SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE SECURITIES AND EXCHANGE
ACT OF 1934
For the fiscal year ended March 25, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _________________ to
Commission File Number 0-13007
NPC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0817298
(State of Incorporation)
(IRS Employer Identification Number)
720 W. 20th Street, Pittsburg, KS 66762
(Address of principal executive offices)
Registrant's telephone number, including area code (316) 231-3390
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of 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 stock held by non-affiliates of the registrant as
of May 20, 1997:
Common Stock, $0.01 par value - $104,450,520
The number of shares outstanding of each of the registrant's classes of common
stock as of May 20, 1997:
Common Stock, $0.01 par value - 24,646,272
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended March
25, 1997 are incorporated by reference in Part II, Items 5 - 8.
Portions of the Proxy Statement for the Annual Stockholders' Meeting to be held
July 15, 1997, are incorporated by reference in Part III, Items 10 - 13.
NPC INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I
ITEM PAGE
1. Business 3
2. Properties 13
3. Legal Proceedings 14
4. Submission of Matters to a Vote of Security Holders 14
4A. Executive Officers of the Registrant 14
PART II
5. Market for Registrant's Common Stock and Related Stockholder Matters 16
6. Selected Financial Data 16
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
8. Financial Statements and Supplementary Data 16
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 16
PART III
10. Directors and Executive Officers of the Registrant 17
11. Executive Compensation 17
12. Security Ownership of Certain Beneficial Owners and Management 17
13. Certain Relationships and Related Transactions 17
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 18
NPC INTERNATIONAL, INC.
Pittsburg, Kansas
Annual Report to Securities and Exchange Commission
March 25, 1997
PART I
ITEM 1. BUSINESS
General
The Company. NPC International, Inc. (the "Company" or "Registrant"),
formerly National Pizza Company, is the successor to certain Pizza Hut
operations commenced in 1962 by O. Gene Bicknell, the Chairman of the Board of
the Company.
At March 25, 1997, the Company operated 358 Pizza Hut restaurants and 115
delivery units in 12 states pursuant to franchise agreements with Pizza Hut,
Inc. ("PHI"), a wholly-owned subsidiary of PepsiCo, Inc.
During the fiscal year, the Company acquired 31 units from R&W Pizza Huts
of North Carolina, Inc. and 60 units from PHI.
On March 26, 1997, the Company closed on the purchase of 62 units and the
operations of four others from PHI.
On April 15, 1997, the Company entered into a letter of intent with PHI to
acquire 52 units in North Dakota, South Dakota and Minnesota. This transaction
is scheduled to close June 4, 1997.
On April 23, 1997, the Company entered into a letter of intent with Jamie
B. Coulter to purchase 100 units in 11 states. This transaction closed May 15,
1997 except for 18 North Carolina units, which will be managed until acquired,
subject to resolution of certain contingencies.
On June 8, 1993, the Company completed the acquisition of Romacorp, Inc.
(formerly NRH Corporation). Romacorp, Inc. is the operator and franchisor of
Tony Roma's Famous For Ribsr restaurants. At March 25, 1997, Romacorp, Inc.
operated 40 Company-owned and two joint-venture restaurants in nine states and
through its subsidiaries, franchised 91 units in 20 states and 49 units in
international locations.
On November 26, 1989, the Company acquired a majority interest in
Skipper's, Inc., a corporation based in Bellevue, Washington ("Skipper's"),
which at March 26, 1996 operated 105 quick service seafood restaurants in seven
states and franchised 12 units in five states and two units in British Columbia.
Pursuant to a merger effective January 12, 1990, Skipper's became a wholly-owned
subsidiary of the Company. Effective March 25, 1996, the Company sold the stock
of Skipper's to a Seattle investment group. A $20 million pre-tax charge
related to the sale has been recorded in the Company's financial statements for
the fiscal year ended March 26, 1996.
The Company is a Kansas corporation incorporated in 1974 under the name
Southeast Pizza Huts, Inc. In 1984, the name of the Company was changed to
National Pizza Company and was subsequently renamed NPC International, Inc. on
July 12, 1994. Its principal executive offices are located at 720 W. 20th
Street, Pittsburg, Kansas and its telephone number is (316) 231-3390.
Pizza Hut Operations
Pizza Hut Restaurant System. The first Pizza Hut restaurant was opened in
1958 in Wichita, Kansas by the original founders of the Pizza Hut system. PHI,
the franchisor of the Company, was formed in 1959.
In 1977, PHI was acquired by PepsiCo, Inc., which continued expanding the
Pizza Hut system. The Pizza Hut system is the largest pizza chain in the world,
both in sales and number of units. As of December 31, 1996 the Pizza Hut system
had approximately 8,850 units. Approximately 55% of the Pizza Hut units are
operated by PHI.
Pizza Hut restaurants generally offer full table service and a similar
menu, featuring pizza, pasta, sandwiches, a salad bar, soft drinks and, in most
restaurants, beer. Most dough products are made fresh several times each day,
and only 100% natural cheese products are used. Product ingredients are of a
high quality and are prepared in accordance with proprietary formulas
established by PHI. The restaurants offer pizza in three sizes with a variety
of toppings. Customers may also choose among thin crust, traditional hand-
tossed, stuffed-crust and thick crust pan pizza. With the exception of the
Personal Pan Pizza and food served at the luncheon buffet, food products are
prepared at the time of order.
Pizza sales account for approximately 85% of the Company's Pizza Hut
operations revenues. Sales of alcoholic beverages are less than 1% of net
sales.
New product introduction is vital to the continued success of any
restaurant system, and PHI maintains a research and development department which
develops new products and recipes, tests new procedures and equipment, and
approves suppliers for Pizza Hut products. All new products are developed by
PHI, and franchisees are prohibited from offering any other products in their
restaurants unless approved by PHI.
Pizza Hut also delivers pizza products to their customers. Prior to 1985,
most delivery was done out of existing restaurants. In 1985, the system began
to aggressively pursue home delivery through delivery / carryout kitchens.
Customer orders are processed through a computerized customer service center
(CSC), a "single unit solution" (SUS, a facility similar to a CSC, but smaller
in scale), or directly to the kitchen.
A successful delivery operation yields lower profit margins as a percentage
of sales than the Company's Pizza Hut restaurants due to higher labor costs, but
the return on invested capital is greater.
The Company's Pizza Hut Operations. The Company is the largest Pizza Hut
franchisee in the world. The franchise agreements, under which the Company
operates, grant exclusive right to operate Pizza Hut restaurants in certain
designated areas. States of operation are indicated in the table below based on
unit count by state.
Company-
owned
Pizza Huts at
State March 25, 1997
Alabama 82
Arkansas 72
Georgia 1
Kansas 21
Kentucky 7
Louisiana 29
Mississippi 116
Missouri 29
North Carolina 31
Oklahoma 32
Tennessee 48
Texas 5
Company Total 473
The Company provides delivery service utilizing a CSC telephone system in
eight metropolitan markets: Springfield, Missouri; Montgomery and Birmingham,
Alabama; Shreveport, Louisiana; Jackson and Long Beach, Mississippi; Little
Rock, Arkansas; and Memphis, Tennessee. Under the CSC system, all customers
within the trade area place telephone orders through a single clearing number,
and the pizza is dispatched from the Company's delivery kitchen nearest the
customer. Customers call the restaurant delivery kitchens directly in other
locations.
Relationships with Pizza Hut, Inc. The Company's franchise agreements with
PHI (the "Franchise Agreements") provide, among other things, for standards of
operation and physical condition of the Company's restaurants, the provision of
services, the geographical territories in which the Company has exclusive rights
to open and operate Pizza Hut restaurants and delivery kitchens, the term of the
franchise and renewal options, the Company's development rights and obligations
and various provisions relating to the transfer of interests in the Company's
franchise rights.
PHI determines standards of operation for all Pizza Hut restaurants,
including standards of quality, cleanliness and service. Further, the Franchise
Agreements allow the franchisor to set specifications for all furnishings,
interior and exterior decor, supplies, fixtures and equipment. See "Business -
Supplies and Equipment." PHI also has the right to determine and change the
menu items offered by, and to inspect all restaurants of its franchisees,
including the Company. All such standards may be revised from time to time.
Upon the failure to comply with such standards, PHI has various rights,
including the right to terminate the applicable Franchise Agreements, redefine
the franchise territory or terminate the Company's rights to establish
additional restaurants in that franchise territory. The Franchise Agreements
may also be terminated upon the occurrence of certain events, such as the
insolvency or bankruptcy of the Company or the commission by the Company or any
of its officers, directors or principal stockholders (other than its public
stockholders) of a felony or other crime that, in the sole judgment of PHI is
reasonably likely to adversely affect the Pizza Hut system, its trademark, the
goodwill associated therewith or PHI's interest therein. At no time during the
Company's history has PHI sought to terminate any of the Company's Franchise
Agreements, redefine its franchise territories or otherwise limit the Company's
franchise rights. The Company believes it is in compliance with all material
provisions of the Franchise Agreements.
Under the Franchise Agreements, extensive structural changes, major
remodeling and renovation and substantial modifications to the Company's
restaurants necessary to conform to the then current Pizza Hut system image may
be required by PHI, but not more often than once every seven years. The Company
has not been required to make any such changes, renovations or modifications.
PHI may also request the Company to introduce new food products that could
require remodeling or equipment changes. PHI can require changes of decor or
products only after it has tested such changes in at least 5% of Pizza Hut
system restaurants.
PHI is required to provide certain continuing services to the Company,
including training programs, the furnishing of operations manuals and assistance
in evaluating and selecting locations for restaurants.
In early 1990, PHI offered franchisees the opportunity to sign a new twenty
year franchise agreement (the "1990 Franchise Agreement"). The 1990 Franchise
Agreement required franchise fees of 4% of sales, as defined, for all
restaurants and delivery kitchens and increases in certain advertising
contributions. The 1990 Franchise Agreement also sought to redefine certain
rights and obligations of the franchisee and franchisor. The 1990 Franchise
Agreement did not alter the franchisee's territorial rights and maintained,
subject to some minor limitations, the exclusivity of the Pizza Hut brand within
the geographical limits of the territory defined by each franchise agreement.
On June 7, 1994, the Company conformed its existing Franchise Agreements to the
1990 Franchise Agreement.
The 1990 Franchise Agreement grants to the Company the exclusive right to
develop and operate restaurants within designated geographic areas through
February 28, 2010. The Company has the option to renew each Franchise Agreement
prior to its expiration for a single renewal term of 15 years by entering into
the then-current form of the PHI franchise agreement, including the then-current
fee schedules, provided the Company is not then in default of its obligations
under that Franchise Agreement, including the development schedule, and has
complied with the requirements thereof throughout the term of the agreement.
The Franchise Agreements under which the Company operates require the
payment of monthly fees to PHI. Under the 1990 Franchise Agreement (as it
applies to the Company), the Company's royalty payments for all units owned
increased to 4% of gross sales in July, 1996, from the Company's prior effective
rate of approximately 2.25%. This rate reflects the royalty rate which was
proposed by PHI to Pizza Hut franchisees as part of the 1990 Franchise Agreement
and is lower than the rate under PHI's current franchise agreement.
Franchise agreements covering units acquired from PHI will operate under a
new Franchise Agreement which, as amended, is similar to the 1990 Franchise
Agreement and has a twenty year term with a fifteen year renewal term. Pizza
Huts acquired from other franchisees will continue to be subject to the terms
and conditions of the respective Franchise Agreement covering the acquired unit.
For the fiscal years ended March 25, 1997, March 26, 1996, and March 28,
1995 the Company incurred total franchise fees of approximately $7,535,000,
$4,983,000 and $4,224,000, respectively. The Franchise Agreements require the
Company to pay initial franchise fees to PHI in amounts of up to $15,000 for
each new restaurant opened ($25,000 in territories granted under the new
Agreement). The Company is required to contribute or expend a certain
percentage of its sales for local and national advertising and promotion. See
"Business - Advertising and Promotion."
Failure to develop a franchise territory as required would give PHI the
right to operate or franchise Pizza Hut restaurants in that territory. Such
failure would not affect the Company's rights with respect to the Pizza Hut
restaurants then in operation or under development by the Company in any such
territory. As of March 25, 1997, the Company had no commitments for future
development under any franchise agreement.
The Franchise Agreements prohibit the transfer or assignment of any
interest in the franchise rights granted thereunder or in the Company without
the prior written consent of PHI, which consent may not be unreasonably withheld
if certain conditions are met. All franchise agreements also give PHI a right
of first refusal to purchase any interest in the franchise rights or in the
Company if a proposed transfer by the Company or a controlling person would
result in a change of control of the Company. PHI also has a right of first
refusal with respect to any Pizza Hut franchise right proposed to be acquired by
the Company from any other Pizza Hut franchisee. The right of first refusal, if
exercised, would allow PHI to purchase the interest proposed to be transferred
upon the same terms and conditions and for the same price as offered by the
proposed transferee.
The Company has the right to develop additional Pizza Hut restaurants and
delivery kitchens in its exclusive franchise territories. However, since
becoming a public company, expansion by acquisition has been one of the
Company's primary methods of growth. Between 1990 and 1993, PHI exercised its
right of first refusal as described above on all proposed transactions between
the Company and other Pizza Hut franchisees; as a result the Company acquired no
units during this period. Between March, 1994 (when the Company announced its
intention to sign a new Franchise Agreement) and May, 1997, the Company has
acquired a total of 302 Pizza Hut units or the operations thereof, including 149
from PHI. PHI nevertheless retains the right of first refusal on any proposed
acquisition in the future, and the Company cannot be assured it will continue to
receive such permission on proposed future acquisitions, if any.
PHI, through the Franchise Agreements, requires principals of the Company
to maintain "control" over the Company, which PHI defines as 51% of the stock of
the Company. Accordingly, a portion of the controlling stockholder's shares is
restricted to insure compliance with this requirement. Holders of common other
than the controlling stockholders are not subject to any of the restrictions of
the Franchise Agreement.
Advertising and Promotion. The Company is required under its Franchise
Agreements to be a member of the International Pizza Hut Franchise Holders
Association, Inc. ("IPHFHA"), an independent association of substantially all
PHI franchisees. IPHFHA requires its members to pay dues, which are spent
primarily for national advertising and promotion. Dues range from 2.5% - 3.0%
of restaurant net sales and net delivery sales. Dues may be increased up to a
maximum of 3% by the affirmative vote of 51% of the members. A joint
advertising committee, consisting of two representatives each from PHI and
IPHFHA, directs the national advertising campaign. PHI is not a member of
IPHFHA but has agreed to make contributions with respect to those restaurants it
owns on a per-restaurant basis to the joint advertising committee at the same
rate as its franchisees (less IPHFHA overhead).
The Franchise Agreements also require the Company to participate in
cooperative advertising associations designated by PHI on the basis of certain
marketing areas defined by PHI. Each Pizza Hut restaurant, including
restaurants operated by PHI, contributes to such cooperative advertising
associations an amount ranging between 1.0% - 1.5% of gross sales. Certain of
the Company's Franchise Agreements provide that the amount of the required
contribution may be increased at the sole discretion of PHI. The cooperative
advertising associations are required to use their funds to purchase only
broadcast media advertising within their designated marketing areas. All
advertisements must be approved in writing by PHI, except with respect to
product or menu item prices.
Supplies and Equipment. The Franchise Agreements require the Company to
purchase all equipment, supplies and other products and materials required in
the operation of its restaurants and delivery kitchens from suppliers who have
been approved by PHI. PepsiCo Food Systems, Inc. ("PFS"), a wholly-owned
subsidiary of PepsiCo, offers purchasing and distribution services to the
Company and substantially all other Pizza Hut franchisees. Although the
Franchise Agreements only require the Company to purchase certain spice blends
from PFS or another supplier designated by PHI, the Company currently purchases
substantially all of its food products and supplies from PFS and may continue to
do so. The Company believes, however, it would not experience difficulties in
obtaining its required food products and supplies from other sources. The
Franchise Agreements limit the amount of profit that PHI and PFS may realize on
sales to Pizza Hut franchisees. PHI is a wholly-owned subsidiary of PepsiCo,
Inc., and the Company's Pizza Hut units sell Pepsi Cola and other PepsiCo, Inc.
beverages. PepsiCo, Inc. has announced the impending spin-off of its restaurant
division and PFS. The Company believes that these spin-offs will not have a
material effect on its Pizza Hut operations.
Supervision and Control. Pizza Hut restaurants are open seven days a week
and serve both lunch and dinner. Each of the restaurants has a manager, and in
most units, an assistant manager who are responsible for daily operations of the
restaurant, including food preparation, quality control, service, maintenance,
personnel, and record keeping. All of the restaurant managers have completed a
comprehensive management training program. Each area general manager is
responsible for approximately six to eleven restaurants. Detailed operations
manuals reflecting current operations and control procedures are provided to
each restaurant and district manager as well as others in the organization.
Currently, the Company's Pizza Huts operate in ten regions ranging from 50 to 90
stores per region. Each region is supervised by a regional manager and
supported by administrative, marketing and human resource staff. There are
currently three divisional vice presidents that oversee the ten regions.
A point-of-sale cash register system is installed in all Company-operated
restaurants. This POS system provides effective communication between the
kitchen and the server, allowing employees to serve its customers in a quick
and consistent manner while still maintaining a high level of control. It feeds
data to the back office system that provides support for inventory, payroll,
accounts payable and cash management. The back office system also provides
management reporting and a communications interface to the corporate systems.
Accounting is centralized in Pittsburg, Kansas. Additional financial and
management controls are maintained at the individual restaurants, where
inventory, labor and food data are recorded to monitor food usage, food waste,
labor costs, and other controllable costs.
Competition. The restaurant business is highly competitive with respect to
price, service, location, food quality and presentation, and is affected by
changes in taste and eating habits of the public, local and national economic
conditions and population and traffic patterns. The Company competes with a
variety of restaurants offering moderately priced food to the public, including
other pizza restaurants. The Company also competes with locally-owned
restaurants which offer similar pizza, pasta and sandwich products. The Company
believes other companies can easily enter its market segment, which could result
in the market becoming saturated, thereby adversely affecting the Company's
revenues and profits. There is also active competition for competent employees
and for the type of commercial real estate sites suitable for the Company's
restaurants.
Employees. At March 25, 1997, the Company's Pizza Hut operations had
approximately 9,300 employees, including 152 headquarters and staff personnel,
two vice presidents, six regional managers, 59 area general managers, 985
restaurant management employees and approximately 8,098 restaurant employees (of
whom approximately 83% are part-time). The Company experiences a high rate of
turnover of its part-time employees, which it believes to be normal in the
restaurant industry. The Company is not a party to any collective bargaining
agreements and believes its employee relations to be satisfactory. The
maintenance and expansion of the Company's restaurant business is dependent on
attracting and training competent employees. The Company believes that the
restaurant manager plays a significant role in the success of its business.
Accordingly, the Company has established bonus plans pursuant to which certain
of its supervisory employees may earn cash bonuses based upon both the sales and
profits of their restaurants.
Trade Names, Trademarks and Service Marks. The trade name "Pizza Hut" and
all other trademarks, service marks, symbols, slogans, emblems, logos and
designs used in the Pizza Hut system are owned by PHI. All of the foregoing are
of material importance to the Company's business and are licensed to the Company
under its Franchise Agreements for use with respect to the operation and
promotion of the Company's restaurants.
Seasonality. The Company's Pizza Hut operations have not experienced
significant seasonality in its sales.
Tony Roma's Operations
Restaurant Format. Romacorp, Inc. operates, and through its affiliates,
franchises casual-theme restaurants under the name Tony Roma's Famous For Ribsr.
The restaurants offer a full and varied menu, including ribs, salads, steaks,
seafood, chicken and other menu items. The decor of the restaurants is casual,
and suitable for family dining. Recent renovations and new restaurants feature
improved lighting and light color decor packages to attract a broader segment of
customers. All entrees are prepared to order. Romacorp, Inc., through its
affiliates, operates two Tony Roma's restaurants as joint ventures. The Company
receives a fee for managing the joint venture restaurants and remits to the
partners an agreed-upon percentage of gross sales.
Menu and Food Preparation. All entrees served at Tony Roma's restaurants
are prepared to order. The menu includes ribs, steak, chicken, seafood,
sandwiches and salads. Tony Roma's signature product is baby back ribs. Guest
checks average approximately $12.41 per person. Alcoholic beverages are served
in all restaurants, and account for approximately 12% of sales.
Supplies and Equipment. To assure consistent product quality and to obtain
optimum pricing, purchases of food and restaurant equipment for the Tony Roma's
restaurants are made through a centralized purchasing function in its corporate
office in Dallas, Texas. The Company negotiates directly with meat processors
for its rib inventory, which is principally maintained in various independent
warehouses. Inventory is then shipped to restaurants via commercial
distributors. Produce and dairy products are obtained locally. Food and
equipment pricing information is also generally available to the Tony Roma's
franchisee community.
The Company is generally not dependent upon any one supplier for
availability of its products; its food and other products are generally
available from a number of acceptable sources. The Company has a policy of
maintaining alternate suppliers for most of its baseline products. The Company
does not manufacture any products nor act as a middleman.
Franchising. Although the first Tony Roma's opened in 1972, franchising
wasn't a key element of Tony Roma's growth strategy until 1984. At March 25,
1997, the Company had 49 franchisees operating 140 units world wide. The
largest franchise holder operates a chain of 23 Tony Roma's restaurants.
Although there are some individual unit franchisees, the Company seeks to
attract franchisees who can develop several restaurants.
New domestic franchisees pay an initial franchise fee of $50,000 and a
continuing royalty of 4% of gross sales. In addition, franchisees are required
to contribute 0.5% of gross sales to a joint marketing account and may be
required to participate in local market advertising cooperatives. All potential
franchisees must meet certain operational and financial criteria.
In return for the domestic franchisee's initial fee and royalties, the
Company provides a variety of services, including: real estate services, site
selection criteria and review/advice on construction cost and administration;
architectural services in the form of prototype designs and an in-house design
team to help with decor considerations; pre-opening and opening assistance,
which include an on-site training team to assist in recruitment, training,
organization, inventory planning and quality control; centralized and system-
wide purchasing opportunities; in-store management training programs,
advertising and marketing programs; and various administrative and training
programs developed by the Company.
International franchisees receive a modified version of the above services.
Currently, international franchises require a fee of $30,000 per unit and
royalty rate of 3% of gross sales. However, costs associated with visits to
international locations by Romacorp personnel are borne by the international
franchisee. International franchise holders also contribute 0.25% to a joint
marketing account.
Supervision and Control. Company operated restaurants are typically run by
one general manager, two to three assistant managers and a kitchen manager. All
of the Tony Roma's restaurant managers have completed a comprehensive management
training program. Detailed operations manuals reflecting current operations and
control procedures are provided to each restaurant and district manager as well
as others in the organization.
A point-of-sale cash register system is installed in all company-operated
restaurants. This POS system provides effective communication between the
kitchen and the server, allowing employees to serve the customers in a quick and
consistent manner while still maintaining a high level of control. It feeds
data to the back office system that provides support for inventory, payroll,
accounts payable and cash management. The back office system also provides
management reporting and a communications interface to the corporate systems.
Accounting is centralized in Pittsburg, Kansas. Additional financial and
management controls are maintained at the individual restaurants, where
inventory, labor and food data are recorded to monitor food usage, food waste,
labor costs, and other controllable costs.
Advertising. With customer research as an information base, the marketing
department directs sales program development, advertising, public relations,
field marketing activities, and product packaging.
Competition. The restaurant industry is intensely competitive with respect
to price, value, service, location and food quality. Tony Roma's has developed
brand identity within the casual theme segment and is the only national chain to
focus on ribs. On a local and regional basis, the Company competes with smaller
chains, which also specialize in ribs, and with larger concepts which include
ribs as a menu item.
Employees. At March 25, 1997, the Company owned Tony Roma's operations had
approximately 2,600 employees including 50 headquarters and staff personnel, 1
president, 2 regional managers, 15 district managers, 207 restaurant management
employees and approximately 2,325 restaurant employees (of whom approximately
76% are part-time). Romacorp, Inc. is not a party to any collective bargaining
agreements and believes its employee relations to be satisfactory.
Trade Names, Trademarks and Service Marks. The trade name "Tony Roma's" and
all other trademarks, service marks, symbols, slogans, emblems, logos, and
designs used in the Tony Roma's restaurant system are of material importance to
its business. The domestic trademark and franchise rights are owned by
Romacorp, Inc. and international trademarks/franchise rights are owned by Roma
Systems, Inc., a wholly owned subsidiary of Romacorp, Inc.; a subsidiary, Roma
Franchise Corporation, through a license from Romacorp, Inc., operates the
franchises in the United States. The use of these marks is licensed to
franchisees under franchise agreements for use with respect to the operation and
promotion of their Tony Roma's restaurants.
Seasonality. Tony Roma's restaurant sales are normally higher from January
to March and traditionally lower during the summer months than during the other
months of the year.
The location of the Company-owned and franchised restaurants is as
follows:
State/Country Company-ownedJoint VentureFranchised
Alabama 2 --- ---
Alaska --- --- 1
Arizona --- --- 4
California 5 1 31
Colorado --- --- 5
Florida 15 --- 3
Hawaii --- --- 4
Kansas --- --- 1
Kentucky --- --- 2
Maine --- --- 1
Minnesota --- --- 2
Missouri 1 --- ---
Nebraska --- --- 1
Nevada 3 --- 4
New York --- --- 1
Ohio --- --- 3
Oklahoma 1 --- ---
Oregon --- --- 3
South Carolina 1 --- 2
Tennessee 1 --- ---
Texas 11 1 3
Utah --- --- 6
Washington --- --- 11
Wisconsin --- --- 3
United States Total40 2 91
Aruba --- --- 1
Canada --- --- 10
Caribbean --- --- 2
China --- --- 1
Guam --- --- 2
Hong Kong --- --- 2
Indonesia --- --- 2
Japan --- --- 10
Korea --- --- 3
Mexico --- --- 3
Peru --- --- 2
Philippines --- --- 1
Saipan --- --- 1
Spain --- --- 5
Singapore --- --- 2
Taiwan --- --- 1
Thailand --- --- 1
International Total--- --- 49
World Total 40 2 140
Number of franchise holders 49
Government Regulation
All of the Company's operations are subject to various federal, state and
local laws that affect its business, including laws and regulations relating to
health, sanitation, alcoholic beverage control and safety standards. To date,
federal and state environmental regulations have not had a material effect on
the Company's operations, but more stringent and varied requirements of local
governmental bodies with respect to zoning, building codes, land use and
environmental factors have in the past increased, and can be expected in the
future to increase, the cost of, and the time required for opening new
restaurants. Difficulties or failures in obtaining required licenses or
approvals could delay or prohibit the opening of new restaurants. In some
instances, the Company may have to obtain zoning variances and land use permits
for its new restaurants. The Company believes it is operating in compliance
with all material laws and regulations governing its operations.
The Company is also subject to the Fair Labor Standards Act, which governs
such matters as minimum wages, overtime and other working conditions. A
substantial majority of the Company's food service personnel are paid at rates
related to the minimum wage and, accordingly, increases in the minimum wage
result in higher labor costs.
Legislation mandating health coverage for all employees, if passed, will
increase benefit costs since most hourly restaurant employees are not currently
covered under Company plans. The Company cannot always effect immediate price
increases to offset higher costs, and no assurance can be given that the Company
will be able to do so in the future.
Cautionary Factors That May Affect Future Results, Financial Condition or
Business
In order to take advantage of the safe harbor provisions for forward-
looking statements adopted by the Private Securities Litigation Reform Act of
1995, the Company is hereby identifying important risks, uncertainties and other
factors that could affect the Company's actual results of operations, financial
condition or business and could cause the Company's actual results of
operations, financial condition or business to differ materially from its
historical results of operations, financial condition or business or the results
of operation, financial condition or business contemplated by forward-looking
statements made herein or elsewhere orally or in writing, by, or on behalf of,
the Company. Except for the historical information contained herein, the
statements made in this Report on Form 10-K are forward-looking statements that
involve such risks, uncertainties and other factors that could cause or
contribute to such differences including, but not limited to, those described
below.
Consumer Demand and Market Acceptance. Food service businesses are often
affected by changes in consumer tastes, national, regional and local economic
conditions and demographic trends. The performance of individual restaurants
may be adversely affected by factors such as traffic patterns, demographic
considerations and the type, number and location of competing restaurants.
Multi-unit food service chains such as the Company's can also be materially and
adversely affected by publicity resulting from food quality, illness, injury and
other health concerns or operating issues stemming from one restaurant or a
limited number of restaurants, including restaurants operated by the franchisor
or another franchisee.
Effectiveness of Franchisor Advertising Programs and the Overall Success
of the Franchisor. The success of the Company is substantially dependent upon
the effectiveness of PHI's advertising programs and development of new and
successful products, and the overall success of Pizza Hut. Pizza Hut is
undergoing significant changes under the new management of PHI including the
introduction of "totally new pizzas" which are made with more abundant and
better quality toppings. There can be no assurance that these changes in
strategy will be successful. Further, PepsiCo, Inc. has announced its intention
to spin-off its restaurant division, which includes Taco Bell, KFC and Pizza
Hut. The Company cannot predict the impact, if any, on the overall success of
Pizza Hut resulting from the spin-off from PepsiCo, Inc.; however, the Company
does not anticipate it will have a material effect on its Pizza Hut operations.
Integration and Assimilation of Acquired Restaurants. During the
Company's fiscal year ended March 25, 1997, the Company acquired 91 Pizza Hut
restaurants and the Company has acquired or has current agreements to acquire in
the subsequent fiscal year approximately 213 additional Pizza Hut restaurants.
The Company will expend substantial effort integrating these restaurants into
its current system, including management, operational, purchasing, accounting
and other systems. The Company's ability to effectively integrate these units
is dependent upon, among other things, continued consumer demand in acquired
markets, retention or attraction of qualified management personnel, and the
Company's ability to implement its stringent labor and food control programs.
Training and Retention of Skilled Management and Other Restaurant
Personnel. The Company's success depends substantially upon its ability to
recruit, train and retain skilled management and other restaurant personnel.
There can be no assurance that labor shortages, economic conditions or other
factors will not adversely affect the ability of the Company to satisfy its
requirements in this area.
Ability to Locate and Secure Acceptable Restaurant Sites. The success of
restaurants is significantly influenced by location. There can be no assurance
that current locations will continue to be attractive, or additional locations
can be located and secured, as demographic patterns change. It is possible that
the current locations or economic conditions where restaurants are located could
decline in the future, resulting in potentially reduced sales in those
locations. There is also no assurance that further sites will produce the same
results as past sites.
Competition. The Company's future performance will be subject to a number
of factors that affect the restaurant industry generally, including competition.
The restaurant business is highly competitive and the competition can be
expected to increase. Price, restaurant location, food quality, quality and
speed of service and attractiveness of facilities are important aspects of
competition as are the effectiveness of marketing and advertising programs. The
competitive environment is also often affected by factors beyond the Company's
or a particular restaurant's control. The Company's restaurants compete with a
wide variety of restaurants ranging from national and regional restaurant chains
(some of which have substantially greater financial resources than the Company)
to locally-owned restaurants. There is also active competition for advantageous
commercial real estate sites suitable for restaurants.
Unforeseeable Events and Conditions. Consumer patterns in the restaurant
industry can be impacted by unforeseeable events and conditions, many of which
are outside the control of the Company. These events include weather patterns,
severe storms and power outages, natural disasters and other acts of God.
Specific examples include but are not limited to the Company's concentration of
Tony Roma's operations and franchisees in Florida and California, both being
areas that have historically suffered from severe weather and natural disasters.
There can be no assurance that the Company's operations will not be adversely
affected by such events in the future.
Commodities Costs, Labor Shortages and Costs and other Risks. Dependence
on frequent deliveries of fresh produce and groceries subjects food service
businesses to the risk that shortages or interruptions in supply, caused by
adverse weather or other conditions, could adversely affect the availability,
quality and cost of ingredients. Specifically, certain ingredients such as
cheese and babyback ribs constitute a large percentage of the total cost of the
Company's food products. Unforeseeable increases in the cost of these specific
ingredients could significantly increase the Company's cost of sales and
correspondingly decrease the Company's operating income. In addition,
unfavorable trends or developments concerning factors such as inflation,
increased food, labor and employee benefit costs (including increases in hourly
wage and minimum unemployment tax rates), regional weather conditions, interest
rates and the availability of experienced management and hourly employees may
also adversely affect the food service industry in general and the Company's
results of operations and financial condition in particular.
ITEM 2. PROPERTIES
Pizza Hut Operations
Pizza Hut restaurants historically have been built according to minimum
identification specifications established by PHI relating to exterior style and
interior decor. Variation from such specifications is permitted only upon
request and if required by local regulations or to take advantage of specific
opportunities in a market area.
The distinctive Pizza Hut red roof is the identifying feature of Pizza Hut
restaurants throughout the world. Pizza Hut restaurants are generally free-
standing, one-story buildings, usually with wood and brick exteriors, and are
substantially uniform in design and appearance. Property sites range from
15,000 to 40,000 square feet and accommodate parking for 30 to 70 cars.
Typically, Pizza Hut restaurants contain from 1,800 to 3,200 square feet,
including a kitchen area, and have seating capacity for 70 to 125 persons.
The cost of land, building and equipment for a typical Pizza Hut restaurant
varies with location, size, construction costs and other factors. The Company
currently estimates that the average cost to construct and equip a new
restaurant in its existing franchise territories is approximately $450,000 to
$500,000, or $550,000 to $675,000 including the cost of land acquisition.
The Company continually renovates and upgrades its existing restaurants.
Such improvements generally include new interior decor, expansion of seating
areas, and installation of more modern equipment.
The Company anticipates that the capital investment necessary for each
delivery-only kitchen is approximately $70,000 in equipment and $50,000 in
leasehold improvements. The cost of a customer service center is approximately
$100,000 in equipment and improvements.
The Pizza Hut restaurants and delivery units operated by the Company at
March 25, 1997, are owned or leased as follows:
Leased from unrelated third parties 304
Leased from officers 1
Land and building owned by the Company 132
Building owned by the Company and land leased 36
473
The amount of rent paid to unrelated persons is determined on a flat rate
basis or as a percentage of sales or as a combination of both. Some leases
contain provisions requiring cost of living adjustments.
Rent paid to affiliates is determined as a combination of a flat rate or as
a percentage of sales in excess of specified amounts. Generally, the percentage
rate is 6% where both land and buildings are leased. Approximately 240 leases
have initial terms which will expire within the next five years. Nearly all of
these leases contain provisions allowing for the extension of the lease term.
The Company owns its principal executive and administrative offices in
Pittsburg, Kansas, containing approximately 46,000 square feet of commercial
office space, and a regional office in Memphis, TN. Currently, the Company
leases from third parties office space for its regional offices in Little Rock,
AR, Ridgeland, MS, Springfield, MO, Birmingham, AL, Evansville, IN, Shreveport,
LA and Portland, OR.
Tony Roma's Operations
The Company selects all company-operated restaurant sites, and must approve
all franchised restaurant locations. Sites are selected using a screening model
to analyze locations with an emphasis on projected financial return,
demographics (such as population density, age and income distribution), analysis
of restaurant competition in the area, and an analysis of the site
characteristics, including accessibility, traffic counts, and visibility.
The current cost of constructing and equipping a free-standing Tony Roma's
restaurant typically ranges from $650,000 to $750,000 for building, $150,000 to
$250,000 for land improvements and signage, and $200,000 to $250,000 for
equipment. The cost of land varies considerably depending on geographic and
site location. Land costs vary from $450,000 to $800,000. Units which are
constructed within existing structures or mall areas are typically less. The
Company has developed standardized restaurant designs using a free-standing
building to be situated on a 1-1/2 acre site. The design is continually revised
and refined.
The 40 Company-operated Tony Roma's restaurants at March 25, 1997, are
owned and leased as follows:
Leased from unrelated parties 21
Land and buildings owned 13
Building owned by the Company and land leased 6
40
Some of Tony Roma's leases contain percentage rent clauses (typically 5% to
6% of gross sales) against which the minimum rent is applied, and most are net
leases under which Tony Roma's pays taxes, maintenance, insurance, repairs and
utility costs.
Properties Held For Sale or Liquidation
In conjunction with the sale of Skipper's Inc. effective March 25, 1996,
the Company retained nineteen fee simple properties that had previously been
operated by Skipper's and had been closed prior to the sale. During fiscal
1997, the Company sold five properties leaving fourteen fee simple properties
for sale at March 25, 1997. At the beginning of the year, thirteen of the
nineteen fee simple properties were leased to tenants operating various
businesses in the facilities. At March 25, 1997, ten of the fourteen fee simple
properties were occupied by tenants.
In addition to the properties held for sale, the Company had obligations
related to thirty-nine properties at the beginning of the year, under operating
leases, that had previously been operated as Skipper's restaurants. During the
year, the Company bought out of six of these leases and two leases expired. At
March 25, 1997, the Company remains obligated for thirty-one properties under
operating leases, twenty-seven of which have been subleased. The Company
continues to market the properties to other potential subtenants, while also
pursuing alternative methods of extinguishing these commitments.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are engaged in ordinary and routine
litigation incidental to its business, but management does not anticipate that
any amounts which it may be required to pay by reason thereof, net of insurance
reimbursements, will have a materially adverse effect on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 25, 1997.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are elected by the Board of Directors
and serve until their successors are duly elected and qualified or until their
earlier resignation or removal. The executive officers of the Company and their
current positions and ages are as follows:
Name Position Age
O. Gene Bicknell Chairman of the Board, Chief Executive
Officer and Director 64
James K. Schwartz President and Chief Operating Officer 35
Marty D. Couk Senior Vice President Pizza Hut Operations 42
D. Blayne Vaughn Vice President Pizza Hut Operations 40
L. Bruce Sharp Vice President Pizza Hut Operations 39
Robert B. Page President, Romacorp, Inc. (Tony Roma's Operations) 38
Troy D. Cook Vice President Finance, Chief Financial
Officer, Treasurer and Assistant Secretary 34
David G. Short Vice President Legal, General Counsel, Secretary 56
O. Gene Bicknell founded the Company and has served as Chairman of the
Board since 1962. He also served as Chief Executive Officer of the Company
before July, 1993 and after January 30, 1995.
James K. Schwartz joined the Company in December, 1991 as Vice President of
Accounting and Administration. He was promoted to Vice President Finance,
Treasurer and Chief Financial Officer in 1993. In January, 1995 he was promoted
to President and Chief Operating Officer.
Marty D. Couk joined the Company as a restaurant manager trainee in April,
1979. He served in various capacities at the Company, including Field
Specialist (1982), Area General Manager (1983) and Regional Manager (1987). He
was promoted to Vice President of Pizza Hut Operations in December, 1992 and
Senior Vice President of Pizza Hut Operations in September, 1993.
D. Blayne Vaughn joined the Company in November, 1985 as an Area General
Manager. He was promoted to Regional Manager in 1990 and then Regional Vice
President in 1993. In May, 1997 he was promoted to Vice President of Pizza Hut
operations.
L. Bruce Sharp joined the Company in May, 1987 as an Area General
Manager. He was promoted to Regional Manager in 1989 and Vice President of
Pizza Hut operations in May, 1997.
Robert B. Page became President of Romacorp, Inc. in 1994. He joined the
Company in 1988 in the Pizza Hut division, serving as a Regional Manager and
Senior Vice President of Pizza Hut Operations until he moved to Tony Roma's in
1993 as its Chief Operating Officer.
Troy D. Cook joined the Company in February, 1995 as Vice President
Finance, Chief Financial Officer, Treasurer and Assistant Secretary. Prior to
that, he was Vice President and Chief Operating Officer of Oread Laboratories
from 1991 to 1995 and Director of Accounting of American Italian Pasta Company
from 1990 to 1991. Mr. Cook is a certified public accountant.
David G. Short joined the Company in June, 1993 as part of the NRH
Corporation acquisition and was appointed to Vice President Legal and General
Counsel in July, 1993. He was Vice President, Legal and General Counsel for NRH
Corporation from September, 1990 and, previous to that, Vice President-Legal,
General Counsel and Secretary of TGI Fridays, Inc.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated herein by reference
from page 28 of the Company's 1997 Annual Report to Stockholders, included
herein as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference
from page 10 of the Company's 1997 Annual Report to Stockholders, included
herein as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by reference
from pages 11 through 15 of the Company's 1997 Annual Report to Stockholders,
included herein as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by reference
from pages 16 through 26 of the Company's 1997 Annual Report to Stockholders,
included herein as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with, the Company's
independent accountants on accounting or financial disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item (except for the information set forth
in Item 4A of Part I hereof with respect to the Registrant's executive officers)
is incorporated herein by reference from the Company's definitive Proxy
Statement for its Annual Meeting of Stockholders to be held July 15, 1997, to be
filed with the Commission pursuant to Regulation 14A within 120 days after the
end of the Company's last fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item concerning remuneration of the
Company's officers and Directors and information concerning material
transactions involving such officers and Directors is incorporated herein by
reference from the Company's definitive Proxy Statement for its Annual Meeting
of Stockholders, to be filed with the Commission pursuant to Regulation 14A
within 120 days after the end of the Company's last fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item concerning the stock ownership of
management and five percent beneficial owners is incorporated herein by
reference from the Company's definitive Proxy Statement for its Annual Meeting
of Stockholders, to be filed with the Commission pursuant to Regulation 14A
within 120 days after the end of the Company's last fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item concerning certain relationships and
related transactions is incorporated herein by reference from the Company's
definitive Proxy Statement for its Annual Meeting of Stockholders, to be filed
with the Commission pursuant to Regulation 14A within 120 days after the end of
the Company's last fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) List of Documents filed as part of this Report
1) Financial Statements
The following financial statements of the Registrant and report of the
Registrant's independent auditors, included in the Registrant's Annual
Report to Stockholders for the year ended March 25, 1997, are
incorporated by reference in Item 8 to this report:
Report of Independent Auditors
Consolidated Balance Sheets as of March 25, 1997 and March 26, 1996.
Consolidated Statements of Operations for the years ended March 25, 1997,
March 26, 1996 and March 28, 1995.
Consolidated Statements of Stockholders' Equity for the years ended March
25, 1997, March 26, 1996 and March 28, 1995.
Consolidated Statements of Cash Flows for the years ended March 25, 1997,
March 26, 1996 and March 28, 1995.
Notes to Consolidated Financial Statements.
2) No schedules are filed as part of this Report
because they are not required or are not applicable, or
the required information is shown in the financial statements or notes
thereto.
3)Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Page Number or
Exhibit Incorporation
Number Description by Reference
from
2.0 Asset Sale Agreement by and between R&W Exhibit 2.0 to Form 8-K
Pizza Huts of North Carolina, Inc., Clyde E. filed November 15, 1996
Keller and Eldon D. Amandus, Sellers with
R&W Pizza Huts of North Carolina Building
Partners and NPC International, Inc., Buyer
dated October 30, 1996
2.1 Asset Sale Agreement by and among Pizza Hut, Exhibits 2-A and 2-B to
Inc. and certain subsidiaries and Form 8-K filed April 14,
NPC International,Inc. and certain 1997
subsidiaries dated March 3,1997 and
amended March 27, 1997
2.2 Asset Purchase Agreement by and between Exhibit 2-A to Form 8-K
Jamie B.Coulter, et al., Sellers and NPC filed May 29, 1997
International, Inc. and certain subsidiaries
dated May 14, 1997.
3.1 Restated Articles of Incorporation Exhibit 3(a) to Form S-1
Registration Statement
effective August 14, 1984
File #2-91885
3.2 Certificate of Amendment to Amended by Form 8 filed
Restated Articles of Incorporation May 30, 1991
dated August 7, 1986, Certificate
of Amendment to Restated of
Articles of Incorporation dated
July 31, 1987 and Certificate of
Change of Location of Registered
Office dated October 20, 1987
3.3 Bylaws Exhibit 3(b) to Form S-1
Registration Statement
effective August 14,1984
File #2-91885
3.4 Certificate of Amendment to Exhibit B to Proxy
Restated Articles of Incorporation Statement for Annual
of National Pizza Company Meeting filed June 13, 1994
Effective July 12, 1994 EDGAR 748714-94-000007
4.1 Specimen Stock Certificate Exhibit 1 to
For Common Stock to Form 8-A
filed July 31, 1995
EDGAR 748714-94-000016
10.01 Franchise Agreement between Exhibit 10.01 to
Pizza Hut, Inc. and NPC to Form 10-Q
International, Inc. (sample document) filed August 1, 1994
effective March 30, 1994 EDGAR 748714-94-000016
10.02 Assignment of and Blanket Amendment Exhibit 10.02 to this
to Franchise Agreements Form 10-K
10.03 Franchise Agreement between Pizza Exhibit 10.03 to this
Hut, Inc. and NPC Management, Inc. Form 10-K
10.04 Profit Sharing Plan of Exhibit 10.25 to Form 10-K
NPC International, Inc. for the year ended March
dated July 1, 1992, as amended 30, 1993
Exhibit 10.29 to Form 10-K
for the year ended March 29, 1994
EDGAR 748714-94-000009
Exhibit 10.33 to Form 10-Q
filed August 1, 1994
EDGAR 748714-94-000016
10.05 Fourth Amendment to the NPC International, Exhibit 10.05 to this
Inc. Profit Sharing Plan dated Form 10-K
October 20, 1995
10.06 Fifth Amendment to the NPC International, Exhibit 10.06 to this
Inc. Profit Sharing Plan effective Form 10-K
July 12, 1994
10.07 Sixth Amendment to the NPC International, Exhibit 10.07 to this
Inc. Profit Sharing Plan dated Form 10-K
October 29, 1996
10.08 Seventh Amendment to the NPC International, Exhibit 10.08 to this
Inc. Profit Sharing Plan effective Form 10-K
January 1, 1997
10.09 NPC International, Inc. 1984 Amended and Exhibit 10(t) to Form 10-K
Restated Stock Option Plan filed June 25, 1990
10.10 NPC International, Inc. 1994 Stock Option Exhibit A to Proxy
Plan dated May 3, 1994 Statement to Annual Meeting
of Stockholders
filed June 13, 1994
EDGAR 748714-94-000007
10.11 Senior Note Purchase Agreement made by and Exhibit 10.26 to Form 10-K
between Pacific Mutual Life Insurance Company, for the year ended March
Pacific Corinthian Life Insurance Company, 30, 1993
Lutheran Brotherhood and NPC International,
Inc., as amended
Exhibit 10.39 to Form 10-K
for the year ended March
28, 1995
Exhibit 10.43 to Form 10-K
for the year ended March
28, 1995
Exhibit 10.44 to Form 10-K
for the year ended March
28, 1995
10.12 Amendment to the Senior Note Purchase Exhibit 10.12 to this
Agreement made by and between Pacific Mutual Form 10-K
Life Insurance Company, Pacific Corinthian
Life Insurance Company, Lutheran Brotherhood
and NPC International, Inc. dated May 29, 1996
10.13 Amendment to the Senior Note Purchase Exhibit 10.13 to this
Agreement made by and between Pacific Mutual Form 10-K
Life Insurance Company, Pacific Corinthian
Life Insurance Company, Lutheran Brotherhood
and NPC International, Inc.dated March 3, 1997
10.14 Amendment to the Senior Note Purchase Exhibit 10.14 to this
Agreement made by and between Pacific Mutual Form 10-K
Life Insurance Company, Pacific Corinthian
Life Insurance Company, Lutheran Brotherhood
and NPC International, Inc. dated May 8, 1997
10.15 NPC Management, Inc. $50 million 7.94% Senior Exhibit 10.15 to this Form
Guaranteed Notes due May 1, 2006, dated 10-K
May 1, 1997
10.16 $160 million Revolving Credit Agreement dated Exhibit 10.16 to this Form
as of March 5, 1997 among NPC International, 10-K
Inc., various banks and Texas Commerce Bank
National Association as Agent and NationsBank
of Texas, N.A. as Documentation Agent
10.17 Amended and Restated Revolving Credit Exhibit 10.17 to this Form
Agreement dated May 8, 1997, effective 10-K
March 26, 1997, among NPC Management,
Inc., various banks and Texas Commerce Bank
National Association as Agent and NationsBank
of Texas, N.A. as Documentation Agent
10.18 $15 Million Revolving Credit Agreement dated Exhibit 10.18 to this Form
as of March 5, 1997 among NPC International, 10-K
Inc., various banks and Texas Commerce Bank
National Association as Agent
10.19 $15 Million Amended and Restated Revolving Exhibit 10.19 to this Form
Credit Agreement dated as of May 8, 1997 10-K
among NPC International, Inc., various banks
and Texas Commerce Bank National Association
as Agent
10.20 Amended and Restated Master Shelf and Exhibit 10.20 to this Form
Assumption Agreement dated May 8, 1997, 10-K
effective March 26, 1997, between NPC
Management, Inc. and The Prudential
Insurance Company of America
10.21 Leases between the Company and Exhibit 10(e) to Form S-1
Messrs. Bicknell and Elliott Registration Statement
effective August 14, 1984
File #2-91885
10.22 Employment Agreement between Exhibit 10.45
NPC International, Inc. and to Form 10-K for the
James K. Schwartz dated January 27, 1995 year ended March 28, 1995
10.23 Acquisition agreement by and among Seattle Exhibit 2.0 to Form 8-K
Crab Co., NPC International, Inc. and filed March 28, 1996
Skipper's, Inc. dated as of March 25, 1996
10.24 Lease Indemnification Agreement Exhibit 2.1 to Form 8-K
filed March 28, 1996
10.25 Liability Assumption Agreement Exhibit 2.2 to Form 8-K
filed March 28, 1996
10.26 Environmental Compliance Agreement Exhibit 2.3 to Form 8-K
filed March 28, 1996
10.27 Non-Competition Agreement Exhibit 2.5 to Form 8-K
filed March 28, 1996
11 Statement regarding computation of per Exhibit 11
share earnings for the year ended to From 10-K for the
March 25, 1997, March 26, 1996, and year ended March 25, 1997
March 28, 1995, attached hereto.
