Governmental Authority) payable by the Lender in respect of any
Loan Document shall, if permitted by law, be paid by the
Borrower, together with interest and penalties, if any (except
for (i) (1) Taxes imposed on or measured by the overall net
income of the Lender, and (2) franchise or similar taxes of the
Lender, and (ii) interest and penalties incurred as a result of
the gross negligence or willful misconduct of the Lender). The
Lender shall notify the Borrower and deliver to the Borrower a
certificate setting forth in reasonable detail the calculation of
the amount of payable Taxes, which certificate is conclusive and
binding (absent manifest error), and the Borrower shall promptly
pay that amount to the Lender. If the Lender subsequently
receives a refund of the Taxes paid to it by the Borrower, then
the Lender shall promptly pay the refund to the Borrower.
(e) The Borrower Agrees To Indemnify The Lender Against,
And Pay To It Upon Demand, Any Funding Losses, Costs or
Expenses Described In Section 3.02(b), 3.03(c) or 8.05(b) With
Respect To Eurodollar Rate Advances. The provisions of and
undertakings and indemnification set forth in this paragraph
shall survive the satisfaction and payment of the Obligations and
termination of this Agreement.
SECTION 3.05. Note; Repayment. The Lender's Advances shall be
evidenced by a Revolving Loan Note executed by the Borrower and
delivered to the Lender pursuant to Article IV (as amended,
modified, substituted or supplemented from time to time, the
"Note"), substantially in the form of Exhibit C, in an original
principal amount equal to the maximum Advance Commitment on the
date hereof. Unless the Termination Date shall have earlier
occurred, the Borrower shall repay the principal amount of the
Advances outstanding on the Maturity Date.
SECTION 3.06. Interest. The Borrower shall pay interest on
the unpaid principal amount of each Advance from the date of such
Advance until such principal amount shall be paid in full, at the
following rates specified below:
(a) Base Rate Advances. If such Advance is a Base Rate
Advance, at a rate per annum equal at all times to the Alternate
Base Rate in effect from time to time, payable monthly in arrears
on the last Business Day of each calendar month and on the date
such Base Rate Advance shall be paid in full; provided, however,
that any amount of principal which is not paid when due (whether
at stated maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until such
amount is paid in full, payable on demand, at a rate per annum
equal at all times to two percent (2.0%) per annum above the
Alternate Base Rate in effect from time to time.
(b) Eurodollar Rate Advances. If such Advance is a
Eurodollar Rate Advance, at a rate per annum equal at all times
during any Interest Period for such Advance to the sum of the
Applicable Margin plus the Eurodollar Rate for such Advance for
such Interest Period, payable in arrears on the last day of such
Interest Period; provided, however, that any amount of principal
which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the date on
which such amount is due until such amount is paid in full,
payable on demand, at a rate per annum equal at all times to two
percent (2.0%) per annum above the Alternate Base Rate in effect
from time to time.
(c) Default Interest. Notwithstanding anything to the
contrary in Sections 3.06(a) and 3.06(b), effective upon the
occurrence of an Event of Default and for as long thereafter as
such Event of Default shall be continuing, all amounts outstanding
under the Loan Documents shall bear interest at a rate per annum
equal at all times to two percent (2.0%) per annum above the Alternate
Base Rate in effect from time to time, payable on demand and, absent
demand, at the times specified in Section 3.06(a) with respect to
Base Rate Advances and at the times specified in Section 3.06(b)
with respect to Eurodollar Rate Advances.
(d) Rate Adjustment Periods. Notwithstanding anything to
the contrary in Sections 3.06(a) and 3.06(b) but subject to
Section 3.06(c) above, at all times during a Rate Adjustment
Period, interest on each Eurodollar Rate Advance shall be at a
rate of one-quarter of one percent (0.25%) below the rate that
would otherwise be payable under Section 3.06(b), provided,
however, that (A) no reduction in the interest rate applicable to
any Eurodollar Rate Advance outstanding on the commencement of a
Rate Adjustment Period shall take effect until such Eurodollar
Rate Advance has been continued or converted pursuant to Section
3.03; (B) no reduction in the interest rate applicable to any
Eurodollar Rate Advance shall reduce such rate below the sum of
1.25% plus the Eurodollar Rate for such Advance for such Interest
Period; and (C) interest on any amount of principal which is not
paid when due (whether at stated maturity, by acceleration or
otherwise) shall continue to be paid at the rates otherwise
specified in Section 3.06(a) or 3.06(b) for such past due amounts.
SECTION 3.07. Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to the Lender so long as the Lender shall
be required under regulations of the Board of Governors of the
Federal Reserve System to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities, additional interest on the unpaid principal amount
of each Eurodollar Rate Advance of the Lender, from the date of
such Advance until such principal amount is paid in full, at an
interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the Eurodollar Rate for the Interest
Period for such Advance from (ii) the rate obtained by dividing
such Eurodollar Rate by a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage of the Lender for such
Interest Period, payable on each date on which interest is
payable on such Advance. Such additional interest so notified to
the Borrower by the Lender shall be payable to the Lender on the
dates specified for payment of interest for such Advance in Section 3.06.