13 1997 Annual Report to Stockholders Exhibit 13
(only those portions of such Annual Report to to Form 10-K for the
Stockholders which are specifically year ended March 25, 1997
incorporated by reference into this Form
10-K shall be deemed to be filed with
the Commission)
21 List of Subsidiaries Exhibit 21 to this
Form 10-K
23 Consent of Ernst & Young LLP Exhibit 23 to
Form 10-K for the year
ended March 25, 1997
(b) Reports on Form 8-K
The following forms were filed on Form 8-K following December 24, 1996:
Announcement of 122 unit acquisition from Filed February 3, 1997
Pizza Hut, Inc.
Completion of Phase I of 122 Unit Acquisition Filed March 18, 1997
from Pizza Hut, Inc.
Completion of 122 Unit Acquisition from Filed April 14, 1997
Pizza Hut, Inc.
Announcement of 52 Unit Acquisition from Filed April 17, 1997
Pizza Hut, Inc.
Announcement of 100 Unit Acquisition from Filed May 12, 1997
Jamie B. Coulter
Closing on 82 of 100 Unit Acquisition from Filed May 29, 1997
Jamie B. Coulter
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 the 6th
day of June, 1997 on its behalf by the undersigned, thereunto duly authorized.
NPC INTERNATIONAL, INC.
By Troy D. Cook
Vice President, Chief Financial Officer,
Treasurer, Assistant Secretary
(Principal Financial Officer)
By Alan L. Salts
Corporate Controller and
Chief Accounting Officer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 6th day of June, 1997.
O. Gene Bicknell Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
James K. Schwartz President, Chief Operating Officer and
Director
Troy D. Cook Vice President Finance, Chief Financial
Officer, Treasurer and Assistant Secretary
(Principal Financial Officer)
David G. Short Secretary
Fran D. Jabara Director
Robert E. Cressler Director
Mary M. Polfer Director
William A. Freeman Director
ASSIGNMENT OF AND BLANKET AMENDMENT TO
FRANCHISE AGREEMENTS
On this 26th day of February 1997, Pizza Hut, Inc. ("PHI") and NPC
International, Inc. ("NPCI"), NPC Management, Inc. ("NPCM"), and NPC Restaurants
LP ("NPCL") make and enter into this Assignment of and Blanket Amendment to
Franchise Agreements ("1997 Blanket Amendment").
WHEREAS, on this date, NPCI is a party to eighty-two (82) 1990 Pizza Hut,
Inc. Franchise Agreements, identified on Exhibit A hereto; one (1) 1990 Pizza
Hut, Inc. Location Franchise Agreement, identified on Exhibit B hereto; and four
(4) Pizza Hut, Inc. Location Franchise Agreements (with Delivery), identified on
Exhibit C hereto (collectively referred to as the "Franchise Agreement").
WHEREAS, as part of an overall restructuring of NPCI, NPCI desires to
transfer ownership of the Franchise Agreements to NPCM, a wholly-owned
subsidiary of NPCI, retaining certain of the rights and obligations of the
Operator thereunder;
WHEREAS, as another part of NPCI's overall restructuring, NPCI and NPCM
request that PHI consent to allow NPCL to assume and perform certain
responsibilities of the Operator under certain of the Franchise Agreements;
WHEREAS, upon the conditions and terms of this 1997 Blanket Amendment, PHI
is willing to consent to the assignment of the Franchise Agreements to NPCM and
is willing to consent to NPCL performing certain of NPCM's obligations under
certain of the Franchise Agreements; and
WHEREAS, the parties desire to modify certain rights and obligations set
forth in the Franchise Agreements to memorialize their agreement on these
matters.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. NPCI agrees that NPCM is and shall remain a wholly-owned subsidiary of
NPCI. Any change in the ownership of NPCM without PHI's prior written consent
shall constitute a default under the Franchise Agreements.
2. NPCI and NPCM agree that NPCL is and shall remain a limited partnership
with NPCI being the General Partner thereof, holding a 1% ownership interest and
with NPCM being the sole limited partner thereof, holding the remaining 99%
ownership interest. Any change in the ownership of NPCL without PHI's prior
written consent shall constitute a default under the Franchise Agreements.
3. Subject to the limitations set forth in paragraphs 4 through 7 below, after
the transfer of the Franchise Agreements to NPCM, the restrictions on transfers,
the covenants regarding other business interests, and the restrictions on
corporate operators in the Franchise Agreements shall apply to NPCI, NPCM and
NPCL just as if NPCI, NPCM and NPCL all were designated "Operator" thereunder.
4. The parties agree that on this date O. Gene Bicknell ("Bicknell") as the
owner of at least 51% of each class of NPCI stock, is the only NPCI stockholder
who falls within the definition of "Operator" under Article XXVIII of the
Franchise Agreements listed on Exhibits A and B, or under Article XXVII of the
Franchise Agreements listed on Exhibit C. Accordingly, all other NPCI
stockholders shall be free to transfer their NPCI shares without PHI's consent
and shall not be subject to the restrictions on transfer set forth in Article
XVI, B, D, E or G of the Franchise Agreements.
5. Provided Bicknell continues to hold at least 51% of each class of NPCI
stock as described in paragraph 4, the definition of "Operator" under Article XI
of the Franchise Agreements shall not include any NPCI shareholders other than
Bicknell and the prohibition on public ownership in Article XVII.E, of those
Franchise Agreements listed on Exhibit C shall not apply to NPCI, NPCM or NPCL.
6. The provisions of Article XVII, A, C and D of the Franchise Agreements
shall not apply to the NPCI shareholders other than Bicknell provided, however,
NPCI shall report to PHI the name of any other shareholders who accumulate 10%
or more of NPCI's common stock within 10 days of learning of any such holding.
The provisions of Article XVII.B of the Franchise Agreements shall not apply to
any NPCI shareholder including Bicknell.
7. The provisions of Article XVII.E and F of the Franchise Agreements that
NPCI confine its business exclusively to operating System Restaurants are waived
to permit NPCI to franchise and operate the Tony Roma's restaurant system . Any
additional expansion of NPCI's business beyond operation of System Restaurants
(as defined in the Franchise Agreements) and the Tony Roma's restaurant system
must receive PHI's prior written approval, which approval will not be
unreasonably withheld.
8. Paragraphs 3-7 of this 1997 Blanket Amendment shall apply to any renewal of
the Franchise Agreements, future franchise agreements acquired by NPCI or NPCM,
and any renewal of any such future franchise agreements, provided however, the
monthly service fee for any future franchise agreement shall be that set forth
in the acquired Pizza Hut Franchise Agreement.
9. NPCI hereby transfers and assigns the Franchise Agreements to NPCM and NPCM
accepts the assignment and transfer of the Franchise Agreements and agrees to
abide by all terms and conditions thereof and all obligations thereunder. PHI
hereby consents to the assignment and transfer of the Franchise Agreements to
NPCM. PHI also consents to NPCL's performance. NPCI hereby releases and
forever discharges PHI from any and all claims, of any nature whatsoever, known
or unknown, that exist on the date of this 1997 Blanket Amendment that arise, or
that might be claimed to arise from the Franchise Agreements.
10. Other than as here amended, all rights and obligations of the Franchise
Agreements remain in effect. The provisions of this 1997 Blanket Amendment are
personal to NPCI and NPCM and shall not apply to any of the Franchise Agreements
that NPCM might assign to others in the future.
IN WITNESS HEREOF, the parties have executed this Blanket Amendment this
26th day of February, 1997.
NPC International, Inc.
"NPCI"
By:
James K. Schwartz, President
NPC Management, Inc.
"NPCM"
By:
James K. Schwartz, President
NPC Restaurants LP
"NPCL"
By:
James K. Schwartz, President
Pizza Hut, Inc.
"PHI"
By:
Exhibit A
FA# Effective Date Territory Description
12 03/01/90 Ashley County, Arkansas
13 03/01/90 City of Beebe and Counties of Woodruff and
Lonoke, Arkansas
16 03/01/90 Clark County, Arkansas
17 03/01/90 Columbia County, Arkansas
19 03/01/90 City of DeWitt and the Counties of Bradley,
Calhoun, Cleveland, Dallas, Desha, Drew and
Lincoln, Arkansas
20 03/01/90 Faulkner County, Arkansas
23 03/01/90 Counties of Hempstead, Hot Spring, Howard, Little
River and Nevada, Arkansas
24 03/01/90 Jefferson County, Arkansas
25 03/01/90 Johnson County, Arkansas
26 03/01/90 Miller County, Arkansas; and City of Texarkana,
Texas as the city limits exist on March 1, 1990
27 03/01/90 Mississippi County, Arkansas; and the Counties of
Crockett and Fayette, Tennessee
28 03/01/90 Ouachita County, Arkansas
29 03/01/90 Phillips County, Arkansas
33 03/01/90 St. Francis County, Arkansas
35 03/01/90 City of Stuttgart, Arkansas, as the city limits exist
on March 1, 1990
36 03/01/90 Union County, Arkansas
38 03/01/90 The City of Springhill, Louisiana, as the city limits
exist on March 1, 1990
42 03/01/90 Counties of Howell and Wright, Missouri
51 03/01/90 McCurtain County, Oklahoma
172 03/30/94 Counties of Autauga and Elmore, Alabama
173 03/30/94 Counties of Bib, Blunt, Jefferson, Saint Clair and
Shelby, Alabama
174 03/30/94 Counties of Chilton, Greene, Hale, Perry and
Pickens, Alabama
175 03/30/94 Etowah County, Alabama
176 03/30/94 Counties of Fayette, Lamar, Marion and Winston,
Alabama; and McNairy County, Tennessee
177 03/30/94 Cities of Jacksonville and Piedmont, Alabama
178 03/30/94 Montgomery County, Alabama
179 03/30/94 Tuscalossa County, Alabama
181 03/30/94 Garland County, Arkansas
182 03/30/94 Pulaski County, Arkansas
184 03/30/94 City of Parsons (and a three (3) mile radius
thereof)and Crawford County, Kansas; and Counties
of Jasper an Newton (excluding the city of Neosho
and a three (3) mile radius thereof), Missouri
185 03/30/94 Parishes of Bienville, Lincoln, Morehouse, Tensas
and Webster (excluding Springhill and Cullen),
Louisiana
186 03/30/94 Parishes of Bossier and Caddo, Louisiana
187 03/30/94 Ouachita Parish, Louisiana
188 03/30/94 Adams County, Mississippi; and Concordia Parish,
Louisiana
189 03/30/94 Counties of Alcorn, Bolivar, Coahoma, Jackson
(excluding Pascagoula), Marshall, Panola, Prentiss,
Tate, Union and Winston, Mississippi
190 03/30/94 Counties of Chickasaw, Itawamba, Lee, Pontotoc,
Tippah and Tishomingo, Mississippi
191 03/30/94 Counties of Grenada, Holmes, Humphreys, Leake,
Quitman, Tallahatchie, and Yalobusha, Mississippi
192 03/30/94 Counties of Hinds, Madison and Rankin, Mississippi
193 03/30/94 Counties of Lafayette and Okitbbeha, Mississippi
194 03/30/94 Leflore County, Mississippi
195 03/30/94 Pascagoula, Mississippi
196 03/30/94 Counties of Sunflower and Washington, Mississippi
197 03/30/94 Warren County, Mississippi
198 03/30/94 Counties of Christian and Douglas, Missouri
199 03/30/94 Greene County (excluding the city of Republic and a
two (2) mile radius thereof), Missouri
202 03/30/94 Shelby County, Tennessee; Counties of Crittenden
and Lee, Arkansas; and DeSoto County, Mississippi
273 03/30/94 Leslie County, Kentucky
488 03/01/90 Counties of Bladen, Brunswick, Columbus,
Cumberland, Harnett, Hoke, Lee Moore, Randolph,
Richmond, Robeson and Scotland, North Carolina
552 03/30/94 Pulaski County, Missouri
553 03/30/94 Counties of Dade, Dallas, Hickory and St. Clair,
Missouri
555 03/30/94 Laclede County, Missouri
556 03/30/94 Counties of Maries and Osage, Missouri
557 03/30/94 Rolk County, Missouri
576 03/01/90 Bourbon County, Kansas
577 03/01/90 Neosho County, Kansas
578 03/01/90 Vernon County, Missouri
623 06/05/92 City of Milan, Tennessee
683 03/30/94 Counties of Amite, Claiborne, Copiah, Franklin,
Hancock, Jefferson, Jefferson Davis, Lawrence,
Lincoln, Marion, Pearl River, Pike Scott, Simpson,
Wathall, Wayne and Wilkinson, Mississippi
684 03/30/94 Counties of Attala, Choctaw, Clay, Monroe,
Montgomery, Neshoba, Noxubee, Sharkey, and
Yazoo, Mississippi; and Sumter County, Alabama
685 03/30/94 Counties of Calhoun and Lowndes, Mississippi
686 03/30/94 Counties of Clarke, Kemper, Lauderdale and
Newton, Mississippi
687 03/30/94 Counties of Covington, Jasper, Jones and Smith
Mississippi
688 03/30/94 Counties of Forrest, Lamar and Perry, Mississippi
689 03/30/94 Counties of Harrison and Stone, Mississippi
757 03/01/90 City of Neosho, Missouri
861 03/01/91 Counties of Caldwell and Davies, Missouri
897 03/01/90 Parishes of Caldwell, Claiborne, Catahoula, East
Carroll, Franklin, Jackson, LaSalle, Madison,
Richland, Union, West Carroll and Winn, Louisiana
1100 03/01/94 The City of Fort Payne, Alabama (excluding,
however, a single location on Highway 35 West,
Fort Payne), as the city limits exist on March 1,
1101 03/01/90 Bowie County, Texas (except City of Texarkana and
the City of New Boston)
1102 03/01/90 Arkansas County, Arkansas (except Cities of
Stuttgart and DeWitt)
1103 03/01/90 City of Cullen, Louisiana
1104- 03/01/90 Gibson County, Tennessee (except the cities of
Milan and Humboldt)
1105 03/01/90 Counties of Grant, Montgomery and Perry, Arkansas
1106 03/01/90 Pike County, Arkansas
1107 03/01/90 Dyer County, Tennessee
1110 06/05/92 Poinsett County, Arkansas; and Counties of Chester,
Hardeman, Haywood, Lauderdale, and Tipton,
Tennessee
1111 03/01/90 Lafayette County, Arkansas; Morris County Texas;
the Counties of Benton and Tunica, Mississippi
1112 06/05/92 The Counties of Panola and Shelby, Texas
1113 03/01/90 Counties of Bullock, Butler, Conecuh, Covington,
Crenshaw, Lowndes, Macon, Marengo and Wilcox,
Alabama
1114 03/01/90 Parishes of DeSoto, Natchitoches, Red River and
Sabine, Louisiana
1115 03/01/90 The City of Humboldt, Tennessee as the city limits
exist on March 1, 1990
1120 03/01/90 White County, Arkansas (excluding the Cities of
Beebe, Bald Knob, Judsonia, Kensett and Searcy
Exhibit B
FA# Effective Date Territory Description
1109 03/01/94 A single location at Highway 35 West, Fort Payne,
Alabama
Exhibit C
FA# Effective Date Territory Description
1127 04/18/95
1720 First Street, Kennett, MO;
2620 Jackson Street,Paducah, KY;
1119 Paris Road, Mayfield, KY;
519 Lindell Street, Martin, TN:
12th & Chestnut, Murray, KY;
5005 Hinkleville Road, Oaks Mall (Route 60 & I-24), Paducah, KY;
703 East Rulfoot Avenue, Union City, TN;
Highway 25 North, Malden, MO
1128 04/18/95
Highway 69 South, Atoka, OK;
Highway 32 & I-35, Marietta, OK;
1200 West First Street, Quanah, TX;
404 East Wise, Bowie, TX;
606 North First Street, Madill, OK:
Highway 76-22 East, Tishomingo, OK;
506 East Broadway Street, Hollis, OK
1129 04/18/95
1000 West Maple, Geneva, AL;
715 Columbia Road, Blakely, GA
1130 04/18/95
405A Southwest Drive, Jonesboro, AR;
Highway 67, Corning, AR;
Highway 67 North, Pocahontas, AR;
Highway 62-167 Junction, Ash Flat, AR;
900 South Caraway, Jonesboro, AR;
Highway 67 North, Walnut Ridge, AR
FA14-1996 SL
PIZZA HUT, INC.
LOCATION FRANCHISE AGREEMENT
DATE: _______________________
PARTIES: Pizza Hut, Inc.
9111 East Douglas
P. O. Box 428
Wichita, Kansas 67201
Franchisee _______________________
_______________________
_______________________
_______________________
RECITALS: PHI franchises a system of restaurants throughout the United
States and in certain foreign countries under the name and mark
"PIZZAEHUT".
Franchisee desires to obtain a franchise to operate "PIZZAEHUT"
restaurants at the site(s) specified in this Agreement. PHI is
willing to grant the rights set forth in this Agreement to Franchisee,
subject to Franchisee's strict compliance with the terms of this
Agreement;
AGREEMENT NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth in this Agreement, PHI and Franchisee agree as
follows:
1. DEFINITIONS In this Agreement, the following terms have the
following meanings:
1.1. Adequate Delivery Service. OAdequate Delivery ServiceO
means delivery of Approved Products in accordance with the standards
described in SectionE2.3.
1.2 Advertising Fund. The OAdvertising FundO is the fund
established in accordance with SectionE7.1, into which PHI,
Franchisee, and other domestic franchisees of PHI (subject to the
terms of SectionE7.1) make payments for national advertising, and
which PHI or its designee will spend in accordance with SectionE7.1.
1.3. Affiliates. A Person's "Affiliates" are all Persons that
directly or indirectly control, are controlled by, or are under common
control with, the Person.
1.4. Agreement. "Agreement" means this Franchise Agreement
(including all Appendices), as amended from time-to-time.
1.5. Approved Products. "Approved Products" are the food,
beverages, promotional items, and other products approved by PHI (in
the Manual or another written document) for sale in, or other
disposition to the public from, System Restaurants.
1.6. Co-op. "Co-op" means any co-operative advertising
association established in accordance with SectionE 7.4.
1.7 Delivery Area. ODelivery AreaO means the area(s) described
in AppendixEB, or the modified Delivery Area if Franchisee's Delivery
Area is changed pursuant to SectionE2.3.
1.8. Direct or Indirect. "Direct or indirect", when used in
describing ownership or other interests in an entity or an agreement,
means that intervening levels of ownership are disregarded.
1.9. Franchisee. "Franchisee", when capitalized, means the
Person(s) identified as "Franchisee" on the first page of this
Agreement, or any approved successor.
1.10. Good Standing. Franchisee is in "Good Standing" under
this Agreement at all times except when Franchisee is in default of
this Agreement (regardless of whether PHI has given Franchisee notice
pursuant to SectionE18.2).
1.11. Gross Sales. "Gross Sales" means the total of all cash
or other payments received (including the fair value of an exchange
and all payments by check, credit, or charge account, regardless of
whether the checks, credits, or charge accounts are ultimately paid)
for the sale or use of any products, goods, or services that are sold
at or from any System Restaurant. Gross Sales exclude only price
discounts and allowances, and taxes imposed directly on sales or
services by governmental authorities, and then only if the amount of
the tax is added to or absorbed in the selling price and is actually
paid to the appropriate governmental authority.
1.12. Interest. "Interest", when used in the context of an
interest in Franchisee or in this Agreement, means any direct or
indirect beneficial or legal ownership interest in Franchisee or in
this Agreement.
1.13. IPHFHA. "IPHFHA" means I.P.H.F.H.A., Inc., a Delaware
corporation, that is frequently referred to as the International Pizza
Hut Franchise Holders Association.
1.14. Lease. "Lease" means any written or oral contract
allowing one Person to possess or use the property of another Person,
and includes subleases and contracts for deed.
1.15 Location(s). OLocation(s)O means the specific site or
sites, listed in AppendixEB, at which franchisee is authorized by this
Agreement to operate System Restaurants.
1.16. Manual. The "Manual" is the set of documents (in one
or more volumes), as published, supplemented and revised (from time-to-
time), and disseminated by PHI, that explain and define the proper
operation of System Restaurants.
1.17. Person. "Person" means both natural persons and legal
entities (including corporations, partnerships, limited liability
companies, and trusts).
1.18. PHI. "PHI" means PizzaEHut, Inc., a Delaware
corporation, and its successors and assigns.
1.19. PizzaEHut Marks. "PizzaEHut Marks" means only those
trademarks, trade names, service marks, trade dress (including product
package designs), symbols, slogans, emblems, logos, insignia, designs,
external and internal building designs and other architectural
features, and any combination of the foregoing that Franchisee is
authorized to use in connection with the System Restaurants.
AppendixEA to this Agreement is a list of the PizzaEHut Marks that
consist of words or a combination of words and design that Franchisee
is authorized to use on the date of this Agreement. PHI may, from
time to time, designate other PizzaEHut Marks pursuant to SectionE3.1
of this Agreement.
1.20. Related Persons. FranchiseeOs "Related Persons"
consist of all Persons having an Interest in Franchisee; all of
Franchisee's Affiliates; the officers, directors, partners, trustees,
and beneficiaries of Franchisee and of any Person having an Interest
in Franchisee; and the spouses and minor children of any of the
foregoing individuals.
1.21 System Restaurants. OSystem RestaurantsO are only the
following three types of OPizzaEHutO restaurant concepts: (a) "Red
Roof" restaurants - (PHI's original concept) from which Pizza Hut
pizza (and other Approved Products) are sold for dine in and carryout
consumption, and may be delivered for off-premises consumption; (b)
Delivery restaurants - from which Pizza Hut pizza (and other Approved
Products) are delivered for off-premises consumption; and (c)
Delivery/Carryout (or "DelCo") restaurants - from which Pizza Hut
pizza (and other Approved Products) are sold for carryout and are
delivered, all for off-premises consumption.
1.22. System Restaurant Concepts. The phrase "System
Restaurant Concepts" refers collectively to the three types of Systems
Restaurants describe in SectionE1.21. "System Restaurants" and "System
Restaurant Concepts" do not include any other OPizzaEHutO restaurant
concept or any other type of restaurant or business owned by PHI or
its Affiliates.
1.23. Term. "Term" means the period during which the rights
granted by this Agreement are in effect, which starts on the date of
this Agreement, and (unless terminated early as allowed by SectionE
18) ends on the day before the 20th anniversary of this Agreement,
with no rights of renewal.
1.24. Transfer. "Transfer" includes every absolute or
conditional method of transferring a legal or equitable, record or
beneficial Interest in Franchisee or in this Agreement, whether
voluntary, involuntary, or by operation of law, and includes a change
in beneficiaries or trustees of a trust.
2. GRANT OF FRANCHISE
2.1. Grant of Franchise. PHI grants to Franchisee, during the
Term, the non-exclusive franchise to operate System Restaurants at the
Location(s),using the PizzaEHut Marks; to promote and sell Approved
Products and related services from System Restaurants at the
Location(s); and to deliver Approved Products produced at System
Restaurants throughout the Delivery Area (subject to Franchisee
providing Adequate Delivery Service as provided for in SectionE2.3).
Franchisee may not operate any System Restaurant except at the
Location(s), and may not deliver products produced at the System
Restaurants or using the PizzaEHut Marks except within the Delivery
Area. Franchisee covenants that it will use its best efforts to
promote sales of Approved Products from its System Restaurants and
throughout the Delivery Area.
2.2. No Subfranchise Right. The franchise granted by this
Agreement is personal to Franchisee. Franchisee may not subfranchise
to any other Person all or any part of the franchise granted by this
Agreement.
2.3. Delivery Service. Franchisee shall provide Adequate
Delivery Service to the entire Delivery Area throughout the Term.
Adequate Delivery Service means delivery service in accordance with
PHI's then-current standards for delivery.
At any time during the Term, PHI may consider whether
Franchisee is providing Adequate Delivery Service to the entire
Delivery Area. If PHI preliminarily determines that Franchisee is not
providing Adequate Delivery Service throughout the Delivery Area, PHI
will give Franchisee written notice of the areas within the Delivery
Area that are not receiving Adequate Delivery Service. Franchisee
may, within 90 days, submit a written protest to PHI that identifies
the geographic boundaries of the area to which Franchisee contends it
is providing Adequate Delivery Service. If Franchisee fails to timely
submit a written protest, PHI's preliminary determination shall become
immediately effective. PHI will consider any written protest timely
submitted by Franchisee but PHI shall in its sole discretion make the
final determination of the area to which Franchisee is providing
Adequate Delivery Service. PHI will give Franchisee written notice of
its final determination within 90 days after receipt of Franchisee's
written protest, at which point it shall be effective. The Delivery
Area shall be re-defined to include only the areas to which PHI
finally determines Franchisee is providing Adequate Delivery Service.
2.4. Relocation Rights. If Franchisee desires to relocate any of
Franchisee's existing System Restaurants, Franchisee will request
PHI's permission to do so. As part of its request, Franchisee must
supply PHI with justification for the relocation (such as expiration
of an existing lease or changed demographics) and any other
information PHI requests. If PHI consents to the relocation, PHI will
notify Franchisee of the portion (if any) of the initial fee that
Franchisee may transfer from the existing System Restaurant to the
proposed replacement System Restaurant and the date by which
Franchisee must open the replacement System Restaurant to receive the
credit (if any). To receive any credit, Franchisee must open the
replacement System Restaurant for business within 12 months after
closure of the existing System Restaurant. This Agreement will govern
Franchisee's operations at any such replacement System Restaurant.
2.5. Limitations on the Franchise. Franchisee (a)Emay not
conduct any business using any portion of the System Restaurant
Concepts licensed by this Agreement at any sites except the
Location(s), and (b)Emay not make deliveries of products produced at
the System Restaurants to any points outside the Delivery Area.
2.6. Protected Radius. During the Term, PHI will not develop or
operate, or allow any other franchisee or licensee to develop or
operate, System Restaurants (i.e., specifically limited to the System
Restaurant Concepts franchised by this Agreement) at the Location(s)
or at any point within 500 yards of the Location(s). Furthermore, as
long as Franchisee is providing Adequate Delivery Service throughout
the Delivery Area, PHI will not provide delivery service, and will not
allow any other licensee or franchisee to provide delivery service,
for Approved Products using the PizzaEHut Marks to any point within
the Delivery Area.
Except as set forth in this SectionE2.6, Franchisee has no
exclusivity and no rights to exclude development of concepts owned,
franchised or licensed by PHI or its Affiliates. PHI and its
Affiliates may develop and operate, or may franchise and license
others to operate, any business concept except the System Restaurant
Concepts at any place, including immediately adjacent to the
Location(s), and may use the PizzaEHut Marks or any other trademarks
owned or developed by PHI or its Affiliates in connection with those
concepts, even if such concepts sell products that are the same as, or
similar to, Approved Products.
3. DESIGNATION AND USE OF MARKS
3.1. Designation of PizzaEHut Marks. PHI may, from time-to-time,
designate new PizzaEHut Marks as applicable to the System Restaurants.
In addition, PHI may, from time-to-time, modify or delete existing
PizzaEHut Marks. PHI will give Franchisee written notice of the
addition, modification, or deletion of PizzaEHut Marks. Franchisee
will cease use of any deleted PizzaEHut Marks within the time stated
in the notice of deletion. PHI now owns and may in the future own
marks that are not PizzaEHut Marks. Franchisee will have absolutely
no right to use any mark owned or controlled by PHI except the
PizzaEHut Marks.
3.2. Use of PizzaEHut Marks. The franchise granted to Franchisee
to use the PizzaEHut Marks is applicable only to Franchisee's System
Restaurants located at the Location(s), except that Franchisee may use
the PizzaEHut Marks in connection with advertisements for the System
Restaurants and may deliver products produced at the System
Restaurants throughout the Delivery Area. Franchisee will use the
PizzaEHut Marks strictly according to the terms and conditions of this
Agreement.
Franchisee may not offer or sell any food, beverage, or other
product (whether or not an Authorized Product) at or from any System
Restaurant under or in connection with any trademark, service mark,
trade name, or trade dress (including product package design) other
than the PizzaEHut Marks, without PHI's prior, written consent in each
case. Franchisee will cause all point of purchase materials and all
other paper goods, all exterior/interior signage, and all promotional
and advertising materials to bear the PizzaEHut Marks as instructed by
PHI.
3.3. Ownership of PizzaEHut Marks. PHI is the sole and exclusive
owner of the PizzaEHut Marks. Nothing contained in this Agreement
vests in Franchisee any interest in any of the PizzaEHut Marks, other
than the limited license granted by this Agreement. All goodwill now
or in the future associated with and/or identified by one or more of
the PizzaEHut Marks (including any goodwill arising out of
Franchisee's use of the PizzaEHut Marks) belongs directly and
exclusively to PHI.
Franchisee may not interfere in any manner with, and will not
attempt to attack, contest, or prohibit, (a) any use of the PizzaEHut
Marks by PHI or by any other franchisee or licensee of PHI that is not
directly contrary to the terms of this Agreement, or (b) PHIOs
ownership of the PizzaEHut Marks. The provisions of this SectionE3.3
will survive the termination or expiration of this Agreement.
3.4. Protection of PizzaEHut Marks. Franchisee will immediately
notify PHI, in writing, if (a) a third party claims that the PizzaEHut
Marks infringe trademarks owned by the third party, or otherwise
challenges Franchisee's use of the PizzaEHut Marks, or (b) Franchisee
knows or suspects that a third party is infringing the PizzaEHut
Marks. Franchisee will provide PHI with any information available to
Franchisee about the matter.
PHI will use reasonable efforts to protect the PizzaEHut Marks,
including (in its sole and absolute discretion) instituting,
prosecuting, and/or settling judicial or administrative actions or
proceedings. Whenever requested to do so by PHI, Franchisee will
cooperate fully in those actions or proceedings. Franchisee may not,
however, take any action with respect to any challenges against
FranchiseeOs use of the PizzaEHut Marks, or any known or suspected
infringements of the PizzaEHut Marks by other parties, without PHI's
prior, written approval (which PHI may grant or withhold in its sole
discretion).
Franchisee will exercise caution in its use of the PizzaEHut
Marks to ensure that the PizzaEHut Marks (and the goodwill associated
with them) are not jeopardized in any manner. Franchisee may not use
the PizzaEHut Marks in any manner or in connection with any statement
or material that is (in PHI's reasonable judgment) in bad taste or
inconsistent with PHI's public image, or that could tend to involve
PHI in a matter of political or public controversy, or tend to bring
disparagement, ridicule, or scorn upon PHI, the PizzaEHut Marks, or
the goodwill associated with the PizzaEHut Marks.
4. TRAINING AND ASSISTANCE
4.1. Management Training Programs.
A. PHI Programs. PHI will offer a training program for
Franchisee and the managers of Franchisee's System Restaurants, at
locations and at times selected by PHI. The training programs, which
may include more than one segment, will be structured to provide
practical training in the implementation of the System Restaurant
Concepts, and the operation of System Restaurants. PHI will bear the
costs of providing the actual training programs, including the
overhead costs of training, staff salaries, materials, and all
technical training tools. Franchisee will pay all traveling, living,
compensation, and other expenses incurred by Franchisee or
Franchisee's employees in connection with attendance at the training
programs. The course content, format, operation, and manner of
conducting these training programs will be in the sole control of PHI.
B. Training Mandatory. Franchisee will not allow any of
Franchisee's System Restaurants to be managed by any person who has
not successfully completed PHI's management training course. If a
manager dies, resigns, or is terminated, Franchisee will not be in
default of this requirement if the successor manager begins the
required training course within 90 days after first assuming the
duties of a manager and successfully completes the course.
C. Independent Training Programs. Franchisee may request
that PHI approve a management training program proposed by Franchisee
as an alternate method of complying with this SectionE4.1. PHI has no
duty to review Franchisee's program unless Franchisee pays all costs
of PHI's review; PHI has no duty to approve Franchisee's program
unless Franchisee satisfies PHI that Franchisee's program is at least
the equivalent of PHI's program. PHI may revoke its approval of
Franchisee's training program whenever, in PHI's opinion, the training
program fails to satisfy this standard.
5. MANUAL
5.1. Loan of Manual. PHI will loan to Franchisee, at no charge,
one complete set of the applicable portions of the Manual for each
System Restaurant. Franchisee may borrow from PHI further copies of
some or all portions of the Manual, upon payment of the fee set by
PHI.
5.2. Ownership of Manual. All copies of the Manual will remain
the exclusive property of PHI. Franchisee may not copy, and will
prevent all Persons, including Franchisee's employees and Related
Persons, from copying, any portion of the Manual. Franchisee will
return to PHI, at the end of the Term, all copies of the Manual in the
possession of Franchisee, Franchisee's employees or its Related
Persons.
5.3. Confidentiality of Manual. The entire contents of the
Manual constitute PHI's confidential trade secrets. Franchisee may
not, and will use its best efforts to ensure that no other Persons
disclose or use (except as authorized by this Agreement) any of the
contents of the Manual or any other trade secrets of PHI, whether
during or after the Term.
5.4. Protection of Trade Secrets. The information contained in
the Manual is a trade secret; disclosure of any of the information
contained in the Manual would cause irreparable harm to PHI. PHI is
entitled to obtain injunctive relief against Franchisee, without
posting bond or other security, to protect the contents of the Manual
from disclosure and improper use. Franchisee waives all defenses it
might otherwise have to equitable relief for this purpose.
5.5. Updates. PHI may, from time-to-time, update, correct or
modify the Manual. Franchisee will follow any instructions from PHI
concerning those updates, corrections and modifications, including
instructions to remove and replace certain pages contained in the
Manual, and instructions to destroy or to return to PHI the old (or
removed) pages or volumes. If there is ever a disagreement about the
proper contents of the Manual, the master copy of the Manual kept by
PHI at its home office is conclusively the controlling version.
6. STANDARDS; DUTIES OF FRANCHISEE AND OPERATOR
6.1. Interpretation of Standards. PHI has sole discretion to
interpret the standards that it sets forth in the Manual or elsewhere.
6.2. Promulgation of Standards. In the Manual, PHI has
promulgated standards of operation for each type of System Restaurant.
PHI has also promulgated standards of usage for the PizzaEHut Marks,
and other standards intended to ensure the consistency of the System
Restaurant Concepts. PHI may, from time-to-time, add to, delete, or
change standards. Franchisee will comply with any change in the
standards within the time-frame set by PHI. At all times throughout
the Term, Franchisee will comply with all standards then current.
6.3. Limitation on Promulgation of Standards. PHI will not
impose any new or modified standard that requires structural changes,
remodeling, or renovation with a cost estimated by PHI to exceed
$10,000.00 per System Restaurant, more often than once every 5 years.
6.4. Inspections. PHI's authorized representatives may enter
upon the premises of Franchisee's System Restaurants at any time
during the System Restaurant's normal business hours, and at any other
reasonable time, for the purpose of determining whether the business
is being conducted in accordance with PHI's standards, the Manual and
the terms of this Agreement.
If any inspection indicates any deficiency, Franchisee will correct or
repair the deficiency within 48 hours after Franchisee receives a
written report of the deficiency from PHI. If (a) the deficiency is
one that Franchisee has a right to cure under SectionE18.2 and (b) the
deficiency cannot be cured within 48 hours, Franchisee will not be in
default if Franchisee begins the necessary corrections or repairs
within the 48-hour period, and diligently pursues the work to
completion. If the deficiency is one that imminently threatens the
health or safety of FranchiseeOs employees or the consuming public,
PHI may (instead of terminating this Agreement as allowed by
SectionE18.1 H) require Franchisee to cease operating the effected
System Restaurant until the deficiency is corrected. If Franchisee
does not cure the deficiency within the permitted time, PHI may make,
or hire someone else to make, the corrections or repairs. Franchisee
will reimburse PHI, upon demand, for all of PHI's repair expenses.
6.5. Compliance with Laws. Franchisee will comply with all
applicable laws and regulations governing the operation of its System
Restaurants.
6.6. Identification. Franchisee will maintain PHI-approved
signage, identifying the System Restaurant as a PIZZA HUT restaurant,
and giving any other information that PHI requires. In addition,
Franchisee will prominently post a PHI-approved sign inside each
System Restaurant, stating Franchisee's name and stating that the
System Restaurant is operated by Franchisee under a franchise from
PHI.
6.7. Uniforms. Franchisee will require all employees, while
working in any System Restaurant, to: (a) wear uniforms of the color,
design, and other specifications that PHI designates from time-to-
time, and (b) present a neat and clean appearance.
6.8. Coin-Operated Machines. Franchisee may not permit any
vending, game, audio, video, other coin- or currency-operated
machines, or any other service, product, or entertainment machine of
any kind (whether or not similar to those listed), to be installed or
maintained on the premises of Franchisee's System Restaurants without
PHI's prior written approval. Unless otherwise provided in the
Manual, PHI consents to the installation in each System Restaurant of
up to the following numbers of coinDoperated machines:
Delivery and DelCo
Red Roof Restaurants Restaurants
One cigarette Two newspaper
vending machine vending machines
Two newspaper One coin telephone
vending machines
Two coin telephones One video game
machine
Onevideo game
machine
One audio jukebox
The portion of receipts from all coinDoperated machines located on the
premises of a System Restaurant that is payable as directed by
Franchisee (even if paid by the vendor directly to the unitOs manager)
is part of Gross Sales.
6.9. Assumed Name Certificate. Franchisee will promptly file and
publish, in all states and counties in which Franchisee does business,
a certificate of doing business under an assumed or fictitious name.
Franchisee will indicate in each certificate that it is doing business
as OPizzaEHutO under a franchise from PHI. Franchisee will furnish a
certified copy of each certificate to PHI promptly after its filing
6.10. Approved Products. Franchisee may not manufacture,
advertise for sale, sell, or give away from any System Restaurant any
product except Approved Products. All Approved Products will be
distributed under the specific name or Mark (if any) approved by PHI.
A. Standard and Optional Items. Franchisee will offer for
sale in each of its System Restaurants all Approved Products that PHI
designates as OstandardO for the type of System Restaurant, unless PHI
agrees otherwise in writing. In addition, Franchisee may offer
Approved Products designated by PHI as OoptionalO for the System
Restaurant in which offered.
B. Menu Modification. Any time PHI notifies Franchisee
that an item will become a OstandardO Approved Product, or that an
item will no longer be an Approved Product (either OstandardO or
OoptionalO), PHI will include a deadline by which Franchisee must
offer the new OstandardO Approved Product for sale, or must cease
selling the item that is no longer an Approved Product. The deadline
will be at least 90 days after PHI gives Franchisee the notice, in the
case of a new OstandardO Approved Product, and at least 30 days after
PHI gives Franchisee the notice, in the case of a product that is no
longer an Approved Product.
C. No Unprepared Products. Franchisee may not sell or
distribute any food product or ingredient except as a complete and
fully prepared food product ready for immediate consumption.
6.11. SUS Computer System. Franchisee will use and maintain
in all System Restaurants the franchisee version of the SUS (Single
Unit System) Computer System (or such other computerized point-of-sale
system as PHI may designate or approve), including all enhancements,
upgrades, modifications, and additions to the SUS system designated by
PHI. PHI is currently the only approved supplier of the SUS System
software. Franchisee will acquire the SUS System software from PHI by
signing a separate License and Support Agreement, a copy of the
current version of which is attached as AppendixEH. The SUS License
and Support Agreement requires Franchisee to pay PHI's standard
support and maintenance fees. Franchisee will acquire all necessary
hardware to operate the SUS System software from a vendor approved by
PHI, and will dedicate that hardware solely to the operation of the
SUS System.
The SUS System software, and all enhancements, additions, upgrades,
and modifications thereto, constitute PHI's confidential information
subject to the confidentiality requirements of SectionsE5.3, 5.4 and
12. Franchisee will store all data and information on the SUS System
as PHI may designate from time to time. PHI may, at any time, access
Franchisee's SUS System and retrieve, analyze, download and use all
software, data and files stored or used thereon.
PHI owns all aspects of the SUS System, including all enhancements,
upgrades, modifications and additions, regardless of who develops or
conceives of any such changes. Upon termination of this Agreement,
Franchisee will cooperate fully in the removal of the SUS System
software from all of Franchisee's System Restaurants.
6.12. Prices. Franchisee will establish, in its sole
discretion, prices for all Approved Products sold by Franchisee.
7. ADVERTISING
7.1. National Advertising.
A. Advertising Fund. Subject to the remainder of this
Section 7.1, Franchisee will make a monthly payment to PHI (for the
Advertising Fund) in an amount equal to 3% of Franchisee's Gross Sales
from each System Restaurant for the prior month. PHI will use the
Advertising Fund to develop and administer advertising, promotional,
and marketing programs designed to promote and enhance the collective
success of all System Restaurants, except that PHI, in its sole
discretion, may rebate some or all of the Advertising Fund to
Franchisee and other franchisees for use in local marketing. PHI need
not expend payments to the Advertising Fund in the same year that they
are received, and need not prove that Franchisee received any benefit
from Franchisee's payments to the Advertising Fund. PHI's good faith
decisions regarding expenditure of the Advertising Fund will be final
and binding. PHI may, in its sole discretion, seek input from
Franchisee or other franchisees regarding expenditure of the
Advertising Fund.
B. IPHFHA. On the date of this Agreement, PHI is a party
to an agreement dated March 31, 1975 (as subsequently amended) with
IPHFHA concerning advertising for System Restaurants (the "Advertising
Committee Agreement"). During the period that the Advertising
Committee Agreement is in force, Franchisee will be a member of
IPHFHA, will abide by the constitution, bylaws, rules and regulations
of IPHFHA, and will timely pay the dues that IPHFHA assesses its
members for contribution to the national advertising fund administered
by the Advertising Committee under the Advertising Committee
Agreement. The amount that Franchisee pays as dues to IPHFHA for
contribution to the national advertising fund administered by the
Advertising Committee under the Advertising Committee Agreement will
be credited, dollar for dollar, toward Franchisee's 3% national
advertising obligations set forth in Section 7.1.A. PHI will remit
all of the national advertising payments that Franchisee makes to PHI
to the Advertising Committee. At any time that IPHFHA holds a vote
concerning the dues to be paid by its members, Franchisee will
exercise all of Franchisee's voting power to implement a dues rate
equal to 3% of the prior months Gross Sales.
C. Delegation of Authority. During the period that the
Advertising Committee Agreement is in force, PHI may delegate its
authority over, and control of, the Advertising Fund to the
Advertising Committee. During the period of this delegation, PHI will
have no responsibility for the Advertising Fund, or for the decisions
made by the Advertising Committee. PHI will nonetheless retain final
control over all uses of the Pizza Hut Marks.
7.2. Local Advertising. In addition to the payments required by
Section 7.1, Franchisee will expend each month 1% of Franchisee's
prior month's Gross Sales from each System Restaurant on local
advertising in the general marketing area of Franchisee's System
Restaurants. Such local advertising shall be confined to broadcast
media, subject to PHI's prior written consent.
7.3. Approval of Advertising. All advertising copy and other
materials used by Franchisee will be in strict conformity with the
standards, formats, and specimens contained in the Manual or otherwise
established by PHI. Franchisee may not use any design, advertisement,
sign, or form of publicity, unless first submitted to PHI and approved
by PHI in writing (except with respect to prices), and not later
disapproved. Any request by Franchisee for PHI's approval will be
addressed to PHI (marked, "Attention: Advertising Department - Ad
Review"), and PHI will endeavor to respond within 30 days. Whenever
Franchisee elects to use, in the manner and time frame intended by
PHI, advertising supplied by PHI or a promotional item specifically
approved by PHI, Franchisee may use that advertising or promotional
item without further approval.
Upon written notice from PHI, Franchisee will immediately discontinue
use of any unapproved advertising materials. If Franchisee does not
discontinue and remove the unapproved materials within 5 days after
notice, PHI or its authorized agents may, at any time, enter upon the
premises of Franchisee's System Restaurants or elsewhere and remove
and destroy the materials without paying for them and without being
liable for trespass or other tort.
7.4. Co-operative Advertising. PHI may, from time-to-time,
establish co-operative advertising associations ("Co-ops") for various
groups of System Restaurants. PHI may establish or modify Co-ops
based upon marketing areas, type(s) of System Restaurants, or any
other criteria chosen by PHI in its sole discretion. If PHI elects to
establish Co-ops, it may, from time-to-time, direct Franchisee to join
one or more Co-ops and to contribute some or all of Franchisee's local
advertising money (otherwise required to be expended by Franchisee
pursuant to SectionE7.2) to one or more of the Co-ops. The monthly
contributions to a Co-op (if any) required by this SectionE7.4 will be
made on or before the 20th day of each month, based on the prior
month's Gross Sales of each of Franchisee's System Restaurants in the
Co-op. PHI reserves the right to establish bylaws, voting rules,
membership agreements, standard advertising agency agreements, and
other standards concerning the operation of Co-ops, advertising
agencies retained by Co-ops, and advertising programs conducted by Co-
ops .
8. PURCHASE OF EQUIPMENT, SUPPLIES AND OTHER PRODUCTS
8.1. Use of Approved Supplies and Approved Distributors. PHI
may, from time-to-time, publish one or more listings of approved
equipment, supplies, and distributors, which listings may be specific
as to manufacturer, brand name, item/model/catalog number, preparation
or manufacturing facility, or other factors considered relevant by
PHI. PHI may add to or delete from the listings at any time.
Franchisee will only purchase and use approved equipment and supplies
in connection with Franchisee's operations under this Agreement, and
will obtain all equipment and supplies only from or through approved
distributors. If Franchisee desires to purchase any equipment or
supplies that are not then approved, or to purchase any items from or
through a distributor that is not then approved, Franchisee will
submit to PHI a written request for approval. PHI may inspect the
facilities of the manufacturer, producer, or distributor, and may
require Franchisee (or the manufacturer, producer, or distributor) to
submit samples, specifications, and other information concerning any
equipment or supplies for which approval is sought. PHI is not
required to inspect or test any proposed manufacturer, producer, or
distributor until PHI is satisfied that all costs associated with
inspection and testing of the proposed manufacturer, producer, or
distributor and of samples of their products (including salaries of
PHI employees, travel costs, and laboratory charges) will be borne by
Franchisee (or the manufacturer, producer, or distributor). PHI may
reDinspect the facilities and products of any approved manufacturer,
producer, or distributor from time-to-time, and may revoke its
approval upon failure to continue to meet any of PHI's criteria as
then in effect.
8.2. Trade Secret Items. PHI's spice blends are highly
confidential secret recipes and are trade secrets of PHI.
Accordingly, Franchisee may use only PHI's secret spice blends in the
preparation of Approved Products and will buy from PHI, or a source
designated by PHI, Franchisee's full requirements of PHI's spice
blends as well as any other trade secret or patented items that PHI
develops in the future.
8.3. Product Rebate.
A. For the purpose of this SectionE8.3, the term "Company"
includes any business entity controlling, controlled by, or under
common control with, PHI.
B. Franchisee may purchase from Company, upon such terms
as Company may offer, such items as Company may offer for sale to
Franchisee.
C. Within 4 months after the end of each fiscal year of
Company, Company will determine its rate of gross profit and its rate
of net pre-tax profit attributable to sales by Company to all its
PizzaEHut franchisees of only food, paper products, and similar
restaurant supplies (but not of any other items, including, without
limitation, nonfood items manufactured by Company and other items such
as furnishings, interior and exterior decor items, and equipment) for
the fiscal year.
In making this determination, the sales, gross profit, and
net pre-tax profit for all entities will be combined (without
considering accounting eliminations) into one financial statement, and
Company's cost will be reduced by any cash discounts that Company
received from its vendors.
D. If --
i) the rate of gross profit as determined by Company
exceeds 14%, or
ii) the rate of net pre-tax profit as determined by
Company exceeds 2.5%,
then in either event Company will, within 30 days thereafter, pay to
Pizza Hut franchisees entitled thereto, in the manner provided in
paragraph E. below, an amount equal to the excess as determined under
either i) or ii) above, whichever is greater; provided, however, that
the aggregate payment called for herein shall in no event exceed an
amount equal to Company's net pre-tax profit attributable to sales of
food, paper products, and similar restaurant supplies by Company to
all its Pizza Hut franchisees for said fiscal year.
E. Company will pay to each Pizza Hut franchisee its share
of the amount determined to be payable by Company under paragraphs C.
and D. above, in the form of a cash payment or a credit, at the option
of the franchisee, pursuant to procedures established by Company. The
share of each Pizza Hut franchisee will be in an amount which bears
the same relationship to the total amount determined to be payable by
Company under paragraphs C. and D. above as such franchisee's gross
purchases from Company of food, paper products, and similar restaurant
supplies bear to gross purchases of such items from Company by all
franchisees; the parties expressly agree that such share shall be
determined without regard to any other factors, including, without
limitation, product mix variations, delivery and service charges,
regional price variations, or other price variations.
9. FEES AND PAYMENT SCHEDULE
9.1. Initial Franchise Fee. Franchisee will pay PHI an initial
franchisee fee of $25,000 for each System Restaurant. The initial
franchise fees will be fully earned when due, and will not be
refundable, in whole or in part, under any circumstances. The entire
initial franchise fee is payable before the System Restaurant opens.
9.2. Monthly Service Fees. Franchisee will pay PHI monthly an
amount equal to 6.5% of Franchisee's Gross Sales from each System
Restaurant for the prior month. If applicable law prohibits
Franchisee from paying PHI a percentage of Franchisee's revenues from
the sale of alcoholic beverages, Franchisee will pay PHI monthly an
amount equal to 7% of Franchisee's Gross Sales (excluding from those
Gross Sales, however, all revenues from the sale of alcoholic
beverages) from each System Restaurant in the affected jurisdiction
for the prior month. Franchisee will pay all monthly service fees on
or before the 20th day of the month. If PHI has not received the fee
by the last day of the month in which the payment is due, Franchisee
will pay a "late charge" equal to 1.5% of the delinquent amount (or
such lesser amount as PHI may designate) and an equal late charge for
each subsequent month that payment is delayed. PHI may apply any
payments received from Franchisee to the oldest amounts due from
Franchisee, regardless of any contrary designation by Franchisee.
9.3. Transfer Fees. As partial reimbursement of PHI's costs of
review and approval of a Transfer of any Interest in Franchisee or in
this Agreement, Franchisee will pay PHI, on or before the effective
date of each Transfer, and as a condition to PHI's approval, a
transfer fee equal to $2,500 plus an additional $250 for each Location
covered by this Agreement (whether or not Franchisee is then operating
a System Restaurant at any Location).
9.4. Offset Rights. At any time that Franchisee or its Related
Persons are 30 days or more delinquent in paying any sums owed to PHI
or its Affiliates, PHI may offset any sums owing by PHI against moneys
owed by Franchisee or its Related Persons.
9.5 Taxes. In additon to the other payments provided for in
this Agreement, Franchisee will pay PHI, or its Affilates, all sales
taxes, personal property taxes, excise taxes, value added taxes and
similar taxes imposed upon or required to be collected or paid by PHI,
or its Affilates, on account of services or goods furnished to
Franchisee through sale, lease or otherwise, or on account of
collection by PHI of the Initial Franchise Fees or Monthly Service
Fees called for by this Agreement. Franchisee shall pay such taxes
upon demand and in the manner designated by PHI, or its Affiliates.
10. BUSINESS PREMISES
10.1. Restrictions on Use. Unless Franchisee receives PHI's
prior, written consent, Franchisee will conduct from the premises of
each of Franchisee's System Restaurants (including any adjacent
sidewalks and parking areas) only business activities licensed by this
Agreement.
10.2. Site Selection. Franchisee is solely responsible for
selecting sites at which to develop System Restaurants. PHI will not
be liable to Franchisee if a location chosen by Franchisee fails to be
profitable or otherwise fails to meet Franchisee's expectations.
10.3. Construction of System Restaurants. Franchisee will
obtain all necessary governmental permits and licenses before
constructing, modifying, or remodeling any System Restaurant.
Franchisee will complete any construction or other work on each System
Restaurant within a reasonable time after Franchisee begins work on
that System Restaurant. Franchisee will begin operation of each new
System Restaurant within 30 days after completion of construction, and
will give PHI at least 10 days written notice before beginning
operations.
10.4. Right to De-Identify. If the premises at which a
System Restaurant is operated are leased, the lease will contain an
express right of de-identification, in the following form:
Upon termination or non-renewal of this Lease,
Lessee/Tenant may de-identify the leased premises. If
Lessee/Tenant fails to do so, Pizza Hut, Inc., is given
the express right to de-identify. Deidentification
consists of removal of all signs; modification or
remodeling of all identifying architectural features
(by removing the cupola from the roof, replacing any
trapezoidal windows with rectangular windows, and
similar actions); repainting as necessary to no longer
use the color scheme used by Pizza Hut, Inc.; and any
other steps necessary (in the sole discretion of Pizza
Hut, Inc.) to effectively distinguish the formerly
leased premises from Pizza Hut, Inc.'s proprietary
building design(s). All de-identification will be done
without cost to Lessor/Landlord.
10.5. Repair and Maintenance. Franchisee will repair and
repaint the interior and exterior of all System Restaurants as
appropriate and as requested by PHI. Franchisee will, at all times,
maintain the interior and exterior of the System Restaurants as well
as the surrounding premises in a clean and orderly condition. If
Franchisee leases the locations on which the System Restaurants are
located, Franchisee will require the leases to contain an express
right to undertake this repair and maintenance.
10.6. Proof of Compliance. Before opening each System
Restaurant, Franchisee will provide to PHI either a copy of a deed
showing that title to the real estate on which the System Restaurant
will be located is held by Franchisee, or a letter from the landlord
of the premises in the form of Appendix C.
10.7. System Restaurant Closure. Franchisee may not cease to
operate any System Restaurant without PHI's prior consent, except upon
condemnation or expiration of a lease pursuant to its terms at
execution. Franchisee acknowledges that the damages to PHI from
unauthorized closure of a System Restaurant are difficult to
calculate; therefore, if Franchisee violates this SectionE10.7,
Franchisee will pay as liquidated damages, and not as a penalty, an
amount equal to 24 times the average monthly service fees paid or due
with respect to the closed System Restaurant during the calendar year
before the closing. If the System Restaurant was not open for
business for a full calendar year, the liquidated damages will be 24
times the highest monthly service fee during the period the System
Restaurant was open.
11. BOOKS AND RECORDS
11.1. Maintenance of Books and Records. Franchisee will keep
on the premises of each of Franchisee's System Restaurants or at
Franchisee's principal place of business, and will preserve for at
least 5 years after the date of their preparation (regardless of any
intervening expiration or termination of this Agreement), true and
accurate records, ledgers, accounts, books, and data in the form that
PHI requires. Franchisee's records will accurately reflect all
details relating to the business done at each System Restaurant.
Franchisee will submit to PHI with its payment of the monthly service
fees a monthly statement of Gross Sales and, within 45 days after the
close of each fiscal quarter, a quarterly profit and loss statement,
on a unit-by-unit basis. In addition, Franchisee will, within 90 days
after the end of each of Franchisee's fiscal years, provide PHI with a
complete annual profit and loss statement and a consolidated balance
sheet prepared in accordance with generally accepted accounting
principles, consistently applied. If requested by PHI, the annual
profit and loss statement and balance sheet will be reviewed by an
independent certified public accountant in accordance with the
Statements on Standards for Accounting and Review Services, and will
contain a signed opinion by the accountant to that effect. PHI
reserves the right to require any further information about
Franchisee's business under this Agreement that PHI from time to time
reasonably prescribes. PHI will take reasonable precautions to
maintain the confidentiality of all financial reports provided by
Franchisee, but if Franchisee executes any promissory notes to PHI,
PHI may disclose the financial reports provided by Franchisee to any
third party to whom PHI sells or pledges (or attempts to sell or
pledge) the promissory notes from Franchisee.
11.2. Inspection and Audit. PHI and its agents or
representations may examine and audit all of Franchisee's records,
accounts, and books at all reasonable times. Franchisee will
cooperate with any examination or audit by gathering records,
accounts, and books for easy access, and by providing other assistance
PHI reasonably requests. If any inspection or audit discloses that
any financial statement delivered to PHI by Franchisee is in error,
Franchisee will immediately pay to PHI any deficiency found to be
owing, plus a finance charge at the maximum rate permitted by law,
accruing from the date payment was first due. If the deficiency is 2%
or more of the amount due, then in addition, Franchisee will reimburse
PHI for the cost and expense of the inspection or audit within 5
business days after receiving a bill from PHI.
11.3. Selection of Accountants. Franchisee will use the
accounting services of a national or large regional firm of certified
public accountants selected by Franchisee, or another accounting
service reasonably satisfactory to PHI. Franchisee will notify PHI of
the name and qualifications of any accounting service (other than a
national or large regional firm of certified public accountants)
selected by Franchisee; that accounting service will be considered
satisfactory to PHI unless, within 30 days after PHI's receipt of
Franchisee's notice of the name and qualifications of the accounting
service, PHI notifies Franchisee of PHI's objection to the accounting
service. PHI may withdraw its approval of any accounting service
(including national and large regional firms) upon reasonable advance
notice to Franchisee.
12. COVENANTS AGAINST COMPETITION
12.1. Acknowledgments. Franchisee acknowledges:
A. Uniqueness. The food products, methods of doing
business, and other elements composing the System Restaurant Concepts
(including the information set forth in the Manual) are distinctive,
and have been developed by PHI at great effort, time, and expense.
B. Secret Information. Franchisee has regular and
continuing access to valuable and confidential trade secrets regarding
the System Restaurant Concepts, and to PHI's knowledge, know-how, and
expertise concerning the operation of a retail food business. It
would be an unfair method of competition for Franchisee to use or
duplicate any of PHI's trade secrets, knowledge, know-how, or
expertise for any use other than operations pursuant to this
Agreement.
12.2. In-Term Covenants. During the Term, Franchisee and its
Related Persons may not (without the prior, written consent of PHI),
directly or indirectly, individually or as a partner, joint venturer,
shareholder, officer, creditor, director, employee, trustee, or agent
of an organization, own, operate, finance, or provide consulting
services to any business (other than a System Restaurant operated
pursuant to this Agreement) engaged in the business of operating
restaurants (including the delivery and carryout aspects of
restaurants) that sell pizza, pasta or other food items similar to
Approved Products.
During the Term, Franchisee and its Related Persons may not
(without the prior, written consent of PHI) lease, sublease, or
otherwise permit the use of, any portion of any premises owned,
leased, or controlled by any of them for purposes of operating a
business (other than a System Restaurant operated pursuant to this
Agreement) engaged in whole or substantial part (more than 10% of its
sales), in the production or sale (at wholesale or retail) of any
pizza, pasta or other food items similar to Approved Products.
12.3. Post-Term Covenants. For a period beginning on the
termination or expiration of this Agreement and ending on the date
specified below, neither Franchisee nor its Related Persons may
engage, nor assist others to engage, directly or indirectly,
individually or as a partner, joint venturer, shareholder, officer,
creditor, director, employee, or agent, in the production or sale (at
wholesale or retail) of any pizza, pasta or other food items similar
to Approved Products: (a) within a 25-mile radius of any Location;
(b)Eanywhere within the county within which one or more Locations are
situated; or (c)Eanywhere within 10 miles of a location in the United
States at which PHI or any subsidiary, Affiliates or franchisee of PHI
operates a System Restaurant on the date of termination or expiration
of this Agreement.
For a period beginning on the date any Person Transfers all of
its Interest in Franchisee or in this Agreement, and ending on the
date specified below, the transferring Person may not engage, directly
or indirectly, individually or as a partner, joint venturer,
shareholder, officer, creditor, director, employee, or agent, in the
production or sale (at wholesale or retail) of any pizza, pasta or
other food items similar to Approved Products: (a) within a 25-mile
radius of any Location; (b)Eanywhere within the county within which
one or more Locations are situated; or (c)Eanywhere within 10 miles of
a location in the United States at which PHI or any subsidiary,
Affiliates or franchisee of PHI operates a System Restaurant on the
date of termination or expiration of this Agreement.
As to each of the covenants, and any Person bound by the
covenants, contained in this SectionE12.3, the covenant will expire on
the date the Person has been in full compliance with the covenant for
18 consecutive months. Each of the covenants set forth in the
foregoing paragraphs are independent of the others, and the
unenforceability of one will not affect the others.
12.4. Perpetual Covenant. In addition to the covenants of
confidentiality contained in SectionE5.3, Franchisee and its Related
Persons may never (whether during or after the Term) take any actions
that would have the probable effect of impairing PHI's ownership of or
goodwill in the PizzaEHut Marks and/or in the System Restaurant
Concepts.
12.5. Stock Ownership. The limitations on being a direct or
indirect owner or shareholder of a business, as contained in this
SectionE12, do not apply to ownership of 1% or less of the issued and
outstanding stock in any corporation traded on a national stock
exchange.
13. EMPLOYMENT RELATIONS
13.1. Franchisee's Employees. Franchise will be solely
responsible for all of Franchisee's employment practices, including
hirings, terminations, and other personnel actions. Franchise will
protect, defend, and indemnify PHI, its affiliates, officers, and
employees, from any and all proceedings, claims, and causes of action
instituted by Franchisee's employees, or by others, that arise from
Franchisee's employment practices.
13.2. Interference. During the Term, neither PHI nor
Franchisee may employ, directly or indirectly, any individual in a
managerial position who is at the time, or was at any time during the
prior 6 months, employed in a managerial position by the other party,
nor may Franchisee employ, directly or indirectly, any individual in a
managerial position who is at the time, or was at any time during the
prior 6 months employed in a managerial position by any other
franchisee of PHI. This restriction will not be violated if, at the
time PHI or Franchisee employs the individual, the current or former
employer has given its written consent. If the restrictions contained
in this SectionE13 are violated, the amount of actual damages will be
difficult to determine; therefore, the former employer will be
entitled to liquidated damages in an amount equal to twice the total
annual compensation of the employee involved (annualized, if
appropriate, to reflect the rate of compensation for a full year's
employment), plus reimbursement of all costs and attorneys' fees
incurred. For purposes of this SectionE13, "managerial position"
means all employees at the pay grade of restaurant manager and above.
14. TRANSFERS
14.1. Transfers by PHI. PHI may Transfer its rights and
obligations under this Agreement without the consent of, or notice to,
Franchisee. This Agreement will inure to the benefit of, and be
binding upon, the successors and assigns of PHI.
14.2. Transfers by Franchisee. Except as otherwise permitted
by this SectionE14 and SectionE15, neither Franchisee nor any Person
with an interest in Franchisee may, without PHI's prior written
consent, directly or indirectly Transfer any Interest in this
Agreement or any Interest in Franchisee. Any purported Transfer
without PHI's prior, written consent will have no effect, except to
cause a default under this Agreement.
14.3. Transfer of Assets. Franchisee may not, without PHI's
prior written consent, Transfer or offer to Transfer any assets that
bear any of the PizzaEHut Marks, except (a) to PHI or a subsidiary or
franchisee of PHI, or (b) to an established salvage dealer, who
destroys or disables the assets transferred under FranchiseeOs direct
supervision.
In addition, Franchisee may not, without PHI's prior written
consent, offer to Transfer by public or private auction, or advertise
publicly for Transfer, any of the furnishings, interior and exterior
decor items, supplies, inventory, fixtures, equipment, smallwares, or
other personal property used in connection with Franchisee's System
Restaurants.
14.4. Consent to Transfers. PHI may withhold its consent to
any proposed Transfer unless, in addition to the other requirements of
this SectionE14 and the requirements of SectionE15, the following
conditions are met, to PHI's satisfaction, before the effective date
of the proposed Transfer:
A. No Default. Franchisee is not in default under this
Agreement or any other agreement with PHI, and Franchisee and its
Related Persons have satisfied all accrued monetary and other
obligations to PHI and its Affiliates.
B. Release. Franchisee and the transferor have each
executed a general release, in a form prescribed by PHI, of all
accrued claims against PHI, its Affiliates, and their respective
officers, directors, and employees.
C. Transfer Standards. The proposed transferee has
demonstrated to PHI's satisfaction that the proposed transferee is, in
all respects, acceptable to PHI (including, if the proposed transferee
is already a franchisee of PHI, that it is in Good Standing under its
franchise agreements with PHI), and that the proposed transferee meets
all of PHI's then current requirements for new franchisees (or for
holders of an interest in a franchisee, as the case may be) including
possession of good moral character and reputation, work experience,
aptitude, financial background and condition, credit rating, absence
of conflicting interests, and ability to comply fully with the terms
of this Agreement.
D. Assumption of Obligations. The proposed transferee has
entered into a written assumption agreement, in a form prescribed by
PHI, assuming and agreeing to discharge all of transferor's
obligations relating to this Agreement and to the System Restaurants
covered by this Agreement (including all obligations owing to third
parties not related to PHI).
E. Training. If not previously trained, the proposed
transferee, its manager, and its other employees responsible for the
operation of all System Restaurants, have satisfactorily completed the
training PHI then requires under SectionE4.1.
F. Transfer Fee. The transfer fee required by SectionE9.3
has been paid.
G. Acknowledgment. If Franchisee or any owner of an
Interest in Franchisee is transferring all of its Interest in this
Agreement or in Franchisee, the proposed transferor has signed an
acknowledgment that the covenants contained in SectionE12 will
continue to apply to the proposed transferor after the Transfer.
14.5. Death or Incapacity. Upon the death or permanent
incapacity of Franchisee or any individual with an Interest in
Franchisee, the executor, administrator, or personal representative of
the affected individual will Transfer all of the individual's Interest
to a third party approved by PHI within 6 months. All Transfers
pursuant to this SectionE14.5, including Transfers by devise or
inheritance, will be subject to the same conditions as any other
Transfer (including the conditions set forth in SectionsE14.4 and
14.6). Nevertheless, in the case of a Transfer by devise or
inheritance, if the heirs or devisees of the deceased are unable to
meet the conditions in SectionE14.4, the personal representative of
the deceased will have a reasonable time (not more than 12 months
after the date of death) to dispose of the decedent's Interest in this
Agreement or in Franchisee, subject to all applicable terms and
conditions for Transfers contained in this Agreement. In the case of
permanent incapacity of an individual owner of an Interest in
Franchisee or in this Agreement, the incapacitated individual may,
with PHI's written consent, retain a non-controlling ownership
Interest in Franchisee.
14.6. Right of First Refusal. If Franchisee or any owner of
an Interest in Franchisee receives and desires to accept any bona fide
offer to Transfer all or any part of his, her, or its Interest in this
Agreement or in Franchisee, and the intended Transfer is not a gift to
a spouse or a direct descendant, and if the Transfer of such Interest
would either (1) result in a change in control of the Franchisee, or
(2) constitute a Transfer of any Interest by a Person holding a 10% or
greater Interest in Franchisee, Franchisee or the proposed transferor
will submit to PHI an executed copy of the agreement for Transfer
(which will be conditioned on this right of first refusal). PHI may,
within 30 days after receipt of a signed copy of the agreement and all
necessary supporting documentation (including financial statements),
send written notice to the transferor that PHI (or a Person designated
by PHI) intends to purchase the Interest which is proposed to be
Transferred on the same terms and conditions (or, at PHI's election,
the reasonable cash equivalent, not including the value of any tax
benefits, of any non-cash consideration) offered by the third party.
Any material change in the terms of an agreement before closing will
constitute a new agreement, subject to the same right of first refusal
by PHI (or its designee) as in the case of the initial agreement.
PHI's failure to exercise its right of first refusal will not
constitute a waiver of any other provision of this Agreement,
including any of the requirements of this SectionE14 with respect to
approval of the proposed transferee.
15. NON-INDIVIDUAL FRANCHISEES If Franchisee, any owner of an
Interest in Franchisee, or any successor thereof, is not an
individual, then each of the following provisions will apply:
15.1. List of Individual Owners. Upon execution of this
Agreement, upon each Transfer of an Interest in Franchisee, and at any
other time upon PHI's request, Franchisee will furnish PHI a list of
all Persons having an Interest in Franchisee, an indication of the
voting rights and percentage Interest of each of those Persons, and a
list of all officers, directors and similar officials of Franchisee,
in the form of AppendixED. PHI may require the same information
regarding all Persons having an Interest in Franchisee.
15.2. Personal Guaranties. Upon the execution of this
Agreement, upon each Transfer of an Interest in Franchisee, and at any
other time upon PHI's request, all holders of a 10% or greater
Interest in Franchisee will execute a written agreement in the form of
Appendix E, personally guaranteeing, jointly and severally with all
other holders of a 10% or greater Interest in Franchisee, the full
payment and performance of Franchisee's obligations to PHI and to
PHI's Affiliates. On the same occasions, all officers, directors and
similar officials of Franchisee, and all holders of an Interest in
Franchisee, will sign an agreement in the form of AppendixEF,
undertaking to be bound by all the terms of this Agreement, including
the restrictions on Transfers and the covenants of confidentiality and
against competition. None of these guaranties or agreements will be
released by a Transfer of an Interest in Franchisee; all guaranties
and undertakings may be released only by a written release signed by
PHI.
15.3. Organizational Documents. All of Franchisee's
organizational documents (including articles of partnership,
partnership agreements, articles of incorporation, bylaws,
shareholders agreements, and trust instruments) will recite that the
issuance and Transfer of any Interest in Franchisee is restricted by
the terms of this Agreement, and that the sole purpose for which
Franchisee is formed (and the sole activity in which Franchisee is or
will be engaged) is the conduct of a retail food business pursuant to
one or more franchise agreements from PHI. Franchisee will submit to
PHI, upon the execution of this Agreement, a resolution of Franchisee
(or its governing body) in the form of AppendixEG.
15.4. Transfer Restrictions. Franchisee will maintain stop
instructions against the Transfer on its records of any securities or
other ownership Interests, and will not issue securities or other
evidences of ownership without the following legend printed legibly
and conspicuously on the face of the security or other evidence of
ownership:
The transfer of this certificate and the interests
it represents are subject to the terms and conditions
of one or more Franchise Agreements with Pizza Hut,
Inc., and to the restrictive provisions of the
organizational documents of the issuer. Please refer
to those documents for the terms of the restrictions.
15.5. Permitted Assignments. Franchisee may assign not more
than an aggregate total of 20% of the Interests in Franchisee to
employees of Franchisee who are actively engaged in the operation of
Franchisee's business under this Agreement, as long as the proposed
transferee submits to PHI a franchise application in the form
prescribed by PHI from time to time. Transfers under this provision
may be made without complying with the other terms of this SectionE15.
Once created, those ownership Interests will be subject to all terms
and conditions of this Agreement, including the restrictions on
Transfers, the requirements of shareholder guaranties and agreements,
and the covenants of confidentiality and against competition.
15.6. No Publicly Traded Ownership Interests. Franchisee and
its Related Persons may not offer, solicit, engage in, or effect any
transaction, whether financial or otherwise, that could foreseeably
result, directly or indirectly, in Opublic tradingO or Opublic
ownershipO (as those terms are commonly understood for purposes of
federal and state securities laws) of any securities or other
Interests in (a) Franchisee, (b) any parent company of Franchisee, (c)
this Agreement, or (d) the System Restaurants operated by Franchisee
or any assets used by Franchisee in connection with those System
Restaurants.
15.7. Changes in Ownership or Organization. Franchisee and
its Related Persons will not reorganize or otherwise change the
ownership or organizational structure of Franchisee or its Related
Persons in any manner that is inconsistent with the provisions of
SectionsE14 and 15.
16. INSURANCE AND INDEMNIFICATION
16.1. Property Insurance. Franchisee will obtain and
maintain throughout the Term, at its own expense, property insurance
on an all-risk basis including flood coverage up to the limits
available in the National Flood Insurance program, from financially-
responsible insurance companies, insuring Franchisee's System
Restaurants and their respective contents (whether those System
Restaurants are completed or under construction) for the full
replacement value of the System Restaurants. In the event of damage
covered by insurance, the proceeds of the insurance will be used to
restore the System Restaurants to their original condition within 120
days, unless restoration is prohibited by the appropriate lease or
applicable law, or PHI has otherwise consented in writing.
16.2. Liability Insurance. Franchisee will obtain and
maintain throughout the Term, at its own expense, with a financially-
responsible insurance company, comprehensive general liability
insurance (including products liability and completed operations
coverage), comprehensive automobile liability insurance (including
coverage for all owned, non-owned, leased, or hired vehicles), and
liquor liability (dram shop) insurance, all in amounts at least equal
to $3,000,000 combined single limit for death, personal injury, and
property damage, as well as workers' compensation insurance (coverage
B). All liability insurance maintained by Franchisee will designate
PHI as an additional insured, as its interests may appear, and will
insure against PHI's vicarious liability for actual and (unless
prohibited by applicable law) punitive damages assessed against
Franchisee.
16.3. Proof of Insurance. Franchisee will file with PHI
certificates of insurance showing all coverages required by this
SectionE16, and will promptly pay all premiums on the policies as and
when those premiums become due. In addition, all policies will
contain a provision requiring 30 days' prior, written notice to PHI,
by certified or registered mail, of any proposed cancellation or
modification of the policies. If Franchisee fails to obtain or
maintain the insurance required by this SectionE16, PHI may, in
addition to any other rights it may have, procure insurance for
Franchisee without notice, and Franchisee will pay the premiums for,
and PHI's cost of acquiring, that insurance immediately upon demand
for those amounts.
16.4. Indemnification and Waiver. Franchisee will indemnify
PHI, its Affiliates, and their respective employees, officers, and
directors against all loss, damage, or liability (including attorneysO
fees and costs) incurred by any of them owing to claims that arise
directly or indirectly from or in connection with Franchisee's
operations under this Agreement. If Franchisee fails to maintain the
insurance required by this SectionE16, or fails to name PHI as an
additional insured under that policy, then FranchiseeOs obligations of
indemnity under this SectionE16.4 will also extend to all liability
that would have been insured by an appropriate policy (including
liability arising from PHIOs own negligence). The insufficiency of
the insurance required to be maintained by Franchisee under the terms
of this SectionE16 will not be a defense to liability under this
SectionE16.4.
Franchisee waives all claims it may have against PHI, its
Affiliates, and their respective officers, directors, and employees
(including claims arising from training, establishment of procedures,
and food and other products distributed but not manufactured by PHI or
its Affiliates), except for claims arising from those parties'
intentional misconduct or gross negligence.
17. REQUESTS FOR WAIVERS AND CONSENTS
17.1. Requests for Waivers or Consents. Whenever Franchisee
desires PHI's waiver of any obligation in this Agreement, and whenever
this Agreement requires Franchisee to obtain PHI's prior, written
consent, Franchisee will address its written request for the waiver or
consent to PHI's Vice President-Franchising (unless PHI specifies
another individual or department in writing). The request will
specify the provision of this Agreement for which a waiver or consent
is sought, and will set forth the basis for the request. PHI's
failure to advise Franchisee within 45 days after receipt of the
request that a request is denied constitutes PHI's consent to the
request (except that, if PHI gives Franchisee written notice within
the 45-day period that PHI requires additional information or
documentation from Franchisee, the 45 days will not begin until
Franchisee has provided PHI with all relevant information and
documentation requested).
17.2. Effect of Waivers and Consents. All requests for
waivers and consents will be considered on a case-by-case basis, and
nothing requires PHI to grant any waiver or consent. PHI may
condition the grant of a waiver or consent as PHI considers
appropriate.
17.3. No Implied Waivers. Except as provided in
SectionE17.1, no other action or inaction by PHI will constitute a
waiver, or impair any right, power, or option reserved to PHI by this
Agreement. No waivers can be inferred from PHIOs failure to respond
to a situation with respect to which Franchisee has not requested a
waiver in accordance with SectionE17.1.
18. DEFAULT AND TERMINATION
18.1. Defaults Without Cure Right. Franchisee will be in
default and, in addition to all other remedies PHI has at law or in
equity, including money damages, injunctive relief, and attorney's
fees, PHI may, upon written notice to Franchisee, terminate this
Agreement without affording Franchisee any opportunity to cure the
default upon the occurrence of any of the following events or
conditions:
A. Financial Performance. If the total of Franchisee's
debts is greater than the fair value of Franchisee's assets, or if
Franchisee is generally not paying its debts as those debts become
due, or if Franchisee admits in writing its inability to pay its
debts, or if Franchisee makes a general assignment for the benefit of
its creditors, or if Franchisee ceases doing business as a going
concern, or if Franchisee files a petition commencing a voluntary case
under any chapter of the Bankruptcy Code (11 U.S.C. 101, et seq.), as
amended.
B. Improper Transfer. If, without the prior, written
consent of PHI, or in any other manner inconsistent with the terms of
this Agreement, (i) Franchisee Transfers or attempts to Transfer an
Interest in this Agreement, (ii) any owner of an Interest in
Franchisee Transfers or attempts to Transfer any portion of that
Interest, (iii)EFranchisee or any of its Related Persons violates
SectionE15.6, or (iv) Franchisee dissolves or liquidates.
C. Failure to Allow Inspection. If Franchisee does not
allow PHI or its employees or agents access to any System Restaurant
or to any of Franchisee's records, or if Franchisee otherwise impairs
PHI's rights of inspection and audit under this Agreement.
D. Criminal Conviction. If Franchisee (or any of its
Related Persons actively involved in the operation, supervision, or
management of any System Restaurant) is convicted of a felony or other
crime involving moral turpitude.
E. Disclosure of Secrets. If Franchisee or any of its
Related Persons discloses, permits the disclosure of, or uses, the
contents of the Manuals or any other trade secrets or confidential or
proprietary information provided to Franchisee by PHI, contrary to the
provisions of this Agreement or otherwise to the detriment of PHI.
F. Falsification of Records. If Franchisee knowingly or
through gross negligence maintains false books or records, or
knowingly or through gross negligence submits any false report to PHI.
G. Habitual Default. If Franchisee defaults under
SectionE18.2 on 3 or more occasions in any 12-month period, or on 5 or
more occasions in any 36-month period, even if Franchisee would
otherwise be given an opportunity under SectionE18.2 to cure the
particular default involved.
H. Endangerment. If Franchisee conducts the business
licensed by this Agreement so contrary to this Agreement and the
Manual as to constitute an imminent danger to the public health.
I. Material Misrepresentation. If Franchisee (or any
Person having a 10% or greater Interest in Franchisee) made a material
misrepresentation about any material fact in a franchise application
given to PHI.
J. Unauthorized Closure or Loss of Occupancy Right. If
any System Restaurant is closed for business for more than 15
consecutive days, for reasons other than a casualty loss, without
PHI's prior written consent, or Franchisee permanently loses its right
to occupy a Location.
18.2. Defaults Subject to Cure Rights. Franchisee will be in
default and, in addition to all other remedies PHI has at law or in
equity, including damages, injunctive relief, and attorney's fees, PHI
may, subject to the notice and cure provisions described below,
terminate this Agreement if 1)EFranchisee does not promptly pay when
due any moneys owing to PHI or its Affiliates, or 2)EFranchisee
breaches any term, covenant, duty, or condition of this Agreement not
listed in SectionE18.1.
PHI will not terminate this Agreement for any default under this
SectionE18.2 until PHI first gives Franchisee written notice of, and
an opportunity to cure, the default. Except as provided below, PHI
will give Franchisee 30 days after the effective date of notice to
cure any such default. If Franchisee's current default involves a
failure to timely pay amounts owing PHI or its Affiliates, and if
Franchisee has previously been in default for failure to timely pay
under this Agreement in the 12 months immediately before the date on
which PHI gives Franchisee notice of Franchisee's current default, PHI
will only be required to give Franchisee 10 days to cure Franchisee's
current default.
18.3. Non-Termination Remedies. If Franchisee defaults under
SectionE18.1, or does not timely cure a default under SectionE18.2,
PHI may, in its sole discretion, and in lieu of terminating this
Agreement, refuse to allow Franchisee to relocate any existing System
Restaurants or to develop any additional System Restaurants. PHI will
give Franchisee written notice if PHI elects this option. Any action
taken by PHI in accordance with this Section will be in addition to
any other right or remedy PHI may have, including a civil action for
legal or equitable relief.
19. POST-TERMINATION PROVISIONS
19.1. Use of PizzaEHut Marks and Systems. Upon expiration or
termination of this Agreement, Franchisee will immediately discontinue
use of the PizzaEHut Marks and of the System Restaurant Concepts. In
addition, upon notice from PHI, Franchisee will immediately
discontinue use of PHI's color scheme (by repainting, if necessary)
and will immediately remove all identifying architectural
superstructure (as set forth in the plans and specifications) and
other distinguishing structures, decor items, furniture, and equipment
from all former System Restaurants and other facilities as PHI may
direct, in order to effectively distinguish Franchisee's former System
Restaurants and other facilities from PHI's proprietary design(s) and
trade dress. If Franchisee does not make all required changes within
7 days after written notice, then PHI, in addition to any other remedy
it has, may enter upon the premises of any former System Restaurant
owned or leased by Franchisee, and make or cause to be made all
necessary changes at the expense of Franchisee (without being liable
for trespass or any other tort), which expense Franchisee will pay
upon demand.
19.2. Cessation of Rights. All obligations of PHI to
Franchisee under this Agreement, and all rights of Franchisee under
this Agreement, will immediately terminate upon termination of this
Agreement.
19.3. Effect on Other Duties. In no event will a termination
of this Agreement affect the obligations of Franchisee and its Related
Persons to pay their accrued monetary obligations to PHI and to comply
with their various post-term obligations, including the covenants in
SectionE12.
19.4. Spice Blends. Franchisee will sell and PHI will buy,
at Franchisee's cost, all quantities of the secret spices and other
trade secret items that Franchisee has in stock upon termination or
non-renewal of this Agreement.
19.5. Trademarked Items. PHI may, by written notice within
30 days after expiration or other termination of this Agreement,
purchase from Franchisee all items bearing any of the PizzaEHut Marks.
If PHI exercises this option, the purchase price for the items will be
the lowest of the fair market value of the items, Franchisee's
purchase price for the items, or Franchisee's book value for the
items.
19.6. Telephone Numbers. PHI may, upon written notice within
30 days after expiration or other termination of this Agreement, take
an assignment of all telephone numbers (and associated listings) for
Franchisee's System Restaurants and centralized order-taking
facilities (if any).
20. DISPUTE RESOLUTION
20.1. Jurisdiction and Governing Law. This Agreement takes
effect upon its acceptance and execution by PHI. This Agreement is
governed by, and should be construed in accordance with, the internal
laws of the State of Kansas (without giving effect to Kansas choice of
law rules). Franchisee acknowledges the importance to the System
Restaurant Concepts of uniformity of interpretation, and therefore
consents and waives any objections Franchisee might otherwise have to
the jurisdiction and venue of any state or federal court of general
jurisdiction in Sedgwick County, Kansas, or any other county or
district in which PHI then has its principal place of business, with
respect to any proceedings arising out of this Agreement or the
relationship between the parties. Franchisee further agrees that it
will bring any legal proceedings arising out of this Agreement or the
relationship between the parties only in such courts. Franchisee
agrees that mailing of any process to Franchisee's appropriate address
pursuant to SectionE21.5, by registered or certified mail or reputable
private delivery service, will constitute lawful and valid process.
20.2. Remedies Cumulative. All remedies provided in this
Agreement are cumulative and non-exclusive. PHI may simultaneously
seek relief specifically provided for by this Agreement and relief not
so provided, and may also seek two or more forms of relief otherwise
inconsistent, and that could not be granted simultaneously. A request
by PHI for interim damages for a particular violation will not
constitute an admission that the continuation of the violation would
not cause irreparable harm to PHI.
20.3. Mediation. All disputes between PHI and Franchisee
relating to this Agreement will be submitted to mediation under the
National Franchise Mediation Program administered by the Center for
Public Resources (or, if that program is discontinued, any successor
program or the nearest available substitute). This SectionE20.3
applies only to disputes that are specific to Franchisee and not to
issues that affect PHIOs franchisees generally.
20.4. Injunctive Relief. In case of a breach or a threatened
breach of any provision of this Agreement by Franchisee, PHI will, in
addition to any other remedy it has, and notwithstanding any other
provision of this Agreement (including SectionE20.3), be entitled to
an injunction restraining Franchisee from committing or continuing to
commit any breach or threatened breach of this Agreement, without
showing or proving any actual damage sustained by PHI, and without
posting bond or other security. No action for a preliminary or
temporary injunction by PHI may be stayed pending mediation, but once
a temporary injunction (pending outcome of the dispute) is granted,
the issues underlying the dispute will be submitted to mediation in
accordance with SectionE20.3.
20.5. Attorneys' Fees. If PHI and Franchisee become involved
in litigation, the losing party will reimburse the prevailing party's
outside attorneys' fees and all expenses. This provision will not
apply to attorneys' fees incurred by the parties in connection with
mediation conducted pursuant to SectionE20.3.
21. MISCELLANEOUS
21.1. Relation of Parties. PHI and Franchisee are not and
will not be considered as joint venturers, partners, or agents of each
other. Neither Franchisee nor PHI will have the power to bind or
obligate the other except as set forth in this Agreement.
Franchisee specifically acknowledges that the relationship
created by this Agreement is not a fiduciary, special, or any other
similar relationship, but rather is an arm's-length business
relationship. PHI owes Franchisee no duties except as expressly
provided in this Agreement.
21.2. Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when executed and delivered,
will be deemed an original, but all counterparts together will
constitute but one and the same instrument.
21.3. Third-Party Beneficiaries. The other franchisees of
PHI are intended beneficiaries of SectionE13 of this Agreement; the
Affiliates of PHI, and the employees, officers, and directors of PHI
and its Affiliates are intended thirdDparty beneficiaries of
SectionE16.4 of this Agreement. Nothing else in this Agreement is
intended to confer any rights or remedies upon any Person or legal
entity not a party to this Agreement.
21.4. Severability. The portions of this Agreement relating
to the payment of fees to PHI, and the portions relating to the
protection and preservation of the PizzaEHut Marks, the System
Restaurant Concepts, and PHI's trade secrets are critical to this
Agreement; if any portion of them is declared invalid or unenforceable
for any reason, PHI will have the option to terminate this Agreement
immediately, upon written notice to Franchisee. All other terms and
conditions of this Agreement, and every portion of those other terms
and conditions, will be considered severable. If, for any reason, any
portion of this Agreement (other than the nonseverable portions, as
defined in the first sentence of this SectionE21.4) is determined to
be invalid or contrary to or in conflict with any applicable present
or future law, rule, or regulation, in a final, unappealable ruling
issued by any court, agency, or tribunal with valid jurisdiction in a
proceeding to which PHI is a party, that ruling will not impair the
operation of, or have any other effect upon, any other portion of this
Agreement, each of which will remain binding upon the parties and
continue to be given full force and effect. Any invalid portion will
be deemed removed from this Agreement as of the date upon which the
ruling becomes final (if Franchisee is a party to such proceedings) or
upon Franchisee's receipt of notice of non-enforcement from PHI, and
will further be deemed replaced by the closest enforceable provision.
21.5. Protests, Requests and Notices. All protests, requests
and notices required or permitted by the terms of this Agreement will
be in writing and sent either by certified or registered mail (return
receipt requested), by reputable private delivery service, or by hand
delivery. All notices will be sent to the respective address of PHI
(marked, except as otherwise required by this Agreement, "Attention:
Vice President-Franchising") or Franchisee shown on page 1 of this
Agreement, until PHI or Franchisee (as the case may be) gives notice,
in writing, of a new address. Neither PHI nor Franchisee must send
multiple notices; a single notice to the specified address will
suffice, and if multiple addresses are specified by either party, the
sending party may send notices to any single address chosen in good
faith. Notices will be effective on the day delivery is made or first
attempted at the specified address during normal business hours (8
a.m. to 5 p.m., Monday through Friday, except national or state
holidays), except that notices of change of address will be effective
10 days after that date.
21.6. Time of Essence. Time is of the essence of this
Agreement and of each provision of this Agreement.
21.7 Rules of Construction. The following rules were used in
drafting this Agreement, and should be used in construing it:
A. Auxiliary Verbs. The auxiliary verb OwillO is used in
a mandatory fashion. Any time this Agreement provides that a party
will do something, the statement is obligatory, and is intended to
apply throughout the life of this Agreement. By contrast, the
auxiliary verb OmayO is permissive when stated affirmatively (Oa party
may do somethingO means that the party is permitted, but not required,
to take the action), and by extension, prohibitive when stated
negatively (that is, the statement that Oa party may not do somethingO
is a denial of permission, and therefore means not only that the
action is not required, but also that it is not permitted).
B. Includes. The word OincludesO (in all its tenses and
variations) is always used in the non-exclusive sense. As a result,
the words "including" or "includes" can always be read as if followed
by the phrase, "but [is] not limited to" or the phrase, "without
limitation".
C. Accounting Periods. Any time that this Agreement calls
for a party to take an action OmonthlyO, the party may instead use
regular accounting periods that are no longer than 35 days long. For
example, a party may use 13 accounting periods of 4 weeks each (a
O52/53 week fiscal yearO) or may use 12 accounting periods arranged so
that there are two 4Dweek and one 5Dweek accounting period each fiscal
quarter. PHI currently uses a 52/53 week fiscal year, divided into 13
4Dweek periods, ending on the Wednesday before the last Saturday in
December of each year; PHI may change its accounting cycle on 30 daysO
written notice to Franchisee. If Franchisee chooses to use one of
these methods of accounting, Franchisee will notify PHI of the method
chosen and the fiscal yearDend used, and may not switch accounting
years without consent from PHI.
D. Locations, Boundaries and Measurements. The sites of
the Locations and the boundaries of the Delivery Area are based on the
physical location of the references used to describe the Locations or
the boundaries on the date of this Agreement. If a street address is
used to describe a Location, the renumbering of the addresses will not
serve to move the Location. If a specified boundary of the Delivery
Area is described as a street, the center line of the street is
intended; if the boundary is described as a political dividing line
(such as a city limit), the line utilized by the appropriate political
jurisdiction is intended. The area and physical location of any
Location or of the Delivery Area will not be altered by a subsequent
movement of the references originally used to describe the Location or
the Delivery Area. Furthermore, it is only those points to the
"inside" of the boundary that form a part of the Delivery Area (for
example, if a Delivery Area is bounded on the north by Main Street,
only the area south of the center line of Main Street is within the
Delivery Area ).
For all calculations based upon a distance (for example, the
limitation on opening a System Restaurant within 500 yards of a
Location), the measurement will be made in a straight line between the
nearest points; if any portion of an object is within the prescribed
distance from a point, the entire object is considered to be within
that distance.
21.8. Merger. This Agreement (together with the Manual,
which is incorporated by reference into this Agreement) contains the
entire agreement of the parties with respect to the subject matter
discussed in this Agreement.
All prior discussions or negotiations (written or oral),
including those included in PHI's offering circular, are merged into
this Agreement, and no representations, inducements, promises, or
agreements not embodied in this Agreement will survive the execution
of this Agreement. This Agreement may not be modified or amended
except (i) pursuant to SectionE17, (ii) by a modification, supplement,
or revision to the Manual issued by PHI in accordance with the terms
of this Agreement, or (iii) by a written document, signed by both
parties, specifically referring to the portion of this Agreement being
modified or amended.
ATTEST: PIZZA HUT, INC.
___________________________ By:_____________________________
Secretary/Assistant Secretary Vice President, Franchising
ATTEST: _______________________________
___________________________ By:_____________________________
[Secretary/Assistant Secretary]
Title:_________________________
APPENDIX A
PARTIAL LIST OF "PIZZAEHUT" MARKS
RegistrationRegistration
Mark Number ___Date__
PIZZAEHUT 729,847 04/10/62
PIZZAEHUT 1,043,014 07/06/76
PIZZAEHUT 1,069,731 07/19/77
PIZZAEHUT 926,516 01/04/72
PIZZAEHUT Logo (service mark) 1,028,170 10/23/75
PIZZAEHUT Logo (trademark) 1,061,317 03/15/77
PIZZAEHUT Logo (trademark) 1,089,680 04/19/78
THICK 'N CHEWY 1,096,909 07/18/78
THIN 'N CRISPY 1,096,198 07/11/78
Building Design No.1 852,458 07/09/68
Building Design No.2 1,068,095 06/21/76
PIZZAEHUT within Sign Design 1,079,511 12/13/77
Roof Design (trademark) 1,116,486 04/10/79
BIG TOPPER (trademark) 1,374,944 12/10/85
PERSONAL PAN PIZZA (trademark) 1,400,567 07/08/86
BOOK IT! (service mark) 1,430,605 02/24/87
PIZZAEHUT (trademark) lined for color red1,443,457 06/16/87
PIZZAEHUT DELIVERY Design (trademark) 1,445,612 06/13/87
PIZZAEHUT Delivery - Truck Design 1,474,524 01/26/88
MAKIN' IT GREAT! (service mark) 1,505,367 09/20/88
BOOK IT! and design 1,561,899 10/24/89
PIZZAEHUT Logo (with phone design) 1,661,222 10/15/91
MAKIN' IT GREAT FOR KIDS! 1,693,612 06/09/91
PERSONAL PAN PIZZA EXPRESS
AND DESIGN 1,772,099 05/15/93
APPENDIX B
LOCATIONS:
DELIVERY AREA:
APPENDIX C
Pizza Hut, Inc.
9111 East Douglas
P. O. Box 428
Wichita, KS 67201
SUBJECT: LEASE AGREEMENT
DATED: ____________________
PREMISES LOCATION: ____________________
____________________
LEASE COMMENCEMENT DATE: ____________________
TO PIZZA HUT, INC.