SECTION 3.08. Pre-payments. The Borrower may prepay the
outstanding amount of any Advance in whole or in part with
accrued interest to the date of such prepayment on the amount
prepaid; provided, however, that (i) notice of any prepayment of
a Eurodollar Rate Advance must be given at least three (3)
Business Days prior to the date of prepayment; (ii) notice of any
prepayment of a Base Rate Advance must be given not later than
12:00 noon (Dallas time) on the date of prepayment; (iii) any
prepayment of any Eurodollar Rate Advance shall be made on, and
only on, the last day of an Interest Period for such Advance; and
(iv) each partial prepayment shall be in a principal amount of
$250,000 and integral multiples of $50,000 in excess of that
amount and, if made after the Termination Date, shall be applied
to the principal installments on the Note in the inverse order of
their maturities.
SECTION 3.09. Maximum Interest Rate. Regardless of any
provision contained in any Loan Document or any document related
thereto, it is the intent of the parties to this Agreement that
the Lender shall not contract for, charge, take, reserve, receive
or apply, as interest on all or any part of the Obligations any
amount in excess of the Maximum Rate or the Maximum Amount or
receive any unearned interest in violation of any applicable law,
and, if the Lender ever does, then any excess shall be treated as
a partial repayment or prepayment of principal and any remaining
excess shall be refunded to the Borrower. In determining if the
interest paid or payable exceeds the Maximum Rate, the Borrower
and the Lender shall, to the maximum extent permitted under
applicable law, (a) treat all Borrowings as but a single extension
of credit (and the Lender and the Borrower agree that is the case
and that provision in this Agreement for multiple Borrowings is for
convenience only), (b) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (c) exclude voluntary
repayments or prepayments and their effects, and (d) amortize, prorate,
allocate and spread the total amount of interest throughout the entire
contemplated term of the Obligations. However, if the Obligations are
paid in full before the end of their full contemplated term, and if the
interest received for its actual period of existence exceeds the
Maximum Amount, the Lender shall refund any excess (and the Lender may
not, to the extent permitted by law, be subject to any penalties
provided by any laws for contracting for, charging, taking, reserving
or receiving interest in excess of the Maximum Amount). If the laws
of the State of Texas are applicable for purposes of determining the
"Maximum Rate" or the "Maximum Amount," then those terms mean the
"indicated rate ceiling" from time to time in effect under
Article 5069-1.04, Title 79, Revised Civil Statutes of Texas, as
amended. The Borrower agrees that Chapter 15, Subtitle 79, Revised
Civil Statutes of Texas, 1925, as amended (which regulates certain
revolving credit loan accounts and revolving tri-party accounts),
does not apply to the Obligations, other than Article 15.10(b).
SECTION 3.10. Interest Recapture. If the designated interest
rate applicable to any Borrowing exceeds the Maximum Rate, the
interest rate on that the Borrowing is limited to the Maximum
Rate, but any subsequent reductions in the designated rate shall
not reduce the interest rate thereon below the Maximum Rate until
the total amount of accrued interest equals the amount of interest
that would have accrued if that designated rate had always been in
effect. If at maturity (stated or by acceleration), or at final
payment of the Note, the total interest paid or accrued is less
than the interest that would have accrued if the designated rates
had always been in effect, then, at that time and to the extent
permitted by applicable law, the Borrower shall pay an amount equal
to the difference between (a) the lesser of the amount of interest
that would have accrued if the designated rates had always been in
effect and the amount of interest that would have accrued if the
Maximum Rate had always been in effect, and (b) the amount of interest
actually paid or accrued on the Note.
ARTICLE IV
CONDITIONS OF EXTENSIONS OF CREDIT
SECTION 4.01. Conditions Precedent to Initial Extension of Credit.
The obligation of the Lender to extend credit under this Agreement is
subject to the following conditions precedent:
(a) The Lender shall have received on or before the day of
the initial extension of credit under this Agreement the following,
each dated such day, in form and substance satisfactory to the Lender:
(i) The Note payable to the order of the Lender in an
amount equal to the maximum Advance Commitment;
(ii) Certified copies of (A) the resolutions of the Board of
Directors of the Borrower approving this Agreement, the Note and
each of the other Loan Documents; and (B) all documents evidencing
other necessary corporate action and governmental approvals, if any,
with respect to this Agreement, the Note and each of the other Loan
Documents;
(iii) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement, the Note
and each of the other Loan Documents, and the accuracy and currency
of the Borrower's Articles of Incorporation and By-Laws attached thereto;
(iv) A favorable opinion of counsel to the Borrower, substantially
in the form of Exhibit E to the Multi-Bank Credit Agreement and as to
such other matters as the Lender may reasonably request;
(v) Payment instructions from the Borrower with respect to
its obligations under the Prior Agreement and evidence that the
Borrower has cancelled the financing commitments under the Prior
Agreement; and
(vi) Such other documents, instruments and agreements in
furtherance of the financing transaction contemplated in the Loan
Documents, each in form and substance satisfactory to the Lender
and its counsel, including, without limitation, the documents,
instruments and agreements described on the List of Closing
Documents attached to the Multi-Bank Credit Agreement as Exhibit F.
(b) No law or regulation affecting the Lender's entering into the
financing transaction contemplated by the Loan Documents shall impose upon
the Lender any material obligation, fee, liability, cost, expense or damages.