The purpose of this letter is to confirm that the Lease described
above, between
_______________________________________________________, as Lessor,
and your franchisee, ___________________________________, as Lessee
contains the following provision:
Upon expiration or termination of this Lease, Lessee/Tenant
may de-identify the leased premises. If Lessee/Tenant fails
to do so, Pizza Hut, Inc., may de-identify. De-
identification consists of removal of all signs, modification
or remodeling of all identifying architectural features (by
removing the cupola from the roof, replacing any trapezoidal
windows with rectangular windows, and similar actions),
repainting as necessary to no longer use the color scheme
used by Pizza Hut, Inc., and any other steps necessary (in
the sole discretion of Pizza Hut, Inc.) to effectively
distinguish the formerly leased premises from Pizza Hut,
Inc.'s proprietary building design(s). All de-identification
will be done without cost to Lessor/Landlord.
As Lessor under the Lease Agreement, the undersigned agrees not to
modify the provision set forth above without the prior, written
consent of Pizza Hut, Inc.
At any time upon 10 days written notice to Lessor, Pizza Hut, Inc.,
may receive a copy of the Lease Agreement together with any amendments
thereto.
___________________________
By:________________________
"LESSOR"
Address:____________________
___________________________
Phone:______________________
APPENDIX D
CERTIFICATE OF OWNERSHIP
The undersigned, who is the authorized representative of
____________________________________ ("Franchisee"), hereby certifies
to PizzaEHut, Inc., that the following information is true and correct
and reflects all of the individuals who own (directly or indirectly)
any interest in Franchisee:
Shareholder, Officer, Percentage
Director, Member, of
Name Manager, and/or Partner Interest
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
____________________ ________________ ________
Dated as of the ____ day of __________________, 19___.
"Franchisee"
ATTEST:
_____________________________ By: _________________________
Its authorized representative
Title: _______________________
APPENDIX E
PERSONAL GUARANTY
PIZZA HUT, INC.
9111 East Douglas
P. O. Box 428
Wichita, KS 67201
Re: Guaranty of Franchisee Obligations
Dear Franchisor:
To induce you to enter into the Location Franchise Agreement dated
_____________, with __________________________________ as
"Franchisee", or to induce you to approve a transfer of a direct or
indirect interest in the Franchise Agreement or in Franchisee, we
represent and agree as follows:
1. We are all of the holders (directly or indirectly) of 10% or
more of the record or beneficial ownership interests in Franchisee.
2. We each personally guarantee, jointly and severally with
each other, the complete performance of each of the terms and
conditions of the Location Franchise Agreement to be performed by
Franchisee, and jointly and severally agree to indemnify Pizza Hut,
Inc., its "Affiliates" (as that term is defined in the Location
Franchise Agreement), and the officers, directors, and employees of
each of them from any liability or expense (including reasonable
attorneys' fees) sustained by reason of the failure of Franchisee to
perform and comply with the terms and conditions of the Location
Franchise Agreement.
3. We understand that disposition of our interest in Franchisee
will not release our liability under this Guaranty, and that only a
written release signed by PizzaEHut, Inc., will have that effect.
4. We also understand that this is a continuing, absolute, and
unconditional Guaranty, co-extensive with the Location Franchise
Agreement. We each expressly waive notice of acceptance of this
Guaranty, notice of default by Franchisee, and notice of nonpayment or
nonfulfillment of Franchisee's duties, liabilities, and obligations
under the Location Franchise Agreement.
Very truly yours,
_______________________
_______________________
_______________________
APPENDIX F
ASSUMPTION OF OBLIGATIONS
PIZZA HUT, INC.
9111 East Douglas
P. O. Box 428
Wichita, KS 67201
Re: Assumption of Obligations
Dear Franchisor:
To induce you to enter into the Location Franchise Agreement dated
_____________, with __________________________________ as "Franchisee"
, or to induce you to approve a transfer of a direct or indirect
interest in the Location Franchise Agreement or in Franchisee, we
represent and agree as follows:
1. We are all of the officers and directors of Franchisee, and
all of the holders (directly or indirectly) of any record or
beneficial ownership interests whatsoever in Franchisee.
2. We each agree to be bound individually by all terms and
obligations of the Location Franchise Agreement that are applicable to
Franchisee's "Related Persons" (as that term is defined in the
Location Franchise Agreement). Without trying to list those terms and
obligations, we understand that they include restrictions on
disposition of interests in Franchisee and covenants of
confidentiality and against competition.
3. We understand that neither the expiration or termination of
the Location Franchise Agreement, nor a disposition of our interests
in Franchisee, will release our responsibility to comply with the
terms and obligations of the Location Franchise Agreement that are
applicable after expiration or termination, or after a disposition (as
the case may be). We also understand that there are covenants of
confidentiality and against competition in the Location Franchise
Agreement that survive the expiration, termination, or disposition of
our interests.
Very truly yours,
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
APPENDIX G
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned hereby certify to PizzaEHut, Inc. ("PHI"),
that they are the duly elected, qualified, and acting President
and Secretary of _____________________________________, a
___________________ corporation ("Franchisee"), and that at a
duly convened joint meeting of the shareholders and directors of
Franchisee, attended by all of them, held on the ____ day of
_______________, 19___, the following resolutions unanimously
were adopted:
WHEREAS, Franchisee has entered into a Location
Franchise Agreement (the "Agreement") with PHI to
operate PizzaEHut restaurants in the location(s)
specified in AppendixEB of the Agreement; and
WHEREAS, SectionsE14 and 15 of the Agreement impose
certain requirements upon Franchisee, restrict the
issuance and transfer of any interest in Franchisee,
and require that Franchisee submit to PHI a resolution
of Franchisee, ratified by all individuals who own an
Interest in Franchisee, which states that without PHI's
prior written consent, no Interests in Franchisee will
be issued, transferred, or assigned to any person or
entity without PHI's prior written consent.
NOW, THEREFORE, be it resolved (jointly by all
individuals who own an Interest in Franchisee) that,
except as permitted by SectionsE14, and 15 of the
Agreement, no shares of stock or other interests in
Franchisee shall be issued, transferred, or assigned to
any person or legal entity without PHI's written
consent; and
FURTHER RESOLVED that the Secretary or a similarly
charged officer of Franchisee shall maintain stop
transfer instructions against the transfer on the
corporation's records of any securities that do not
comply with the restrictions of this resolution and
SectionsE14 and 15 of the Agreement; and
FURTHER RESOLVED that the Secretary or a similarly
charged officer legibly and conspicuously print the
following legend on all securities or other documents
evidencing an ownership interest in Franchisee:
The transfer of this certificate is subject
to the terms and conditions of one or more
Franchise Agreements with PizzaEHut, Inc.,
and to the restrictive provisions of the
organizational documents of the issuer.
Please refer to those documents for the terms
of the restrictions.
The undersigned further certify to PHI that the Articles of
Incorporation and Bylaws of Franchisee restrict Franchisee's
business activities to operations licensed by PHI or its
subsidiaries and affiliates, and that Franchisee is in compliance
with those restrictions.
This certificate is executed _______________________, 19___.
"Franchisee"
By: _________________________
, President
ATTEST: By: _________________________
, Secretary
PIZZA HUT, INC.
LOCATION FRANCHISE AGREEMENT
TABLE OF CONTENTS
PAGE
DATE 1
PARTIES 1
RECITALS 1
AGREEMENT 1
1. DEFINITIONS
1.1 Adequate Delivery Service 1
1.2 Advertising Fund 1
1.3 Affiliates 1
1.4 Agreement 1
1.5 Approved Products 1
1.6 Co-op 2
1.7 Delivery Area 2
1.8 Direct or Indirect 2
1.9 Franchisee 2
1.10 Good Standing 2
1.11 Gross Sales 2
1.12 Interest 2
1.13 IPHFHA 2
1.14 Lease 2
1.15 Locations 2
1.16 Manual 2
1.17 Person 2
1.18 PHI 2
1.19 PizzaEHut Marks 3
1.20 Related Persons 3
1.21 System Restaurants 3
1.22 System Restaurant Concepts 3
1.23 Term 3
1.24 Transfer 3
2. GRANT OF FRANCHISE
2.1 Grant of Franchise 3
2.2 No Subfranchise Right 4
2.3 Delivery Service 4
2.4 Relocation Rights 4
2.5 Limitations on the Franchise 4
2.6 Protected Radius 4
3. DESIGNATION AND USE OF MARKS
3.1 Designation of PizzaEHut Marks 5
3.2 Use of PizzaEHut Marks 5
3.3 Ownership of PizzaEHut Marks 5
3.4 Protection of PizzaEHut Marks 5
4. TRAINING AND ASSISTANCE
4.1 Management Training Programs 6
5. MANUAL
5.1 Loan of Manual 6
5.2 Ownership of Manual 7
5.3 Confidentiality of Manual 7
5.4 Protection of Trade Secrets 7
5.5 Updates 7
6. STANDARDS; DUTIES OF FRANCHISEE AND OPERATOR
6.1 Interpretation of Standards 7
6.2 Promulgation of Standards 7
6.3 Limitation on Promulgation of Standards 7
6.4 Inspections 7
6.5 Compliance with Laws 8
6.6 Identification 8
6.7 Uniforms 8
6.8 Coin-Operated Machines 8
6.9 Assumed Name Certificate 8
6.10 Approved Products 9
6.11 SUS Computer System 9
6.12 Prices 9
7. ADVERTISING
7.1 National Advertising 10
7.2 Local Advertising 10
7.3 Approval of Advertising 10
7.4 Co-operative Advertising 11
8. PURCHASE OF EQUIPMENT, SUPPLIES, AND OTHER PRODUCTS
8.1 Use of Approved Supplies and Approved Distributors 11
8.2 Trade Secret Items 12
8.3 Product Rebate 12
9. FEES AND PAYMENT SCHEDULE
9.1 Initial Franchise Fee 13
9.2 Monthly Service Fees 13
9.3 Transfer Fees 13
9.4 Offset Rights 13
9.5 Taxes 13
10. BUSINESS PREMISES
10.1 Restrictions on Use 13
10.2 Site Selection 13
10.3 Construction of System Restaurants 14
10.4 Right to De-Identify 14
10.5 Repair and Maintenance 14
10.6 Proof of Compliance 14
10.7 System Restaurant Closure 14
11. BOOKS AND RECORDS
11.1 Maintenance of Books and Records 14
11.2 Inspection and Audit 15
11.3 Selection of Accountants 15
12. COVENANTS AGAINST COMPETITION
12.1 Acknowledgments 15
12.2 In-Term Covenants 16
12.3 Post-Term Covenants 16
12.4 Perpetual Covenant 17
12.5 Stock Ownership 17
13. EMPLOYMENT RELATIONS
13.1 Franchisee's Employees 17
13.2 Interference 17
14. TRANSFERS
14.1 Transfers by PHI 17
14.2 Transfers by Franchisee 17
14.3 Transfer of Assets 17
14.4 Consent to Transfers 18
14.5 Death or Incapacity 18
14.6 Right of First Refusal 19
15. NON-INDIVIDUAL FRANCHISEES
15.1 List of Individual Owners 19
15.2 Personal Guaranties 19
15.3 Organizational Documents 20
15.4 Transfer Restrictions 20
15.5 Permitted Assignments 20
15.6 No Publicly Traded Ownership Interests 20
15.7 Changes in Ownership or Organization 20
16. INSURANCE AND INDEMNIFICATION
16.1 Property Insurance 20
16.2 Liability Insurance 21
16.3 Proof of Insurance 21
16.4 Indemnification and Waiver 21
17. REQUESTS FOR WAIVERS AND CONSENTS
17.1 Requests for Waivers or Consents 21
17.2 Effect of Waivers and Consents 22
17.3 No Implied Waivers 22
18. DEFAULT AND TERMINATION
18.1 Defaults Without Cure Right 22
18.2 Defaults Subject to Cure Rights 23
18.3 NonDTermination Remedies 23
19. POST-TERMINATION PROVISIONS
19.1 Use of PizzaEHut Marks and Systems 24
19.2 Cessation of Rights 24
19.3 Effect on Other Duties 24
19.4 Spice Blends 24
19.5 Trademarked Items 24
19.6 Telephone Numbers 24
20. DISPUTE RESOLUTION
20.1 Jurisdiction and Governing Law 24
20.2 Remedies Cumulative 25
20.3 Mediation 25
20.4 Injunctive Relief 25
20.5 Attorneys' Fees 25
21. MISCELLANEOUS
21.1 Relation of Parties 25
21.2 Counterparts 25
21.3 Third-Party Beneficiaries 25
21.4 Severability 26
21.5 Protests, Requests and Notices 26
21.6 Time of Essence 26
21.7 Rules of Construction 26
21.8 Merger 27
APPENDICES
APPENDIX A PARTIAL LIST OF MARKS
APPENDIX B LOCATIONS AND DELIVERY AREA
APPENDIX C LANDLORD CERTIFICATION
APPENDIX D CERTIFICATE OF OWNERSHIP
APPENDIX E PERSONAL GUARANTY
APPENDIX F ASSUMPTION OF OBLIGATIONS
APPENDIX G CORPORATE RESOLUTION
APPENDIX H SUS LICENSE AND SUPPORT AGREEMENT
FOURTH AMENDMENT TO
NATIONAL PIZZA COMPANY, INC.
PROFIT SHARING PLAN
Except as noted otherwise, this Amendment is entered into and is
effective as of the first day of July, 1992 by National Pizza
Company, Inc. (the "Employer") and Boatmen's Trust Company (the
"Trustee").
WITNESSETH, WHEREAS:
The Employer maintains a profit-sharing plan intended to meet the
requirements of Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") for the benefit of its employees;
and
The Employer is empowered to amend the Plan pursuant to Section
11.1 thereof; and
The Employer wishes to amend the Plant to the extent necessary to
comply with changes requested by the Internal Revenue Service as
part of the Employer's application for a determination as to the
tax-exempt qualified status of the Plan;
NOW, THEREFORE, the Employer is determined with the concurrence
of the Trustee that the Plan shall be amended, effective as of
the date set forth above, as follows:
1. Section 1.2 of the Plan hereby is amended in its entirety to
provide as follows:
"Participating Employer" means the Employer and any
Affiliated Company that adopts
the Plan with the approval of the Board of Directors of the
Employer, and any successor
thereto. A list of the Participating Employers in addition
to the Employer is attached as
Exhibit I to the Plan.
2 Section 1.7 of the Plan hereby is amended to add to the end
thereto the following paragraphs:
Notwithstanding the foregoing, annual Compensation in excess
of $200,000 shall be disregarded; provided, however, that
this $200,000 limit shall be automatically adjusted to the
maximum permissible dollar limitation permitted by the
Commissioner of the Internal Revenue Service. In
determining Compensation of a Participant for purposes of
this limitation, the family aggregation rules of Section
414(q)(6) of the Code shall apply, except in applying such
rules, the term "family" shall include only the spouse of
the Participant and an lineal descendants of the Participant
who have not attained age 19 before the close of the year.
If as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then the limitation shall
be prorated among the affected individuals in proportion to
each such individual's Compensation as determined under this
Section prior to the application of this limitation.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to
the contrary, for Plan Years beginning on or after January
1, 1994, the annual Compensation of each employee taken into
account under the plan shall not exceed the OBRA `93 annual
compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in
accordance with section 401(a)(17)(B) of the Internal
Revenue Code. The cost-of-living adjustment in effect for a
calendar year applies to any period, not exceeding 12
months, over which Compensation is determined (determination
period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA `93 annual
compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Section
401(a)(17) of the Code shall mean the OBRA `93 annual
compensation limit set forth in this provision.
If Compensation for any prior determination period is taken
into account in determining an employee's benefits accruing
in the current Plan Year, the Compensation for that prior
determination period is subject to the OBRA `93 annual
compensation limit in effect for that prior determination
period. For this purpose, for the determination periods
beginning before the first day of the first Plan Year
beginning on or after January 1, 1994, the OBRA `93 annual
compensation is $150,000.
3. The first paragraph of Section 1.9 of the Plan hereby is
amended in its entirety to provide as follows:
"Earnings" for any Plan Year means wages paid by the
Employer to the Employee reported in Box 10 of Form W-2, and
any salary deferral contributions made by the Employer on
behalf of the Employee for the Plan Year.
4. The fifth paragraph of Section 3.5 of the Plan hereby is
amended in its entirety to provide as follows:
For purposes of the ADP tests, the definition of
"Compensation" may be modified to mean any definition of
compensation that complies with Section 414(s) of the Code.
Further provided, that for purposes of the ADP tests, a
Participant's pre-tax contributions to the Plan shall be
taken into account for that Plan Year only to the extent
that such contributions relate to compensation at either (i)
would have been received by the Employee for the Plan Year
but for the Employee's election to defer under the Plan, or
(ii) is attributable to services performed by the Employee
in the Plan Year and, but for the Employee's election to
defer, would have been received by the Employee within two
and one-half months after the close of the Plan Year.
5. Section 3.5 of the Plan hereby is amended to add to the end
thereto the following paragraph:
In the event that this Plan satisfies the requirements of
Code Sections 401(k), 401(a)(4) or 410(b) only if aggregated
with one or more other plans, or if one or more of the plans
satisfies the requirements of such sections only if
aggregated with this Plan, then this Section shall be
applied by determining the ADP of Employees as if all such
plans were a single plan. Provided, however, that plans may
be aggregated in order to satisfy Code Section 401(k) only
if they have the same Plan Year.
6. The second paragraph of Section 3.8(c) of the Plan hereby is
deleted and in its place the following language shall be
added to provide:
The amount of the excess contributions for a Highly
Compensated Employee for a Plan Year is to be determined
under the following method, pursuant to which the actual
deferral percentage of the Highly Compensated Employee with
the highest actual deferral percentage is reduced to the
extent required to equal of the lessor of the amount which:
(i) enables the Plan to satisfy the ADP limitation, or
(ii) causes such Highly Compensated Employee's actual
deferral percentage to equal the percentage of the Highly
Compensated Employee with the next highest actual deferral
percentage.
This reduction process shall be repeated until the Plan
satisfies the ADP test. For each Highly Compensated
Employee, the amount of excess contributions shall be equal
to the pre-tax contributions made on behalf of the
Participant (determined prior to application of this Section
3.8(c)) minus the amount determined by multiplying the
Participant's actual deferral percentage (determined after
application of this Section 3.8(c)) by his compensation used
in determining such percentage, and such excess
contributions, together with related earnings, shall be
distributed to such Participant within twelve months after
the end of the Plan Year for which there is an excess. In
no case shall the amount of excess contributions for a Plan
Year with respect to any Highly Compensated Employee exceed
the amount of pre-tax contributions made on behalf of such
Highly Compensated Employee for such Plan Year. In
addition, to the extent that a Highly Compensation Employee
is subject to the family aggregation rules of Code Section
414(q)(6) as provided in Section 3.5 of this Plan, then in
such event any distributions made pursuant to this Section
shall be allocated among such family members in proportion
to the contributions of each such family member combined for
the purpose of this test.
7. Section 4.1(b) of the Plan hereby is amended in its entirety
to provide as follows:
(b) Allocation of Contributions Among Participating
Employers
For Plan Years beginning prior to December 31, 1994, amounts
contributed by each Participating Employer may be different
from the amount contributed by another Participating
Employer. The Board of Directors for each Participating
Employer shall determine each Plan Year whether a profit
sharing contribution will be made and the amount, if any.
The aggregate amount contributed by the Participating
Employers for a Plan Year shall be allocated among the
Participating Employers pursuant to the following formula:
(i) for the Plan Year ending December 31, 1992, 84.12% of
such aggregate contribution shall be allocated to National
Pizza Company, and the remaining 15.88% of such contribution
shall be allocated to Skipper's, Inc.;
(ii) For the Plan Year ending December 31, 1993, 91.10% of
such aggregate contribution shall be allocated to National
Pizza Company, and the remaining 8.9% of such contribution
shall be allocated to Skipper's, Inc.; and
(iii) For the Plan Year ending December 31, 1994, 73.28%
of such aggregate contribution shall be allocated to
National Pizza Company, 0.00% of such contribution shall be
allocated to Skipper's, Inc., and the remaining 26.72% of
such contribution shall be allocated to Romacorp, Inc.
Such amount allocated to a Participating Employer will be
the Employer contribution for the Participating Employer for
that Plan Year and will be allocated only to Participants
employed by that Participating Employer, based on Earnings
paid by that Participating Employer. Profit sharing
contributions shall be credited to the Participant's Profit
Sharing Account.
8. Section 4.1(c) of the Plan hereby is amended in its entirety
to provided as follows:
(c) Allocation of Contributions Among Participants
The amount of the profit sharing contribution for a
Participating Employer (as determined under the preceding
paragraph) shall be allocated to the Profit Sharing Accounts
of the Participants who are employed by the Participating
Employer in the same proportion that each such Participant's
Earning plus Excess Earnings for the Plan Year bears to the
total Earnings plus Excess Earnings for all such
Participants of such Participating Employee for the Plan
Year. The allocation under this section, as a percentage of
each such Participant's Earnings plus Excess Earnings, may
not exceed 5.7% (or, if greater, the percentage equal to the
tax rate under Code Section 3111(a) applicable to old age
insurance). "Excess Earnings" is the amount of Earnings
which exceeds the maximum amount of earnings which may be
considered compensation for the year under Code Section
3121(a)(1) for the purposes of social security
contributions. Any remaining contributions will then be
allocated in the same ration that each such Participant's
Earning for the Plan Year bears to the total Earnings of all
such Participants for the Plan Year.
9. Section 4.1 of the Plan hereby is amended to add the
following subsection (d):
(d) Allocation of Contributions for Plan Years Beginning on
or after January 1, 1995
For Plan Years Beginning on or after January 1, 1995,
amounts contributed by each Participating Employer may be
different from the amount contributed by another
Participating Employer. The Board of Directors for each
Participating Employer shall determine each Plan Year
whether a profit sharing contribution will be made and the
amount, if any. The aggregate amount contributed by the
Participating Employers for a Plan Year shall be allocated
to the Profit Sharing Accounts of the Participants in the
same proportion that each such Participant's Earnings plus
Excess Earnings for the Plan Year bears to the total
Earnings plus Excess Earnings for all such Participants for
the Plan Year. The allocation under this section, as a
percentage of each such Participant's Earnings plus Excess
Earnings, may not exceed 5.7% (or, if greater, the
percentage equal to the tax rate under Code Section 3111(a)
applicable to old age insurance). "Excess Earnings" is the
amount of Earnings which exceeds the maximum amount of
earnings which may be considered compensation for the year
under Code Section 3121(a)(1) for the purposes of social
security contributions.
Any remaining contributions will then be allocated in the
same ratio that each such Participant's Earnings for the
Plan Year bears to the total Earnings of all such
Participants for the Plan Year.
10. Section 8.1(b) of the Plan hereby is amended in its entirety
to provide as follows:
(b) Annual Additions Defined
For purposes of Section 8, the term "Annual Additions" for
any participant in any Plan Year shall be the sum of the
following amounts allocated to the Participant's Accounts
for the Plan Year:
(A) Employer contributions,
(B) after-tax Employee contributions
(C) forfeitures, and
(D) amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Section 415(1)(2)
of the Code, which is part of a pension or annuity plan
maintained by the Employer, are treated as Annual Additions
to a defined contribution plan. Also amounts derived from
contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are attributable
to post-retirement medical benefits, allocated to the
separate account of a Key Employee, as defined in Section
419(d)(3) of the Code, under a welfare benefit fund, as
defined in Section 419(e) of the Code, maintained by the
Employer are treated as Annual Additions to a defined
contribution plan.
11. Section 9.2(h)(1) of the Plan hereby is amended in its
entirety to provide as follows:
(1) The Required Aggregation Group includes each plan of
the Affiliated Companies in which a Key Employee is a
participant in the Plan Year containing the Determination
Date or any of the four preceding Plan Years, and each other
plan of the Affiliated Companies which, during this period,
enables any plan in which a Key Employee participates to
meet the minimum participation standards or non-
discriminatory contribution requirements of Code Sections
401(a)(4) or 410.
12. The first paragraph of Section 10.8(j) of the Plan hereby is
amended in its entirety to provide as follows:
In the event a distribution is required to commence under
Section 6 and the Participant or Beneficiary cannot be
located, the Participant's Account shall be forfeited on the
last day of the Plan Year following the Plan Year in which
the distribution was supposed to commence. Such forfeiture
shall be reallocated pursuant to Section 4.1 in the same
manner as the Employer's profit sharing contribution.
13. The second paragraph of Section 10.10 of the Plan hereby is
amended in its entirety to provide as follows:
Notwithstanding anything herein to the contrary, this Plan
shall be contingent upon receipt of a favorable Internal
Revenue Service ruling that the Plan, as initially approved
by the Internal Revenue Service, is qualified under Code
Section 401(a) and exempt from income taxation under Code
Section 501(a). In the event that t timely application for
such a determination is made by the time prescribed by law
for filing the Employer's return for the taxable year in
which such Plan was adopted, or by such later date as the
Secretary of Treasury may prescribe, and if the Plan
receives an adverse determination with respect to its
initial qualification, and the Plan is not amended
retroactively for any reason to correct such defaults, then
the Plan shall be void ab initio and all amounts contributed
by the Employer to the Plan, plus investment earnings, less
expenses paid, shall be returned to the Employer or
Participating Employer within one year after such
determination.
14. Section 10.8(a) of the Plan hereby is amended in its
entirety to provide as follows:
(a) Limitations on Assignments
Benefits under the Plan may not be assigned, sold,
transferred, or encumbered, and any attempt to do so shall
be void. The interest of a Participant in benefits under
the Plan shall not be subject to debts or liabilities of any
kind and shall not be subject to attachment, garnishment or
other legal process, except as provided in Code Section
401(a)(13), or in Section 10.9 of the Plan and Code Section
414(p) relating to Qualified Domestic Relations Orders.
15. Section 6.1 of the Plan hereby is amended to add to the end
thereto the following language:
Notwithstanding the foregoing, a Participant shall not be
eligible to receive a distribution of the Participant's
Accounts attributable to the pre-tax contributions made to
the Plan by the Participant earlier than upon one of the
following events:
(i) the Participant's retirement, death, disability or
separation from service;
(ii) the Participant's attainment of age 59 1/2, or the
Participant's hardship;
(iii) the termination of the Plan without establishment
or maintenance of another defined contribution plan (other
than an employee stock ownership plan or simplified employee
pension);
(iv) the date of the sale or the disposition by a
corporation which is the Employer or Participating Employer
to an unrelated corporation of substantially all of the
assets used in the trader business of the corporation, but
only with respect to those Participants who continue
employment with the acquiring corporation and the acquiring
corporation does not maintain the Plan after such
disposition; and
(v) The date of the sale or other disposition by the
Employer or Participating Employer of its interest in a
subsidiary to an unrelated entity but only with respect to
those Participants who continue employment with the
subsidiary and the acquiring entity does maintain the Plan
after the disposition.
Clauses (ii), (iv) and (v), shall apply only where the
distribution to a Participant is made in form of a lump sum
within the meaning of Code Section 402(e)(4), without regard
to subparagraphs (A)(i) through (iv), (B), and (H) of that
section.
Paragraphs (iv) and (v) above shall apply only where the
Employer or Participating Employer which is the transfer or
corporation continues to maintain the Plan after the
disposition.
IN WITNESS WHERE, the Plan is amended as of the day and date set
forth above.
EMPLOYER:
National Pizza Company
WITNESS AS TO EMPLOYER: By
___________________________
__________________________
___________________________
Print Name
TRUSTEE:
Boatmen's Trust Company
By
___________________________
___________________________
Print Name
FIFTH AMENDMENT TO
NPC INTERNATIONAL, INC.
PROFIT SHARING PLAN
Except as noted otherwise, this Fifth Amendment is enter into
and is effective as of the twelfth day of July, 1994, by NPC
International, Inc. (the "Employer") and Boatmen's Trust
Company (the "Trustee").
WITNESSETH, WHEREAS:
The Employer maintains a profit-sharing plan (the "Plan")
intended to meet the requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), for
the benefit of its employees; and
The Employer is empowered to amend the Plan pursuant to
Section 11.1 thereof; and
The Employer wishes to amend the Plan in the manner set forth
below;
NOW, THEREFORE, the Employer has determined with the
concurrence of the Trustee that the Plan shall be amended as
follows:
Effective as of July 12, 1994, the name of the Plan
shall be changed from "National Pizza Company, Profit Sharing
Plan" to "NPC International, Inc. Profit Sharing Plan."
Effective as of July 12, 1994, Section 1.5 of the Plan
shall be deleted in its entirety and the following inserted
in lieu thereof:
""Board of Directors" shall mean the Board
of Directors of NPC International, Inc."
Effective as of July 12, 1994, the first sentence of
Section 1.13 of the Plan shall be deleted in its entirety and
the following inserted in lieu thereof:
""Employer" means NPC International, Inc.,
a Kansas corporation."
Effective as of July 12, 1994, Section 1.21 of the
Plan shall be deleted in its entirety and the
following inserted in lieu thereof:
""Plan" means the NPC International, Inc.
Profit Sharing Plan, either in its present
form or as amended from time to time."
Effective as of January 1, 1995, Section 4.1(b) of the
Plan is hereby amended to add the following subsection (iv):
"(iv) For the Plan Year ended December 31,
1995, the contribution shall be 2% of
eligible compensation for employees of the
Pizza Hut division, 0% of eligible
compensation for employees of Skipper's
Inc., and 2% of eligible compensation for
employees Romacorp, Inc."
IN WITNESS WHEREOF, the Plan is amended as of the day and the
date set forth above.
EMPLOYER:
NPC International, Inc.
ATTEST AS TO EMPLOYER
By_________________________
_________________________
___________________________
Print Name
TRUSTEE:
Boatmen's Trust Company
By_________________________
___________________________
Print Name
PROPOSED RESOLUTION
OF THE BOARD OF DIRECTORS
OF NPC INTERNATIONAL, INC.
The undersigned, being all of The Directors of NPC
International, Inc. ("the Company") do hereby adopt and
approve the following resolutions:
WHEREAS, the Company originally adopted the National
Pizza Company Profit Sharing Plan ("the Plan") on November
17, 1992; and
WHEREAS, the Company has previously executed the First
Amendment, Second Amendment, Third Amendment and Fourth
Amendment to the Plan; and
WHEREAS, the Company desires to further amend the Plan.
NOW, THEREFORE, IT IS RESOLVED, that the instrument
entitled FIFTH AMENDMENT TO NATIONAL PIZZA COMPANY PROFIT
SHARING PLAN as presented to this meeting of the Board, is
hereby approved and adopted, generally effective as of July
12, 1994; and
FURTHER RESOLVED, that the proper officers of the
Company be, and they hereby are, authorized and directed to
take all other actions necessary and proper to carry said
instrument into full force and effect and to cause such
instrument, when taken together with the Plan and Trust, as
amended, to remain qualified under Section 401(a) and 501(a)
of the Internal Revenue Code: and
FURTHER RESOLVED, that a copy of said FIFTH AMENDMENT be
attached hereto and be made a part hereof.
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF SKIPPER'S, INC.
The undersigned, being all of The Directors of
Skipper's, Inc. ("the Corporation") do hereby adopt and
approve the following resolutions:
WHEREAS, NPC International, Inc. (formerly know as
National Pizza Company) (the "Company") originally adopted
the National Pizza Company Profit Sharing Plan ("the Plan")
on November 17, 1992; and
WHEREAS, the Company previously executed the First
Amendment, Second Amendment, Third Amendment, and Fourth
Amendment to the Plan; and
WHEREAS, the Corporation previously adopted the Plan as
a Participating Employer; and
WHEREAS, the Company has adopted certain amendments to
the Plan; and
WHEREAS, as a Participating Employer in the Plan, the
Corporation desires to consent to such amendment.
NOW, THEREFORE, IT IS RESOLVED, that the Corporation
hereby consents to the adoption and approval of the
instrument entitled FIFTH AMENDMENT TO NATIONAL PIZZA COMPANY
PROFIT SHARING PLAN, generally effective July 12, 1994; and
FURTHER RESOLVED, the proper officers of the company be,
and they hereby are, authorized and directed to take all
other actions necessary and proper to carry said instrument
into full force and effect and to cause such instrument, when
taken together with the Plan and Trust, as amended, to remain
qualified under Section 401(a) and 501(a) of the Internal
Revenue Code; and
FURTHER RESOLVED, that a copy of said FIFTH AMENDMENT be
attached hereto and be made a part hereof.
This Consent, when signed by all Directors of the
Corporation, may be certified by any proper officer of the
Corporation as having been unanimously adopted by a vote of
the Board of Directors of the Corporation on the ___________
day of _____________, 1995.
_____________________________
O. Gene Bicknell
_____________________________
James K. Schwartz
_____________________________
Paul R. Baird
Being all the members of the Board
of Directors of Skipper's, Inc.
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS
OF ROMACORP, INC.
The Undersigned, being all of The Directors of Romacorp,
Inc. ("the Corporation"), do hereby adopt and approve the
following resolutions:
WHEREAS, NPC International, Inc. (formerly known as
National Pizza Company) (the "Company") originally adopted
the National Pizza Company Profit Sharing Plan ("the Plan")
on November 17, 1992; and
WHEREAS, the Company previously executed the First
Amendment, Second Amendment, Third Amendment, and Fourth
Amendment to the Plan; and
WHEREAS, the Corporation previously adopted the Plan as
a Participating Employer; and
WHEREAS, the Company has adopted certain amendments to
the Plan; and
WHEREAS, as a Participating Employer in the Plan, the
Corporation desires to consent to such amendment.
NOW, THEREFORE, IT IS RESOLVED, that the Corporation
hereby consents to the adoption and approval of the
instrument entitled FIFTH AMENDMENT TO NATIONAL PIZZA COMPANY
PROFIT SHARING PLAN, generally effective as of July 12, 1994;
and
FURTHER RESOLVED, the proper officers of the Company be,
and they hereby are, authorized and directed to take all
other actions necessary and proper to carry said instrument
into full force and effect and to cause such instrument, when
taken together with the Plan and Trust, as amended, to remain
qualified under Section 401(a) and 501(a) of the Internal
Revenue Code; and
FURTHER RESOLVED, that a copy of said FIFTH AMENDMENT be
attached hereto and be made a part hereof.
This consent, when signed by all the Directors of the
Corporation, may be certified by any proper officer of the
Corporation as having been unanimoulsy adopted by a vote of
the Board of Directors of the Corporation on the _______ day
of ______________, 1995.
________________________
James K. Schwartz
________________________
Robert B. Page
SIXTH AMENDMENT TO
NPC INTERNATIONAL, INC.
PROFIT SHARING PLAN
WITNESSETH, WHEREAS:
The Employer maintains a profit-sharing plan (the "Plan") intended to meet the
requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), for the benefit of its employees; and
The Employer is empowered to amend the Plan pursuant to Section 11.1 thereof;
and
The Employer wishes to amend the Plan in the manner set forth below;
NOW, THEREFORE, the Employer has determined with the concurrence of the Trustee
that the Plan shall be amended as follows:
Effective as of January 1, 1997, Section 4.1(b) of the Plan is hereby
amended to add the following subsection (iv);
"(iv) For the Plan Year ended December 31, 1996, the contribution
shall be 2% of eligible compensation for employees of the Pizza Hut
division and 2% of eligible compensation for employees of Romacorp,
Inc."
IN WITNESS WHEREOF, the Plan is amended as of the day and the date set forth
above.
EMPLOYER:
NPCInternational,Inc.
ATTEST AS TO EMPLOYER
By______________________
_________________________
_________________________
Print Name
TRUSTEE:
Boatmen's Trust Company
By______________________
_________________________
12
SEVENTH AMENDMENT
TO
NPC INTERNATIONAL, INC.
PROFIT SHARING PLAN
Except as noted otherwise, this Seventh Amendment is adopted, effective as of
the first day of January, 1997, by NPC International, Inc. (the "Employer") and
Boatmen's Trust Company (the "Trustee").
WITNESSETH, WHEREAS:
The Employer maintains a profit-sharing plan (the "Plan") intended to meet the
requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), for the benefit of its employees; and
The Employer is empowered to amend the Plan pursuant to Section 11.1 thereof;
and
The Employer wishes to amend the Plan in the manner set forth below;
NOW, THEREFORE, the Employer has determined with the concurrence of the Trustee
that the Plan shall be amended as follows, effective as of January 1, 1997,
except as otherwise provided herein:
1. Effective January 1, 1996, Section 1.20 of the Plan is hereby
amended in its entirety to provide as follows:
"1.20 Participating Employer
"Participating Employer" means the Employer and any
Affiliated Company that adopts the Plan with the approval of the
Board of Directors of the Employer, and any successor thereto. A
separate division of the Employer or an Affiliated Company may
also adopt the Plan with the approval of the Board of Directors
of the Employer and be treated as a separate Participating
Employer hereunder. A list of the Participating Employers in
addition to the Employer is attached as Appendix I to the Plan."
2. Effective January 1, 1996, Section 4.1 of the Plan is amended in
its entirety to provide as follows:
"4.1 Profit Sharing Contributions
(a) Eligibility For Contributions
Each Participating Employer may make a profit sharing
contribution for any Plan Year on behalf of each Participant who
is employed on the last day of the Plan Year and completes 1,000
Hours of Service during the Plan Year; and each Participant who
terminated during the Plan Year due to termination of employment
on or after Normal Retirement Date, Disability or death.
The Participating Employer shall pay the profit sharing
contribution for a Plan Year (if any) in cash to the Trustee
within a reasonable time after such Plan Year.
(b) Amount of Contribution
Amounts contributed by each Participating Employer may be
different from the amount contributed by another Participating
Employer. Amounts contributed by each Participating Employer
will be allocated only to Participants employed by that
Participating Employer, based on Earnings paid by that
Participating Employer. The Board of Directors for each Plan
Year whether a profit sharing contribution will be made and the
amount, if any. Profit sharing contributions shall be credited
to the Participant's Profit Sharing Account.
(c) Allocation of Contributions Among Participants
The amount of the profit sharing contribution for a
Participating Employer (as determined under the preceding
paragraph) shall be allocated to the Profit Sharing Accounts of
the Participants who are employed by the Participating Employer
in the same proportion that each such Participant's Earnings plus
Excess Earnings for the Plan Year bears to the total Earnings
plus Excess Earnings for all such Participants of such
Participating Employer for the Plan Year. The allocation under
this section, as a percentage of each such Participant's Earnings
plus Excess Earnings, may not exceed 5.7% (of, if greater, the
percentage equal to the tax rate under Code Section 3111(a)
applicable to old age insurance). "Excess Earnings" is the
amount of earnings which may be considered compensation for the
year under Code Section 3121(a)(1) for the purposes of social
security contributions. Any remaining contributions will then be
allocated in the same ratio that each such Participant's Earnings
for the Plan Year bears to the total Earnings of all such
Participants for the Plan Year.
(d) Time of Contribution
In no event shall contributions for any Plan Year be made
later than the time prescribed by law (i) for the deduction of
such contributions for purposes of federal income tax, as
determined by the applicable provisions of the Code, or (ii) for
making such contributions under a cash or deferred arrangement
(within the meaning of Section 401(k) of the Code).
3. Appendix A of the Plan is hereby amended in its entirety to provide as
follows:
APPENDIX A
"Participating Employer" as defined in Section 1.20 shall also
include the following Participating Employers.
Participating Employers
1. NPC Management, Inc.
2. NPC Restaurants LP
3. Romacorp, Inc.
4. Roma Dining LP
5. Roma Franchise Corporation
IN WITNESS WHEREOF, the Plan is amended, effective as set forth above.
EMPLOYER:
NPC International, Inc.
ATTEST AS TO EMPLOYER By ___________________________
______________________________ ______________________________
Print Name
TRUSTEE:
Boatmen's Trust Company
By ___________________________
______________________________
Print Name
RESOLVED, that NPC Management, Inc. hereby adopts and shall become a
Participating Employer under the NPC International, Inc. Profit Sharing Plan,
effective January 1, 1997.
SECRETARY'S CERTIFICATE
I, ___________________________, hereby certify that I am Secretary of
NPC Management, Inc. and that the foregoing resolution regarding the
NPC International, Inc. Profit Sharing Plan was adopted by the Board
of Directors of the Corporation on ___________________. 1997. I
further certify that such resolution is in full force and effect.
____________________________________
_______________________________, 1997
RESOLVED, that NPC Restaurants LP hereby adopts and shall become a Participating
Employer under the NPC International, Inc. Profit Sharing Plan, effective
January 1, 1997.
SECRETARY'S CERTIFICATE
I, ___________________________, hereby certify that I am Secretary of
NPC Restaurants LP and that the foregoing resolution regarding the NPC
International, Inc. Profit Sharing Plan was adopted by the Board of
Directors of the Corporation on ___________________. 1997. I further
certify that such resolution is in full force and effect.
____________________________________
_______________________________, 1997
RESOLVED, that Romacorp, Inc. hereby adopts and shall become a Participating
Employer under the NPC International, Inc. Profit Sharing Plan, effective
____________, 199___.
SECRETARY'S CERTIFICATE
I, ___________________________, hereby certify that I am Secretary of
Romacorp, Inc. and that the foregoing resolution regarding the NPC
International, Inc. Profit Sharing Plan was adopted by the Board of
Directors of the Corporation on ___________________. 1997. I further
certify that such resolution is in full force and effect.
____________________________________
_______________________________, 1997
RESOLVED, that Roma Dining LP hereby adopts and shall become a Participating
Employer under the NPC International, Inc. Profit Sharing Plan, effective
January 1, 1997.
SECRETARY'S CERTIFICATE
I, ___________________________, hereby certify that I am Secretary of
Roma Dining LP and that the foregoing resolution regarding the NPC
International, Inc. Profit Sharing Plan was adopted by the Board of
Directors of the Corporation on ___________________. 1997. I further
certify that such resolution is in full force and effect.
____________________________________
_______________________________, 1997
RESOLVED, that Roma Franchise Corporation hereby adopts and shall become a
Participating Employer under the NPC International, Inc. Profit Sharing Plan,
effective January 1, 1997.
SECRETARY'S CERTIFICATE
I, ___________________________, hereby certify that I am Secretary of
Roma Franchise Corporation and that the foregoing resolution regarding
the NPC International, Inc. Profit Sharing Plan was adopted by the
Board of Directors of the Corporation on ___________________. 1997. I
further certify that such resolution is in full force and effect.
____________________________________
_______________________________, 1997
RESOLVED, that NPC International, Inc. hereby approves the adoption of the NPC
International, Inc. Profit Sharing Plan as Participating Employers by NPC
Management, Inc., NPC Restaurants LP, Romacorp, Inc., Roma Dining LP and Roma
Franchise Corporation.
SECRETARY'S CERTIFICATE
I, ___________________________, hereby certify that I am Secretary of
NPC International, Inc. and that the foregoing resolution regarding
the NPC International, Inc. Profit Sharing Plan was adopted by the
Board of Directors of the Corporation on _____________________, 1997.
I further certify that such resolution is in full force and effect.
____________________________________
_______________________________, 1997
May 29, 1996
Pacific Mutual Life Insurance Company
700 Newport Center Drive
P.O. Box 9000
Newport Beach, California 92658-9000
Attention: Fixed Income Securities Department
Pacific Corinthian Life Insurance Company
700 Newport Center Drive
P.O. Box 9000
Newport Beach, California 92658-9000
Attention: Fixed Income Securities Department
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Re: Amendment No. 2 to:
Each of the three separate Note Agreements, dated as of March 30,
1993, and entered into between NPC International, Inc., formerly
National Pizza Company (the "Company"), as the first party
thereto, and Pacific Mutual Life Insurance Company, Pacific
Corinthian Life Insurance Company and Lutheran Brotherhood,
respectively, as the second party thereto.
Ladies and Gentlemen:
We refer to the Note Agreements described above as each may have
been amended through the date hereof, including those amendments set forth
in the letter agreements dated May 24, 1995, (collectively, the "Existing
Agreements"). The addressees of this letter shall be referred to herein
individually as a "Lender," and collectively as the "Lenders." All other
capitalized terms used herein but not defined herein shall have the meanings
assigned to them in the Existing Agreements.
The Company has sold Skipper's, Inc., a wholly owned subsidiary of
the Company. Tony Roma's Inc., another wholly owned subsidiary of the
Company, has closed certain of its restaurant locations that are no longer
useful in the conduct of its business. In connection with the Skipper's
sale and the Tony Roma closings, the Company has taken a charge against
consolidated income for the fiscal quarter ending March 26, 1996. Also, as
a result of the Skipper's sale and the Tony Roma closings and certain other
transactions contemplated by the Company, certain provisions and covenants
in the Existing Agreements require amendment. Accordingly, each Lender and
the Company hereby agrees as follows with respect to each Existing Agreement
as to which that Lender is a party.
1. The provisions of each of Subsection 5F and Subsection 6C(5)
and Subsection 6C(6) of each of the Existing Agreements are hereby amended
by deleting the period at the end thereof and replacing it with the
following phrase "; provided, however, that the Company may effect the
Skipper's Sale."
2. The provisions of Subsection 6A of each of the Existing
Agreements are hereby amended to read in their entirety as follows:
"Consolidated Net Worth Requirement. The Company
covenants that it will not permit consolidated Net Worth
at any time to be less than the sum of (i) $77,000,000
plus (ii) an amount equal to 50% of Consolidated Net
Income (without reduction for any deficit in
Consolidated Net Income for any quarterly fiscal period)
for the period from and after March 26, 1996, to and
including the date of determination thereof, computed on
a cumulative basis for said entire period."
3. The provisions of Section 10 of each of the Existing
Agreements are hereby amended as follows:
A. The following defined terms shall be inserted in Section 10
in the appropriate alphabetical order:
"Acquisition Agreement" shall mean the Acquisition
Agreement dated as of March 25, 1996, by and among
Seattle Crab Co., the Company and Skipper's, Inc.
"Indemnification Agreements" shall mean, collectively,
the Lease Indemnification Agreement and the Liability
Assumption Agreement, as those agreements are defined
and identified in the Acquisition Agreement.
"Skipper's Sale" shall mean the Company's sale of the
common stock of Skipper's, Inc. in accordance with all
of the terms and conditions of the Acquisition
Agreements.
B. The defined term "Funded Debt" shall be amended by deleting
the period at the end of the definition thereof, and replacing it with the
following phrase: "; provided, however, that the term "Funded Debt" shall
not include any of the company's obligations under the Indemnification
Agreement."
C. The defined term "Consolidated Net Income" shall be amended
by deleting the period at the end of the definition thereof, and replacing
it with the following phrase:
"; provided, however, that for purposes of calculating
Consolidated Net Income with respect to the last day of
the fiscal quarter ending March 26, 1996, and with
respect to the last day of each of the next three
successive fiscal quarters thereafter, Consolidated Net
Income Available for Fixed Charges shall be calculated
without regard for any charges against income in
connection with the Skipper's Sale or in connection with
the closure or relocation of up to eight Tony Roma's
locations during calendar year 1996, which might
otherwise be required under GAAP."
D. The defined term "EBITDA" shall be amended by deleting the
period at the end of the definition thereof, and replacing it with the
following phrase:
"; provided, however, that for purposes of calculating
EBITDA with respect to the last day of the fiscal
quarter ending March 26, 1996, and with respect to the
last day of each of the next three successive fiscal
quarters thereafter, EBITDA shall be calculated without
regard for any charges against income in connection with
the Skipper's Sale or in connection with the closure or
relocation of up to eight Tony Roma's locations during
calendar year 1996, which might otherwise be required
under GAAP."
Except as expressly amended as set forth above, the Existing
Agreements remain in full force and effect and are hereby ratified and
confirmed. The execution, delivery and effectiveness of this Amendment No.
2 shall not, except as expressly provided herein, operates as an amendment
or waiver of any provision of the Existing Agreements.
This Amendment may be executed in any number of counterparts and
by any combination of the parties hereto in separate counterparts, each of
which counterparts shall be an original and all of which taken together
shall constitute one and the same Amendment.