SECTION 4.02. Conditions Precedent to Each Extension of Credit,
Conversion or Continuation. The obligation of the Lender to make
an Advance, or to convert or continue any Advance as described in
Section 3.03 on the occasion of each such extension of credit
(including the initial extension of credit hereunder), conversion
or continuation shall be subject to the further conditions precedent
that on the date of such extension of credit, conversion or continuation:
(a) The following statements shall be true (and each of the
giving of the applicable Notice of Borrowing or Notice of Continuation
or Conversion, as applicable, and the acceptance by the Borrower of the
proceeds or other benefits of the requested extension of credit, conversion
or continuation shall constitute a representation and warranty by the
Borrower that on the date of such extension of credit, conversion or
continuation such statements are true):
(i) The representations and warranties contained in Section
6.01 of the Multi-Bank Credit Agreement are correct on and as of
the date of such extension of credit, conversion or continuation
before and immediately after giving effect to such extension of
credit, conversion or continuation and to the application of the
proceeds or other benefits thereof, as though made on and as of
such date; and
(ii) No event has occurred and is continuing, or would
result from such extension of credit, conversion or continuation
or from the application of the proceeds or other benefits
thereof, that constitutes a Default or an Event of Default.
(b) The Lender shall have received such other approvals, opinions
or documents as the Lender may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants to the Lender that the
representations and warranties contained in Section 6.01 of the
Multi-Bank Credit Agreement (each of which is hereby incorporated
by reference as if set forth herein verbatim, except that references
therein to "the Agent" or "the Lenders" shall be deemed to be references
to the Lender under this Agreement) are true, correct and complete as of
the date of this Agreement and as of the date of each reaffirmation thereof
made pursuant to Section 4.02(a)(i).
ARTICLE VI
COVENANTS OF THE BORROWER
SECTION 6.01. Affirmative Covenants. The Borrower covenants to
the Lender that, so long as any Obligation shall remain unpaid or
the Lender shall have any commitment hereunder, the Borrower will,
unless the Lender shall otherwise consent in writing, do and perform
all acts necessary to comply with each of the affirmative covenants
set forth in Section 7.01 of the Multi-Bank Credit Agreement (each of
which is hereby incorporated by reference as if set forth herein verbatim,
except that references therein to "the Agent" or "the Lenders" shall
be deemed to be references to the Lender under this Agreement).
SECTION 6.02. Negative Covenants. The Borrower covenants to the
Lender that, so long as any Obligation shall remain unpaid or the
Lender shall have any commitment hereunder, the Borrower will
not, unless the Lender shall otherwise consent in writing, do or
perform any acts in violation of the negative covenants set forth
in Section 7.02 of the Multi-Bank Credit Agreement (each of which
is hereby incorporated herein by reference as if set forth herein
verbatim, except that references therein to "the Agent" or "the
Lenders" shall be deemed to be references to the Lender under this Agreement).
SECTION 6.03. Financial Covenants. The Borrower covenants to
the Lender that so long as any Obligation shall remain unpaid or
the Lender shall have any obligation hereunder, the Borrower
will, unless the Lender shall otherwise consent in writing, do
and perform all acts necessary to comply with each of the financial
covenants set forth in Section 7.03 of the Multi-Bank Credit Agreement
(each of which is hereby incorporated herein by reference as if set
forth herein verbatim, except that references therein to "the Agent"
or "the Lenders" shall be deemed to be references to the Lender under
this Agreement).
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) either (i) the Borrower shall fail to make any payment
of principal on the Advances when the same becomes due, or (ii)
the Borrower shall fail to make any other payment on the Obligations
when the same becomes due and such failure shall continue for five (5)
days; or
(b) any representation or warranty made by the Borrower
herein or in any other Loan Document or by the Borrower (or any
of its officers) in connection with any Loan Document shall prove
to have been incorrect or misleading in any material respect when
made; or
(c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 7.02 of the Multi-Bank
Credit Agreement on its part to be performed or observed; or
(d) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document on its
part to be performed or observed and any such failure shall
remain unremedied for the earliest of (i) ten (10) business days
after written notice thereof shall have been given to the
Borrower by the Lender, (ii) ten (10) business days after the
date the Borrower discovers, or should have discovered, such
failure, and (iii) if such failure has existed for more that
sixty (60) days, five (5) business days after the earlier of (A)
the date of delivery by the Lender to the Borrower of written
notice thereof, and (B) the date that the Borrower discovers, or
should have discovered, such failure; or
(e) with respect to any Debt (other than Debt constituting
Obligations) of the Borrower or any subsidiary of the Borrower in
an aggregate principal amount outstanding in excess of $500,000,
the Borrower or such subsidiary shall fail to pay any principal
of or premium or interest on such Debt when the same becomes due
and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or any other
event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to cause
the holders of such Debt to accelerate, or to permit the holders
of such Debt to accelerate, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(f) (i) the Borrower or any of its subsidiaries shall
generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Borrower or
any of its subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or
other similar official for it or for any substantial part of its
property; or (ii) the Borrower or any of its subsidiaries shall
take any corporate action to authorize any of the actions set
forth in clause (i) above; or
(g) any judgment or order for the payment of money in
excess of $1,000,000 above any insurance coverage therefor shall
be rendered against the Borrower or any of its subsidiaries by
any Governmental Authority or quasi-governmental authority, and
either (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order, or (ii) there shall be
any period of thirty (30) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(h) any Plan shall have any Unfunded Liabilities, or any
Reportable Event shall occur in connection with any Plan; or
(i) the Borrower or any of its subsidiaries shall be the
subject of any proceeding or investigation pertaining to the
release by the Borrower, any of its subsidiaries, or any other
Person of any toxic or hazardous waste or substance into the
environment, or any violation of any federal, state or local
environmental, health or safety law or regulation, which would,
in either case, have a material adverse effect upon the
operations of the Borrower or any of its subsidiaries; or
(j) the acquisition by any Person, or two or more Persons
acting in concert (other than any Person or Persons who own,
prior to that acquisition, 20% or more of the outstanding shares
of the Borrower's voting stock), of beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or
more of the outstanding shares of the Borrower's voting stock; or
(k) the occurrence of an "Event of Default" as defined in
the Multi-Bank Credit Agreement.