If you agree to the terms and provisions hereof, please evidence
your agreement by executing and returning one counterpart of this Amendment
No. 2 to NPC International, Inc., 720 West 20th Street, P.O. Box 643,
Pittsburg, Kansas 66762, Attention: Troy D. Cook. This Amendment No. 2
shall become effective as to any Lender as of the date first above written
when and if a counterpart of this Amendment No. 2 shall have been executed
by such Lender.
Very truly yours,
NPC INTERNATIONAL, INC.
By:
Name: Troy D. Cook
Title Vice President and Chief Financial
Officer
Agreed as of the date first above written:
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By:
Name:
Title:
Agreed as of the date first above written:
PACIFIC CORINTHIAN LIFE INSURANCE COMPANY
By:
Name:
Title:
Agreed as of the date first above written:
LUTHERAN BROTHERHOOD
By:
Name:
Title:
Pacific Mutual Life Insurance Company, et al.
March 3, 1997
Page 5
March 3, 1997
Pacific Mutual Life Insurance Company
700 Newport Center Drive
P. O. Box 9000
Newport Beach, California 92658-9000
Attention: Fixed Income Securities Department
Pacific Corinthian Life Insurance Company
700 Newport Center Drive
P. O. Box 9000
Newport Beach, California 92658-9000
Attention: Fixed Income Securities Department
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, Minnesota 55415
RE: Amendment No. 3 to each of the three separate Note
agreements, dated as of May 15, 1992, as amended, and
entered into between NPC International, Inc., formerly
National Pizza Company (the "Company"), as the first party
thereto, and Pacific Mutual Life Insurance Company, Pacific
Corinthian Life Insurance Company and Lutheran Brotherhood,
respectively, as the second party thereto
Ladies and Gentlemen:
We refer to the Note Agreements described above as each may have
been amended through the date hereof, including those amendments
set forth in the letter agreements dated May 24, 1995 and May 29,
1996 (collectively, the "Existing Agreements"). The addresses of
this letter shall be referred to herein individually as a
"Lender," and collectively as the "Lenders." All other
capitalized terms used herein but not defined herein shall have
the same meanings assigned to them in the Existing Agreements.
1. Subsection 6C(2)(A)(iii) of the Existing Agreements as
amended May 24, 1995 is hereby amended by substitution of the
following in its entirety:
"(iii) additional unsecured Funded Debt of the Company and its
Restricted Subsidiaries and Funded Debt of the Company and its Restricted
Subsidiaries secured by Liens permitted by 6C(1)(v) and (vi), provided
that at the time of issuance thereof and after giving effect thereto and to
the application of the proceeds thereof (x) Consolidated Funded Debt shall
not exceed an amount equal (1) prior to and including the last day of the
first fiscal quarter of fiscal year 1997, three (3) times Pro Forma EBITDA,
and (2) thereafter three (3) times Pro Forma EBITDA, in each case for the
four fiscal quarters immediately preceding the date of determination, and
(y) in the case of Consolidated Funded Debt to be incurred by a Restricted
Subsidiary such Debt could be incurred within the applicable limitations
provided in 6C(4); and"
2. The following definition of Pro Form EBITDA shall be inserted in Section 10
in appropriate alphabetical order as a Defined Term:
"Pro Forma EBITDA means EBITDA provided, however, for the purpose of
calculating Pro Forma EBITDA (i) with respect to the last day of the fiscal
quarter ending March 26, 1996, and with respect to the last day of each of
the next three successive fiscal quarters thereafter, Pro Forma EBITDA
shall be calculated without regard for any charges against income in
connection with the Skipper's Sale, or in connection with the closure or
relocation of up to eight Tony Roma's locations during calendar year 1996,
which might otherwise be required under GAAP and (ii) with respect to any
Pizza Hut or Tony Roma's restaurants acquired (the "Acquisition Target"),
EBITDA of the Acquisition Target for each full fiscal quarter included in
the applicable Computation Period prior to such Acquisition (including the
fiscal quarter during which it was acquired) shall be included without
duplication and reasonably adjusted for tangible operational changes due to
field expense differentials, royalty payments to be made to Pizza Hut,
Inc., contractual rent payments on real estate and equipment and general
and administrative cost differences (collectively, the "Acquisition
Adjustments"). Prior to, and in connection with, the calculation of Pro
Forma EBITDA, the Company shall provide each Purchaser with appropriate
documentation, certified by an authorized financial officer of the Company,
supporting the reasonableness of the Acquisition Adjustments."
3. Section 11, Miscellaneous, will be amended by the addition of the
following:
"11.P. Agreement to Amend. Within 180 days after the date hereof if
required by the Banks participating in the Company's revolving credit
facility, enter into, and cause its Subsidiaries to enter into, an
amendment to this Agreement and such other documents as required, and in
form and substance satisfactory to the Company and the Purchasers, to
accomplish one of the following:
1. Implement the tax restructuring outlined in that certain letter
from the Borrower dated as of December 27, 1996, whereby the
notes will be assigned to NPC Management, Inc. and all of its
Subsidairies shall become co-Borrowers or guarantee its
obligations to all Senior unsecured Lenders; or
2. All of its Subsidiaries shall become co-Borrowers or
Guarantee its obligations to all Senior unsecured Lenders; or
3. Such other reorganization and/or amendments on which
the Company, and Purchasers may agree."
Except as expressly amended as set forth hereinabove, the Existing Agreements
remain in full force and effect and are hereby ratified and confirmed. The
execution, delivery and effectiveness of this Amendment No. 3 shall not, except
as expressly provided herein, operate as an amendment or waiver of any other
provision of the Existing Agreements.
This Amendment may be executed in any number of counterparts and by any
combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same Amendment.
If you agree to the terms and provisions hereof, please evidence your agreement
by executing and returning one counterpart of this Amendment No. 3 to NPC
International, Inc., 720 West 20th Street, P.O. Box 643, Pittsburg, Kansas
66762, ATTN: Troy D. Cook. This Amendment No. 3 shall become effective as to
any Lender as of the date first above written when and if a counterpart of this
Amendment No. 3 shall have been executed by such Lender.
NPC INTERNATIONAL, INC.
By:___________________________________
Troy D. Cook, Vice President
Agreed as of the date first above written.
PACIFIC MUTUAL LIFE INSURANCE
COMPANY
By:_______________________________
Name:_________________________
Title:__________________________
Agreed as of the date first above written:
PACIFIC CORINTHIAN LIFE
INSURANCE COMPANY
By:_______________________________
Name:_________________________
Title:__________________________
Agreed as of the date first above written:
LUTHERAN BROTHERHOOD
By:_______________________________
Name:_________________________
Title:__________________________
Fourth Amendment -- Page 14
FOURTH AMENDMENT TO NOTE AGREEMENTS
This Fourth Amendment to Note Agreements (the "Amendment")
is entered into as of May 8, 1997 (with an effective date of
March 26, 1997), by and among NPC International, Inc., a Kansas
corporation formerly known as National Pizza Company ("NPCI"),
NPC Management, Inc., a Delaware corporation ("NPC Management"),
Pacific Mutual Life Insurance Company ("Pac Mutual"), Pacific
Corinthian Life Insurance Company ("Pacific Corinthian") and
Lutheran Brotherhood. Pac Mutual, Pacific Corinthian and
Lutheran Brotherhood are each referred to herein as a "Purchaser"
and are collectively referred to herein as the "Purchasers."
Preliminary Statements
(a) NPCI is indebted to the Purchasers pursuant to three
separate Note Agreements, each dated as of March 30, 1993, as
amended (each a "Note Agreement" and, collectively, the "Note
Agreements"). The Note Agreements relate to NPCI's 6.35% Senior
Notes due April 1, 2000 issued to the Purchasers in the aggregate
stated principal amount of $20,000,000 (collectively, and as
amended from time to time, the "Notes").
(b) NPCI and NPC Management have requested of the
Purchasers that NPCI be permitted to assign its obligations under
the Notes to NPC Management and that, in connection therewith,
NPCI and all of its existing and future Subsidiaries (other than
NPC Management) guarantee the payment and performance of all
obligations of NPC Management under the Notes.
(c) NPCI and NPC Management have further requested that
certain conforming changes be made to the Note Agreements in
connection with such assignment and assumption.
(d) The Purchasers have agreed to the foregoing request by
NPCI and NPC Management, subject, however, to the terms and
conditions of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Assumption by NPC Management. NPC Management hereby
assumes and agrees to pay and perform all existing and future
obligations of any nature whatsoever of NPCI under the Notes and
the Note Agreements (collectively, the "Note Documents"), and to
be bound by every provision in the Note Documents applicable to
NPCI. Without limiting the generality of the foregoing, NPC
Management hereby assumes and agrees to pay all principal of and
premium, if any, and interest on the Notes in accordance with the
terms thereof.
2. Release of NPCI. Subject to Section 3 below, the
Purchasers hereby release and discharge NPCI from all of its
existing and future obligations under the Note Documents.
Without limiting the generality of the foregoing, but subject to
Section 3 below, the Purchasers hereby release and discharge NPCI
from its obligation to pay the principal of, premium, if any, and
interest on the Notes.
3. Master Guaranty.
(a) In consideration of the Purchasers consenting to
the transactions described in Sections 1 and 2 above, and in
recognition that the Purchasers would not give such consent
but for the promises hereunder, NPCI and each Subsidiary of
NPCI (other than NPC Management) agrees to guaranty the
payment and performance of NPC Management's existing and
future obligations under the Note Documents, in each case
pursuant to a Master Guaranty substantially in the form of
Exhibit H attached hereto (as amended from time to time, the
"Master Guaranty"). NPCI and each of its Subsidiaries
(other than NPC Management) shall execute and deliver the
Master Guaranty contemporaneously with the execution and
delivery of this Amendment.
(b) Nothing in Section 2 above (including, without
limitation, any release by the Purchasers of NPCI's
obligations under the Notes) shall release, limit or
otherwise impair NPCI's obligations under the Master
Guaranty; it being understood that the release referred to
in Section 2 above relates only to NPCI's obligations as the
original and primary obligor under the Note Documents, and
not NPCI's obligations as a guarantor under the Master
Guaranty.
4. General Conforming Amendments to Note Documents. Each
of the Note Documents is hereby amended as follows:
(a) Company. Unless the context clearly requires
otherwise, all references in the Notes or the Note
Agreements to the "Company" shall be deemed to refer instead
to NPC Management; provided, however, that (i) all
references in the Note Agreements to the "the Company and
its Subsidiaries" or "the Company or any Subsidiary" (or, in
either case, words of similar import) shall be deemed to
refer instead to "NPCI and its Subsidiaries" or "NPCI or any
Subsidiary," as the case may be, with such grammatical
changes as may be incidental thereto, and (ii) all
references in 5.1A of the Note Agreements to any filings
by the "Company" with the Securities and Exchange Commission
(or any similar references to filings with or notices to
shareholders or other agencies) shall be deemed to refer
instead to any such filings or notices by NPCI; it being
understood that nothing in this Amendment shall limit or
otherwise affect the reporting requirements of NPCI and its
Subsidiaries to the Purchasers under the Note Documents.
(b) Restricted Subsidiary. Unless the context clearly
requires otherwise, all references in the Notes or the Note
Agreements to a "Restricted Subsidiary" or "Restricted
Subsidiaries" shall be deemed to refer instead to a
Guarantor or Guarantors, as the case may be, with such
grammatical changes as may be incidental thereto.
(c) Subsidiary. The definition of "Subsidiary" in
10A of the Note Agreements is deleted as is replaced by the
following:
"Subsidiary" shall mean, as to
any Person, any other Person of
which or in which such Person and
its other Subsidiaries owns
directly or indirectly 50% or more
of (i) the combined voting power of
all classes of stock having general
voting power under ordinary
circumstances to elect a majority
of the board of directors of such
Person, if it is a corporation,
(ii) the capital interest or
profits interest of such Person, if
it is a partnership, joint venture
or similar entity, or (iii) the
beneficial interest of such Person,
if it is a trust, association or
other incorporated organization.
(d) Guarantor. A new defined term "Guarantor" is
added to 10B of the Note Agreements which reads as
follows:
"Guarantor" means NPCI and any
Subsidiary of NPCI (other than the
Company), and any other Person who
may be a guarantor under the Master
Guaranty from time to time.
5. Permitted Liens. 6C(1)(vi) is deleted in its
entirety and is replaced by the following:
(vi) other Liens on the property of the
Company or any Guarantor to secure Debt of
the Company or any Guarantor, provided that
(x) the aggregate amount of (1)
such Debt secured by such Liens and (2)
any other Debt incurred by any Guarantor
pursuant to 6C(4) (collectively,
"Priority Debt"), does not exceed at any
time an amount equal to twenty percent
(20%) of Consolidated Net Worth, and
(y) all such Debt shall have been
incurred within the applicable
limitations provided in 6C(2)(a)(iii).
6. Permitted Debt.
(a) General. 6C(2) of the Note Agreements is
deleted in its entirety and is replaced by the following:
(2) Debt. (a) The Company will not and
will not permit any Guarantor to create,
incur, or assume or in any manner be or
become liable in respect of any Debt, except
(i) Debt evidenced by the Notes;
(ii) Debt of the Company and the
Guarantors described on Exhibit F,
including, in the case of any Guarantor,
any Permitted Guaranty Debt in respect
of such Debt;
(iii) additional unsecured Debt
of the Company and the Guarantors and
Debt of the Company and the Guarantors
secured by Liens permitted by 6C(1)(v)
and (vi), provided that at the time of
issuance thereof and after giving effect
thereto and to the application of
proceed thereof
(x) Consolidated Debt shall
not exceed an amount equal to (i)
prior to and including March 31,
1998, three and one-fourths times
(3.25x) Consolidated Pro Forma
EBITDA, and (ii) thereafter, three
times (3.0x) Consolidated Pro Forma
EBITDA, in each case for the four
fiscal quarters immediately
preceding the date of
determination, and
(y) in the case of Debt to be
incurred by a Guarantor, such Debt
could be incurred within the
applicable limitations provided in
6C(4);
(iv) Debt of the Company to any
Guarantor or Debt of any Guarantor to
the Company or to any other Guarantor;
and
(v) in the case of Romacorp, Inc.,
Debt due T.R. Restaurant Group pursuant
to a promissory note dated July 20,
1992, from Romacorp, Inc.'s predecessor
to T. R. Restaurant Group in the
original principal amount of $4,000,000.
(b) Guarantor Debt. 6C(4) is deleted in its
entirety and is replaced by the following:
(4) Guarantor Debt. The Company will
not permit any Guarantor to create, incur or
assume or in any manner become liable in any
respect of any Debt other than Permitted
Guaranty Debt
(i) if, at the time such Debt is
created, incurred or assumed and after
giving effect thereto, the aggregate
amount of Priority Debt of the Company
and the Guarantors would exceed an
amount equal to twenty percent (20%) of
Consolidated Net Worth at such time, and
(ii) such Debt can be incurred
within the applicable limitations
provided in 6C(2)(A)(iii).
7. Additional Fixed Charge Coverage Ratio Covenant. A new
6D to the Note Agreement is added which reads as follows:
D. Fixed Charges. The Company
covenants that, on the last day of each
fiscal quarter, the ratio of (a) Consolidated
Pro Forma EBITDA plus the consolidated
operating lease rental expense of NPCI and
its Subsidiaries to (b) Fixed Charges will be
not less than 1.5 to 1.0, for the period
consisting of the four (4) consecutive fiscal
quarters ending on the date of such
determination. For purposes of determining
whether the entering into of any lease
results in a breach of this 6D, the Company
shall make the calculation required under
this 6D as of the date such lease is
entered into on the assumption that the
rental expense that is expected to be
incurred during the twelve-month period
following the entering into of the lease was
incurred during the twelve-month period
ending on the date of such calculation.
8. Intercompany Asset Transfers. In order to permit the
Company and the Guarantors to sell or otherwise transfer assets
to one another from time to time, 6C(6)(iii) of the Note
Agreement is deleted in its entirety and is replaced by the
following:
"(iii) the Company may sell, lease,
transfer or otherwise dispose of assets to
any Guarantor (excluding Pizza Hut franchise
rights), and any Guarantor may sell, lease,
transfer or otherwise dispose of assets to
any other Guarantor or to the Company."
Nothing in 6(C)(3) [relating to Restricted Investments] or in
6(C)(7) [relating to Transactions with Affiliates] shall prohibit
or otherwise impair the ability of the Company or any Guarantor
to sell, lease, transfer or otherwise dispose of assets
(including, without limitation, financial assets) to the extent
such sale, lease, transfer or other disposal is permitted
pursuant to 6C(6)(iii).
9. Representations regarding Outstanding Debt. 8I of
the Note Agreements is deleted and is replaced by the following:
I. Outstanding Debt; No Defaults.
Neither the Company nor any Guarantor has
outstanding any Debt except as permitted by
6C(2). Exhibit F describes the outstanding
principal amount, as of April 30, 1997, of
the Debt described in 6C(2)(a)(ii). The
outstanding principal amount, as of April 30,
1997, of the Debt described in 6C(2)(a)(v)
is $1,764,459. There exists no default under
the provisions of any instrument evidencing
any such Debt or of any agreement relating
thereto. No Default or Event of Default has
occurred and is continuing.
10. Organizational Structure; Joinder Agreement. 8A and
8B of the Note Agreements are deleted and are replaced by the
following:
A. Subsidiaries.
(1) Ownership. NPCI owns 100% of
the Voting Securities of the Company.
Exhibit E attached hereto states the
name of each Subsidiary of NPCI (other
than the Company), its jurisdiction of
incorporation or organization, and the
ownership of its Voting Securities. The
Company and each Guarantor has good and
marketable title to all of the equity
interests it purports to own as set
forth on Exhibit E, free and clear in
each case of any Lien. All such shares
and other equity interests have been
duly issued and are fully paid and non-
assessable.
(2) Guarantors; Joinder Agreement.
NPCI and each existing and hereafter
acquired or created Subsidiary of NPCI
(other than the Company) shall
unconditionally and jointly and
severally guarantee the payment of all
principal on, premium, if any, and
interest on the Notes and all other
obligations of the Company under this
Agreement in accordance with and
pursuant to the terms of the Master
Guaranty. If NPCI or any existing
Subsidiary of NPCI hereafter creates or
acquires any Subsidiary, such Subsidiary
shall execute and deliver to the
Purchasers the Joinder Agreement
referred to in the Master Guaranty and
shall thereupon become unconditionally
and jointly and severally liable for the
payment of all principal on, premium, if
any, and interest on the Notes and all
other obligations of the Company under
this Agreement in accordance with and
pursuant to the terms of the Master
Guaranty. NPCI and its Subsidiaries
listed in Exhibit E constitute the
initial Guarantors.
B. Organization; Qualification;
Corporate Authority. The Company is a
corporation duly organized, validly existing
and in good standing under the laws of the
State of Delaware; each Guarantor is duly
organized, validly existing and in good
standing under the laws of the jurisdiction
in which it is incorporated or organized.
The Company has and each Guarantor has the
corporate or other organizational power to
own its respective property and to carry on
its respective business as now being
conducted, and the Company is duly qualified
as a foreign corporation to do business and
is in good standing in every jurisdiction in
which the nature of the business conducted by
it makes such qualification necessary. The
execution, delivery and performance by the
Company of this Agreement and the Notes are
within the Company's corporate powers and
have been duly authorized by all necessary
corporate action.
11. Additional Definitions. The following definitions are
added to 10A of the Note Agreements in the appropriate
alphabetical order:
"Consolidated Debt" shall mean all Debt
of NPCI and its Subsidiaries, determined on a
consolidated basis eliminating intercompany
items. (And all references in the Note
Agreements to "Consolidated Funded Debt"
shall be deemed to refer instead to
"Consolidated Debt.")
"Consolidated Net Income Available for
Fixed Charges" for any period shall mean the
sum of Consolidated Net Income during such
period, plus (to the extent deducted in
determining Consolidated Net Income during
such period) (i) interest expense,
(ii) provision for income taxes,
(iii) depreciation and amortization, and
(iv) operating lease expense.
"Consolidated Net Worth" shall mean the
stockholders' equity account of NPCI and its
Subsidiaries on a consolidated basis,
according to GAAP.
"Consolidated Pro-Forma EBITDA" shall
mean, for any period, EBITDA of NPCI and its
Subsidiaries on a consolidated basis during
such period; provided, however, that for
purposes of calculating Consolidated Pro-
Forma EBITDA with respect to any Pizza Hut or
Tony Roma's restaurant to be acquired by the
Company or any Subsidiary (each, an
"acquisition target"), the EBITDA of the
acquisition target for each full fiscal
quarter included in the computational period
prior to the acquisition (including the
fiscal quarter during which it was acquired)
shall be included, without duplication, and
shall be reasonably adjusted for tangible
operational changes due to field expenses
differentials, royalty payments to be made to
Pizza Hut, Inc., contractual rent payments on
real estate and equipment and general and
administrative cost differences
(collectively, "acquisition adjustments").
Prior to, and in connection with, the
calculation of Consolidated Pro-Forma EBITDA,
the Company shall provide each Purchaser with
appropriate documentation, certified by an
authorized financial officer of the Company,
supporting the reasonableness of the
acquisition adjustments.
"EBITDA" shall mean Consolidated Net
Income before interest expense, provision for
taxes (to the extent not excluded from
Consolidated Net Income), depreciation,
amortization and the noncash portion of
nonrecurring charges (as defined in GAAP).
"Master Guaranty" means the Master
Guaranty attached hereto as Exhibit H, as the
same may be amended from time to time.
"NPCI" shall mean NPC International,
Inc., a Kansas corporation formerly known as
National Pizza Company.
"Permitted Guaranty Debt" shall mean any
Debt evidenced by the Master Guaranty and any
Debt evidenced by any guaranty agreement
given by any Guarantor in favor of any holder
of any Debt described in Exhibit F, and any
holder of any Permitted Debt of the Company
incurred in the future, whereby such
Guarantor guarantees the payment of all
principal, interest and other amounts, if
any, payable in respect of such Debt.
12. New Note Agreement Exhibits. Exhibits D, E and F to
the Note Agreements are replaced by Exhibits D, E and F hereto.
A new Exhibit H is added to the Note Agreements in the form of
Exhibit H hereto.
13. Fee. On the date hereof, the Company shall pay to the
Purchasers a fee in an aggregate amount equal to $24,000 to be
allocated pro-rata among the Purchasers based upon the relative
outstanding principal balance of each of their Notes.
14. No Other Amendments. Except as amended hereby, the
Notes and the Note Agreements shall remain in full force and
effect and be binding on the parties thereto in accordance with
their respective terms and are hereby ratified and reaffirmed.
15. Counterparts; Fax. This Amendment may be executed in
any number of counterparts and by different signatories thereto.
This Amendment may be executed and delivered by fax or other
electronic transmission.
16. Conformity with American General Note Agreement. The
Company has indicated that it contemplates entering into certain
financing transactions in the future with American General Life
Insurance Company and certain other lenders (collectively, the
"American General Lenders"). It is the intention and
understanding of the parties hereto that the covenants and
provisions contained in Sections 5, 6 and 7, respectively, of the
Note Agreement (and any corresponding definitions) are to conform
in all material respects with the covenants and provisions (and
any corresponding definitions) to be contained in any credit
agreement among the Company and the American General Lenders.
In the event the Company elects to enter into such financing
transactions with the American General Lenders (a) the Company
and the Purchasers agree to use their reasonable best efforts to
amend or restate (at the Company's option) the Note Agreement to
the extent necessary to so conform the aforementioned covenants
and provisions in all material respects, and (b) the Company
agrees to deliver customary closing documents in connection with
such amendment or restatement including legal opinions, no
default certificates, new promissory notes and organizational
documents.
IN WITNESS WHEREOF, this Amendment has been executed and
delivered by the parties as of the date first above written.
NPC INTERNATIONAL, INC.
By:__________________________
Name:
Title:
NPC MANAGEMENT, INC.
By:__________________________
Name:
Title:
PACIFIC MUTUAL LIFE INSURANCE
COMPANY
By:__________________________
Name:
Title:
PACIFIC CORINTHIAN LIFE INSURANCE
COMPANY
By:__________________________
Name:
Title:
LUTHERAN BROTHERHOOD
By:__________________________
Name:
Title:
Exhibits to Fourth Amendment
Exhibit D - List of Agreements Restricting Debt
Exhibit E - NPC and its Subsidiaries, other than the Company
Exhibit F - Description of Debt
Exhibit H - Master Guaranty (including Exhibit A thereto)
Exhibit D
(List of Agreements Restricting Debt)
1. Amended and Restated Master Shelf and Assumption Agreement
dated as on or about the date hereof, between the Company
and The Prudential Insurance Company of America relating to
promissory notes in the original aggregate principal amount
of $60,000,000 issuable in accordance with the terms
thereof.
2. $15,000,000 Amended and Restated Revolving Credit Agreement
dated on or about the date hereof, between the Company and
Texas Commerce Bank National Association.
3. $185,000,000 Amended and Restated Revolving Credit Agreement
dated on or about the date hereof, among the Company,
various banks party thereto, and Texas Commerce Bank
National Association, as agent for such banks.
4. Note Agreements, each dated as of May 15, 1992, among the
Company, Massachusetts Mutual Life Insurance Company,
Pacific Mutual Life Insurance Company and PM Group Life
Insurance Company, as amended, relating to 7.58% promissory
notes in the original aggregate principal amount of
$25,000,000.
Exhibit E
(NPCI and its Subsidiaries, other than the Company)
1. NPCI. NPC International, Inc., a Kansas corporation,
formerly known as National Pizza Company.
2. Romacorp. Romacorp, Inc., a Delaware corporation
("Romacorp"), 100% of the Voting Securities of which are
owned by NPCI.
3. NPC Restaurants. NPC Restaurants LP, a Delaware limited
partnership ("NPC Restaurants"), the sole general partner of
which is NPCI, and the sole limited partner of which is the
Company. NPCI, as general partner, owns 1% of the Voting
Securities of NPC Restaurants, and the Company, as limited
partner, owns 99% of the voting Securities of NPC
Restaurants.
4. Roma Holdings. Roma Holdings, Inc., a Delaware corporation
("Roma Holdings"), 100% of the Voting Securities of which
are owned by Romacorp.
5. Roma Dining. Roma Dining LP, a Delaware limited partnership
("Roma Dining"), the sole general partner of which is
Romacorp, and the sole limited partner of which is Roma
Holdings. Romacorp, as general partner, owns 1% of the
Voting Securities of Roma Dining, and Roma Holdings, as
limited partner, owns 99% of the Voting Securities of Roma
Dining.
6. Roma Franchise. Roma Franchise Corporation, a Delaware
corporation, 100% of the Voting Securities of which are
owned by Romacorp.
7. Roma Systems. Roma Systems, Inc., a Delaware corporation,
100% of the Voting Securities of which are owned by
Romacorp.
8. Seattle Restaurant Equipment. Seattle Restaurant Equipment
Company, a Washington corporation, 100% of the Voting
Securities of which are owned by NPCI.
9. Roma Ft. Worth. Roma Ft. Worth, Inc., a Texas corporation,
100% of the Voting Securities of which are owned by
Romacorp.
10. Roma Bar Management. Roma Bar Management Corporation, a
Texas corporation, 100% of the Voting Securities of which
are owned by Romacorp.
11. Roma Huntington Beach. Roma Hunting Beach, Inc., a Delaware
corporation, 100% of the Voting Securities of which are
owned by Romacorp.
Exhibit F
(Description of Debt)
Amended and Restated Master Shelf and Assumption
Agreement dated on or about the date hereof, between
the Company and The Prudential Insurance Company
of America, relating to promissory notes in the
original aggregate principal amount of $60,000,000
issuable in accordance with the terms thereof. $30,000,000
$15,000,000 Amended and Restated Revolving Credit
Agreement dated on or about the date hereof, between
the Company and Texas Commerce Bank
National Association. $7,400,000
$185,000,000 Amended and Restated Revolving Credit
Agreement dated on or about the date hereof, among
the Company, various banks party thereto, and Texas
Commerce Bank National Association,
as agent for such banks. $89,000,000
Note Agreements, each dated as of May 15, 1992,
among the Company, Massachusetts Mutual
Life Insurance Company, Pacific Mutual Life
Insurance Company and PM Group Life Insurance
Company, as amended, relating to 7.58% promissory
notes in the original aggregate principal amount of
$25,000,000. $5,000,000
Exhibit H
MASTER GUARANTY
This Master Guaranty (the "Guaranty"), dated as of May 8,
1997 (and effective as of March 26, 1997), is executed and
delivered by NPC INTERNATIONAL, INC., a Kansas corporation,
ROMACORP, INC., a Delaware corporation, NPC RESTAURANTS LP, a
Delaware limited partnership, ROMA HOLDINGS, INC., a Delaware
corporation, ROMA DINING LP, a Delaware limited partnership, ROMA
FRANCHISE CORPORATION, a Delaware corporation, ROMA SYSTEMS,
INC., a Delaware corporation, SEATTLE RESTAURANT EQUIPMENT
COMPANY, a Washington corporation, ROMA FT. WORTH, INC., a Texas
corporation, ROMA BAR MANAGEMENT CORPORATION, a Texas
corporation, ROMA HUNTING BEACH, INC., a Delaware corporation,
and EACH OF THE PERSONS WHICH MAY BECOME A PARTY HERETO
(individually, a "Guarantor" and, collectively, the
"Guarantors"), to PACIFIC MUTUAL LIFE INSURANCE COMPANY, PACIFIC
CORINTHIAN LIFE INSURANCE COMPANY and LUTHERAN BROTHERHOOD
(individually, a "Purchaser" and, collectively, the
"Purchasers").
ARTICLE 1.
Section 1.1 Definitions. As used in this Guaranty, these
terms shall have these respective meanings:
"Company" means NPC Management, Inc., a Delaware
corporation, and its successors, assigns, trustees and
receivers.
"Note Agreements" means, collectively, each Note
Agreement dated as of March 30, 1993, as amended, between
the Company and each Purchaser whereby the Company has
agreed to issue to the Purchasers its 6.35% Senior Secured
Notes Due April 1, 2000 in the aggregate stated principal
amount of $20,000,000, as the same may be amended, restated,
consolidated or other modified from time to time.
"Debt" means the sum of all principal of, premium, if
any, and interest on the Notes, and all other amounts for
which the Company or any other Obligor is liable to the
Purchasers under the Note Agreements and the Notes. The
Debt includes interest and other obligations accruing or
arising in connection with the foregoing after (a)
commencement of any case under any bankruptcy or similar
laws by or against any Obligor or (b) the obligations of any
Obligor shall cease to exist by operation of law or for any
other reason.
"Dollars" and "$" means lawful money of the United
States of America.
"Guaranteed Debt" means, as to any Guarantor, the
Maximum Amount, less the amounts, if any, of payments of the
Guaranteed Debt made by such Guarantor and clearly
identified as such in a notice accepted in writing by a
Purchaser confirming the payment and reduction of the
Guaranteed Debt as to such Guarantor.
"Guarantor's Net Worth" means, as to any Guarantor,
(a) the fair value of the property of such Guarantor from
time to time (taking into consideration the value, if any,
of rights of subrogation, contribution and indemnity), plus
(b) such Guarantor's rights under any contribution
agreement, minus (c) the total liabilities of such Guarantor
(including contingent liabilities [discounted in appropriate
instances], but excluding liabilities of such Guarantor
under this Guaranty) from time to time. It is agreed that a
Guarantor's Net Worth may fluctuate from time to time after
the date hereof as it is determined on each Determination
Date (as defined int he definition of "Maximum Amount").
"Joinder Agreement" means each Joinder Agreement from
time to time executed and delivered to the Purchasers by a
Subsidiary of NPCI, pursuant to the terms of the Note
Agreements, for the purpose, among others, of becoming an
additional Guarantor hereunder, substantially in the form of
Exhibit A attached hereto.
"Maximum Amount" means, with respect to any Guarantor,
the greater of (a) all proceeds (without duplication)
of the Debt directly or indirectly (by intercompany loan,
advance, capital contribution, such Guarantor's ownership
interest in any Person receiving the proceeds of the Debt,
or otherwise) advanced to or for the amount of, or used by
or for the benefit of, such Guarantor; (b) ninety-five
percent (95%) of Guarantor's Net Worth from time to time; or
(c) the amount that in a legal proceeding brought within the
applicable limitations period is determined by the final,
nonappealable order of a court having jurisdiction over the
issue and the applicable parties to be the amount of value
given by the Purchasers, or received by such Guarantor, in
exchange for the obligations of Guarantor under this
Guaranty. If on any date after the date hereof (any such
date being herein called a "Determination Date"), ninety-
five percent (95%) of such Guarantor's Net Worth is greater
than either of the amounts described in clauses (a) and (c)
above, the Maximum Amount shall be deemed to have increased
through and as of such Determination Date to ninety-five
percent (95%) of such Guarantor's Net Worth as determined on
such Determination Date (and the Guaranteed Debt as to such
Guarantor shall have correspondingly increased), without
further action by or agreement between the Purchasers and
such Guarantor, and any subsequent reduction or diminution
of such Guarantor's Net Worth after such Determination Date
will not reduce the Guaranteed Debt as to such Guarantor.
Notwithstanding anything to the contrary contained in this
definition of "Maximum Amount" or in any other provision of
this Guaranty, the "Maximum Amount" shall never be less than
the amount referred to in clause (a) above.
"Note Documents" means the Note Agreements and the
Notes.
"Obligor" means any person or entity now or hereafter
primarily or secondarily obligated to pay all or any part of
the Debt, including the Company and each Guarantor.
Unless redefined in this Guaranty, capitalized terms used in this
Guaranty have the respective meanings ascribed to them in the
Note Agreements.
ARTICLE 2.
Section 2.1 Execution of Note Documents. Company has
executed and delivered the Note Documents to the Purchasers.
Section 2.2 Consideration. In consideration of the credit
and financial accommodations extended to Company by the
Purchasers pursuant to the Note Documents or otherwise, which
each Guarantor has determined will substantially benefit it
directly or indirectly, and for other good and valuable
consideration, the receipt and sufficiency of which each
Guarantor hereby acknowledges, each Guarantor executes and
delivers this Guaranty to the Purchasers with the intention of
being presently and legally bound by its terms.
ARTICLE 3.
Section 3.1 Payment Guaranty. Guarantors, as primary
obligors and not as sureties, unconditionally, jointly and
severally, guarantee to the Purchasers, for their pro-rata
benefit in accordance with their respective rights under the Note
Documents, the full, prompt and punctual payment of the Debt when
due (whether at its stated maturity, by acceleration or
otherwise) in accordance with the Note Documents, to the extent
set forth herein. This Guaranty is irrevocable, unconditional
and absolute, and if for any reason all or any portion of the
Debt shall not be paid when due, Guarantors, jointly and
severally, will immediately pay the Debt to the Purchasers or
other Person entitled to it, in Dollars, regardless of (a) any
defense, right of set-off or counterclaim which any Obligor may
have or assert, (b) whether any Purchaser or any other Person
shall have taken any steps to enforce any rights against any
Obligor or any other Person to collect any of the Debt, and (c)
any other circumstance, condition or contingency.
Notwithstanding any provision of this Guaranty or the Note
Documents to the contrary, to the extent that in a legal
proceeding brought within the applicable limitations period it is
determined by the final, nonappealable order of a court having
jurisdiction over the issue and the applicable parties that any
Guarantor received less than a reasonably equivalent value in
exchange for such Guarantor's incurrence of its obligations under
this Guaranty, then and only then the total liability of such
Guarantor under this Guaranty shall be limited to the Guaranteed
Debt applicable to such Guarantor. The Purchasers shall have the
right to determine and designate from time to time, without
notice or assent of Guarantor, which portions of the Debt shall
be deemed included in the Guaranteed Debt. Each Guarantor
acknowledges that such determination and designation shall be
conclusive, absent manifest error. This Guaranty shall not fail
or be ineffective or invalid or be considered too indefinite or
contingent with respect to any Guarantor because the Guaranteed
Debt applicable to such Guarantor may fluctuate from time to time
or for any other reason.
Section 3.2 Application of Payments or Prepayments. The
parties hereto agree that any payment or prepayment by the
Company or any other Person against the Debt (other than payments
made by a Guarantor in accordance with the procedures described
in the definition of "Guaranteed Debt" herein and then only with
respect to such Guarantor's liability hereunder) shall be deemed
paid first against the portion of the Debt not included in
"Guaranteed Debt" or determined for any reason not to be a part
of "Guaranteed Debt," and then shall be paid against any portion
of the Debt that is Guaranteed Debt, in such order and manner as
the Purchasers shall determine in their sole discretion.
Section 3.3 Obligations Not Affected. The Guarantors'
covenants, agreements and obligations under this Guaranty shall
in no way be released, diminished, reduced, impaired or otherwise
affected by reason of the happening from time to time of any of
the following things, for any reason, whether by voluntary act,
operation of law or order of any competent governmental authority
and whether or not the Guarantors are given any notice or are
asked for or give any further consent (all requirements for
which, however arising, each Guarantor hereby WAIVES to the
fullest extent permitted by applicable law):
3.3.1 release or waiver of any obligation or duty
to perform or observe any express or implied agreement,
covenant, term or condition imposed in any of the Note
Documents or by applicable law on any Obligor or any party
to the Note Documents;
3.3.2 extension of time for payment of any part of
the Debt or any other sums payable under the Note Documents,
extension of the time for performance of any other
obligation under or arising out of or in connection with the
Note Documents or change in the manner, place or other terms
of such payment or performance;
3.3.3 settlement or compromise of any or all of the
Debt;
3.3.4 renewal, supplementing, modification,
rearrangement, amendment, restatement, replacement,
cancellation, rescission, revocation or reinstatement
(whether or not material) of any part of any of the Note
Documents or any obligations under the Note Documents of any
Obligor or any other party to the Note Documents (without
limitation on the number of times any of the foregoing may
occur);
3.3.5 acceleration of the time for payment or
performance of any Debt or other obligation under any of the
Note Documents or exercise of any other right, privilege or
remedy under or in regard to any of the Note Documents;
3.3.6 failure, omission, delay, neglect, refusal or
lack of diligence by any Purchaser or any other Person to
assert, enforce, give notice of intent to exercise--or any
other notice with respect to--or exercise any right,
privilege, power or remedy conferred on any Purchaser
or any other Person in any of the Note Documents or by law or
action on the part of any Purchaser or any other Person granting
indulgence, grace, adjustment, forbearance or extension of any
kind to any Obligor or any other Person;
3.3.7 release, surrender, exchange, subordination
or loss of any security or lien priority under any of the
Note Documents or in connection with the Debt;
3.3.8 release, modification or waiver of, or
failure, omission, delay, neglect, refusal or lack of
diligence to enforce, any guaranty, pledge, mortgage, deed
of trust, security agreement, lien, charge, insurance
agreement, bond, letter of credit or other security device,
guaranty, surety or indemnity agreement whatsoever;
3.3.9 taking or acceptance of any other security or
guaranty for the payment or performance of any or all of the
Debt or the obligations of any Obligor;
3.3.10 release, modification or waiver of, or
failure, omission, delay, neglect, refusal or lack of
diligence to enforce, any right, benefit, privilege or
interest under any contract or agreement, under which the
rights of any Obligor have been collaterally or absolutely
assigned, or in which a security interest has been granted,
to any Purchaser as direct or indirect security for payment
of the Debt or performance of any other obligations to--or
at any time held by--any Purchaser;
3.3.11 voluntary or involuntary liquidation,
dissolution, sale of any collateral, marshaling of assets
and liabilities, change in corporate or organization status,
receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement,
composition or readjustment of debt or other similar
proceedings of or affecting any Obligor or any of the assets
of any Obligor, even if any of the Debt is thereby rendered
void, unenforceable or uncollectible against any other
Person;
3.3.12 occurrence or discovery of any irregularity,
invalidity or unenforceability of any of the Debt or Note
Documents or any defect or deficiency in any of the Debt or
Note Documents, including the unenforceability of any
provisions of any of the Note Documents because entering
into any such Note Document was ultra vires or because
anyone who executed them exceeded their authority;
3.3.13 failure to acquire, protect or perfect any
lien or security interest in any collateral intended to
secure any part of the Debt or any other obligations under
the Note Documents or failure to maintain perfection;
3.3.14 failure by any Purchaser or any other Person
to notify--or timely notify--any Guarantor of any default,
event of default or similar event (however denominated)
under any of the Note Documents, any renewal, extension,
supplementing, modification, rearrangement, amendment,
restatement, replacement, cancellation, rescission,
revocation or reinstatement (whether or not material) or
assignment of any part of the Debt, release or exchange of
any security, any other action taken or not taken by any
Purchaser against any Obligor or any other Person or any
direct or indirect security for any part of the Debt or
other obligation of Company, any new agreement between any
Purchaser and any Obligor or any other Person or any other
event or circumstance. Except as required by applicable
law, no Purchaser has any duty or obligation to give any
Guarantor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Debt or
the Note Documents;
3.3.15 occurrence of any event or circumstances
which might otherwise constitute a defense available to, or
a discharge of, any Obligor, including failure of
consideration, fraud by or affecting any Person, usury,
forgery, breach of warranty, failure to satisfy any
requirement of the statute of frauds, running of any statute
of limitation, accord and satisfaction and any defense based
on election of remedies of any type; and
3.3.16 receipt and/or application of any proceeds,
credits or recoveries from any source, including any
proceeds, credits, or amounts realized from exercise of any
rights, remedies, powers or privileges of any Purchaser
under the Note Documents, by law or otherwise available to
any Purchaser except only as and to the extent the same
reduces the Guaranteed Debt pursuant to and in accordance
with other express provisions of this Guaranty.
Section 3.4 Waiver of Certain Rights and Notices. To the
fullest extent permitted by applicable law, each Guarantor hereby
WAIVES and RELEASES all right to require marshaling of assets and
liabilities, sale in inverse other of alienation, notice of
acceptance of this Guaranty and of any liability to which it
applies or may apply, notice of the creation, accrual, renewal,
increase, extension, modification, amendment or rearrangement of
any part of the Debt, presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of intent to
accelerate, notice of acceleration and all other notices and
demands, collection, suit and the taking of any other action by
any Purchaser.
Section 3.5 Not a Collection Guaranty. This is an absolute
guaranty of payment, and an absolute guaranty of performance of
all of the obligations of the Obligors under the Note Documents,
and not of collection, and to the fullest extent not prohibited
by applicable law, each Guarantor WAIVES any right to require
that any action be brought against any Obligor or any other
Person, or that any Purchaser be required to enforce, attempt to
enforce or exhaust any rights, benefits or privileges of any
Purchaser under any of the Note Documents, by law or otherwise;
provided that nothing herein shall be construed to prevent any
Purchaser from exercising and enforcing at any time any right,
benefit or privilege which any Purchaser may have under any Note
Document or by law from time to time, and at any time, and
Guarantors agree that Guarantors' obligations hereunder are--and
shall be--absolute, independent, unconditional, joint and several
under any and all circumstances. Should any Purchaser seek to
enforce Guarantors' obligations by action in any court, to the
fullest extent not prohibited by applicable law, each Guarantor
WAIVES any requirement, substantive or procedures, that (a) any
Purchaser pursue any foreclosure action, realize or attempt to
realize on any security or preserve or enforce any deficiency
claim against any Obligor or any other Person after any such
realization, (b) a judgment first be sought or rendered against
any Obligor or any other Person, (c) any Obligor or any other
Person be joined in such action or (d) a separate action be
brought against any Obligor or any other Person. Guarantors'
obligations under this Guaranty are several from those of any
other Obligor or any other Person. Guarantors' obligations under
this Guaranty are several from those of any other Obligor or any
other Person, and are primary obligations concerning which
Guarantors are the principal obligors. All waivers in this
Guaranty or any of the Note Documents shall be without prejudice
to any Purchaser at its option to proceed against any Obligor or
any other Person, whether by separate action or by joinder.
Guarantors agree that this Guaranty shall not be discharged
except by payment of the Debt in full, complete performance of
all obligations of the Obligors under the Note Documents and
termination of each Purchaser's obligation--if any--to make any
further advances under the Note Documents or extend other
financial accommodations to any Obligor.
Section 3.6 Subrogation. Each Guarantor agrees that to the
extent not prohibited by applicable law, it shall not be entitled
to be subrogated to any Purchaser's rights against any Obligor or
any other Person or offset rights held by any Purchaser for
payment of the Debt until final termination of this Guaranty.
Section 3.7 Reliance on Guaranty. All extensions of credit
and financial accommodations heretofore or hereafter made by any
Purchaser under or in respect of the Note Documents shall be
conclusively presumed to have been made in acceptance of this
Guaranty.
Section 3.8 Demands are Conclusive. Any demand by any
Purchaser under this Guaranty shall be conclusive, absent
manifest error, as to the matters therein stated, including the
amount due.
Section 3.9 Joint and Several. If any Person makes any
guaranty of any of the obligations guaranteed hereby or gives any
security for them, Guarantors' obligations hereunder shall be
joint and several with the obligations of such other Person
pursuant to such agreement or other papers making the guaranty or
giving the security.
Section 3.10 Payments Returned. Guarantors agree that, if
at any time all or any part of any payment previously applied by
any Purchaser to the Debt is or must be returned by any Purchaser-
- -or recovered from any Purchaser--for any legally binding reason
(including the order of any bankruptcy court), to the extent not
prohibited by applicable law, this Guaranty shall automatically
be reinstated to the same effect as if the prior application had
not been made, and, in addition, each Guarantor hereby agrees, to
the extent not prohibited by applicable law, to indemnify each
Purchaser against, and to save and hold each Purchaser harmless
from any required return by any Purchaser--or recovery from any
Purchaser--of any such payment because of its being deemed
preferential under application bankruptcy, receivership or
insolvency laws, or for any other reason.
ARTICLE 4.
Each Guarantor warrants and represents as follows:
Section 4.1 Relationship to Company. Each Guarantor has
determined that it has substantially benefited, or may reasonably
expect to substantially benefit, directly or indirectly, from the
extension of credit to or for the benefit of the Company or any
other Guarantor pursuant to the Note Documents and, accordingly,
each Guarantor has benefited or will benefit from the incurrence
of its liability and obligations hereunder. The Company and each
Guarantor are separate legal entities but are under common
ownership control, conduct related businesses, enter into
business and financial transactions with one another
periodically, and, in general, have a commonality of interests.
The maintenance and improvement of Company's financial condition
is vital to sustaining its business and the transactions
contemplated in the Note Documents produce distinct and
identifiable financial and economic direct or indirect benefits
to it. Such identifiable benefits include: (i) the availability
to it of the proceeds of credit on an as needed basis by way of
intercompany loans and/or capital contributions for general
corporate or other purpose and (ii) the general improvement of
its financial and economic condition. It has had full and
complete access to the Note Documents and all other papers
executed by any Obligor or any other Person in connection with
the Debt, has reviewed them and is fully aware of the meaning and
effect of their contents. It is fully informed of all
circumstances which bear upon the risks of executing this
Guarantee and which a diligent inquire would reveal. It has
adequate means to obtain from Company on a continuing basis
information concerning Company's financial condition, and not
depending any Purchaser to provide such information, now or in
the future. It agrees that no Purchaser has any obligation to
provide such information, now or in the future. It agrees that
no Purchaser shall have an obligation to advise or notify it or
to provide it with any such data or information. The execution
and delivery of this Guaranty is not a condition precedent (and
no Purchaser has in any way implied that the execution of this
Guaranty is a condition precedent) to any Purchaser's making,
extending or modifying any loan or any other financial
accommodation to or for it. The Company and the Guarantors are
and intend to remain separate legal entities and nothing in this
Section 4.1 is intended or shall act to invalidate or impair the
separate corporate or other organizational existence or status of
the Company or any Guarantor.
Section 4.2 Proceedings. No bankruptcy or insolvency
proceedings are pending or contemplated by or against it.
ARTICLE 5.