then, and in any such event, the Lender may (i) declare the
Advance Commitment and the Advance Facility and the obligations
of the Lender under each of the Loan Documents, to be terminated,
whereupon the same shall forthwith terminate, and (ii) declare
the Obligations to be forthwith due and payable, whereupon such
Obligations shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower;
provided, however, that upon the occurrence of any Event of
Default described in Section 7.01(f)(i) above, (A) the Advance
Commitment, and the obligations of the Lender under the Advance
Facility, shall automatically be terminated, and (B) the
Obligations shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrower.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of any Loan Document, nor consent to any departure by
the Borrower therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Lender, and then
such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telegraphic, telecopy, telex or cable communication)
and mailed, telegraphed, telexed, cabled or delivered, if to the
Borrower, at its address at 400 West 48th Avenue, P.O. Box 16601,
Denver, Colorado 80216, Attention: Stanley Ereckson, Jr.; and if
to the Lender, at its address at 901 Main Street, Dallas, Texas
75202, Attention: Kimberley Knop, with a copy to Porter &
Hedges, L.L.P., 700 Louisiana, 35th Floor, Houston, Texas 77002,
Attention: F. Walter Bistline, Jr.; or, as to each party, at such
other address as shall be designated by such party in a written
notice to the other party. All such notices and communications
shall be effective upon receipt, or if mailed, four (4) days
after deposit in the United States mails; if telegraphed, when
delivered to the telegraph company; if telexed, when confirmed by
telex answerback; if telecopied, when verbally confirmed by
telephone; or if cabled, when delivered to the cable company,
except that notices and communications to the Lender pursuant to
Article II or III shall not be effective until received by the Lender.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
the Lender to exercise, and no delay in exercising, any right
under any Loan Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04. Payments Set Aside. To the extent that the
Borrower makes a payment or payments to the Lender, or the Lender
exercises its right of set-off, and such payment or payments or
the proceeds of such enforcement or set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law,
real estate or federal law, common law or equitable cause, then
to the extent of such recovery, the Obligation or part thereof
originally intended to be satisfied, and all such Liens, rights
and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such
enforcement or set-off had not occurred.
SECTION 8.05. Costs, Expenses and Taxes.
(a) The Borrower agrees to pay on demand all "Costs and
Expenses," as hereinafter defined. "Costs and Expenses," as used
in this Agreement, shall mean (A) all costs, expenses, fees and
charges incurred by the Lender or its Affiliates (including,
without limitation, NationsBanc Capital Markets, Inc.) and all
fees for services (including disbursements) of the attorneys,
accountants, valuation experts and all professionals (and all
paraprofessionals and other staff employed by such professionals)
employed by the Lender or any such Affiliate from time to time in
any way or for any purpose arising out of, or relating to, the
Obligations of the Borrower, any of the Loan Documents or the
Lender's or such Affiliate's relationship or transactions with
the Borrower, including, without limitation, (i) the development,
preparation, negotiation, execution, delivery, syndication,
modification, review and administration of the Loan Documents,
(ii) the commencement, defense of or intervention in any court
proceeding in any way related to the Obligations of the Borrower
or the Loan Documents, or any other agreements contemplated by
the terms of this Agreement, (iii) the filing of a petition,
complaint, answer, motion or other pleadings, or the taking of
any other action in or with respect to any suit or proceeding
(bankruptcy or otherwise) relating to the Borrower or any Loan
Document, (iv) the enforcement of the Lender's right to collect
any of the Obligations, (v) all costs and expenses incurred by
the Lender or any Affiliate internally including, but not limited
to, travel, food and lodging expenses for employees, duplicating
and document processing costs, and internal auditing service
expenses, and (vi) all audit costs, appraisal costs and costs of
searches, recordings and filings, all recording and filing fees,
all Taxes and all other similar fees and disbursements; and (B)
all costs, expenses, fees and charges incurred by the Lender
(including fees and disbursements for services of attorneys and
paralegals) in connection with the matters described in clauses
(ii), (iii) and (iv) above. The Borrower also agrees to pay, and
to save harmless the Lender from any delay in paying, any
tangibles, intangibles, documentary stamp and other Taxes, if
any, which may be payable in connection with the execution and
delivery of this Agreement or any of the Loan Documents, or the
recording of any hereof or thereof, or in connection with any
modification hereof or thereof, any of which Taxes payable by the
Lender are to be part of the Costs and Expenses. All Costs and
Expenses provided for in this Section 8.05 may, at the option of
the Lender, be charged and treated as a Borrowing comprised of
Base Rate Advances made by the Lender.
(b) If any payment of principal of any Eurodollar Rate
Advance is made other than on the last day of the Interest Period
for such Advance, as a result of acceleration of the maturity of
the Note pursuant to Section 7.01 or for any other reason, or if
any Eurodollar Rate Advance is converted to a Base Rate Advance
pursuant to Section 3.04(a), the Borrower shall, upon demand by
the Lender, pay to the Lender any amounts required to compensate
the Lender for any additional losses, costs or expenses which the
Lender may reasonably incur as a result of such payment including,
without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by the Lender to fund or maintain
such Advance.
SECTION 8.06. Right of Set-Off. The Lender and each Affiliate
of the Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at
any time owing by the Lender or such Affiliate to or for the
credit or the account of the Borrower against any and all of the
Obligations, irrespective of whether or not any demand shall have
been made under any Loan Document and although such Obligations
may be contingent and unmatured. The Lender agrees to promptly
notify the Borrower of such set-off and application; provided,
however, that the Lender's failure to notify the Borrower as set
forth in this sentence shall not affect the validity of such
set-off and application. The rights of the Lender under this
Section 8.06 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which
the Lender may have.
SECTION 8.07. Indemnification.
(a) The Borrower hereby indemnifies and holds the Lender
and its Affiliates, their respective attorneys and agents
(individually and collectively referred to for purposes of this
Section 8.07 as the "Indemnified Parties") harmless from and
against any and all claims (including, without limitation, causes
of action, cross-claims, counterclaims, rights of set-off and
recoupment), whether by any Affiliate or shareholder of the
Borrower, or by any creditor of the Borrower, or any Affiliate
thereof, which are at any time asserted against the Indemnified
Parties (together with all Costs and Expenses relating to the
defense of such claims) arising out of, or relating to, the
Indemnified Parties' relationship or transactions with the
Borrower or any of its Affiliates, including, without limitation,
(i) any claim for funds received by the Lender and applied to the
Obligations; (ii) any claims contesting the validity or priority
of the Liens granted to the Lender pursuant to the terms and
provisions of any of the Loan Documents; and (iii) any claims for
actions taken or not taken by any of the Indemnified Parties in
connection with, or otherwise resulting from, whether directly or
indirectly, the negotiation, structuring, funding, issuance or
administration of the Advances, and all other extensions of
credit by the Lender to or on behalf of the Borrower; provided,
however, that the Lender hereby agrees to refund to the Borrower
any amounts paid to the Lender by the Borrower pursuant to the
foregoing indemnity to the extent that a court of competent
jurisdiction has found, pursuant to a "Final Order," as hereinafter
defined, that the liability asserted against the Indemnified Parties
for which such indemnity payment was made resulted primarily from
the Indemnified Parties' own willful misconduct or knowing and
intentional violation (individually and not as a co-conspirator with
the Borrower or any of its Affiliates) of any applicable law, rule or
statute, which violation is punishable as a criminal offense. As used
herein, a "Final Order" shall mean an order entered by a court of
competent jurisdiction which is not interlocutory and as to which
(i) the time to appeal or petition for a writ of certiorari has expired
with no appeals or petitions for a writ of certiorari from such
order having been taken, or (ii) all appeals and petitions for
writs of certiorari prosecuted from such order have been exhausted.
An used herein, "knowing and intentional" violation of a law, rule
or statute shall be interpreted to mean that an Indemnified Party
had knowledge both of the applicable law, rule or statute which it
violated and that its act was a violation of such law, rule or statute.
(b) The Borrower hereby agrees to reimburse the Indemnified
Parties for all Costs and Expenses incurred by the Indemnified
Parties at any time from and after the date of this Agreement
relating in any way to any and all claims which fall within the
scope of the Borrower's indemnity obligations pursuant to Section
8.07(a). All such Costs and Expenses shall be payable by the
Borrower upon demand. At the Lender's option, the Lender may
reimburse itself for any such Costs and Expenses, and the amount
of any such reimbursement shall constitute additional Obligations
of the Borrower under this Agreement.
SECTION 8.08. Change in Accounting Principles. If any changes
in accounting principles from those used in the preparation of
the financial statements referred to in Section 6.01(e) of the
Multi-Bank Credit Agreement are hereafter required or permitted
by GAAP, and are adopted by the Borrower with the agreement of
its independent certified public accountants, and such changes
result in a change in the method of calculation or the
interpretation of any of the financial covenants, standards or
terms found in Article VII of the Multi-Bank Credit Agreement or
any other provision of this Agreement, the Borrower agrees to
amend any such affected terms and provisions to reflect such
changes in GAAP with the result that the criteria for evaluating
the financial condition of the Borrower and its consolidated
subsidiaries shall be the same after such changes in GAAP as if
such changes had not been made.
SECTION 8.09. The Lender's Performance of Defaulted Acts.