Section 5.1 Covenants for the Benefit of the Purchasers.
Guarantors, jointly and severally, covenant and agree that, until
termination of the Note Agreement in accordance with its terms,
each Guarantor will promptly, after learning of any Default or
Event of Default, notify the Purchasers of it in writing,
specifying its nature, the period of its existence and what
action Guarantors are taking or propose to take with respect
thereto.
ARTICLE 6.
Section 6.1 Term. Subject to the automatic reinstatement
provisions of Article 3 above, this Guaranty shall terminate and
be of no further force or effect upon the termination of the Note
Documents and the indefeasible payment of the Debt in full in
cash.
ARTICLE 7.
Section 7.1 Default. If any Event of Default occurs under
the Note Agreements, then that shall automatically constitute
default under this Guaranty.
ARTICLE 8.
Section 8.1 Binding on Successors: No Assignment by
Guarantors. All guaranties, warranties, representations,
covenants and agreements in this Guaranty shall bind the
trustees, receivers, successors and assigns of each Guarantor and
shall ratably benefit the Purchasers, their respective successors
and assigns, and any other holder of any part of the Debt. No
Guarantor shall assign or delegate any of its obligations under
this Guaranty or any of the Note Documents without the express
prior written consent of the Purchasers.
Section 8.2 Subordination of Company's Obligations to
Guarantors. Each Guarantor agrees that if, for any reason
whatsoever, Company now or hereafter owes any Indebtedness,
directly or indirectly, to any Guarantor, or any Guarantor now or
hereafter owes any Indebtedness, directly or indirectly, to any
other Guarantor, all such Indebtedness, together with all
interest thereon and fees and other charges in connection
therewith, and all Liens securing any such Indebtedness shall at
all times be second, subordinate and inferior in right of
payment, in lien priority and in all other respects to the Debt
and fulfillment of any such indebted Guarantor's obligations
hereunder or under any of the Note Documents and all Liens from
time to time securing the Debt. The provisions of this Section
are in addition to, and cumulative of, any other provisions
contained in any Note Document or other document, instrument or
writing.
Section 8.3 Waiver of Suretyship Rights. By signing this
Guaranty or executing a Joinder Agreement, each Guarantor, to the
fullest extent not prohibited by applicable law, WAIVES each and
every right to which it may be entitled by virtue of any
suretyship law.
Section 8.4 Indemnification. To the fullest extent not
prohibited by applicable law, Guarantors, jointly and severally,
agree to indemnify, defend and hold the Purchasers and their
respective shareholders, directors, officers, agents, attorneys,
advisors and employees (collectively, the "Indemnified Parties")
harmless from and against any and all loss, liability,
obligation, damage, penalty, judgment, claim, deficiency,
expenses, action, suit, cost and disbursement of any kind or
nature whatsoever (including interest, penalties, attorneys' fees
and amounts paid in settlement) (the "Losses"), regardless of
whether caused in whole or in part by the negligence of any of
the Indemnified Parties, imposed on, incurred by or asserted
against the Indemnified Parties growing out of or resulting from
any Note Document or any transaction or event contemplated
therein, except to the extent determined by a final decision of a
court or competent jurisdiction that such Loss was due to the
gross negligence or willful misconduct of such Indemnified Party.
Any amount to be paid under this Section by Guarantors to any
Purchaser shall be a joint and several demand obligation owing by
Guarantors and shall bear interest from the date of expenditure
until paid at a per annum rate equal to 6.35%.
Section 8.5 Amendments in Writing. This Guaranty shall not
be changed orally but shall be changed only by agreement in
writing signed by each Guarantor and each Purchaser. Any waiver
or consent with respect to this Guaranty shall be effective only
in the specific instance and for the specific purpose for which
given. No course of dealing between the parties, no usage of
trade and no parole or extrinsic evidence of any nature shall be
used to supplement or modify any of the terms or provisions of
this Guaranty.
Section 8.6 Notices. Any notices or other communications
required or permitted to be given hereunder shall be given, made
and received in the manner provided in the Note Documents;
provided that with respect to the Guarantors, any such notices or
other communications shall be sent to them at the "Address for
Notices" specified below their respective names on the signature
pages hereof or on the signature pages of any Joinder Agreement
or at such other address as shall be designated by such recipient
in a notice to the other parties hereto given in accordances with
the Note Documents.
Section 8.7 Gender; "Including" is Not Limiting: Section
Headings. The masculine and neuter genders used in this Guaranty
each includes the masculine, feminine and neuter genders, and
the singular number includes the plural where appropriate, and
vice versa. Wherever the term "including" or a similar term is
used in this Guaranty, it shall be read as if it were written
"including by way of example only and without in any way limiting
the generality of the clause or concept referred to." The
headings used in this Guaranty are included for reference only
and shall not be considered in interpreting, applying or
enforcing this Guaranty.
Section 8.8 Offset Rights.
8.8.1 Guarantors agree that, in addition to (and
without limitation of) any right of set-off, bankers' lien
or counterclaim a Purchaser may otherwise have, to the
fullest extent not prohibited by applicable law, each
Purchaser shall be entitled, at its option, upon the
occurrence and during the continuance of an Event of Default
to offset balances held by it for the account of any
Guarantor at any of its offices, in Dollars or in any other
currency, against any obligations of Guarantors hereunder or
under any Note Document, which is not paid when due, in
which case it shall promptly notify the affected Guarantor
and the other Purchaser thereof, provided that such
Purchaser's failure to give such notice shall not affect the
validity thereof.
8.8.2 If a Purchaser shall obtain payment of any
obligation then due hereunder or under any Note Document to
such Purchaser, through the exercise of any right of set-
off, banker's lien, counterclaim or similar right, or
otherwise, it shall promptly purchase from the other
Purchasers participation in the obligations held by the
other Purchasers in such amounts, and make such other
adjustments from time to time as shall be equitable to the
end that all the Purchasers shall share the benefit of such
payment (net of any expenses which may be incurred by such
Purchaser in obtaining or preserving such benefit) pro rata
in accordance with the unpaid principal and interest on the
obligations then due to each of them. To such end all the
Purchasers shall make appropriate adjustments among
themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be
restored.
8.8.3 Guarantors agree, that any Purchaser so
purchasing a participation in the obligations held by other
Purchasers may to the fullest extent it may effectively do
so under applicable law, exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect
to such participation as fully as if such Purchaser were a
direct holder of obligations in the amount of such
participation. Nothing contained herein shall require any
Purchaser to exercise any such right or shall affect the
right of any Purchaser to exercise, and retain the benefits
of exercising, any such right with respect to any other
indebtedness of Guarantors.
SECTION 8.9 CHOICE OF LAW. THIS GUARANTY SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE
STATE OF KANSAS AND THE UNITED STATES OF AMERICA FROM TIME TO
TIME IN EFFECT.
Section 8.10 Survival. The representations, covenants and
agreements set forth in this Guaranty shall continue and survive
until final termination of this Guaranty.
Section 8.11 Rights Cumulative: Delay Not Waiver. Any
Purchaser's exercise of any right, benefit or privilege under any
of the Note Documents or any other papers or at law or in equity
shall not preclude the concurrent or subsequent exercise of any
other present or future rights, benefits or privileges or any
Purchaser. The remedies provided in this Guaranty are cumulative
and not exclusive of any remedies provided by law, the Note
Documents or any other papers or in equity. No failure by any
Purchaser to exercise, and no delay in exercising, any right
under any Note Document or any other papers shall operate as a
waiver thereof.
Section 8.12 Severability. If any provision of this
Guaranty is held to be illegal, invalid or unenforceable under
present or future laws, the legality, validity and enforceability
of the remaining provisions of this Guaranty shall not be
affected thereby, and this Guaranty shall be liberally construed
so as to carry out the intent of the parties to it. Each waiver
in this Guaranty is subject to the overriding and controlling
rule that it shall be effective only if and to the extent that
(a) it is not prohibited by applicable law and (b) applicable law
neither provides for nor allows any material sanctions to be
imposed against any Purchaser for having bargained for and
obtained it.
Section 8.13 Entire Agreement. This Guaranty embodies the
entire agreement and understanding between Guarantors and the
Purchasers with respect to its subject matter and supersedes all
prior conflicting or inconsistent agreements, consents and
understandings relating to such subject matter. Guarantors
acknowledge and agree that there is no oral agreement between any
Guarantor and any Purchaser which has not been incorporated in
this Guaranty.
Section 8.14 Usury Not Intended: Savings Provisions.
Notwithstanding any provision to the contrary contained in any
Note Document, it is expressly provided that in no case or event
shall the aggregate of any amounts accrued or paid pursuant to
this Guaranty which under applicable laws are or may be deemed to
constitute interest ever exceed the maximum nonusurious interest
rate permitted by applicable Kansas or federal laws, which ever
permit the higher rate. In this connection, each Guarantor and
each Purchaser stipulate and agree that it is their common and
overriding intent to contract in strict compliance with
applicable usury laws. In furtherance thereof, none of the terms
of this Guaranty shall ever be construed to create a contract to
pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the maximum rate permitted
by applicable laws. Guarantors shall never be liable for
interest in excess of the maximum rate permitted by applicable
laws. If, for any reason whatever, such interest paid or
received during the full term of the applicable indebtedness
produces a rate which exceeds the maximum rate permitted by
applicable laws, the Purchasers shall credit against the
principal of such indebtedness (or, if such indebtedness shall
have been paid in full, shall refund to the payor of such
interest) such portion of said interest as shall be necessary to
cause the interest paid to produce a rate equal to the maximum
rate permitted by applicable laws. All sums paid or agreed to be
paid to the Purchasers for the use, forbearance or detention of
money shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread in equal parts
throughout the full term of the applicable indebtedness, so that
the interest rate is uniform throughout the full term of such
indebtedness. The provisions of this Section shall control all
agreements, whether now or hereafter existing and whether written
or oral, between any Guarantor and any Purchaser.
ARTICLE 9.
Section 9.1 It is contemplated by each Guarantor that
additional Subsidiaries of NPCI may from time to time become a
Guarantor hereunder (as required by the terms of the Note
Agreements) by their execution and delivery to the Purchasers of
a Joinder Agreement. Each Guarantor agrees, consents and
acknowledges that upon the execution and delivery to the
Purchasers by any such Subsidiary of a Joinder Agreement, such
Subsidiary shall become a Guarantor hereunder for all purposes,
jointly and severally liable hereunder as if such Subsidiary had
originally been a party hereto, without notice to any Guarantor
or any other Party.
THIS GUARANTY is executed as of the date first above
written.
Address for Notices: NPC INTERNATIONAL, INC.
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Address for Notices: ROMACORP, INC.
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Address for Notices: NPC RESTAURANTS LP
720 West 20th Street By: NPC
International, Inc., general
partner
Pittsburg, KS 66762
By:
___________________________
Name:
Title:
Address for Notices: ROMA HOLDINGS, INC.
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Address for Notices: ROMA DINING LP
720 West 20th Street By: Romacorp,
Inc., general partner
Pittsburg, KS 66762
By:
___________________________
Name:
Title:
Address for Notices: ROMA FRANCHISE
CORPORATION
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Address for Notices: ROMA SYSTEMS, INC.
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Address for Notices: SEATTLE RESTAURANT
EQUIPMENT COMPANY
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Address for Notices: ROMA FT. WORTH, INC.
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Address for Notices: ROMA BAR MANAGEMENT
CORPORATION
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Address for Notices: ROMA HUNTINGTON BEACH,
INC.
720 West 20th Street
Pittsburg, KS 66762 By:_______________________
Name:
Title:
Exhibit A to Master Guaranty
JOINDER AGREEMENT
This JOINDER AGREEMENT (this "Joinder Agreement") is dated
effective as of _____________, 19___, and is executed and
delivered by ______________________________ (the "Joining
Guarantor"), a ____________________, to each of the Purchasers
under the Note Agreement referred to below.
Recitals
(a) NPC Management, Inc., a Delaware corporation (the
"Company"), is indebted to the Purchasers identified in three
separate Note Agreements, each dated as of March 30, 1993, as
amended, between NPC International, Inc. ("NPCI"), a Delaware
corporation formerly known as National Pizza Company, and each
such Purchaser, as amended (each a "Note Agreement" and,
collectively, the "Note Agreements"). The Company has assumed
the payment and performance of NPCI's obligations under the Note
Agreements. The Note Agreements relate to the 6.35% Senior Notes
due April 1, 2000 issued to the Purchasers in the aggregate
stated principal amount of $20,000,000 (collectively, and as
amended from time to time, the "Notes").
(b) Pursuant to the terms of the Note Agreements, NPCI and
certain Subsidiaries of NPCI executed and delivered to the
Purchasers a Master Guaranty dated as of May ___, 1997, pursuant
to which, among other things, each of such Subsidiaries, jointly
and severally, unconditionally guaranteed the payment of all of
the Debt (subject to certain limitations, as provided therein).
The Master Guaranty, as amended, modified, supplemented, joined
in and restated from time to time, is herein called the
"Guaranty." All Persons from time to time a party to the
Guaranty (whether originally or by joinder) are herein
collectively called the "Guarantors," and are each a "Guarantor,"
herein.
(c) Pursuant to the terms of the Note Agreements, the
Joining Guarantor is now required, among other things and subject
to certain terms and conditions, to join in the execution and
delivery to the Purchasers of the Guaranty by its execution and
delivery of this Joinder Agreement and otherwise by such action
as the Purchasers may reasonably require.
(d) In order to comply with such requirement, the Joining
Guarantor executes and delivers this Joinder Agreement.
NOW, THEREFORE, in consideration of the credit and
financial accommodations extended to Company pursuant to the
Notes or otherwise, which Joining Guarantor hereby agrees has
benefitted and shall continue to benefit Joining Guarantor and
its equity holders as described in the Guaranty, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Joining Guarantor hereby agrees,
assumes, ratifies, joins and acknowledges as follows:
1. Assumption. Joining Guarantor hereby unconditionally,
jointly and severally, assumes liability for all Guarantees,
covenants, warranties, representations, indemnifications,
obligations and other Indebtedness of Guarantors now existing or
which may hereafter arise under the Guaranty and shall be liable
therefor as through Joining Guarantor had originally been a party
to the Guaranty. Without limitation of the foregoing, Joining
Guarantor, as a primary obligor and not as a surety,
unconditionally, jointly and severally, guarantees unto the
Purchasers the payment of the Debt when due (whether at the
stated maturity, by acceleration or otherwise) in accordance with
the terms of the Note Documents. Notwithstanding the foregoing
and the other provisions of this Joinder Agreement, to the extent
that in a legal proceeding brought within the applicable
limitations period it is determined by the final, non-appealable
order of a court having jurisdiction over the issue and the
applicable parties that Joining Guarantor received less than a
reasonably equivalent value in exchange for such Joining
Guarantor's incurrence of its obligations under the Guaranty,
then and only then the liability of Joining Guarantor under the
Guaranty shall be limited to the Guaranteed Debt applicable to
such Joining Guarantor. The Purchasers shall have the right to
determine and designate from time to time, without notice or
assent of Joining Guarantor, which portions of the Debt shall be
deemed included in the Guaranteed Debt. Joining Guarantor
acknowledges that such determination and designation shall be
conclusive, absent manifest error. The Guaranty shall not fail
or be ineffective or invalid or be considered too indefinite or
contingent with respect to Joining Guarantor because the
Guaranteed Debt applicable to Joining Guarantor may fluctuate
from time to time or for any other reason. Any payment or
prepayment by Company or any other Person against the Debt (other
than payments made by a Guarantor in accordance with the
procedures described in the definition of "Guaranteed Debt" in
the Guaranty and then only with respect to such Guarantor's
liability thereunder) shall be deemed paid first against that
portion of the Debt not included in the "Guaranteed Debt" or
determined for any reason not to be a part of "Guaranteed Debt,"
and then shall be paid against any portion of the Debt that is
Guaranteed Debt, in such order and manner as the Purchasers shall
determine in their sole discretion.
2. Terms Ratified. Joining Guarantor hereby expressly
ratifies all guaranties, terms, covenants, representations,
warranties, agreements, provisions, indemnifications, WAIVERS,
RELEASES, restrictions, duties and responsibilities of Guarantors
under the Guaranty and agrees that they shall apply to Joining
Guarantor as if Joining Guarantor had executed the Guaranty and
that any reference to "Guarantors" or a "Guarantor" contained in
the Guaranty or the Note Documents shall mean, without
limitation, the Joining Guarantor.
3. Representations. Joining Guarantor (a) confirms that
it has received a copy of the Note Documents, together with such
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this
Joinder Agreement; (b) agrees that it will, independently and
without reliance upon any Purchaser and based on such documents
and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under the Note Documents, and (c) represents that the
value of the consideration received and to be received by Joining
Guarantor is reasonably worth at least as much as the liability
and obligation of such Joining Guarantor hereunder, and that such
liability and obligation may reasonably be expected to benefit
Joining Guarantor directly or indirectly. The board of directors
or similar governing body of Joining Guarantor has duly adopted
resolutions certifying that the execution, delivery and
performance of this Joinder Agreement (and the effect thereof)
will benefit Joining Guarantor and its equity holders.
4. No Impairment. Nothing herein shall in any manner
impair or extinguish the Guaranty or any of the Note Documents or
any lien or security interest now or hereafter securing the
payment of any of the indebtedness arising pursuant to the Note
Documents.
5. Conditions. This Joinder Agreement shall not become
effective until the Joining Guarantor shall have delivered to the
Purchasers each of the following:
(a) a certificate of the Secretary or any Assistant
Secretary of Joining Guarantor (or other officer or director
of Joining Guarantor which is authorized in Joining
Guarantors organizational documents to keep the minute book
or similar record of Joining Guarantor), in form and
substance satisfactory to the Purchasers, dated as of the
date hereof, as to (i) the resolutions of the board of
directors (or similar governing body) of the Joining
Guarantor authorizing the execution, delivery and
performance of this Joinder Agreement and of all instruments
contemplated herein to be executed and delivered by Joining
Guarantor in connection herewith (a copy of such resolutions
to be incorporated into such certificate), such certificate
to state that said copy is a true and correct copy of such
resolutions and that such resolutions were duly adopted and
have not been amended, superseded, revoked or modified in
any respect and remain in full force and effect as of the
date of such certificate; (ii) the election, incumbency and
signatures of the officer or officers (of other official) of
Joining Guarantor executing and delivering this Joinder
Agreement and each other instrument or document furnished in
connection herewith; (iii) Joining Guarantor's
organizational documents in effect as of the date hereof (a
copy thereof to be attached to the certificate), and (iv)
such other documents and information as the Purchasers shall
reasonably request; and
(b) a legal opinion from the legal counsel for Joining
Guarantor in form and substance satisfactory to the
Purchasers.
6. Governing Law. Unless otherwise specified therein,
this Joinder Agreement shall be governed by and construed in
accordance with the laws of the State of Kansas and the United
States of America.
7. Survival: Parties Bound. All representations,
warranties, covenants and agreements made by or on behalf of the
Joining Guarantor in connection herewith shall survive the
execution and delivery of this Joinder Agreement and the Note
Documents, shall not be affected by any investigation made by any
Person, and shall bind the Joining Guarantor and its successors,
trustees, receivers and assigns and inure to the benefit of the
successors and assigns of each Purchaser. The term of this
Joinder Agreement shall be until the termination of the Guaranty
as to all parties thereto.
8. Captions. The headings and captions appearing in this Joinder
Agreement have been included solely for convenience and shall not be considered
in construing this Joinder Agreement.
9. Definitions. Terms used herein and not defined herein, but which are
defined in the Note Agreements or the Guaranty, shall have the meanings herein
assigned to them in the Note Agreements or the Guaranty, respectively.
10. Parties Bound. This Joinder Agreement shall bind and benefit the
parties hereto an their respective successors and assigns, except that Joining
Guarantor and Company may not assign their rights or obligations hereunder
without the prior written consent of the Purchasers.
11. Amendments, Etc. No amendment or waiver of any provision of this
Joinder Agreement or any Note Document, nor any consent to any departure by the
Joining Guarantor therefrom, shall in any event be effective unless the same
shall be agreed or consented to by the Purchasers and Joining Guarantor, and
each such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given, unless otherwise specifically provided
in the Note Agreements.
IN WITNESS WHEREOF, the Joining Guarantor has executed this Agreement as of
the date set forth above.
____________________________________
By:_________________________________
Name:
Title:
NPC Management, Inc.
$50,000,000
7.94% Senior Guaranteed Notes Due May 1, 2006
________________________________
Note Agreement
_______________________________
Dated as of May 1, 1997
Table of Contents
(Not Part of Agreement)
Section Heading Page
Section 1. Authorization of Issue of Notes 1
Section 2. Purchase and Sale of Notes 2
Section 3. Conditions of Closing 2
Section 4. Prepayments 4
Section 5. Affirmative Covenants 6
Section 6. Negative Covenants 10
Section 7. Events of Default. 14
Section 8. Representations, Covenants and Warranties 18
Section 9. Representations of the Purchaser 24
Section 10. Definitions and Accounting Terms 24
Section 11. Miscellaneous 31
Attachments to Note Agreement:
Schedule I _ Names and Addresses of Purchasers and Amounts
of Commitments
Exhibit A _ Form of Note
Exhibit B-1 _ Form of Opinion of Company's Counsel
Exhibit B-2 _ Form of Notice of Election
Exhibit C _ Form of Opinion of Special Counsel
Exhibit D _ List of Agreements Restricting Debt
Exhibit E _ Subsidiaries of NPC International, Inc.
Exhibit F _ Description of Debt
Exhibit G _ Liens Existing as of the Date of Closing
Exhibit H _ Form of Master Guaranty
NPC Management, Inc.
720 West 20th Street
Pittsburg, Kansas 66762
Dated as of May 1, 1997
To the Purchaser named in Schedule I
which is a Signatory to this Agreement
Re:$50,000,000 7.94% Senior Guaranteed Notes Due May 1, 2006
__________________________________________
Gentlemen:
The undersigned, NPC Management, Inc., a Delaware
corporation (the "Company"), and NPC International Inc., a Kansas
corporation ("NPCI"), hereby, severally, agree with you as
follows:
.c.Section 1.Authorization of Issue of Notes; Other Agreement;.
Section 1. A. Authorization of Issue of Notes. The Company
will authorize the issue of its senior promissory notes (the
"Notes") in the aggregate principal amount of $50,000,000, to be
dated the date of issue thereof, to mature May 1, 2006, to bear
interest on the unpaid balance thereof from the date thereof
until the principal thereof shall have become due and payable at
the rate of 7.94% per annum, payable semiannually on the first
day of each November and May in each year (commencing November 1,
1997) and to bear interest on overdue principal (including any
overdue required or optional prepayment of principal) and
premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest at the rate of (i) 9.94% per
annum or (ii) the rate announced by Texas Commerce Bank National
Association as its "prime rate," whichever is greater, after the
due date, whether by acceleration or otherwise, until paid, and
to be substantially in the form of Exhibit A attached hereto.
The Notes (as defined below) are unconditionally guaranteed
pursuant to the Master Guaranty dated May 1, 1997. Interest on
the Notes shall be computed on the basis of a 360-day year of
twelve 30-day months. The Notes are not subject to prepayment or
redemption at the option of the Company prior to their expressed
maturity dates except on the terms and conditions and in the
amounts and with the premium, if any, set forth in 4 of this
Agreement. The term "Notes" as used herein shall include each
Note delivered pursuant to any provision of this Agreement and
the separate agreement with the other purchaser named in Schedule
I and each Note delivered in substitution or exchange for any
such Note pursuant to any such provision. Capitalized terms used
herein have the meanings specified in 10. You and the other
purchasers named in Schedule I are hereinafter referred to as the
"Purchasers."
B. Other Agreements. Simultaneously with the execution
and delivery of this Agreement, the Company is entering into
similar agreements with the other Purchasers under which such
other Purchasers agree, severally, to purchase from the Company
the principal amount of Notes set opposite each such Purchaser's
name in Schedule I, and your obligation and the obligations of
the Company hereunder are subject to the execution and delivery
of similar agreements by the other Purchasers. This Agreement
and said similar agreements with the other Purchasers are herein
collectively referred to as the "Agreements." The obligations of
each Purchaser shall be several and not joint and no Purchaser
shall be liable or responsible for the acts of any other
Purchaser.
.c.Section 2.Purchase and Sale of Notes;.
Section 2. Purchase and Sale of Notes. The Company hereby
agrees to sell to you and, subject to the terms and conditions
herein set forth, you agree to purchase from the Company, the
aggregate principal amount of Notes set forth opposite your name
in Schedule I attached hereto at 100% of such aggregate principal
amount. The Company will deliver to you, at the offices of
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois,
one or more Notes registered in your name, evidencing the
aggregate principal amount of the Notes to be purchased by you
and in the denomination or denominations specified with respect
to you in Schedule I attached hereto, against payment of the
purchase price thereof by transfer of immediately available funds
for credit to the Company's account # 00100532408 at Texas
Commerce Bank, National Association, 712 Main Street, Houston, TX
77002, ABA # 113000609, on the date of closing, which shall be
May 14, 1997, or any other date (not later than May 28, 1997)
upon which the Company and you may mutually agree (the "Closing"
or the "Date of Closing").
.c.Section 3.Conditions of Closing;.
Section 3. Conditions of Closing. Your obligation to
purchase and pay for the Notes to be purchased by you hereunder
is subject to the satisfaction, on or before the Date of Closing,
of the following conditions:
A. Certain Documents. You shall have received the
following, each dated the Date of Closing:
(i) The Note(s), executed by the Company, to be
purchased by you;
(ii) Certified copies of the resolutions of the
Board of Directors or the Executive Committee of the
Board of Directors of the Company approving this
Agreement and the Notes, and of all documents
evidencing other necessary corporate action and
governmental approvals, if any, with respect to this
Agreement and the Notes;
(iii) A certificate of the Secretary or an
Assistant Secretary of the Company certifying the names
and true signatures of the officers of the Company
authorized to sign this Agreement and the Notes and the
other documents to be delivered hereunder;
(iv) Certified copies of the Articles of
Incorporation and bylaws of the Company;
(v) Certified copies of the resolutions of the
respective Board of Directors or the Executive
Committees thereof of each Guarantor approving this
Agreement, the Notes and the Master Guaranty, and all
of the documents evidencing other necessary corporate
action and governmental approvals, if any, with respect
to this Agreement, the Notes and the Master Guaranty;
(vi) A certificate of the respective Secretary or
the Assistant Secretary of each of the Guarantors
certifying the names and true signatures of the
officers thereof authorized to sign the Master Guaranty
(and, in the case of NPCI, this Agreement) and the
other documents to be delivered hereunder or under the
Master Guaranty;
(vii) Certified copies of the respective Articles
of Incorporation and bylaws of each Guarantor;
(viii) This Agreement, executed by the parties
hereto;
(ix) The Master Guaranty, executed by all of the
Guarantors;
(x) A favorable opinion of Shook, Hardy & Bacon
L.L.P., special counsel to the Company and the
Guarantors, satisfactory to you and substantially in
the form of Exhibit B-1 attached hereto and as to such
other matters as you may reasonably request;
(xi) A favorable opinion of Chapman and Cutler,
special counsel to the Purchasers, satisfactory to you
and substantially in the form of Exhibit C attached
hereto and as to such other matters as you may
reasonably request; and
(xii) The Officers' Certificate, executed by an
officer of the Company and of NPCI, referred to in 3B.
B. Representations and Warranties; No Default. The
representations and warranties contained in 8 shall be true
on and as of the Date of Closing; there shall exist on the
Date of Closing no Event of Default or Default; the Company
and the Guarantors shall have performed all of their
respective obligations hereunder which are to be performed
on or prior to the Date of Closing; and the Company and NPCI
shall have delivered to you an Officers' Certificate, dated
the Date of Closing, to such effect.
C. Private Placement Number. On or prior to the Date
of Closing, special counsel to the Purchasers of the Notes
shall have duly made the appropriate filings with Standard
and Poor's CUSIP Service Bureau, as agent for the National
Association of Insurance Commissioners, in order to obtain a
private placement number for the Notes.
D. Certain Fees. On the Date of Closing, the Company
shall pay the reasonable fees and expenses of Chapman and
Cutler, your special counsel, as of the Date of Closing.
Without limiting the foregoing, the Company also agrees to
pay, promptly upon the receipt of any supplemental
statements therefor, professional fees and separately
charged items of such special counsel unposted or not
incurred as of the Date of Closing.
E. Related Transaction. The Company shall have
consummated the sale of the entire principal amount of the
Notes scheduled to be sold on the Date of Closing pursuant
to this Agreement and the other agreements referred to in
1B.
F. Sharing Agreement. You shall have received from
the Company at least two (2) Business Days prior to the Date
of Closing a written description of all information
necessary to permit you to become a party to the Sharing
Agreement concurrently with the issue and sale of the Notes
hereunder.
G. Proceedings. All corporate and other proceedings
taken or to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall
be satisfactory in substance and form to you, and you shall
have received all such counterpart originals or certified or
other copies of such documents as you may reasonably
request.
.c.Section 4.Prepayments;.
Section 4. Prepayments. The Notes shall be subject to
prepayment only with respect to the required prepayments
specified in 4A and also under the circumstances set forth in
4B.
A. Required Prepayments. Until the Notes shall be
paid in full, the Company shall apply to the prepayment of
the Notes, without premium, the sum of $10,000,000 (each
being a "Required Prepayment") on May 1 of each of the years
2002, 2003, 2004 and 2005. Each Required Prepayment,
together with interest thereon to the applicable prepayment
date, shall become due on such prepayment date. Any
prepayment made by the Company pursuant to any other
provision of this 4 shall not reduce or otherwise affect
its obligation to make any prepayment required by this 4A.
The outstanding principal amount of the Notes, together with
interest accrued thereon, shall become due on the maturity
date of the Notes. The amount of each prepayment,
retirement, purchase or other acquisition of the Notes by
the Company or any Guarantor pursuant to 4B or 4E shall
reduce each of the then remaining required prepayments
pursuant to this 4A by a percentage equal to the aggregate
principal amount of the Notes so prepaid, retired, purchased
or otherwise acquired divided by the aggregate principal
amount of the Notes outstanding immediately prior to such
prepayment, retirement, purchase or other acquisition.
B. Optional Prepayment at Optional Prepayment Price.
The Notes shall be subject to prepayment, in whole or in
part (but if in part then in units in excess of $1,000,000),
at any time at the option of the Company, at the Optional
Prepayment Price with respect to the principal amount of
Notes to be prepaid, plus interest thereon to such
prepayment date. The Optional Prepayment Price shall be
determined as of two (2) Business Days prior to the date of
such prepayment pursuant to this 4B (the "Determination
Date").
C. Notice of Optional Prepayment. The Company shall
give the holder of each Note written notice of any
prepayment pursuant to 4B not less than ten (10) Business
Days prior to the prepayment date, specifying (i) such
prepayment date, (ii) the principal amount of the Notes, and
of the Notes held by such holder, to be prepaid on such
date, (iii) that a premium may be payable, (iv) the date
when the Optional Prepayment Price will be calculated, (v)
the estimated Optional Prepayment Price, and (vi) that such
prepayment is to be made pursuant to 4B. Notice of
prepayment having been given as aforesaid, the principal
amount of the Notes specified in such notice, together with
interest thereon to the prepayment date and together with
the premium, if any, herein provided, shall become due and
payable on such prepayment date; provided, however, that
such amounts shall not become due and payable if on or prior
to the Determination Date each holder of a Note shall have
received facsimile or telephonic notice (such telephonic
notice to be immediately confirmed in writing) from the
Company that the Company has determined not to make the
scheduled optional prepayment, whereupon the respective
rights and obligations of the parties hereunder shall
continue as if the notice of optional prepayment referred to
above had not been given. Two Business Days prior to the
prepayment date specified in such notice, the Company shall
provide each holder of a Note written notice by facsimile
transmission of the premium, if any, payable in connection
with such prepayment and, whether or not any premium is
payable, a reasonably detailed computation of the Optional
Prepayment Price.
D. Partial Payments Pro Rata. Upon any partial
prepayment of the Notes, the principal amount so prepaid
shall be allocated to all Notes at the time outstanding in
proportion to the respective outstanding principal amounts
thereof.
E. Retirement of Notes. The Company shall not, and
shall not permit any Guarantor to, prepay or otherwise
retire in whole or in part prior to their stated final
maturity (other than by prepayment pursuant to 4A or 4B or
upon acceleration of such final maturity pursuant to 7A),
or purchase or otherwise acquire, directly or indirectly,
Notes held by any holder unless the Company or such
Guarantor shall have offered to prepay or otherwise retire
or purchase or otherwise acquire, as the case may be, the
same proportion of the aggregate principal amount of Notes
held by each other holder of Notes at the time outstanding
upon the same terms and conditions. Any Notes so prepaid or
otherwise retired or purchased or otherwise acquired by the
Company or any Guarantor shall not be deemed to be
outstanding for any purpose under this Agreement.
.c.Section 5.Affirmative Covenants;.
Section 5. Affirmative Covenants. So long as any Note shall
remain unpaid or you shall have any commitment hereunder, the
Company and NPCI, severally, covenant that:
A. Financial Statements. NPCI will deliver to each
Significant Holder:
(i) as soon as practicable and in any event
within 50 days after the end of each quarterly period
(other than the last quarterly period) in each fiscal
year, consolidated statements of income, consolidated
statements of stockholder's equity and consolidated
statements of cash flows of NPCI and its Subsidiaries
for the period from the beginning of the current fiscal
year to the end of such quarterly period, and
consolidated balance sheets of NPCI and its
Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures
for the corresponding period or as of the end of such
corresponding period, as applicable, in the preceding
fiscal year, all in reasonable detail, prepared in
accordance with generally accepted accounting
principles as then in effect applicable to quarterly
financial statements generally, and certified by an
authorized financial officer of NPCI and of the
Company, subject to changes resulting from year-end
adjustments; provided, however, that, so long as such
delivery is made within the time requirement set forth
above in this clause (i), delivery pursuant to clause
(iv) below of copies of the Quarterly Report on Form 10-
Q of NPCI for such quarterly period filed with the
Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (i);
(ii) as soon as practicable and in any event
within 50 days after the end of each quarterly period
in each fiscal year (or, at the Company's option, more
frequently), balance sheets at the end of each fiscal
quarter and income statements for the period from the
beginning of the current fiscal year to the end of such
fiscal quarter for each Material Operating Group of
NPCI and its Subsidiaries (whether incorporated or
not), setting forth in each case in comparative form
figures as of the end of the corresponding period or
for the corresponding period, as applicable, in the
preceding fiscal year, all in reasonable detail,
prepared in accordance with generally accepted
accounting principles as then in effect applicable to
quarterly financial statements generally, and certified
by an authorized financial officer of NPCI and of the
Company as fairly presenting the financial condition
and operations of such divisions in accordance with
prior practices of NPCI consistently applied;
(iii) as soon as practicable and in any event
within 95 days after the end of each fiscal year,
consolidated statements of income, consolidated
statements of stockholder's equity and consolidated
statements of cash flows of NPCI and its Subsidiaries
for such year, and consolidated balance sheets of NPCI
and its Subsidiaries as at the end of such year,
setting forth in each case in comparative form
corresponding consolidating and consolidated figures
from the preceding annual audit, and certified to NPCI
by independent public accountants of recognized
national standing selected by NPCI whose certificate
shall state that such consolidated financial statements
fairly present the consolidated financial position of
NPCI and its Subsidiaries for said year in conformity
with generally accepted accounting principles as then
in effect and that the financial statements have been
audited in accordance with generally accepted auditing
standards, provided, however, that, so long as such
delivery is made within the time requirement set forth
above in this clause (iii), delivery pursuant to clause
(iv) below of copies of the Annual Report on Form 10-K
of NPCI for such fiscal year filed with the Securities
and Exchange Commission shall be deemed to satisfy the
requirements of this clause (iii);
(iv) promptly upon transmission thereof, copies of
all such financial statements, proxy statements,
notices and reports as NPCI shall send to its
stockholders and copies of all registration statements
(without exhibits) and all reports which NPCI files
with any securities exchange or the Securities and
Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and
Exchange Commission);
(v) promptly upon receipt thereof, a copy of each
other report submitted to the board of directors (or
the executive committee thereof) of the Company or any
Guarantor by independent accountants in connection with
any annual, interim or special audit made by them of
the books of the Company or any Guarantor;
(vi) promptly after the filing or receiving
thereof, copies of all reports and notices related to
any Plan, if any, which the Company or any Guarantor
may hereafter file under ERISA with the Internal
Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which
the Company or any Guarantor may hereafter received
from such corporation;
(vii) promptly after receipt of notice thereof by
the Company or after the Company obtains knowledge
thereof, notice of any default under any Franchise
Agreement and any notice received by the Company
pursuant to Article XXI. C. (or any similar provision
of any Franchise Agreement hereafter entered into by
the Company or any Guarantor) of the Franchise
Agreements in effect on the Date of Closing; and
(viii) with reasonable promptness, such other
information respecting the condition or operations,
financial or otherwise, of the Company or any
Guarantors as you may reasonably request.
Together with each delivery of financial statements required
by clauses (i) and (iii) above, NPCI will deliver to each
Significant Holder an Officers' Certificate demonstrating (with
computations in reasonable detail) compliance by NPCI, the
Company and the Guarantors with the financial covenants set forth
in 6 and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists,
specifying the nature and period of existence thereof and what
action NPCI and the Company propose to take with respect thereto.
Together with each delivery of financial statements required by
clause (iii) above, NPCI will deliver to each Significant Holder
a certificate of such accountants stating that, in making the
audit necessary to the certification of such consolidated
financial statements, they have obtained no knowledge of any
Event of Default or Default, or, if they have obtained knowledge
of any Event of Default or Default, specifying the nature and
period of existence thereof. Such accountants, however, shall
not be liable to anyone by reason of their failure to obtain
knowledge of any Event of Default or Default which would not be
disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards. NPCI also covenants that
forthwith upon its President or Chief Financial Officer or
principal accounting officer obtaining knowledge of an Event of
Default or Default, it will deliver to each Significant Holder an
Officers' Certificate specifying the nature and period of
existence thereof and what action NPCI and the Company propose to
take with respect thereto. All certificates and reports required
to be delivered under this Agreement which pertain to financial
matters, including, without limitation, all financial statements
and calculations to determine covenant compliance, shall contain
a detailed reconciliation of the accounting principles applied in
the fiscal period or periods being reported upon and GAAP as
defined in Section 10A including a re-calculation of the terms
and provisions hereof affected by changes in GAAP after the Date
of Closing.
B. Inspection of Property. NPCI will permit any
Person designated by any Significant Holder in writing to
visit and inspect any of the properties of NPCI, the Company
and each Guarantor, to examine the corporate books and
financial records of NPCI, the Company and each Guarantor
and make copies thereof or extracts therefrom and to discuss
the affairs, finances and accounts of any of such
corporations with the principal officers of NPCI, the
Company and each Guarantor and their independent public
accountants (and by this provision NPCI and the Company
authorize said accountants to discuss with you the finances
and affairs of NPCI and the Company and each Guarantor), all
at such reasonable times and as often as such Significant
Holder may reasonably request. If and so long as no Default
or Event of Default then exists, any such visitation or
inspection shall be at the expense of the Significant Holder
making such visitation or inspection and if and so long as
any Default or Event of Default exists, any such visitation
or inspection shall be at the expense of NPCI and the
Company.
C. Covenant to Secure Notes Equally. If NPCI, the
Company or any Guarantor shall create or assume any Lien
upon any of its property or assets, whether now owned or
hereafter acquired, other than Liens permitted by the
provisions of 6C(1) (unless prior written consent to the
creation or assumption thereof shall have been obtained
pursuant to 11C), it will make or cause to be made
effective provision whereby the Notes will be secured by
such Lien equally and ratably with any and all other Debt
thereby secured so long as any such other Debt shall be so
secured. In the event NPCI, the Company or any Guarantor
shall propose to secure the Notes pursuant to this Section,
the mortgage or other instrument creating such Lien shall be
satisfactory in form and substance (including without
limitation the portion thereof pertaining to the release of
the collateral secured thereby and the application of the
proceeds from the sale or other disposition of such
collateral) to the holders of not less than 75% in aggregate
principal amount of the Notes then outstanding.
D. Compliance with Laws, Etc. NPCI will comply, and
cause the Company and each Guarantor to comply, in all
material respects with all applicable regulatory and
governmental laws, rules, regulations and orders the
noncompliance with which could result in a material adverse
effect on NPCI, the Company or the Guarantors taken as a
whole, such compliance to include, without limitation,
paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon
its property provided NPCI, the Company or such Guarantor
shall not be required to pay any such taxes, assessments or
governmental charges if (i) the validity, applicability or
amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the
forfeiture or sale of any property of NPCI, the Company or
such Guarantor or any material interference with the use
thereof by NPCI, the Company or such Guarantor, and (ii)
NPCI, the Company or such Guarantor shall set aside on its
books, reserves deemed by it to be adequate with respect
thereto.
E. Maintenance of Insurance. NPCI will maintain, and
cause the Company and each Guarantor to maintain, insurance
in such amounts, with such carriers, and against such
liabilities and hazards as is consistent with sound business
practices and as is customary in the case of entities of
established reputation engaged in the same or a similar
business and similarly situated.
F. Maintenance of Properties, Etc. NPCI will
maintain and preserve, and cause the Company and each
Guarantor to maintain and preserve, to the extent that a
failure to so maintain or preserve would have a material
adverse effect on NPCI, the Company or the Guarantors taken
as a whole (i) all of its or their properties which are used
or useful in the conduct of its business in good repair and
working order, ordinary wear and tear excepted and (ii) all
of its or their rights, title, licenses, trademarks and
other permits necessary for the conduct of their business.
G. Corporate Existence. NPCI will maintain, and
cause the Company and each Guarantor to maintain, its
corporate or other organization existence, as the case may
be.
H. Claims for Labor and Materials. NPCI will
promptly pay and discharge, and cause the Company and each
Guarantor promptly to pay and discharge, all trade accounts
payable in accordance with usual and customary business
terms, and all claims for work, labor or materials, which if
unpaid might become a Lien upon any property of NPCI, the
Company or such Guarantor; provided NPCI, the Company or
such Guarantor shall not be required to pay any such account
payable or claim if either (i) (a) the validity,
applicability or amount thereof is being contested in good
faith by appropriate actions or proceedings which will
prevent the forfeiture or sale of any property of NPCI, the
Company or such Guarantor or any material interference with
the use thereof by NPCI, the Company or such Guarantor, and
(b) NPCI, the Company or such Guarantor shall set aside on
its books, reserves deemed by it to be adequate with respect
thereto, or (ii) the failure to pay any such account payable
or claim would not have a material adverse effect on the
business, prospects, profits, properties or condition
(financial or otherwise) of NPCI, the Company and the
Guarantors taken as a whole.
.c.Section 6.Negative Covenants;.
Section 6. Negative Covenants. So long as any Note shall
remain unpaid or you shall have any commitment hereunder:
A. Consolidated Net Worth Requirement. NPCI
covenants that it will not permit Consolidated Net Worth at
any time to be less than the sum of (i) $86,000,000 plus
(ii) an amount equal to 50% of Consolidated Net Income
(without reduction for any deficit in Consolidated Net
Income for any quarterly fiscal period) for the period from
and after March 25, 1997 to and including the date of
determination thereof, computed on a cumulative basis for
said entire period.
B. Consolidated Fixed Charge Requirement. NPCI
covenants that, on the last day of each fiscal quarter, the
ratio of (a) Consolidated Net Income Available for Fixed
Charges to (b) Fixed Charges will be not less than 2.0 to
1.0, for the period consisting of the four (4) consecutive
fiscal quarters ending on the date of such determination.
C. Lien, Debt, and Other Restrictions.
(1) Liens. NPCI will not and will not permit the
Company or any Guarantor to create, assume or suffer to
exist any Lien upon any of its properties or assets,
whether now owned or hereafter acquired (whether or not
provision is made for the equal and ratable securing of
the Notes in accordance with the provisions of 5C),
except
(i) Liens for taxes or governmental charges
and Liens securing claims or demands of mechanics
and materialmen provided that payment is not at
the time required by 5D or 5H;
(ii) other Liens incidental to the conduct of
its business or the ownership of its property and
assets which are not incurred in connection with
the borrowing of money or the obtaining of
advances or credit, and which do not in the
aggregate materially detract from the value of its
property or assets or materially impair the use
thereof in the operation of its business;
(iii) survey exceptions which, when taken as a
whole, would not have a material adverse effect on
NPCI, the Company or the Guarantors;
(iv) Liens on property or assets of a
Guarantor (other than NPCI) to secure obligations
of such Guarantor to NPCI, the Company or another
Guarantor;
(v) Liens incurred after the Date of Closing
given to secure the payment of the purchase price
incurred in connection with the acquisition of
fixed assets useful and intended to be used in
carrying on the business of NPCI, the Company or a
Guarantor, including Liens existing on such fixed
assets at the time of acquisition thereof or at
the time of acquisition by NPCI, the Company or a
Guarantor of any business entity then owning such
fixed assets, whether or not such existing Liens
were given to secure the payment of the purchase
price of the fixed assets to which they attach so
long as they were not incurred, extended or
renewed in contemplation of such acquisition,
provided that (i) the Lien shall attach solely to
the fixed assets acquired or purchased, (ii) at
the time of acquisition of such fixed assets, the
aggregate amount remaining unpaid on all Debt
secured by Liens on such fixed assets whether or
not assumed by NPCI, the Company or a Guarantor
shall not exceed an amount equal to the total
purchase price at the time of acquisition of such
fixed assets, and (iii) all such Debt shall be
permitted by the applicable limitations provided
in 6C(2)(a) and (b); and
(vi) other Liens on the property of NPCI, the
Company or any Guarantor to secure Debt of NPCI,
the Company or any Guarantor, provided that
Consolidated Priority Debt does not at any time
exceed an amount equal to twenty-percent (20%) of
Consolidated Net Worth.
(2) Debt and Other Restrictions. (a) NPCI will
not at any time permit Consolidated Debt to exceed an
amount equal to (i) prior to and including the last day
of fiscal year 1998, three and one-fourths times
(3.25x) Consolidated Pro Forma EBITDA, and
(ii) thereafter, three times (3.0x) Consolidated Pro
Forma EBITDA, in each case for the four fiscal quarters
immediately preceding the date of determination.
(b) NPCI will not at any time permit Consolidated
Priority Debt to exceed an amount equal to twenty-
percent (20%) of Consolidated Net Worth.
(c) Any Person which becomes a Guarantor after
the date hereof shall for all purposes of this 6C(2)
be deemed to have created, assumed or incurred at the
time it becomes a Guarantor all Debt of such Person
existing immediately after it becomes a Guarantor.
(3) Restricted Investments. NPCI will not permit
the aggregate amount of Restricted Investments of NPCI,
the Company and the Guarantors at any time outstanding
to be greater than ten percent (10%) of Consolidated
Net Worth.
(4) Interest and Rents Coverage. On the last day
of each fiscal quarter, NPCI will not permit the ratio
of (a) Consolidated Pro Forma EBITDA plus the
consolidated operating lease rental expense of NPCI and
its Subsidiaries to (b) Fixed Charges, to be less than
1.5 to 1.0, for the period consisting of the four (4)
consecutive fiscal quarters ending on the date of such
determination. For purposes of determining whether the
entering into of any lease results in a breach of this
6C(4), NPCI shall make the calculation required under
6C(4) as of the date such lease is entered into on the
assumption that the rental expense that is expected to
be incurred during the twelve-month period following
the entering into of the lease was incurred during the
twelve-month period ending on the date of such
calculation.