The Lender may, but need not, following five (5) days prior notice
to the Borrower and so long as the Borrower shall have failed to
have made such payment or perform such act in a manner
satisfactory to the Lender, make any payment or perform any act
herein required of the Borrower in any form and manner deemed
expedient by the Lender. All monies paid for any of the purposes
herein authorized and all expenses paid or incurred in connection
therein, including reasonable attorney's fees shall constitute
Obligations and bear interest at the rate provided herein for
Base Rate Advances.
SECTION 8.10. Binding Effect; Assignments; Participations.
This Agreement shall become effective when it shall have been executed
by the Borrower and the Lender and thereafter shall be binding
upon and inure to the benefit of the Borrower, the Lender and
their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Lender.
The Lender may assign (with the consent of the Borrower) to one
or more banks or other entities all or any part or portion of, or
may grant participations to one or more banks or other entities
in all or any part or portion of its rights and obligations
hereunder (including, without limitation, the Advance Commitment,
the Note, or the Advances). Without limiting the foregoing, each
assignee and each purchaser of an assignment or participation
shall, to the fullest extent permitted by law, have the same
rights and benefits hereunder with respect to the rights and
benefits so assigned or participated as it would have if it were
the Lender hereunder.
SECTION 8.11. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS. ANY DISPUTE BETWEEN THE BORROWER OR THE LENDER
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH ANY OF
THE LOAN DOCUMENTS AND WHETHER ARISING IN CONTRACT, TORT, EQUITY,
OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL
LAWS AND DECISIONS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE
STATE OF TEXAS.
SECTION 8.12. CONSENT TO JURISDICTION.
(a) EXCEPT AS PROVIDED IN SECTION 8.12(b), THE BORROWER AND
THE LENDER AGREE THAT ALL DISPUTES BETWEEN THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED
THERETO AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS
LOCATED IN DALLAS COUNTY, TEXAS, BUT THE BORROWER AND THE LENDER
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF DALLAS COUNTY, TEXAS. THE
BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(b) THE BORROWER AGREES THAT THE LENDER SHALL HAVE THE
RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT
IN ANY LOCATION TO ENABLE SUCH PERSON TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE BORROWER
AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN
ANY PROCEEDING BROUGHT BY THE LENDER TO REALIZE ON THE BORROWER'S
PROPERTY, THE BORROWER OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF SUCH PERSON. THE BORROWER WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE LENDER
HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH.
SECTION 8.13. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN OR AMONG THE BORROWER OR THE LENDER ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH ANY OF THE LOAN
DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED
THERETO. THE BORROWER AND THE LENDER HEREBY AGREE AND CONSENT
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT JURY.
SECTION 8.14. Term. This Agreement shall remain in full force
and effect until the later to occur of (i) the Termination Date,
and (ii) the repayment in full of all the Obligations hereunder.
SECTION 8.15. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by the parties hereto
in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement.
SECTION 8.16. Lender's Creation of Security Interest.
Notwithstanding any other provision set forth in this Agreement,
the Lender may at any time create a security interest in all or
any portion of its rights under this Agreement (including,
without limitation, Obligations owing to it and the Note held by
it) in favor of any Federal Reserve bank in accordance with
Regulation A of the Federal Reserve Board.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
VICORP RESTAURANTS, INC.
By: /s/ Michael R. Kinnen
-----------------
Name: Michael R. Kinnen
-----------------
Title: Treasurer
---------
NATIONSBANK OF TEXAS, N.A.
By: /s/ Frank M. Johnson
----------------
Senior Vice President
Domestic Lending Office:
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Frank M. Johnson
Eurodollar Lending Office:
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Frank M. Johnson
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 J. Michael Jenkins, an employee of the Company ("Optionee").
RECITALS
--------
A. On August 26, 1994, the Company and Optionee
entered into a Stock Option Agreement pursuant to which Optionee
was granted the option to purchase 300,000 shares of the
Company's common stock, par value $.05 per share ("Common Stock")
at prices ranging from $15.00 per share to $30.17 per share, and
vesting on October 1, 1999 ("August 1994 Option").
B. Effective August 19, 1996, the Board of Directors
of the Company approved the grant of an option to Optionee as
hereinafter provided, subject to and conditioned upon the
surrender to the Company by Optionee of the August 1994 Option.
C. Optionee is desirous of surrendering to the
Company the August 1994 Option in consideration for the grant by
the Company to Optionee of an option on the terms set forth herein.
NOW, THEREFORE, in consideration of the covenants
contained herein, the Company and Optionee agree as follows:
I. SURRENDER AND CANCELLATION.
Optionee hereby surrenders all right, title and
interest of Optionee in the options granted to him in the August
1994 Option. The Company hereby cancels and terminates the
August 1994 Option Agreement and the options granted therein.
II. NUMBER OF SHARES, OPTION PRICE, AND VESTING.
A. The Company hereby grants to Optionee options (the
"Options") to purchase 300,000 shares of Common Stock for the
exercise price of $13.00 per share. 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. In the event that the outstanding shares of the
Company's common stock are increased or decreased or changed into
or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation, through
reorganization, merger, consolidation, liquidation, recapitalization,
stock split up, or a combination of shares or dividends payable in
stock of the class which is subject to this Option Agreement,
appropriate adjustment in the number of shares subject to the
Options shall be made so that the proportionate number of shares
subject to the Options shall be maintained as before the occurrence
of such event and an appropriate adjustment shall be made to the
exercise price.
C. 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.
III. PERIOD OF OPTION AND CONDITIONS OF EXERCISE.
A. The Options shall vest and become exercisable in
accordance with the following schedule:
Shares Vesting Date
------- ---------------
100,000 August 19, 1996
100,000 October 1, 1999
100,000 October 1, 2002
Except as provided hereinafter, once vested, the options shall
continue to be exercisable at any time or from time to time in
whole or in part until August 20, 2006.
B. If Optionee's employment with the Company is
terminated for Just Cause or he resigns without Just Grounds
prior to the vesting of the options, then any non-vested options
shall not vest and they shall be immediately forfeited upon such
termination or resignation.
C. If Optionee terminates his position as an Employee
of the Company without Just Grounds and for any reason other than
death or disability or is terminated for Just Cause, any
unexercised but vested options shall be canceled three (3) months
after the effective date of Optionee's termination of employment.
D. If Optionee dies, becomes permanently disabled,
resigns on Just Grounds or is terminated other than for Just
Cause ("Events"), the shares shall vest and be vested in
accordance with the following schedule:
Vesting Date Number of Shares
--------------- ----------------
October 1, 1996 50,000
October 1, 1997 50,000
October 1, 1998 50,000
October 1, 1999 50,000
Such Options must then be exercised within six (6)
months after vesting. All Options which have not previously
vested under paragraph A above and which do not vest upon the
occurrence of an Event under the above schedule in this paragraph D
shall be immediately forfeited upon the occurrence of the Event.
Disability and time of disability shall be determined by
the Board.
E. Upon a change of control of the Company, all of
the Options shall immediately vest and become exercisable in full
and shall continue to be exercisable at any time or from time to
time in whole or in part until August 20, 2006. The terms "Just
Cause" and "Just Grounds" as used in this Option Agreement shall
have the same meaning as defined in Optionee's Employment
Agreement with the Company dated August 26, 1994. The term
"Change of Control" as used in this Option Agreement shall mean:
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.
IV. NON-TRANSFERABILITY OF OPTION; DEATH OF OPTIONEE.
The Options shall not be transferable otherwise than by
will or by the laws of descent and distribution; and the Options
may be exercised, during the lifetime of Optionee, only by
Optionee, and in the event of the death of Optionee, only by
Optionee's estate. In particularly, the options may not be
assigned, transferred (except as provided above), pledged or
hypothecated in any way, shall not be assignable by operation of
law, except as expressly provided above and shall not be subject
to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition
of the Options contrary to the provisions hereof shall be null
and void and without effect.
V. EXERCISE OF OPTION.
The Options shall be exercised in the following manner:
Optionee or Optionee's estate shall deliver to the Company
written notice specifying the number of shares which he elects to
purchase and a date, not more than ten (10) business days after
the date of such notice, upon which such shares shall be
purchased and payment therefor shall be made. Upon delivery to
the Company on such date of (i) cash or certified or bank
cashier's check payable to the order of the Company, or (ii)
shares of Common Stock, or (iii) the irrevocable direction of
Optionee to withhold Common Stock from those exercised, in an
amount equal to the product of the number of shares specified in
such notice and the exercise price, together with payment, by (i)
cash or certified or bank cashier's check payable to the order of
the Company, (ii) or shares of Common Stock, or (iii) the
irrevocable direction of Optionee to withhold Common Stock from
those exercised, or (iv) by such other method as shall be
acceptable to the Company, of such amount, if any, as the Company
deems necessary to satisfy its liability to withhold federal,
state or local income or other taxes incurred by reason of the
exercise or the transfer of shares thereupon, the shares so
purchased shall thereupon be promptly delivered to Optionee or
Optionee's estate. Provided, however, that if any securities or
other law or regulation of any commission or agency of competent
jurisdiction shall require the Company or the exercising Optionee
to take any action with respect to the shares acquired by the
exercise of an Option, then the date upon which the Company shall
issue or cause to be issued the certificate or certificates for
the shares shall be postponed until full compliance has been made
with all such requirements of law or regulation; provided that
Optionee shall use Optionee's best efforts to take all necessary
action to comply with such requirements of law or regulation.
Neither Optionee nor Optionee's estate will be deemed to be a
holder of any shares pursuant to exercise of the Options until
the date of the issuance of a stock certificate to him for such shares.
VI. NOTICES.
Any notice required or permitted under this Option
Agreement shall be deemed given when delivered personally, or
when deposited in a United States Post Office as registered mail,
postage prepaid, addressed, as appropriate, either to Optionee at
the address Optionee last gave to the Company as his home address
or such other address as he may designate in writing or to the
Corporation at its principal offices.
VII. 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.
VIII. 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.
IX. 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.
X. 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/ J. Michael Jenkins
____________________________
J. Michael Jenkins, Optionee
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our reports included in this
Form 10-K, into the Company's previously filed Registration
Statements, File Nos. 33-26650, 33-32608, 33-34447, 33-48205,
33-43889, 33-49166 and 33-11003.
ARTHUR ANDERSEN LLP
Denver, Colorado,
January 17, 1997
POWER OF ATTORNEY
The undersigned, Carole Lewis Anderson, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson and J.