(5) Sale of Stock and Debt of Guarantors. NPCI
will not permit the Company or any Guarantor to sell or
otherwise dispose of, or part with control of, any
shares of stock (which constitute or upon issuance will
constitute more than 5% of the outstanding shares of
stock of the Company or any Guarantor (excluding NPCI))
or Debt of the Company or any Guarantor (excluding
NPCI), except to NPCI, the Company or another
Guarantor, and except that all shares of stock of a
Guarantor together with all Debt of such Guarantor owed
to the Company and any other Guarantor may be sold as
an entirety for a cash consideration which represents
the fair value (as determined in good faith by the
Board of Directors of NPCI) at the time of sale of the
shares of stock and Debt so sold, provided that the
assets of such Guarantor could be sold within the
limitations of 6C(6) and that the earnings of such
Guarantor shall not have constituted more than 5% of
Consolidated Net Income for any of the three fiscal
years then most recently ended, and provided further
that, at the time of such sale, such Guarantor shall
not own, directly or indirectly, any shares of stock or
Debt of any other Guarantor (unless all of the shares
of stock and Debt of such other Guarantor owned,
directly or indirectly, by the Company and all
Guarantors are simultaneously being sold as permitted
by this 6C) or any Debt of NPCI or the Company.
(6) Merger and Sale of Assets. NPCI will not and
will not permit the Company or any Guarantor to merge
or consolidate with or into any other Person or during
any 12 month period, sell, lease, transfer or otherwise
dispose of any assets (other than in the ordinary
course of business) which in the aggregate have a book
value in excess of 5% of the consolidated assets of
NPCI and its Subsidiaries to any Person (determined as
of the end of the fiscal year immediately preceding the
date of such sale or disposition), except that
(i) NPCI or the Company may consolidate or
merge with any other corporation if (x) NPCI or
the Company shall be the surviving or continuing
corporation and (y) at the time of such
consolidation or merger and after giving effect
thereto no Default or Event of Default shall have
occurred and be continuing, including any Default
or Event of Default under 6C(2)(a) or (b);
(ii) any Guarantor (other than NPCI) may
merge with NPCI or the Company (provided that NPCI
or the Company shall be the continuing or
surviving corporation) or with any one or more
other Guarantors;
(iii) any Guarantor may sell, lease, transfer
or otherwise dispose of any of its assets to NPCI,
the Company or any other Guarantor, and the
Company may sell, lease, transfer or otherwise
dispose of any of its assets (other than any
Franchise Agreement or interest therein) to any
Guarantor; and
(iv) any Guarantor (other than NPCI) may
sell, or otherwise dispose of all or substantially
all of its assets subject to the conditions
specified in 6C(5) with respect to a sale of the
stock of such Guarantor.
Nothing in 6C(3) or 6C(7) shall prohibit or otherwise
impair the ability of the Company or any Guarantor to sell,
lease transfer or otherwise dispose of assets to the extent
such sale, lease, transfer or other disposition is permitted
under 6C(6)(iii).
(7) Transactions with Affiliates. NPCI will not,
and will not permit the Company or any Guarantor to,
enter into or be a party to any transaction or
arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or
for, any Affiliate), except upon fair and reasonable
terms no less favorable to NPCI, the Company or such
Guarantor than would obtain in a comparable arm's-
length transaction with a Person other than an
Affiliate.
(8) Franchise Rights. NPCI will not and will not
permit the Company or any Guarantor to take any action
or fail to take any action which results in the loss of
any franchise agreement, license, or other permit which
would preclude NPCI, the Company or such Guarantor from
operating such franchise under the name "Pizza Hut," or
such other names as are designated in the respective
franchise agreements if such loss materially adversely
affects the business operations or profitability of
NPCI or the Company and such Guarantors taken as a
whole. In addition to, and not in limitation of, the
foregoing restrictions, NPCI shall, and shall cause
each Subsidiary which is a Pizza Hut franchisee to,
(i) in the case of any such Subsidiary, on or before
June 30, 1997, amend its organizational documents and
other agreements to the extent necessary to comply with
the provisions of its respective franchise agreement
relating to restrictions on the disposition of
ownership interests and (ii) in the case of NPCI, on or
before June 30, 1997 amend its organizational documents
and other agreements to the extent necessary to comply
with provisions of its respective franchise agreement
relating to restrictions on the disposition of
ownership interests or, in the alternative in the case
of NPCI, deliver to the holders and maintain in full
force and effect the agreement of Pizza Hut, Inc.
substantially in the form of the letter agreement dated
May 14, 1997, attached hereto as Exhibit I, without
material breach or violation of such letter agreement.
(9) Nature of Business. NPCI will not and will
not permit the Company or any Guarantor to engage in
any business, if as a result the general nature of the
business, taken on a consolidated basis, which would
then be engaged in by NPCI, the Company and the
Guarantors would be substantially changed from the
general nature of the business engaged in by the
Company and the Guarantors as presented in the Private
Placement Memorandum dated April, 1997 prepared by
George K. Baum & Company (the "Memorandum").
(10) Sale or Discount of Receivables. NPCI will
not permit the Company or any Guarantor to sell with
recourse or discount or otherwise sell or transfer for
less than the face value thereof any notes or accounts
receivables of NPCI, the Company or any Guarantor.
(11) Fees and Compensation. NPCI will not permit
the Company or any Guarantor to compensate, directly or
indirectly, through salary, bonus or otherwise any of
its respective officers, directors, employees or
stockholders in amounts which are in excess of fair and
reasonable compensation paid for similar services
rendered by such officers, directors, employees and
stockholders by business substantially similar to NPCI,
the Company and the Guarantors.
.c.Section 7.Events of Default.
Section 7. Events of Default.
A. Acceleration. If any of the following events
shall occur and be continuing for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of law or otherwise):
(i) the Company defaults in the payment of any
principal of or premium on any Note when the same shall
become due, either by the terms thereof or otherwise as
herein provided; or
(ii) the Company defaults in the payment of any
interest on any Note and such default continues for
more than five (5) Business Days after the date due; or
(iii) the Company or any Guarantor defaults in any
payment of principal of or interest on any other
obligation for money borrowed (or any Capitalized Lease
Obligation, any obligation under a conditional sale or
other title retention agreement, any obligation issued
or assumed as full or partial payment for property
whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of
grace provided with respect thereto, or the Company or
any Guarantor fails to perform or observe any other
agreement, term or condition contained in any agreement
under which any such obligation is created (or if any
other event of default thereunder or under any such
agreement shall occur and be continuing) and the effect
of such failure or other event of default is to cause,
or to permit the holder or holders of such obligation
(or a trustee on behalf of such holder or holders) to
cause, such obligation to become due (or to be
repurchased by the Company or any Guarantor) prior to
any stated maturity or the Company or any Guarantor
fails to pay any Guaranty in accordance with its terms,
provided that the aggregate amount of all obligations
as to which such a payment default shall occur and be
continuing or such a failure or other event causing or
permitting acceleration (or resale to the Company or
any Guarantor) shall occur and be continuing exceeds
$2,500,000; or
(iv) any representation or warranty made by the
Company or any Guarantors herein or in the Master
Guaranty or by the Company, any Guarantor or any of its
officers in any writing furnished in connection with or
pursuant to this Agreement or the Master Guaranty shall
be false in any material respect on the date as of
which made; or
(v) the Company fails to perform or observe any
term, covenant or agreement contained in 6 and such
failure shall not be remedied within five (5) Business
Days after any officer of the Company obtains actual
knowledge thereof or receives written notice thereof,
whichever occurs first; or
(vi) any Guarantor fails to perform or observe any
agreement, covenant, term or condition contained in the
Master Guaranty; or
(vii) the Company fails to perform or observe any
other material agreement, covenant, term or condition
contained herein and such failure shall not be remedied
within 30 days after any officer of the Company obtains
actual knowledge thereof or receives any written notice
thereof, whichever occurs first; or
(viii) the Company or any Guarantor makes an
assignment for the benefit of creditors or is generally
not paying its debts as such debts become due; or
(ix) any decree or order for relief in respect of
the Company or any Guarantor is entered under any
bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt (with respect to the
bankruptcy or insolvency of the Company or any
Guarantor), dissolution or liquidation or similar law,
whether now or hereafter in effect (herein called the
"Bankruptcy Law"), of any jurisdiction and such decree
or order for relief remains unstayed or in effect for
more than 30 days; or
(x) the Company or any Guarantor petitions or
applies to any tribunal for, or consents to, the
appointment of, or taking possession by, a trustee,
receiver, custodian, liquidator or similar official of
the Company or any Guarantor, or of any substantial
part of the assets of the Company or any Guarantor, or
commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than
proceedings for the voluntary liquidation and
dissolution of a Subsidiary (other than the Company) of
NPCI provided that such liquidation or dissolution
would otherwise be permitted hereunder) relating to the
Company or any Subsidiary under the Bankruptcy Law of
any other jurisdiction; or
(xi) any such petition or application is filed, or
any such proceedings are commenced, against the Company
or any Guarantor and the Company or such Guarantor by
any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or
decree is entered appointing any such trustee,
receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in
effect for more than 30 days; or
(xii) any order, judgment or decree is entered in
any proceedings against NPCI or the Company decreeing
the dissolution of NPCI or the Company and such order,
judgment or decree remains unstayed and in effect for
more than 30 days; or
(xiii) any order, judgment or decree is entered in
any proceedings against the Company or any Guarantor
decreeing a split-up of the Company or such Guarantor
which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a
Guarantor whose assets represent a substantial part, of
the consolidated assets of NPCI and its Subsidiaries
(determined in accordance with generally accepted
accounting principles) or which requires the
divestiture of assets, or stock of a Guarantor, which
shall have contributed a substantial part of the
Consolidated Net Income for any of the three fiscal
years then most recently ended, and such order,
judgment or decree remains unstayed and in effect for
more than 60 days; or
(xiv) any judgment or order, or series of judgments
or orders, for the payment of money in an amount in
excess of $2,500,000 (exclusive of any amount covered
by insurance and not subject to any deductible
provision) is rendered against the Company or any
Guarantor and either (y) enforcement proceedings have
been commenced by any creditor upon such judgment or
order or (z) within 30 days after entry thereof, such
judgment is not discharged or execution thereof stayed
pending appeal, or within 30 days after the expiration
of any such stay, such judgment is not discharged;
then
(a) if such event is an Event of Default
specified in clause (viii), (ix), (x) or (xi) of this
7A, all of the Notes at the time outstanding shall
automatically become immediately due and payable at the
Optional Prepayment Price, together with accrued but
unpaid interest thereon, without presentment, demand,
protest or notice of any kind, all of which are hereby
waived by the Company, and
(b) if such event is an Event of Default
specified in clause (iii), (iv), (v), (vi), (vii),
(xii), (xiii) or (xiv) of this 7A, the holder or
holders of at least twenty- five percent (25%) of the
aggregate principal amount of the Notes then
outstanding, may at its or their option, by notice in
writing to the Company, declare all of the Notes to be,
and all of the Notes shall thereupon be and become,
immediately due and payable at the Optional Prepayment
Price, together with accrued but unpaid interest
thereon, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by
the Company, and
(c) if such event is an Event of Default
specified in clause (i) or (ii) of this 7A, any holder
of the Note may, at its or their option, by notice in
writing to the Company, declare all of the Notes to be,
and all of the Notes shall thereupon be and become,
immediately due and payable at the Optional Prepayment
Price, together with accrued but unpaid interest
thereon, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by
the Company.
B. Rescission of Acceleration. The provisions of 7A
are subject to the condition that if the principal of and
accrued interest on all or any outstanding Notes have been
declared immediately due and payable by reason of the
occurrence of any Event of Default described in paragraphs
(i) through (vii), inclusive, or (xii), (xiii) and (xiv) of
7A, the Required Holders may, by written instrument filed
with the Company, rescind and annul such declaration and the
consequences thereof, provided that at the time such
declaration is annulled and rescinded:
(a) no judgment or decree has been entered for
the payment of any monies due pursuant to the Notes or
this Agreement;
(b) all arrears of interest upon all the Notes
and all other sums payable under the Notes and under
this Agreement (except any principal, interest or
premium on the Notes which has become due and payable
solely by reason of such declaration under 7A) shall
have been duly paid; and
(c) each and every other Default and Event of
Default shall have been made good, cured or waived
pursuant to 11C;
and provided further, that no such rescission and annulment
shall extend to or affect any subsequent Default or Event of
Default or impair any right consequent thereto.
C. Other Remedies. If any Event of Default or
Default shall occur and be continuing the holder of any Note
may proceed to protect and enforce its rights under this
Agreement and such Note by exercising such remedies as are
available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other
agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy
conferred in this Agreement upon the holder of any Note is
intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or
hereafter existing at law or in equity or by statute or
otherwise.
.c.Section 8.Representations, Covenants and Warranties;.
Section 8. Representations, Covenants and Warranties. NPCI
and the Company severally represent, covenant and warrant:
A. Subsidiaries.
(1) Ownership. NPCI owns 100% of the Voting
Securities of the Company. Exhibit E attached hereto
states the name of each Subsidiary of NPCI (other than
the Company), its jurisdiction of incorporation or
organization, and the ownership of its Voting
Securities. The Company and each Guarantor has good and
marketable title to all of the equity interests it
purports to own as set forth on Exhibit E, free and
clear in each case of any Lien. All such shares and
other equity interests have been duly issued and are
fully paid and non-assessable. Seattle Restaurant
Equipment Company, Inc. does not, as of the Date of
Closing, have material assets or operations.
(2) Guarantors; Joinder Agreement. NPCI and each
existing and hereafter acquired or created Subsidiary
of NPCI (other than the Company) shall unconditionally
and jointly and severally guarantee the payment of all
principal of, premium, if any, and interest on the
Notes and all other obligations of the Company under
this Agreement in accordance with and pursuant to the
terms of the Master Guaranty. If NPCI or any existing
Subsidiary of NPCI creates or acquires any Subsidiary
after the Date of Closing, such Subsidiary shall
execute and deliver to the Purchasers the Joinder
Agreement referred to in the Master Guaranty and shall
thereupon become unconditionally and jointly and
severally liable for the payment of all principal of,
premium, if any, and interest on the Notes and all
other Obligations of the Company under this Agreement
in accordance with and pursuant to the terms of the
Master Guaranty. NPCI and its Subsidiaries listed in
Exhibit H constitute the initial Guarantors.
B. Organization; Qualification; Corporate Authority.
The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware; each Guarantor is duly organized, validly existing
and in good standing under the laws of the jurisdiction in
which it is incorporated or organized. The Company has and
each Guarantor has the corporate or other organizational
power to own its respective property and to carry on its
respective business as now being conducted, and the Company
is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such
qualification necessary. The execution, delivery and
performance by the Company of this Agreement and the Notes
are within the Company's corporate powers and have been duly
authorized by all necessary corporate action.
C. Business and Property. You have heretofore been
furnished with a copy of the Memorandum which generally sets
forth the business conducted by NPCI and its Subsidiaries
and the principal properties of NPCI and its Subsidiaries.
Neither the Company nor any Guarantor has any current
intention of engaging in any business which would
significantly change the general nature of business engaged
in by the Company and the Guarantors on the Date of Closing.
D. Financial Statements. The Company has furnished
you with the following financial statements, identified by a
principal financial officer of the Company: consolidated
balance sheets of NPCI and its Subsidiaries for the fiscal
years ending on March 29, 1994, March 28, 1995 and March 26,
1996, and a consolidated statement of income and
consolidated statements of cash flows of NPCI and its
Subsidiaries for each such fiscal year all certified by
Ernst & Young. The Company has also furnished to you a
consolidated balance sheet, a consolidated statement of
income and a consolidated statement of cash flows in each
case of NPCI and its Subsidiaries for the fiscal quarter
ending December 24, 1996. Such financial statements
(including any related schedules and/or notes) are true and
correct in all material respects, have been prepared in
accordance with generally accepted accounting principles
consistently followed throughout the periods involved and
show all liabilities, direct and contingent, of NPCI and its
Subsidiaries required to be shown in accordance with such
principles. The consolidated balance sheets fairly present
the condition of NPCI and its Subsidiaries as at the dates
thereof, and the consolidated statements of income and
consolidated statements of cash flows fairly present the
results of the operations of NPCI and its Subsidiaries for
the periods indicated. There has been no material adverse
change in the business, condition or operations (financial
or otherwise) of NPCI and its Subsidiaries taken as a whole
since March 26, 1996.
E. Conflicting Agreements and Other Matters. Neither
the Company nor any Guarantor is a party to any contract or
agreement or subject to any charter or other corporate
restriction which materially and adversely affects its
business, property or assets, or financial condition.
Neither the execution nor delivery of this Agreement or the
Notes, nor the offering, issuance and sales of the Notes,
nor fulfillment of nor compliance with the terms and
provisions hereof and of the Notes will conflict with, or
result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any
of the properties or assets of the Company or any Guarantor
pursuant to, the charter, by-laws or other organizational
documents of the Company or any Guarantor, any award of any
arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute,
law, rule or regulation to which the Company or any
Guarantor is subject. Neither the Company nor any Guarantor
is a party to, or otherwise subject to any provision
contained in, any instrument evidencing indebtedness of the
Company or such Guarantor, any agreement relating thereto or
any other contract or agreement (including its charter)
which limits the amount of, or otherwise imposes
restrictions on the incurring of, Debt of the Company of the
type to be evidenced by the Notes except as set forth in the
agreements listed in Exhibit D attached hereto.
F. Governmental Consent. Neither the nature of the
Company or of any Guarantor, nor any of their respective
business or properties, nor any relationship between the
Company or any Guarantor and any other Person, nor any
circumstance in connection with the offering, issuance, sale
or delivery of the Notes is such as to require any
authorization, consent, approval, exemption or other action
by or notice to or filing with any court or administrative
or governmental or regulatory body (other than routine
filings after the Date of Closing with the Securities and
Exchange Commission and/or state Blue Sky authorities) in
connection with the execution and delivery of this
Agreement, the offering, issuance, sale or delivery of the
Notes or fulfillment of or compliance with the terms and
provisions hereof or of the Notes.
G. Enforceability. This Agreement is, and the Notes
when delivered hereunder will be, legal, valid and binding
obligations of the Company enforceable against the Company
in accordance with their terms.
H. Actions Pending. There is no action, suit,
investigation or proceeding pending or, to the knowledge of
the Company, threatened against the Company or any
Guarantor, or any properties or rights of the Company or any
Guarantor, by or before any court, arbitrator or
administrative or governmental body which might result in
any material adverse change in the business, condition or
operations of the Company and the Guarantors taken as a
whole. There is no action, suit, investigation or
proceeding pending or threatened against the Company or any
Guarantor which purports to affect the validity or
enforceability of this Agreement or any Note.
I. Outstanding Debt; No Defaults. Neither the
Company nor any Guarantor has outstanding any Debt except as
permitted by 6C(2). Exhibit F describes the outstanding
Debt of the Company and the Guarantors, (including the
principal amount thereof) as of the Date of Closing. There
exists no default under the provisions of any instrument
evidencing such Debt or of any agreement relating thereto.
No Default or Event of Default has occurred and is
continuing.
J. Title to Properties. The Company has and each
Guarantor has good and marketable title to substantially all
of its respective real properties (other than properties
which it leases) and good title to substantially all of its
other respective properties and assets, including the
properties and assets reflected in the consolidated balance
sheet as at March 25, 1996 referred to in 8D (other than
properties and assets disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens
permitted by 6C(1) and Liens as described in Exhibit G
hereto. The Company and each Guarantor enjoys peaceful and
undisturbed possession under all leases necessary in any
material respect for the operation of their respective
properties and assets, none of which contains any unusual or
burdensome provisions which might affect or impair the
operation of such properties and assets. All leases
necessary in any material respect for the conduct of the
respective businesses of the Company and the Guarantors are
valid and subsisting and are in full force and effect.
K. Taxes. The Company has and each Guarantor has
filed all Federal, State and other income tax returns and
franchise tax reports which, to the best knowledge of the
officers of the Company, are required to be filed, and each
has paid all taxes as shown on such returns and/or reports
and on all assessments received by it to the extent that
such taxes have become due, except such taxes as are being
contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with
generally accepted accounting principles. The Company does
not know of any proposed additional tax assessment against
it for which adequate provision has not been made on its
accounts, and no material controversy in respect of
additional Federal or state income taxes due since said date
is pending or to the knowledge of the Company threatened.
The provisions for taxes on the books of the Company and
each Guarantor are adequate in all material respects for all
open years, and for its current fiscal period.
L. Offering of Notes. Neither the Company nor any
agent acting on its behalf has, directly or indirectly,
offered the Notes or any similar security of the Company for
sale to, or solicited any offers to buy the Notes or any
similar security of the Company from, or otherwise
approached or negotiated with respect thereto with, any
Person other than the Purchasers and not more than twenty-
one (21) other institutional investors and neither the
Company nor any agent acting on its behalf has taken or will
take any action which would subject the issuance or sale of
the Notes to the provisions of 5 of the Securities Act or
to the provisions of any securities or Blue Sky law of any
applicable jurisdiction.
M. Regulation G, Etc. Neither the Company nor any
Guarantor owns or has any present intention of acquiring any
"margin stock" as defined in Regulation G (12 CFR Part 207)
of the Board of Governors of the Federal Reserve System
(herein called "margin stock"). The proceeds of sale of the
Notes will be used to acquire assets (other than stock) (or
to reduce indebtedness incurred to acquire such assets)
pursuant to the Asset Purchase Agreement by and between
Jamie B. Coulter, et al., and the Company, NPCI and NPC
Restaurants LP and for general corporate purposes. None of
such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose
of maintaining, reducing or retiring any indebtedness which
was originally incurred to purchase or carry any stock that
is currently a margin stock or for any purpose which might
constitute this transaction a "purpose credit" within the
meaning of such Regulation G. Neither the Company nor any
agent acting on its behalf has taken or will take any action
which might cause this Agreement or the Notes to violate
Regulation G, Regulation T, Regulation X or any other
regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Exchange Act of 1934, as
amended, in each case as in effect now or as the same may
hereafter be in effect.
N. Disclosure. Neither this Agreement nor any other
document, certificate or statement furnished to you by or on
behalf of the Company in connection herewith contains any
untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements
contained herein and therein not misleading. There is no
fact peculiar to the Company or any Guarantor which
materially adversely affects or in the future may (so far as
the Company can now foresee) materially adversely affect the
business, property or assets, or financial condition of the
Company or any Guarantor and which has not been set forth in
this Agreement or in the other documents, certificates and
statements furnished to you by or on behalf of the Company
prior to the date hereof in connection with the transactions
contemplated hereby.
O. Investment Company Act. Neither the Company nor
any Guarantor is an "investment company" or a company
"controlled" by an "investment company," within the meaning
of the Investment Company Act of 1940, as amended.
P. Public Utility Holding Company Act. Neither the
Company nor any Guarantor is a "holding company" or a
"subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility"
within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
Q. Patents and Trademarks. The Company and each
Guarantor owns, possesses or is licensed to use all the
patents, trademarks, trade names, service marks, copyrights,
licenses and rights with respect to the foregoing necessary
for the present and planned future conduct of its business,
without any known conflict with the rights of others.
R. ERISA. The consummation of the transactions
provided for in the Agreements and compliance by the Company
and the Guarantor with the provisions thereof and the Notes
issued thereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of
the Code. Neither the Company nor any ERISA Affiliate has
heretofore or is currently maintaining any Plan. Neither
the Company nor any ERISA Affiliate has any contingent
liability with respect to any post-retirement "welfare
benefit plan" (as such term is defined in ERISA) except as
has been disclosed to the Purchasers.
S. Compliance with Law. To NPCI's or the Company's
knowledge, neither the Company nor any Guarantor (a) is in
violation of any law, ordinance, franchise, governmental
rule or regulation to which it is subject; or (b) has failed
to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of its
property or to the conduct of its business, which violation
or failure to obtain would materially adversely affect the
business, prospects, profits, properties or condition
(financial or otherwise) of the Company and the Guarantors,
taken as a whole, or impair the ability of the Company to
perform its obligations contained in the Agreements or the
Notes. Neither the Company nor any Guarantor is in default
with respect to any order of any court or governmental
authority or arbitration board or tribunal.
T. Compliance with Environmental Laws. To NPCI's or
the Company's knowledge, neither the Company nor any
Guarantor is in violation of any applicable Federal, state,
or local laws, statutes, rules, regulations or ordinances
relating to public health, safety or the environment,
including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or
ground water, to the withdrawal or use of ground water, to
the use, handling or disposal of polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde, to the treatment,
storage, disposal or management of hazardous substances
(including, without limitation, petroleum, crude oil or any
fraction thereof, or other hydrocarbons), pollutants or
contaminants, to exposure to toxic, hazardous or other
controlled, prohibited or regulated substances which
violation could have a material adverse effect on the
business, prospects, profits, properties or condition
(financial or otherwise) of the Company and the Guarantors,
taken as a whole. The Company does not know of any
liability or class of liability of the Company or any
Guarantor under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq.), or the Resource Conservation
and Recovery Act of 1976, as amended (42 U.S.C. Section 6901
et seq.).
U. Franchise Agreements. All franchise agreements,
licenses, or other permits (as amended, modified, replaced
or superseded, collectively, "Franchise Agreements")
necessary to permit the Company and the Guarantors to
operate under the name "Pizza Hut" are in full force and
effect. No event exists which with the lapse of time or the
giving of notice, or either, would constitute a default
under any such Franchise Agreements. The Franchise
Agreements do not expire prior to February 28, 2010.
.c.Section 9.Representations of the Purchaser;.
Section 9. Representations of the Purchaser. You represent
and in making this sale to you it is specifically understood and
agreed that you are not acquiring the Notes to be purchased by
you hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act,
provided that the disposition of your property shall at all times
be and remain within your control.
You also represent that the source of funds to be used by
you to pay the purchase price of the Notes to be purchased by you
hereunder is your "insurance company general account" as defined
in Department of Labor Prohibited Transaction Exemption PTE 95-60
(60 FR 35925), July 12, 1995 (hereinafter "PTE 95-60"), and in
respect thereof you represent that there is no "employee benefit
plan" (as defined in section 3(3) of ERISA and section 4975(e)(1)
of the Code) established or maintained by the Company (and
affiliates thereof as defined in section V(a)(1) of the PTE 95-
60) with respect to which the amount of general account reserves
and liabilities of all contracts held by or on behalf of such
plan exceed ten percent (10%) of the total reserves and
liabilities of such general account (exclusive of separate
account liabilities) plus surplus, as set forth in the National
Association of Insurance Commissioners' Annual Statement filed
with your state of domicile.
.c.Section 10. Definitions and Accounting Terms;.
A. Certain Defined Terms. As used in this Agreement the
following terms shall have the meanings specified with respect
thereto below (such meanings to be equally applicable to both the
singular and plural forms of the terms defined);
"Affiliate" shall mean any Person (i) which directly or
indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, NPCI or
the Company, (ii) which beneficially owns or holds 5% or
more of any class of the Voting Securities of NPCI or the
Company or (iii) 5% or more of the Voting Securities (or in
the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or
held by NPCI or the Company or a Subsidiary. The term
"control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of
Voting Securities by contract or otherwise.
"Bankruptcy Laws" shall have the meaning specified in
clause (ix) of 7A.
"Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which commercial banks in New
York City are required or authorized to be closed.
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to 4B
or has become or is declared to be immediately due and
payable pursuant to 7A, as the context requires.
"Capitalized Lease" shall mean any lease which is
required to be capitalized on the balance sheet of the
lessee pursuant to GAAP.
"Capitalized Lease Obligations" shall mean the amount
at which the aggregate rentals due and to become due under
all Capitalized Leases under which the Company or any
Guarantor, as a lessee, would be required to be reflected as
a liability on the consolidated balance sheet of NPCI in
accordance with GAAP.
"Closing" or "Date of Closing" shall have the meaning
specified in 2.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Consolidated Debt" shall mean all Debt of NPCI and its
Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Net Income" for any period shall mean the
net income and net losses of NPCI and its Subsidiaries on a
consolidated basis as defined according to GAAP after
excluding the sum of (i) any net loss or any net earnings of
any business entity (other than a Guarantor) in which NPCI
or any of its Subsidiaries has an ownership interest unless
such net earnings shall have actually been received by NPCI
or such Subsidiary in the form of cash distributions, (ii)
the net income or loss of any Subsidiary for any period
prior to the date it became a Subsidiary, (iii) the gain or
loss (net of any tax effect) resulting from the sale of any
capital assets other than in the ordinary course of
business, and (iv) extraordinary or nonrecurring gains or
losses.
"Consolidated Net Income Available for Fixed Charges"
for any period shall mean the sum of Consolidated Net Income
during such period, plus (to the extent deducted in
determining Consolidated Net Income during such period) (i)
interest expense, (ii) provision for income taxes, (iii)
depreciation and amortization, and (iv) operating lease
expense.
"Consolidated Net Worth" shall mean the stockholders'
equity account of NPCI and its Subsidiaries on a
consolidated basis, according to GAAP.
"Consolidated Priority Debt" shall mean, as of the date
of any determination thereof, Consolidated Debt excluding:
(i) unsecured Debt of the Company or NPCI;
(ii) Debt of the Company or NPCI secured by liens
described in 6C(1)(i) through (v) inclusive; and
(iii) Permitted Guaranty Debt.
"Consolidated Pro-Forma EBITDA" shall mean, for any
period, EBITDA of NPCI and its Subsidiaries on a
consolidated basis during such period; provided, however,
that for purposes of calculating Consolidated Pro-Forma
EBITDA with respect to any Pizza Hut or Tony Roma's
restaurant to be acquired by NPCI, the Company or any
Subsidiary (each, an "acquisition target"), the EBITDA of
the acquisition target for each full fiscal quarter included
in the computational period prior to the acquisition
(including the fiscal quarter during which it was acquired)
shall be included, without duplication, and shall be
reasonably adjusted for tangible operational changes due to
field expenses differentials, royalty payments to be made to
Pizza Hut, Inc., contractual rent payments on real estate
and equipment and general and administrative cost
differences (collectively, "acquisition adjustments").
Prior to, and in connection with, the calculation of
Consolidated Pro-Forma EBITDA, the Company shall provide
each Purchaser with appropriate documentation, certified by
an authorized financial officer of the Company, supporting
the reasonableness of the acquisition adjustments.
"Debt" shall mean indebtedness for all borrowed money,
including the liability with respect to Capitalized Lease
Obligations, liabilities secured by a Lien on existing
property, and the aggregate amount of Guaranties and
together with the aggregate amount of all letters of credit
issued for the account of the Company or any Guarantor to
the extent such letters of credit have an aggregate face
amount in excess of $12,000,000 and (but without
duplication) all letters of credit issued for the account of
the Company or any Guarantor to the extent draws have been
made thereon. For purposes of this definition, "Debt" shall
not include trade accounts payable, accrued expenses or
income taxes payable.
"Discount Rate" shall mean, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity
implied by (i) the yields reported, as of 10:00 A.M. (New
York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on
the display designated as "USD" of the Bloomberg Financial
Markets Services Screen (or such other display as may
replace page "USD" of the Bloomberg Financial Markets
Services Screen) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date, or
(ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the
latest day for which such yields have been so reported as of
the second Business Day preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date.
Such implied yield will be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-
equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration
closest to and greater than the Remaining Average Life and
(2) the actively traded U.S. Treasury security with the
duration closest to and less than the Remaining Average
Life.
"EBITDA" shall mean Consolidated Net Income before
interest expense, provision for taxes (to the extent not
excluded from Consolidated Net Income), depreciation,
amortization and the noncash portion of nonrecurring charges
(as defined in GAAP).
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and any successor statute
of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to
sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" shall mean any corporation, trade or
business that is, along with the Company, a member of a
controlled group of corporations or a controlled group of
trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall mean any of the events
specified in 7A, provided that there has been satisfied any
requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any
further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has
been satisfied.
"Fixed Charges" shall mean the sum of interest expenses
and operating lease expenses as reflected in the GAAP
financial statements of NPCI and its Subsidiaries on a
consolidated basis.
"Franchise Agreements" shall have the meaning specified
in 8U.
"GAAP" shall mean those generally accepted accounting
principles as in effect at the Date of Closing.
"Guaranties" by any Person shall mean all obligations
(other than endorsements in the ordinary course of business
of negotiable instruments for deposit or collection) of such
Person guaranteeing, or in effect guaranteeing, any debt,
dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by
such Person: (i) to purchase such Debt or obligation or any
property or assets constituting security therefor, (ii) to
advance or supply funds (x) for the purchase or payment of
such Debt or obligation, (y) to maintain working capital or
other balance sheet condition or otherwise to advance or
make available funds for the purchase or payment of such
Debt or obligation, (iii) to lease property or to purchase
Securities or other property or services primarily for the
purpose of assuring the owner of such Debt or obligation of
the ability of the primary obligor to make payment of the
Debt or obligation, or (iv) otherwise to assure the owner of
the Debt or obligation of the primary obligor against loss
in respect thereof. For the purposes of all computations
made under this Agreement, a Guaranty in respect of any Debt
for borrowed money shall be deemed to be Debt equal to the
principal amount of such Debt for borrowed money which has
been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to
be Debt equal to the maximum aggregate amount of such
obligation, liability or dividend.
"Guarantor" shall mean at any time NPCI and each other
Person which is a party to the Master Guaranty at such time.
"Interest Payment Date" shall mean each May 1 and
November 1 of each year during the term of the Notes.
"Investments" shall mean all investments, in cash or by
delivery of property made, directly or indirectly in any
Person, whether by acquisition of shares of capital stock,
Debt or other obligations or Securities or by loan, advance,
capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include routine investments
in property to be used or consumed in the ordinary course of
business.
"Lien" shall mean any mortgage, pledge security
interest, encumbrance, lien or charge of any kind (including
any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the
nature thereof, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code of any
jurisdiction) or any other type of preferential arrangement
encumbering property.
"Master Guaranty" shall mean the guaranty agreement to
be dated on the Date of Closing, substantially in the form
of Exhibit H hereto, and whereby each Guarantor shall
unconditionally and jointly and severally guarantee in favor
of the Purchasers the due and punctual payment of all
principal of, premium, if any, and interest on the Notes.
"Material Operating Group" shall mean and include the
Pizza Hut restaurant group, the Tony Roma restaurant group
and all other operating restaurant groups.
"Memorandum" shall have the meaning specified in
6C(9).
"Notes" shall have the meaning specified in 1A.
"NPCI" means NPC International, Inc., a Kansas
corporation.
"Officers' Certificate" shall mean a certificate signed
in the name of NPCI by its President, one of its Vice
Presidents or its Treasurer and in the name of the Company
by its President, one of its Vice Presidents or its
Treasurer.
"Optional Prepayment Price" shall mean, with respect to
the principal amount of the Notes to be prepaid, an amount
obtained by discounting all scheduled payments of such
prepaid principal amount of the Notes and interest thereon
that would be due on or after the prepayment date to the
scheduled due date thereof at the Discount Rate. If the
Company and the holder of any Note shall prior to the
prepayment date designate in writing a different prepayment
price, that different prepayment price shall be payable on
the prepayment date and shall be the "Optional Prepayment
Price." In no event shall the Optional Prepayment Price be
less than the principal amount of the Notes to be prepaid.
"Person" shall mean an individual, corporation,
partnership, trust, joint venture, unincorporated
organization or a government agency or political subdivision
thereof.
"Permitted Guaranty Debt" shall mean any Debt evidenced
by the Master Guaranty and any Debt evidenced by any
guaranty agreement given by any Guarantor in favor of any
holder of any Debt described in Exhibit F whereby such
Guarantor guarantees the payment of all principal, interest
and other amounts, if any, payable in respect of such Debt.
"Plan" shall mean a "pension plan," as such term is
defined in ERISA, established or maintained by the Company
or any ERISA Affiliate or as to which the Company or any
ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Remaining Average Life" means, with respect to any
Called Principal, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained
by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by
(b) the number of years (calculated to the nearest one-
twelfth year) that will elapse between the Settlement Date
with respect to such Called Principal and the scheduled due
date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to
the Called Principal of any Note, all payments of such
Called Principal and interest thereon that would be due
after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made
prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are
due to be made under the terms of the Notes, then the amount
of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement
Date and required to be paid on such Settlement Date
pursuant to 4B or 7A.
"Required Holder(s)" shall mean the holder or holders
of at least seventy-five percent (75%) of the aggregate
principal amount of the Notes from time to time outstanding.
"Required Prepayment" shall have the meaning specified
in 4A.
"Restricted Investments" shall mean all Investments
made by the Company or any Guarantor in any Person or
property except:
(a) Investments by NPCI and its Subsidiaries in
and to NPCI and its Subsidiaries, including any
Investment in any Person which, after giving effect to
such Investment, will become a Subsidiary;
(b) Investments in commercial paper maturing in
270 days or less from the date of issuance which, at
the time of acquisition by the Company or any
Guarantor, is accorded the highest ratings by Standard
& Poor's Corporation, Moody's Investors Service, Inc.
or other nationally recognized credit rating agency of
similar standing;
(c) Investments in direct obligations of the
United States of America or any agency or
instrumentality of the United States of America, the
payment or guarantee of which constitutes a full faith
and credit obligation of the United States of America,
in either case, maturing in twelve months or less from
the date of acquisition thereof;
(d) Investments in certificates of deposit
maturing within one year from the date of issuance
thereof, issued by a bank or trust company organized
under the laws of the United States or any state
thereof, or the United States branch of any bank or
trust company organized under the laws of any country
of Western Europe or of Japan, having, in each case,
capital, surplus and undivided profits aggregating at
least $250,000,000;
(e) Investments in securities issued by state and
local governments (or subdivisions thereof) maturing in
twelve months or less from the date of acquisition by
the Company or a Guarantor which at the time of
acquisition thereof by the Company or a Guarantor are
rated AA or better by Standard & Poor's Corporation or
Aa or better by Moody's Investors Service, Inc.;
(f) loans or advances to officers, directors and
employees, such loans or advances not in the aggregate
to exceed, in any event, an amount equal to $1,500,000;
and
(g) promissory notes and other receivables
arising from the sale of goods and services or other
assets, not to exceed, in the aggregate, $7,500,000.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Settlement Date" means, with respect to the Called
Principal of any Note, the date on which such Called
Principal is to be prepaid pursuant to Section 8.2 or has
become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
"Sharing Agreement" shall mean the Sharing Agreement
dated as of May 8, 1997, as amended from time to time.
"Significant Holder" shall mean (i) you, so long as you
shall hold (or be committed under this Agreement to
purchase) any Note, or (ii) any other holder of at least 10%
of the aggregate principal amount of the Notes from time to
time outstanding.
"Subsidiary" shall mean any Person of which or in which
NPCI and its other Subsidiaries owns directly or indirectly
50% or more of (i) the combined voting power of all classes
of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors
of such Person, if it is a corporation, (ii) the capital
interest or profits interest of such Person, if it is a
partnership, joint venture or similar entity, or (iii) the
beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
"Total Assets" shall mean, as of the date of any
determination thereof, all assets of the Company and the
Guarantors computed in accordance with GAAP consistently
applied.
"Transferee" shall mean any direct or indirect
transferee of all or any part of any Note purchased by you
under this Agreement.
"Voting Securities" shall mean Securities of any class
or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of
the corporate directors (or Persons performing similar
functions).
B. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles consistent with those
applied in the preparation of the financial statements referred
to in 8D.
.c.Section 11. Miscellaneous;.
Section 11. Miscellaneous.
A. Note Payments. So long as you shall hold any
Note, the Company will make payments of principal thereof or
Optional Prepayment Price as applicable, and interest
thereon, not later than 12:00 noon, Houston time, on the day
when due by wire transfer of immediately available funds for
credit to your account or accounts as specified in Schedule
I attached hereto, or such other account or accounts in the
United States as you may designate in writing,
notwithstanding any contrary provision herein or in any Note
with respect to the place of payment. You agree that,
before disposing of any Note, you will make a notation
thereon (or on a schedule attached thereto) of all principal
payments previously made thereon and of the date to which
interest thereon has been paid. The Company agrees to
afford the benefits of this 11A to any Transferee which
shall have made the same agreement as you have made in this
11A. If any payment due on any Note is payable on a
Saturday, Sunday or day on which banks in the State of Texas
or the State of New York are authorized to be closed, such
payment shall be payable on the next succeeding day which is
not a Saturday, Sunday or day on which banks in Texas and
New York are authorized to be closed, without accruing
additional interest.
B. Expenses. The Company agrees, whether or not the
transactions contemplated hereby shall be consummated, to
pay, and save you and any Transferee harmless against
liability for the payment of, all reasonable out-of-pocket
expenses arising in connection with such transactions (other
than such costs and expenses associated with or resulting
from your resale of the Notes), including (i) all document
production and duplication charges and the reasonable fees
and expenses of any special counsel engaged by you in
connection with this Agreement and the transactions
contemplated hereby, and all document production and
duplication charges and the reasonable fees and expenses of
any special counsel engaged by you or any Transferee in
connection with any subsequent proposed modification of, or
proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or proposed consent
granted, (ii) expenses incurred in obtaining a Private
Placement Number from Standard & Poor's CUSIP Service Bureau
with respect to the Notes being purchased by you; and (iii)
to the extent permitted by applicable law, the reasonable
costs and expenses, including reasonable attorneys' fees,
incurred by you or any Transferee in enforcing any rights
against the Company under this Agreement or the Notes
(whether in the contest of civil action, adversary
proceeding, workout or otherwise) or in responding to any
subpoena or other legal process issued in connection with
this Agreement or the transactions contemplated hereby or by
reason of your or any Transferee's having acquired any Note,
including without limitation reasonable costs and expenses
incurred in any bankruptcy case. The obligations of the
Company under this 11B shall survive the transfer of any
Note or portion thereof or interest therein by you or any
Transferee and the payment of any Note.
C. Consent to Amendments. This Agreement may be
amended, and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the
Required Holder(s) except that, without the written consent
of the holder or holders of all Notes at the time
outstanding and the Company no amendment to this Agreement
shall change the maturity of any Note, or change the
principal of, or the rate or time of payment of interest or
any premium payable with respect to any Note, or affect the
time, amount or allocation of any required prepayments, or
change the proportion of the principal amount of the Notes
required with respect to any consent. Each holder of any
Note at the time or thereafter outstanding shall be bound by
any consent authorized by this 11C, whether or not such
Note shall have been marked to indicate such consent, but
any Notes issued thereafter may bear a notation referring to
any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any
rights hereunder or under any Note shall operate as a waiver
of any rights of any holder of such Note. As used herein and
in the Notes, the terms "this Agreement" and "the Note
Agreements" and references thereto shall mean this Agreement
as it may from time to time be amended or supplemented.
D. Form, Registration, Transfer and Exchange of
Notes; Lost Notes. The Notes are issuable as registered
notes without coupons in denominations of not less than
$1,000,000, except as may be necessary to effect the
registration or transfer of a Note which is outstanding in a
principal amount of less than $1,000,000. The Company shall
keep at its principal office a register in which the Company
shall provide for the registration of Notes and of transfers
of Notes. Upon surrender for registration of transfer of any
Note at the principal office of the Company, the Company
shall, at its expense, execute and deliver one or more new
Notes of like tenor and of a like aggregate principal
amount, registered in the name of such transferee or
transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of
any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the
principal office of the Company. Whenever any Notes are so
surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the
exchange is entitled to receive. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed,
or be accompanied by a written instrument of transfer duly
executed, by the holder of such Note or such holder's
attorney duly authorized in writing. Any Note or Notes
issued in exchange for any Note or upon transfer thereof
shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of
written notice from the holder of any Note of the loss,
theft, destruction or mutilation of such Note and, in the
case of any such loss, theft or destruction, upon receipt of
such holder's unsecured indemnity agreement, or in the case
of any such mutilation upon surrender and cancellation of
such Note, the Company will make and deliver a new Note, of
like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
E. Persons Deemed Owners; Participations. Prior to
due presentment for registration of transfer, the Company
may treat the Person in whose name any Note is registered as
the owner and holder of such Note for the purpose of
receiving payment of principal of and premium, if any, and
interest on such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary. Subject to
the preceding sentence, the holder of any Note may from time
to time grant participations in all or any part of such Note
to any Person on such terms and conditions as may be
determined by such holder in its sole and absolute
discretion.
F. Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained
herein or made in writing by or on behalf of the Company in
connection herewith shall survive the execution and delivery
of this Agreement and the Notes, the transfer by you of any
Note or portion thereof or interest therein and the payment
of any Note, and may be relied upon by any Transferee,
regardless of any investigation made at any time by or on
behalf of you or any Transferee until such time as all
principal of, Optional Prepayment Price, if applicable, and
interest on, the Notes have been paid in full. Subject to
the preceding sentence, this Agreement and the Notes embody
the entire agreement and understanding between you and the
Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
G. Successors and Assigns. All covenants and other
agreements in this Agreement contained by or on behalf of
either of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any
Transferee) whether so expressed or not.
H. Disclosure to Other Persons. The Company
acknowledges that the holder of any Note may deliver copies
of any financial statements and other documents delivered to
such holder, and disclose any other information disclosed to
such holder, by or on behalf of the Company or any Guarantor
in connection with or pursuant to this Agreement to (i) such
holder's directors, trustees, officers, employees, agents
and professional consultants, (ii) any other holder of any
Note, (iii) any Person to which such holder offers to sell
such Note or any part thereof, (iv) any Person to which such
holder sells or offers to sell a participation in all or any
part of such Note, (v) any federal or state regulatory
authority having jurisdiction over such holder, (vi) the
National Association of Insurance Commissioners or any
similar organization or (vii) any other Person to which such
delivery or disclosure may be necessary or appropriate (a)
in compliance with any law, rule, regulation or order
applicable to such holder, (b) in response to any subpoena
or other legal process, (c) in connection with any
litigation to which such holder is a party, (d) in order to
protect such holder's investment in such Note or (e) to
correct any false or misleading information which may become
public concerning the relationship with such holder to the
Company or the Guarantors. Except as provided in the
previous sentence, each holder agrees that it will use its
best efforts to hold in confidence and not to disclose the
Confidential Information. As used herein "Confidential
Information" means copies of any financial statements and
other documents delivered to such holder, and any other
information disclosed to such holder, by or on behalf of the
Company or any Guarantor of the Company in connection with
or pursuant to this Agreement, but does not include
information (i) which was publicly known or otherwise known
to such holder, at the time of disclosure, (ii) which
subsequently becomes publicly known through no act or
omission of such holder, or (iii) which otherwise becomes
known to such holder, other than through disclosure by the
Company or any Guarantor of the Company.
I. Notices. All notices or other communications
provided for hereunder (except for the telephonic notices
required by 4C) shall be in writing and sent by nationwide
overnight delivery service (with charges prepaid) or
telecopy (with receipt confirmed by the recipient) and, (i)
if to you, addressed to you at the address specified for
such communications in Schedule 1 attached hereto, or at
such other address as you shall have specified to the
Company in writing, (ii) if to any other holder of any Note,
addressed to such other holder at such address as such other
holder shall have specified to the Company in writing or, if
any such other holder shall not have so specified an address
to the Company, then addressed to such other holder in care
of the last holder of such Note which shall have so
specified an address to the Company, and (iii) if to the
Company or any Guarantor, addressed to it at 720 W. 20th
Street, Pittsburg, Kansas 66762, Attention: Troy D. Cook,
Vice President Finance (telecopy number (316) 231-1188), or
at such other address as the Company shall have specified to
the holder of each Note in writing; provided, however, that
any such communication to the Company may also, at the
option of the holder of any Note, be delivered by any other
reasonable means either to the Company at its address
specified above or to any officer of the Company.
J. Descriptive Headings. The descriptive headings of
the several Sections of this Agreement are inserted for
convenience only and do not constitute a part of this
Agreement.
K. Satisfaction Requirement. If any agreement,
certificate or other writing, or any action taken or to be
taken, is by the terms of this Agreement required to be
satisfactory to you or to the Required Holders, the
determination of such satisfaction shall be made by you or
the Required Holders, as the case may be, in the sole and
exclusive judgment (exercised in good faith) of you or the
Required Holders, as the case may be, making such
determination.