Michael Jenkins, or either of them with full power of substitution,
as the undersigned's attorney-in-fact with authority to execute on
behalf of the undersigned, in the undersigned's capacity as a
Director of the Company, the Company's Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, on
Form 10-K, and all amendments thereto, which Report is to be filed
with the Securities and Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set her
hand and seal this 13th day of December, 1996.
/s/ Carole Lewis Anderson
---------------------
Carole Lewis Anderson
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came Carole
Lewis Anderson, known to me to be the individual described
herein, and executed the foregoing Power of Attorney, and
acknowledged that she executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Bruce B. Brundage, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson and J.
Michael Jenkins, or either of them with full power of substitution,
as the undersigned's attorney-in-fact with authority to execute on
behalf of the undersigned, in the undersigned's capacity as a
Director of the Company, the Company's Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, on
Form 10-K, and all amendments thereto, which Report is to be filed
with the Securities and Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ Bruce B. Brundage
-----------------
Bruce B. Brundage
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came Bruce
B. Brundage, known to me to be the individual described herein,
and executed the foregoing Power of Attorney, and acknowledged
that he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Charles R. Frederickson, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint J. Michael Jenkins with full
power of substitution, as the undersigned's attorney-in-fact with
authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ Charles R. Frederickson
-----------------------
Charles R. Frederickson
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came
Charles R. Frederickson, known to me to be the individual
described herein, and executed the foregoing Power of Attorney,
and acknowledged that he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, John C. Hoyt, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson and
J. Michael Jenkins, or either of them with full power of
substitution, as the undersigned's attorney-in-fact with
authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ John C. Hoyt
------------
John C. Hoyt
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came John
C. Hoyt, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, J. Michael Jenkins, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson with
full power of substitution, as the undersigned's attorney-in-fact
with authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ J. Michael Jenkins
------------------
J. Michael Jenkins
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came
J. Michael Jenkins, known to me to be the individual described
herein, and executed the foregoing Power of Attorney, and
acknowledged that he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Robert T. Marto, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson and
J. Michael Jenkins, or either of them with full power of
substitution, as the undersigned's attorney-in-fact with
authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ Robert T. Marto
---------------
Robert T. Marto
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came Robert
T. Marto, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Dudley C. Mecum, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson and
J. Michael Jenkins, or either of them with full power of
substitution, as the undersigned's attorney-in-fact with
authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ Dudley C. Mecum
---------------
Dudley C. Mecum
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came Dudley
C. Mecum, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Dennis B. Robertson, a Director of
VICORP Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson and
J. Michael Jenkins, or either of them with full power of
substitution, as the undersigned's attorney-in-fact with
authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ Dennis B. Robertson
-------------------
Dennis B. Robertson
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came Dennis
B. Robertson, known to me to be the individual described herein,
and executed the foregoing Power of Attorney, and acknowledged
that he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Hunter Yager, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation,
does hereby constitute and appoint Charles R. Frederickson and
J. Michael Jenkins, or either of them with full power of
substitution, as the undersigned's attorney-in-fact with
authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, on Form 10-K, and all
amendments thereto, which Report is to be filed with the
Securities and Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ Hunter Yager
------------
Hunter Yager
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came Hunter Yager,
known to me to be the individual described herein, and executed the
foregoing Power of Attorney, and acknowledged that he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
POWER OF ATTORNEY
The undersigned, Arthur Zankel, a Director of VICORP
Restaurants, Inc. (the "Company"), a Colorado corporation, does
hereby constitute and appoint Charles R. Frederickson and
J. Michael Jenkins, or either of them with full power of
substitution, as the undersigned's attorney-in-fact with
authority to execute on behalf of the undersigned, in the
undersigned's capacity as a Director of the Company, the
Company's Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, on Form 10-K, and all amendments
thereto, which Report is to be filed with the Securities and
Exchange Commission on or before January 29, 1997.
The undersigned hereby ratifies and confirms all that
said attorney may do by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his
hand and seal this 13th day of December, 1996.
/s/ Arthur Zankel
-------------
Arthur Zankel
Director
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
This 13th day of December, 1996, before me came Arthur
Zankel, known to me to be the individual described herein, and
executed the foregoing Power of Attorney, and acknowledged that
he executed the same.
My commission expires 8/25/98.
WITNESS my hand and official seal.
/s/ Toni A. Schreivogel
-------------------
Toni A. Schreivogel
Notary Public
400 West 48th Avenue
Denver, Colorado 80216
{SEAL}
<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 OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000703799
<NAME> VICORP RESTAURANTS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,406
<SECURITIES> 0
<RECEIVABLES> 3,221
<ALLOWANCES> 0
<INVENTORY> 6,517
<CURRENT-ASSETS> 17,346
<PP&E> 272,759
<DEPRECIATION> 138,106
<TOTAL-ASSETS> 203,946
<CURRENT-LIABILITIES> 34,650
<BONDS> 33,585
0
0
<COMMON> 453
<OTHER-SE> 121,816
<TOTAL-LIABILITY-AND-EQUITY> 203,946
<SALES> 339,937
<TOTAL-REVENUES> 343,280
<CGS> 111,954
<TOTAL-COSTS> 111,954
<OTHER-EXPENSES> 199,770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,014
<INCOME-PRETAX> (2,583)
<INCOME-TAX> (1,654)
<INCOME-CONTINUING> (929)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (929)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