L. Governing Law. This Agreement shall be construed
and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of
Kansas.
M. Integration. This Agreement may not be changed
orally, but (subject to the provisions of 11C) only by an
agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge
is sought. This Written Note Agreement represents the final
agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral
agreements between the parties. This Agreement, together
with all other written agreements between you and the
Company, is the final expression of the Note Agreement
between you and the Company, and such Written Note Agreement
may not be contradicted by evidence of any prior oral
agreement or of A contemporaneous oral agreement between you
and the Company. Any additional non-standard terms of this
Agreement between you and the Company including the
reduction to writing of A previous oral agreement between
you and the Company are set forth in the space below:
None
No Unwritten Oral Agreement Between You and the Company
Exists.
N. Maximum Interest Payable. The Company, you and any
other holders of the Notes specifically intend and agree to
limit contractually the amount of interest payable under
this Agreement, the Notes and all other instruments and
agreements related hereto and thereto to the maximum amount
of interest lawfully permitted to be charged under
applicable law. Therefore, none of the terms of this
Agreement, the Notes or any instrument pertaining to or
relating to this Agreement or the Notes shall ever be
construed to create a contract to pay interest at a rate in
excess of the maximum rate permitted to be charged under
applicable law, and neither the Company, any guarantor nor
any other party liable or to become liable hereunder, under
the Notes, any guaranties or under any other instruments and
agreements related hereto and thereto shall ever be liable
for interest in excess of the amount determined at such
maximum rate, and the provisions of this Section shall
control over all other provisions of this Agreement, the
Notes, any guaranties or any other instrument pertaining to
or relating to the transactions herein contemplated. If any
amount of interest taken or received by you or any holder of
a Note shall be in excess of said maximum amount of interest
which, under applicable law, could lawfully have been
collected by you or such holder incident to such
transactions, then such excess shall be deemed to have been
the result of a mathematical error by all parties hereto and
shall be refunded promptly by the Person receiving such
amount to the party paying such amount, or, at the option of
the recipient, credited ratably against the unpaid principal
amount of the Note or Notes held by you or such holder,
respectively. All amounts paid or agreed to be paid in
connection with such transactions which would under
applicable law be deemed "interest" shall, to the extent
permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the stated term of this
Agreement. "Applicable law" as used in this Section means
that law governing this Agreement in effect from time to
time which permits the charging and collection of the
highest permissible lawful, nonusurious rate of interest on
the transactions herein contemplated and "maximum rate" as
used in this Section means, with respect to each of the
Notes, the maximum lawful, nonusurious rates of interest (if
any) which under applicable law may be charged to the
Company from time to time with respect to such Notes.
O. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which
shall be deemed an original, and it shall not be necessary
in making proof of this Agreement to produce or account for
more than one such counterpart.
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement among you, NPCI and the Company.
Very truly yours,
NPC Management, Inc.
By
Name:
Title:
NPC International, Inc.
By:
Name:
Title:
The foregoing Agreement is hereby
accepted as of the date first above
written.
[Name of Note Purchaser]
By__________________________________
Name:
Title:
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement among you, NPCI and the Company.
Very truly yours,
NPC Management, Inc.
By
Name:
Title:
NPC International, Inc.
By:
Name:
Title:
The foregoing Agreement is hereby
accepted as of the date first above
written.
The Northwestern Mutual Life
Insurance Company
By__________________________________
Name:
Title:
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement among you, NPCI and the Company.
Very truly yours,
NPC Management, Inc.
By
Name:
Title:
NPC International, Inc.
By:
Name:
Title:
The foregoing Agreement is hereby
accepted as of the date first above
written.
The Variable Annuity Life
Insurance Company
By__________________________________
Name:
Title:
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement among you, NPCI and the Company.
Very truly yours,
NPC Management, Inc.
By
Name:
Title:
NPC International, Inc.
By:
Name:
Title:
The foregoing Agreement is hereby
accepted as of the date first above
written.
American General Life
Insurance Company
By__________________________________
Name:
Title:
If you are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement among you, NPCI and the Company.
Very truly yours,
NPC Management, Inc.
By
Name:
Title:
NPC International, Inc.
By:
Name:
Title:
The foregoing Agreement is hereby
accepted as of the date first above
written.
The Franklin Life Insurance Company
By__________________________________
Name:
Title:
Name and Address Principal Amount
of Purchaser of Notes to Be Purchased
The Northwestern Mutual Life
Insurance Company $15,000,000
720 East Wisconsin Ave.
Milwaukee, Wisconsin 53202
Attention: Securities Department
Telecopier number: (414) 299-7124
Payments
All payments on or in respect of the Notes to be by bank
wire transfer of Federal or other immediately available funds
(identifying each payment as "NPC Management, Inc., 7.94% Senior
Notes due May 1, 2006, [principal, premium or interest]") to:
Bankers Trust Company
ABA # 0210-01033
16 Wall Street
Insurance Unit, 4th Floor
New York, New York 10005
for credit to: The Northwestern Mutual Life Insurance
Company
Account Number: 00-000-027
Notices
All notices and communications to be addressed as first
provided above, except notices with respect to payments and
written confirmation of each such payment, to be addressed
Attention: Investment Operations
Telephonic Notice, if any, under 4C, to be made to Lisa
Cadotte, at (414) 299-1545 (or to such other person at such other
telephone number designated in writing by the holder to the
Company) in person and not by voice mail.
Name of Nominee in which Notes are to be issued: None
Tax I.D. Number: 39-0509570
Name and Address Principal Amount
of Purchaser of Notes to Be Purchased
The Variable Annuity Life Insurance Company $20,000,000
c/o American General Corporation
*[P. O. Box 3247
Houston, Texas 77253-3247]
Attention: Investment Research Department, A37-01
Facsimile Number: (713) 831-1366
*Overnight Mailing Address:
[2929 Allen Parkway
Houston, Texas 77019-2155]
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as "NPC Management, Inc., 7.94% Senior
Guaranteed Notes due May 1, 2006, [principal, premium or
interest]") to:
ABA #011000028
State Street Bank and Trust Company
Boston, Massachusetts 02101
Re: The Variable Annuity Life Insurance Company
AC-0125-821-9
OBI=PPN Number and description of payment
Fund Number PA 54
Notices
All notices of payment on or in respect of the Notes and written
confirmation of each such payment to:
The Variable Annuity Life Insurance Company and PA 54
c/o State Street Bank and Trust Company
Insurance Services Custody (AH2)
1776 Heritage Drive
North Quincy, Massachusetts 02171
Facsimile Number: (617) 985-4923
Duplicate payment notices and all other correspondences to be
addressed as first provided above.
Telephonic Notice, if any, under 4C, to be made to Kathy Gentry,
at (713) 831-1356 (or to such other person at such other
telephone number designated in writing by the holder to the
Company) in person and not by voice mail.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 74-1625348
Deliver securities by overnight courier to:
State Street Bank and Trust Company
Securities Services
225 Franklin Street
Boston, Massachusetts 02105
Attention: Mr. David A. Kay_Receive and Deliver
with a transmittal letter requesting that State Street confirm
receipt of the securities to Carolyn Lee at American General and
that they transmit by regular mail a photocopy of such securities
to her attention at the above address for American General.
Copies of transmittal letter, together with copies of original
securities, should be sent to David G. Castano at American
General Corporation, Suite A-36-01, 2929 Allen Parkway, Houston,
Texas 77019.
Name and Address Principal Amount
of Purchaser of Notes to Be Purchased
American General Life Insurance Company $10,000,000
c/o American General Corporation
*[P. O. Box 3247
Houston, Texas 77253-3247]
Attention: Investment Research Department, A37-01
Facsimile Number: (713) 831-1366
*Overnight Mailing Address:
[2929 Allen Parkway
Houston, Texas 77019-2155]
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as "NPC Management, Inc., 7.94% Senior
Guaranteed Notes due May 1, 2006, [principal, premium or
interest]") to:
ABA #011000028
State Street Bank and Trust Company
Boston, Massachusetts 02101
Re: American General Life Insurance Company
AC-0125-880-5
OBI=PPN # and description of payment
Fund Number PA 40
Notices
All notices of payment on or in respect of the Notes and written
confirmation of each such payment to:
American General Life Insurance Company and PA 40
c/o State Street Bank and Trust Company
Insurance Services Custody (AH2)
1776 Heritage Drive
North Quincy, Massachusetts 02171
Facsimile Number: (617) 985-4923
Duplicate payment notices and all other correspondences to be
addressed as first provided above.
Telephonic Notice, if any, under 4C, to be made to Kathy Gentry,
at (713) 831-1356 (or to such other person at such other
telephone number designated in writing by the holder to the
Company) in person and not by voice mail.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 25-0598210
Securities should be forwarded to:
State Street Bank and Trust Company
Securities Services
225 Franklin Street
Boston, Massachusetts 02105
Attention: Mr. David A. Kay - Receive and Deliver
with a transmittal letter requesting that State Street confirm
receipt of the securities to Carolyn Lee at American General and
that they transmit by regular mail a photocopy of such securities
to her attention at the above address for American General.
Copies of transmittal letter, together with copies of original
securities, should be sent to David G. Castano at American
General Corporation, Suite A-36-01, 2929 Allen Parkway, Houston,
Texas 77019.
Name and Address Principal Amount
of Purchaser of Notes to Be Purchased
The Franklin Life Insurance Company $5,000,000
c/o American General Corporation
*[P. O. Box 3247
Houston, Texas 77253-3247]
Attention: Investment Research Department, A37-01
Facsimile Number: (713) 831-1366
*Overnight Mailing Address:
[2929 Allen Parkway
Houston, Texas 77019-2155]
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as "NPC Management, Inc., 7.94% Senior
Guaranteed Notes due May 1, 2006, [principal, premium or
interest]") to:
ABA #011000028
State Street Bank and Trust Company
Boston, Massachusetts 02101
Re: The Franklin Life Insurance Company
AC-2492-440-9
OBI=PPN Number and description of payment
Fund Number PA 37
Notices
All notices of payment on or in respect of the Notes and written
confirmation of each such payment to:
The Franklin Life Insurance Company and PA 37
c/o State Street Bank and Trust Company
Insurance Services Custody (AH2)
1776 Heritage Drive
North Quincy, Massachusetts 02171
Facsimile Number: (617) 985-4923
Duplicate payment notices and all other correspondences to be
addressed as first provided above.
Telephonic Notice, if any, under 4C, to be made to Kathy Gentry,
at (713) 831-1356 (or to such other person at such other
telephone number designated in writing by the holder to the
Company) in person and not by voice mail.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 37-0281650
Deliver securities by overnight courier to:
State Street Bank and Trust Company
Securities Services
225 Franklin Street
Boston, Massachusetts 02105
Attention: Mr. David A. Kay_Receive and Deliver
with a transmittal letter requesting that State Street confirm
receipt of the securities to Carolyn Lee and transmit by regular
mail a photocopy of such securities to her attention at American
General Corporation, Suite A37-01, 2929 Allen Parkway, Houston,
Texas 77019.
Copies of transmittal letter, together with copies of original
securities, should be sent to David G. Castano at American
General Corporation, Suite A-36-01, 2929 Allen Parkway, Houston,
Texas 77019.
(Form of Note)
This Note has not been registered under the Securities Act of
1933, as amended (the "Securities Act"). Any sale, transfer or
other disposition of this Note (other than to the Issuer hereof)
may be made only if made (A) pursuant to an effective
registration statement under the Securities Act or (B) pursuant
to an exemption from the registration requirements of the
Securities Act.
NPC Management, Inc.
7.94% Senior Guaranteed Note
Due May 1, 2006
No. _____________, 19____
$
NPC Management, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
_________________________________
or registered assigns
on the first day of May, 2006
the principal amount of
_______________________________________ Dollars ($_____________)
and to pay interest (computed on the basis of a 360-day year of
twelve 30-day months) on the principal amount from time to time
remaining unpaid hereon at the rate of 7.94% per annum from the
date hereof until maturity, payable semiannually on the first day
of each May and November in each year (commencing November 1,
1997) and at maturity. The Company agrees to pay interest on
overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent
legally enforceable) on any overdue installment of interest, at
the rate of (i) 9.94% per annum or (ii) the rate announced by
Texas Commerce Bank National Association as its "prime rate",
whichever is greater, after the due date, whether by acceleration
or otherwise, until paid. Both the principal hereof and interest
hereon are payable at the principal office of the Company in
Pittsburg, Kansas in coin or currency of the United States of
America which at the time of payment shall be legal tender for
the payment of public and private debts.
This Note is one of the 7.94% Senior Guaranteed Notes due
May 1, 2006 (the "Notes") of the Company in the aggregate
principal amount of $50,000,000 issued or to be issued under and
pursuant to the terms and provisions of the separate Note
Agreements, each dated as of May 1, 1997 (the "Note Agreements"),
entered into by the Company with the original Purchasers therein
referred to. This Note and the payment and performance hereof
are unconditionally guaranteed pursuant to the Master Guaranty
dated May 1, 1997 (the "Master Guaranty") of the Guarantors named
therein. This Note and the holder hereof are entitled equally
and ratably with the holders of all other Notes outstanding under
the Note Agreements to all the benefits provided for thereby or
referred to therein and provided for by the Master Guaranty.
Reference is hereby made to the Note Agreements and the Master
Guaranty for a statement of such rights and benefits
This Note and the other Notes outstanding under the Note
Agreements may be declared due prior to their expressed maturity
dates and certain prepayments are required to be made thereon,
all in the events, on the terms and in the manner and amounts as
provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the
option of the Company prior to their expressed maturity dates
except on the terms and conditions and in the amounts and with
the premium, if any, set forth in the Note Agreements.
This Note is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of
the Company duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of this Note
or its attorney duly authorized in writing. Payment of or on
account of principal, premium, if any, and interest on this Note
shall be made only to or upon the order in writing of the
registered holder.
NPC Management, Inc.
By
Name:
Title:
(Form of Opinion of Counsel to the Company)
The closing opinion of Shook, Hardy & Bacon L.L.P., special
counsel for the Company and the Guarantors, which is called for
by 3A(x) of the Agreements, shall be dated the Date of Closing
and addressed to the Purchasers, shall be satisfactory in scope
and form to the Purchasers, and shall be to the effect that:
1. The Company is a corporation, duly incorporated,
validly existing and in good standing under the laws of Delaware,
has the corporate power and the corporate authority to execute
and perform the Note Agreements and to issue the Notes and has
the full corporate power and the corporate authority to conduct
the activities in which it is now engaged and is duly licensed or
qualified and is in good standing as a foreign corporation in
each jurisdiction wherein the failure to be so licensed or
qualified would have a material adverse effect on the conditions
or operations of the Company and Guarantors on a consolidated
basis.
2. Each Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation and is duly licensed or qualified and is in good
standing in each jurisdiction wherein the failure to be so
licensed or qualified would materially adversely affect the
condition or operations of such Guarantor and all of the issued
and outstanding shares of capital stock of each such Guarantor
have been duly issued, are fully paid and non-assessable and are
owned by the Company, by one or more Guarantors, or by the
Company and one or more Guarantors. NPCI owns 100% of the
outstanding shares of capital stock of the Company and the
Company and/or NPCI own the percentage of shares of capital stock
of each other Guarantor indicated on Exhibit E hereto.
3. The Note Agreements and the Notes have been duly
authorized by all necessary corporate action on the part of the
Company, has been duly executed and delivered by the Company and
constitute the legal, valid and binding contract of the Company
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is
considered in a proceeding in equity or at law).
4. The Master Guaranty has been duly authorized by all
necessary corporate action on the part of each of the Guarantors,
has been duly executed and delivered by the Guarantors and
constitutes the legal, valid and binding contract of the
Guarantors enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law).
5. No approval, consent or withholding of objection on the
part of, or filing, registration or qualification with, any
governmental body, Federal or state, is necessary in connection
with the execution and delivery of the Note Agreements, Notes,
and the Master Guaranty (collectively the "Operative Documents").
6. The issuance and sale of the Notes and the execution,
delivery and performance by the Company and the Guarantors of the
Operative Documents do not conflict with or result in any breach
of any of the provisions of or constitute a default under or
result in the creation or imposition of any Lien upon any of the
property of the Company or any Guarantor pursuant to the
provisions of the Charter or By-laws of the Company or any
Guarantor or any agreement or other instrument known to such
counsel to which the Company or any Guarantor is a party or by
which the Company or any Guarantor may be bound.
7. The issuance, sale and delivery of the Notes and the
Master Guaranty under the circumstances contemplated by the Note
Agreement do not, under existing law, require the registration of
the Notes or the Master Guaranty under the Securities Act of
1933, as amended, or the qualification of an indenture under the
Trust Indenture Act of 1939, as amended.
8. Assuming the Purchasers have delivered the written
notice attached hereto as Exhibit B-2 to the addressees also set
forth on Exhibit B-2, the Purchasers are parties to the Sharing
Agreement as if they were original parties thereto.
The opinion of Shook, Hardy & Bacon L.L.P. shall cover such
other matters relating to the sale of the Notes as the Purchasers
may reasonably request. With respect to matters of fact on which
such opinion is based, such counsel shall be entitled to rely on
appropriate certificates of public officials and officers of the
Company and the Guarantors.
Notice Regarding Election
to
Join Sharing Agreement
May ____, 1997
Notice is hereby given to each of the parties listed on
Schedule A hereto as follows:
Whereas, pursuant to that certain Note Agreement dated as of
May 1, 1997, between NPC Management, Inc. (the "Company"), NPC
International, Inc. and the institutional investors which are
signatories hereto (the "Noteholders"), the Company has issued
and sold to such Noteholders $50,000,000 of its 7.94% Senior
Guaranteed Notes (the "Notes") due May 1, 2006. The Notes are
unconditionally guaranteed pursuant to the Master Guaranty dated
May 1, 1997 (the "Guaranty");
Whereas, pursuant to that certain Sharing Agreement dated as
of May 8, 1997 (the "Sharing Agreement"), entered into by and
among Texas Commerce Bank National Association, individually and
as agent, Pacific Mutual Life Insurance Company, Pacific
Corinthian Life Insurance Company, Lutheran Brotherhood and the
Prudential Insurance Company of America (collectively, the
"Current Lenders"), the Current Lenders have agreed to certain
sharing arrangements as more fully set forth therein and,
pursuant to Section 17 thereof, have agreed to permit any
institutional investor which loans money to, or purchases notes
from, the Company (collectively, "New Borrowings"), which New
Borrowings are pari passu with the indebtedness of the Company to
the Current Lenders, and which indebtedness is guaranteed by the
Guarantors (as defined in the Sharing Agreement), to become a
party to the Sharing Agreement;
Whereas, the Notes will be pari passu with the indebtedness
of the Company to the Current Lenders and the Notes will be
guaranteed by the Guarantors;
Therefore, pursuant to Section 17 of the Sharing Agreement,
the Noteholders elect to become a party to the Sharing Agreement
and, thereupon, have all the rights and obligations of a "Lender"
thereunder. As a result of such election, (a) the Notes shall be
considered "Company Loan Documents" for all purposes of the
Sharing Agreement, and (b) the Guaranty Agreement shall be
considered a "Subject Guaranty" and one of the "Subject
Guaranties" for all purposes of the Sharing Agreement and the
Noteholders shall have the same rights and obligations under the
Sharing Agreement as do existing Lenders thereunder.
American General Life
Insurance
Company
The Variable Annuity Life
Insurance
Company
The Franklin Life Insurance
Company
By:
Its
The Northwestern Mutual Life
Insurance Company
By:
Its
Schedule A
to
Notice
Pacific Mutual Life Insurance Company
Pacific Corinthian Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92658-9000
Attention: Bill Schmidt
Fax: (714) 721-5406
Lutheran Brotherhood
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Attention: Conrad Smith
Fax: (612) 340-8408
Texas Commerce Bank National Association
712 Main
Houston, Texas 77002
Attention: John Sarvadi
Fax: (713) 216-6710
The Prudential Insurance Company of America
c/o Prudential Capital Group
Texas Commerce Tower
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201
Attention: Managing Director
Fax: (214) 720-6299
(Form of Opinion of Counsel to the Purchasers)
The closing opinion of Chapman and Cutler, special counsel
for the Purchasers, which is called for by 3A(xi) of the
Agreements, shall be dated the Date of Closing and addressed to
the Purchasers, shall be satisfactory in scope and form to the
Purchasers, and shall be to the effect that:
1. The Company is a corporation, duly incorporated,
validly existing and in good standing under the laws of Delaware,
has the corporate power and the corporate authority to execute
and deliver the Note Agreements and to issue the Notes.
2. The Note Agreements have been duly authorized by all
necessary corporate action on the part of the Company, have been
duly executed and delivered by the Company and constitutes the
legal, valid and binding contracts of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting creditors'
rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a
proceeding in equity or law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, and the Notes being
delivered on the date hereof have been duly executed and
delivered by the Company and constitute the legal, valid and
binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent
conveyance and similar laws affecting creditors' rights
generally, and general principles of equity (regardless of
whether the application of such principles is considered in a
proceeding in equity or at law).
4. The issuance, sale and delivery of the Notes and the
Master Guaranty contemplated by the Note Agreements under the
circumstances contemplated by the Note Agreements do not, under
existing law, require the registration of the Notes or the Master
Guaranty under the Securities Act of 1933, as amended, or the
qualification of an indenture under the Trust Indenture Act of
1939, as amended.
The opinion of Chapman and Cutler shall also state that the
opinion of Shook, Hardy & Bacon is satisfactory in scope and form
to Chapman and Cutler and that, in their opinion, the Purchaser
is justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above,
Chapman and Cutler may rely, as to matters referred to in
paragraph 1, solely upon an examination of the Certificate of
Incorporation certified by, and a certificate of good standing of
the Company from, the Secretary of State of the State of
Delaware, the By-laws of the Company and the general business
corporation law of the State of Delaware. The opinion of Chapman
and Cutler is limited to the laws of the State of Illinois, the
general business corporation law of the States of Delaware and
Kansas and the Federal laws of the United States.
The opinion of Chapman and Cutler shall cover such other
matters relating to the sale of the Notes as the Purchasers may
reasonably request. With respect to matters of fact on which such
opinion is based, such counsel shall be entitled to rely on
appropriate certificates of public officials and officers of the
Company and the Guarantors.
(List of Agreements Restricting Debt)
1. Note Agreement dated as of March 30, 1993, among National
Pizza Company and Pacific Mutual Life Insurance Company,
Pacific Corinthian Life Insurance Company and Lutheran
Brotherhood relating to 6.35% promissory notes in the
original aggregate principal amount of $20,000,000 due
April 1, 2000, as amended by agreements dated March 28,
1995, May 24, 1995, May 29, 1996, March 3, 1997 and May 8,
1997.
2. Amended and Restated Master Shelf and Assumption Agreement
dated as of May 8, 1997, between the Company and The
Prudential Insurance Company of America, relating to
promissory notes in the aggregate principal amount of
$60,000,000 issuable in accordance with the terms thereof.
3. $15,000,000 Amended and Restated Revolving Credit Agreement
dated as of May 8, 1997, among the Company, various banks
and Texas Commerce Bank National Association, as agent for
such banks.
4. $185,000,000 Amended and Restated Revolving Credit Agreement
dated as of May 8, 1997, among the Company, various banks
and Texas Commerce Bank National Association, as agent for
such banks.
(NPCI and its Subsidiaries, other than the Company)
1. NPCI. NPC International, Inc., a Kansas corporation,
formerly known as National Pizza Company.
2. Romacorp. Romacorp, Inc., a Delaware corporation
("Romacorp"), 100% of the Voting Securities of which are
owned by NPCI.
3. NPC Restaurants. NPC Restaurants LP, a Delaware limited
partnership ("NPC Restaurants"), the sole general partner of
which is NPCI, and the sole limited partner of which is the
Company. NPCI, as general partner, owns 1% of the Voting
Securities of NPC Restaurants, and the Company, as limited
partner, owns 99% of the voting Securities of NPC
Restaurants.
4. Roma Holdings. Roma Holdings, Inc., a Delaware corporation
("Roma Holdings"), 100% of the Voting Securities of which
are owned by Romacorp.
5. Roma Dining. Roma Dining LP, a Delaware limited partnership
("Roma Dining"), the sole general partner of which is
Romacorp, and the sole limited partner of which is Roma
Holdings. Romacorp, as general partner, owns 1% of the
Voting Securities of Roma Dining, and Roma Holdings, as
limited partner, owns 99% of the Voting Securities of Roma
Dining.
6. Roma Franchise. Roma Franchise Corporation, a Delaware
corporation, 100% of the Voting Securities of which are
owned by Romacorp.
7. Roma Systems. Roma Systems, Inc., a Delaware corporation,
100% of the Voting Securities of which are owned by
Romacorp.
8. Seattle Restaurant Equipment. Seattle Restaurant Equipment
Company, Inc., a Washington corporation, 100% of the Voting
Securities of which are owned by NPCI.
9. Roma Ft. Worth. Roma Ft. Worth, Inc., a Texas corporation,
100% of the Voting Securities of which are owned by
Romacorp.
10. Roma Bar Management. Roma Bar Management Corporation, a
Texas corporation, 100% of the Voting Securities of which
are owned by Romacorp.
11. Roma Huntington Beach. Roma Huntington Beach, Inc., a
Delaware corporation, 100% of the Voting Securities of which
are owned by Romacorp.
(Description of Debt)*
Note Agreement dated as of March 30, 1993,
among National Pizza Company and Pacific
Mutual Life Insurance Company, Pacific
Corinthian Life Insurance Company and
Luther Brotherhood relating to 6.35%
promissory notes in the original aggregate
principal amount of $20,000,000 due
April 1, 2000, as amended by Letter Agreements
dated March 28, 1995, May 24, 1995, May 29, 1996,
March 3, 1997 and May 8, 1997. $12,000,000
Amended and Restated Master Shelf and Assumption
Agreement dated as of May 8, 1997,
between the Company and The Prudential
Insurance Company of America relating to
promissory notes in the aggregate
principal amount of $60,000,000 issuable in
accordance with the terms thereof. $30,000,000
$15,000,000 Amended and Restated Revolving Credit
Agreement dated as of March 5, 1997, among the Company,
various banks and Texas Commerce Bank National
Association, as agent for such banks. $4,000,000
$185,000,000 Amended and Restated Revolving Credit
Agreement dated as of March 5, 1997, among the Company,
various banks and Texas Commerce Bank National
Association, as agent for such banks. $89,000,000
Debt due T. R. Restaurants, Inc., pursuant to a
promissory note dated July 20, 1992, from
Romacorp, Inc.'s predecessor to T. R. Restaurants, Inc.
(assigned by T. R. Restaurants, Inc., to Fred Kasner)
in the original principal amount of $4,000,000. $1,764,459
Total $136,764,4
59
*Balances as of May 13, 1997
(Liens Existing as of the Date of Closing)
1. Liens on certain restaurant equipment of Romacorp, Inc.
located at approximately eight Tony Roma's restaurants, securing
Debt permitted under 6C(2).
(Form of Master Guaranty)
Master Guaranty
This Master Guaranty (the "Guaranty"), dated as of May 1,
1997, is executed and delivered by NPC International, Inc., a
Kansas corporation ("NPCI"), Romacorp, Inc., a Delaware
corporation, NPC Restaurants LP, a Delaware limited partnership,
Roma Holdings, Inc., a Delaware corporation, Roma Dining LP, a
Delaware limited partnership, Roma Franchise Corporation, a
Delaware corporation, and Roma Systems, Inc., a Delaware
corporation, Seattle Restaurant Equipment Company, Inc., a
Washington corporation, Roma Ft. Worth, Inc., a Texas
corporation, Roma Bar Management Corporation, a Texas
corporation, Roma Huntington Beach, Inc., a Delaware corporation
and Each of the Persons which may become a party hereto
(individually, a "Guarantor" and, collectively, the
"Guarantors"), to The Northwestern Mutual Life Insurance Company
and The Variable Annuity Life Insurance Company, American General
Life Insurance Company and The Franklin Life Insurance Company
(individually, a "Purchaser" and, collectively, the
"Purchasers").
Article I
Section 1.1. Definitions. As used in this Guaranty, these
terms shall have these respective meanings:
"Company" means NPC Management, Inc., a Delaware
corporation, and its successors, assigns, trustees and
receivers.
"Debt" means the sum of all principal of, premium, if
any, and interest on the Notes, and all other amounts for
which the Company or any other Obligor is liable to the
Purchasers under the Note Agreements and the Notes. The
Debt includes interest and other obligations accruing or
arising in connection with the foregoing after
(a) commencement of any case under any bankruptcy or similar
laws by or against any Obligor or (b) the obligations of any
Obligor shall cease to exist by operation of law or for any
other reason. The Debt also includes all reasonable
attorneys' fees and any other expenses incurred by a
Purchaser in negotiation, monitoring or enforcing the Note
Agreements, the Notes or this Master Guaranty or defending
against any claims made by Persons other than the
Purchasers, arising directly or indirectly in respect of or
on account of any of the Debt.
"Dollars" and "$" means lawful money of the United
States of America.
"Guaranteed Debt" means, as to any Guarantor, the
Maximum Amount, less the amounts, if any, of payments of the
Guaranteed Debt made by such Guarantor and clearly
identified as such in a notice accepted in writing by a
Purchaser confirming the payment and reduction of the
Guaranteed Debt as to such Guarantor.
"Guarantor's Net Worth" means, as to any Guarantor,
(a) the fair value of the property of such Guarantor from
time to time (taking into consideration the value, if any,
of rights of subrogation, contribution and indemnity), plus
(b) such Guarantor's rights under any contribution
agreement, minus (c) the total liabilities of such Guarantor
(including contingent liabilities discounted in appropriate
instances, but excluding liabilities of such Guarantor under
this Guaranty) from time to time. It is agreed that a
Guarantor's Net Worth may fluctuate from time to time after
the date hereof as it is determined on each Determination
Date (as defined in the definition of "Maximum Amount").
"Joinder Agreement" means each Joinder Agreement from
time to time executed and delivered to the Purchasers by a
Subsidiary of NPCI, pursuant to the terms of the Note
Agreements, for the purpose, among others, of becoming an
additional Guarantor hereunder, substantially in the form of
Exhibit A attached hereto.
"Note Agreements" means, collectively, each Note
Agreement dated as of May 1, 1997, among the Company, NPCI
and each Purchaser whereby the Company has agreed to issue
to the Purchasers its 7.94% Senior Guaranteed Notes Due May
1, 2006 in the aggregate stated principal amount of
$50,000,000, as the same may be amended, restated,
consolidated or otherwise modified from time to time.
"Maximum Amount" means, with respect to any Guarantor,
the greater of (a) all proceeds (without duplication) of the
Debt directly or indirectly (by intercompany loan, advance,
capital contribution, such Guarantor's ownership interest in
any Person receiving the proceeds of the Debt, or otherwise)
advanced to or for the amount of, or used by or for the
benefit of, such Guarantor (which in the case of NPCI, shall
mean 100% of the Debt); (b) ninety-five percent (95%) of
Guarantor's Net Worth from time to time; or (c) the amount
that in a legal proceeding brought within the applicable
limitations period is determined by the final, nonappealable
order of a court having jurisdiction over the issue and the
applicable parties to be the amount of value given by the
Purchasers, or received by such Guarantor, in exchange for
the obligations of Guarantor under this Guaranty. If on any
date after the date hereof (any such date being herein
called a "Determination Date"), ninety-five percent (95%) of
such Guarantor's Net Worth is greater than either of the
amounts described in clauses (a) and (c) above, the Maximum
Amount shall be deemed to have increased through and as of
such Determination Date to ninety-five percent (95%) of such
Guarantor's Net Worth as determined on such Determination
Date (and the Guaranteed Debt as to such Guarantor shall
have correspondingly increased), without further action by
or agreement between the Purchasers and such Guarantor, and
any subsequent reduction or diminution of such Guarantor's
Net Worth after such Determination Date will not reduce the
Guaranteed Debt as to such Guarantor. Notwithstanding
anything to the contrary contained in this definition of
"Maximum Amount" or in any other provision of this Guaranty,
the "Maximum Amount" shall never be less than the amount
referred to in clause (a) above.
"Note Documents" means the Note Agreements and the
Notes, as amended.
"Obligor" means any person or entity now or hereafter
primarily or secondarily obligated to pay all or any part of
the Debt, including the Company and each Guarantor.
Unless redefined in this Guaranty, capitalized terms used in this
Guaranty have the respective meanings ascribed to them in the
Note Agreements.
Article II
Section 2.1. Execution of Note Documents. Company has
executed and delivered the Note Documents to the Purchasers.
Section 2.2. Consideration. In consideration of the credit
and financial accommodations contemplated to be extended to
Company by the Purchasers pursuant to the Note Documents or
otherwise, which each Guarantor has determined will substantially
benefit it directly or indirectly, and for other good and
valuable consideration, the receipt and sufficiency of which each
Guarantor hereby acknowledges, each Guarantor executes and
delivers this Guaranty to the Purchasers with the intention of
being presently and legally bound by its terms.
Article III
Section 3.1. Payment Guaranty. Guarantors, as primary
obligors and not as sureties, unconditionally, jointly and
severally, guarantee to the Purchasers, for their pro-rata
benefit in accordance with their respective rights under the Note
Documents, the full, prompt and punctual payment of the Debt when
due (whether at its stated maturity, by acceleration or
otherwise) in accordance with the Note Documents, to the extent
set forth herein. This Guaranty is irrevocable, unconditional
and absolute, and if for any reason all or any portion of the
Debt shall not be paid when due, Guarantors, jointly and
severally, will immediately pay the Debt to the Purchasers or
other Person entitled to it, in Dollars, regardless of (a) any
defense, right of set-off or counterclaim which any Obligor may
have or assert, (b) whether any Purchaser or any other Person
shall have taken any steps to enforce any rights against any
Obligor or any other Person to collect any of the Debt, and (c)
any other circumstance, condition or contingency.
Notwithstanding any provision of this Guaranty or the Note
Documents to the contrary, to the extent that in a legal
proceeding brought within the applicable limitations period it is
determined by the final, nonappealable order of a court having
jurisdiction over the issue and the applicable parties that any
Guarantor received less than a reasonably equivalent value in
exchange for such Guarantor's incurrence of its obligations under
this Guaranty, then and only then the total liability of such
Guarantor under this Guaranty shall be limited to the Guaranteed
Debt applicable to such Guarantor. The Purchasers shall have the
right to determine and designate from time to time, without
notice or assent of Guarantor, which portions of the Debt shall
be deemed included in the Guaranteed Debt. Each Guarantor
acknowledges that such determination and designation shall be
conclusive, absent manifest error. This Guaranty shall not fail
or be ineffective or invalid or be considered too indefinite or
contingent with respect to any Guarantor because the Guaranteed
Debt applicable to such Guarantor may fluctuate from time to time
or for any other reason.
Section 3.2. Application of Payments or Prepayments. The
parties hereto agree that any payment or prepayment by the
Company or any other Person against the Debt (other than payments
made by a Guarantor in accordance with the procedures described
in the definition of "Guaranteed Debt" herein and then only with
respect to such Guarantor's liability hereunder) shall be deemed
paid first against the portion of the Debt not included in
"Guaranteed Debt" or determined for any reason not to be a part
of "Guaranteed Debt," and then shall be paid against any portion
of the Debt that is Guaranteed Debt, in such order and manner as
the Purchasers shall determine in their sole discretion.
Section 3.3. Obligations Not Affected. The Guarantors'
covenants, agreements and obligations under this Guaranty shall
in no way be released, diminished, reduced, impaired or otherwise
affected by reason of the happening from time to time of any of
the following things, for any reason, whether by voluntary act,
operation of law or order of any competent governmental authority
and whether or not the Guarantors are given any notice or are
asked for or give any further consent (all requirements for
which, however arising, each Guarantor hereby waives to the
fullest extent permitted by applicable law):
Section 3.3.1. release or waiver of any obligation or duty
to perform or observe any express or implied agreement,
covenant, term or condition imposed in any of the Note
Documents or by applicable law on any Obligor or any party
to the Note Documents;
Section 3.3.2. extension of the time for payment of any
part of the Debt or any other sums payable under the Note
Documents, extension of the time for performance of any
other obligation under or arising out of or in connection
with the Note Documents or change in the manner, place or
other terms of such payment or performance;
Section 3.3.3. settlement or compromise of any or all of
the Debt;
Section 3.3.4. renewal, supplementing, modification,
rearrangement, amendment, restatement, replacement,
cancellation, rescission, revocation or reinstatement
(whether or not material) of any part of any of the Note
Documents or any obligations under the Note Documents of any
Obligor or any other party to the Note Documents (without
limitation on the number of times any of the foregoing may
occur);
Section 3.3.5. acceleration of the time for payment or
performance of any Debt or other obligation under any of the
Note Documents or exercise of any other right, privilege or
remedy under or in regard to any of the Note Documents;
Section 3.3.6. failure, omission, delay, neglect, refusal or
lack of diligence by any Purchaser or any other Person to
assert, enforce, give notice of intent to exercise _ or any
other notice with respect to _ or exercise any right,
privilege, power or remedy conferred on any Purchaser or any
other Person in any of the Note Documents or by law or
action on the part of any Purchaser or any other Person
granting indulgence, grace, adjustment, forbearance or
extension of any kind to any Obligor or any other Person;
Section 3.3.7. release, surrender, exchange, subordination
or loss of any security or lien priority under any of the
Note Documents or in connection with the Debt;
Section 3.3.8. release, modification or waiver of, or
failure, omission, delay, neglect, refusal or lack of
diligence to enforce, any guaranty, pledge, mortgage, deed
of trust, security agreement, lien, charge, insurance
agreement, bond, letter of credit or other security device,
guaranty, surety or indemnity agreement whatsoever;
Section 3.3.9. taking or acceptance of any other security
or guaranty for the payment or performance of any or all of
the Debt or the obligations of any Obligor;
Section 3.3.10. release, modification or waiver of, or
failure, omission, delay, neglect, refusal or lack of
diligence to enforce, any right, benefit, privilege or
interest under any contract or agreement, under which the
rights of any Obligor have been collaterally or absolutely
assigned, or in which a security interest has been granted,
to any Purchaser as direct or indirect security for payment
of the Debt or performance of any other obligations to _ or
at any time held by _ any Purchaser;
Section 3.3.11. voluntary or involuntary liquidation,
dissolution, sale of any collateral, marshaling of assets
and liabilities, change in corporate or organizational
status, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt or other similar
proceedings of or affecting any Obligor or any of the assets
of any Obligor, even if any of the Debt is thereby rendered
void, unenforceable or uncollectible against any other
Person;
Section 3.3.12. occurrence or discovery of any
irregularity, invalidity or unenforceability of any of the
Debt or Note Documents or any defect or deficiency in any of
the Debt or Note Documents, including the unenforceability
of any provisions of any of the Note Documents because
entering into any such Note Document was ultra vires or
because anyone who executed them exceeded their authority;
Section 3.3.13. failure to acquire, protect or perfect any
lien or security interest in any collateral intended to
secure any part of the Debt or any other obligations under
the Note Documents or failure to maintain perfection;
Section 3.3.14. failure by any Purchaser or any other
Person to notify _ or timely notify _ any Guarantor of any
default, event of default or similar event (however
denominated) under any of the Note Documents, any renewal,
extension, supplementing, modification, rearrangement,
amendment, restatement, replacement, cancellation,
rescission, revocation or reinstatement (whether or not
material) or assignment of any part of the Debt, release or
exchange of any security, any other action taken or not
taken by any Purchaser against any Obligor or any other
Person or any direct or indirect security for any part of
the Debt or other obligation of Company, any new agreement
between any Purchaser and any Obligor or any other Person or
any other event or circumstance. Except as required by
applicable law, no Purchaser has any duty or obligation to
give any Guarantor any notice of any kind under any
circumstances whatsoever with respect to or in connection
with the Debt or the Note Documents;
Section 3.3.15. occurrence of any event or circumstances
which might otherwise constitute a defense available to, or
a discharge of, any Obligor, including failure of
consideration, fraud by or affecting any Person, usury,
forgery, breach of warranty, failure to satisfy any
requirement of the statute of frauds, running of any statute
of limitation, accord and satisfaction and any defense based
on election of remedies of any type; and
Section 3.3.16. receipt and/or application of any proceeds,
credits or recoveries from any source, including any
proceeds, credits, or amounts realized from exercise of any
rights, remedies, powers or privileges of any Purchaser
under the Note Documents, by law or otherwise available to
any Purchaser except only as and to the extent the same
reduces the Guaranteed Debt pursuant to and in accordance
with other express provisions of this Guaranty.
Section 3.4. Waiver of Certain Rights and Notices. To the
fullest extent permitted by applicable law, each Guarantor hereby
waives and releases all right to require marshaling of assets and
liabilities, sale in inverse order of alienation, notice of
acceptance of this Guaranty and of any liability to which it
applies or may apply, notice of the creation, accrual, renewal,
increase, extension, modification, amendment or rearrangement of
any part of the Debt, presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of intent to
accelerate, notice of acceleration and all other notices and
demands, collection, suit and the taking of any other action by
any Purchaser.
Section 3.5. Not a Collection Guaranty. This is an absolute
guaranty of payment, and an absolute guaranty of performance of
all of the obligations of the Obligors under the Note Documents,
and not of collection, and to the fullest extent not prohibited
by applicable law, each Guarantor waives any right to require
that any action be brought against any Obligor or any other
Person, or that any Purchaser be required to enforce, attempt to
enforce or exhaust any rights, benefits or privileges of any
Purchaser under any of the Note Documents, by law or otherwise;
provided that nothing herein shall be construed to prevent any
Purchaser from exercising and enforcing at any time any right,
benefit or privilege which any Purchaser may have under any Note
Document or by law from time to time, and at any time, and
Guarantors agree that Guarantors' obligations hereunder are _ and
shall be _ absolute, independent, unconditional, joint and
several under any and all circumstances. Should any Purchaser
seek to enforce Guarantors' obligations by action in any court,
to the fullest extent not prohibited by applicable law, each
Guarantor waives any requirement, substantive or procedural, that
(a) any Purchaser pursue any foreclosure action, realize or
attempt to realize on any security or preserve or enforce any
deficiency claim against any Obligor or any other Person after
any such realization, (b) a judgment first be sought or rendered
against any Obligor or any other Person, (c) any Obligor or any
other Person be joined in such action or (d) a separate action be
brought against any Obligor or any other Person. Guarantors'
obligations under this Guaranty are several from those of any
other Obligor or any other Person, and are primary obligations
concerning which Guarantors are the principal obligors. All
waivers in this Guaranty or any of the Note Documents shall be
without prejudice to any Purchaser at its option to proceed
against any Obligor or any other Person, whether by separate
action or by joinder. Guarantors agree that this Guaranty shall
not be discharged except by payment of the Debt in full, complete
performance of all obligations of the Obligors under the Note
Documents and termination of each Purchaser's obligation--if any-
- -to make any further advances under the Note Documents or extend
other financial accommodations to any Obligor.
Section 3.6. Subrogation. Each Guarantor agrees that to the
extent not prohibited by applicable law, it shall not be entitled
to be subrogated to any Purchaser's rights against any Obligor or
any other Person or offset rights held by any Purchaser for
payment of the Debt until final termination of this Guaranty.
Section 3.7. Reliance on Guaranty. All extensions of credit
and financial accommodations heretofore or hereafter made by any
Purchaser under or in respect of the Note Documents shall be
conclusively presumed to have been made in acceptance of this
Guaranty.
Section 3.8. Demands are Conclusive. Any demand by any
Purchaser under this Guaranty shall be conclusive, absent
manifest error, as to the matters therein stated, including the
amount due.
Section 3.9. Joint and Several. If any Person makes any
guaranty of any of the obligations guaranteed hereby or gives any
security for them, Guarantors' obligations hereunder shall be
joint and several with the obligations of such other Person
pursuant to such agreement or other papers making the guaranty or
giving the security.
Section 3.10. Payments Returned. Guarantors agree that, if at
any time all or any part of any payment previously applied by Any
Purchaser to the Debt is or must be returned by any Purchaser--or
recovered from any Purchaser--for any legally binding reason
(including the order of any bankruptcy court), to the extent not
prohibited by applicable law, this Guaranty shall automatically
be reinstated to the same effect as if the prior application had
not been made, and, in addition, each Guarantor hereby agrees, to
the extent not prohibited by applicable law, to indemnify each
Purchaser against, and to save and hold each Purchaser harmless
from any required return by any Purchaser--or recovery from any
Purchaser--of any such payment because of its being deemed
preferential under applicable bankruptcy, receivership or
insolvency laws, or for any other reason.
Article IV
Each Guarantor warrants and represents as follows:
Section 4.1. Relationship to Company. The Board of Directors
of each Guarantor has determined that it may reasonably expect to
substantially benefit, directly or indirectly, from the extension
of credit to or for the benefit of the Company or any other
Guarantor pursuant to the Note Documents and, accordingly, the
incurrence of its liability and obligations hereunder. The
Company and each Guarantor are separate legal entities but are
under common ownership control, conduct related businesses, enter
into business and financial transactions with one another
periodically, and, in general, have a commonality of interests.
The maintenance and improvement of Company's financial condition
is vital to sustaining its business and the transactions
contemplated in the Note Documents produce distinct and
identifiable financial and economic direct or indirect benefits
to it. Such identifiable benefits include: (i) the availability
to it of the proceeds of credit on an as needed basis by way of
intercompany loans and/or capital contributions for general
corporate or other purposes and (ii) the general improvement of
its financial and economic condition. It has had full and
complete access to the Note Documents and all other papers
executed by any Obligor or any other Person in connection with
the Debt, has reviewed them and is fully aware of the meaning and
effect of their contents. It is fully informed of all
circumstances which bear upon the risks of executing this
Guarantee and which a diligent inquiry would reveal. It has
adequate means to obtain from Company on a continuing basis
information concerning Company's financial condition, and is not
depending any Purchaser to provide such information, now or in
the future. It agrees that no Purchaser has any obligation to
provide such information, now or in the future. It agrees that
no Purchaser shall have an obligation to advise or notify it or
to provide it with any such data or information. The execution
and delivery of this Guaranty is not a condition precedent (and
no Purchaser has in any way implied that the execution of this
Guaranty is a condition precedent) to any Purchaser's making,
extending or modifying any loan or any other financial
accommodation to or for it. The Company and the Guarantors are
and intend to remain separate legal entities and nothing in this
Section 4.1 is intended or shall act to invalidate or impair the
separate corporate or other organizational existence or status of
the Company or any Guarantor.
Section 4.2. Proceedings. No bankruptcy or insolvency
proceedings are pending or contemplated by or against it.
Article V
Section 5.1. Covenants for the Benefit of the Purchasers.
Guarantors, jointly and severally, covenant and agree that, until
termination of the Note Agreement in accordance with its terms,
each Guarantor will promptly, after learning of any Default or
Event of Default, notify the Purchasers of it in writing,
specifying its nature, the period of its existence and what
action Guarantors are taking or propose to take with respect
thereto.
Article VI
Section 6.1. Term. Subject to the automatic reinstatement
provisions of Article 3 above, this Guaranty shall terminate and
be of no further force or effect upon the termination of the Note
Documents and the indefeasible payment of the Debt in full in
cash.
Article VII
Section 7.1. Default. If any Event of Default occurs under
the Note Agreements, then that shall automatically constitute
default under this Guaranty.
Article VIII
Section 8.1. Binding on Successors: No Assignment by
Guarantors. All guaranties, warranties, representations,
covenants and agreements in this Guaranty shall bind the
trustees, receivers, successors and assigns of each Guarantor and
shall ratably benefit the Purchasers, their respective successors
and assigns, and any other holder of any part of the Debt. No
Guarantor shall assign or delegate any of its obligations under
this Guaranty or any of the other Note Documents without the
express prior written consent of the Purchasers.
Section 8.2. Subordination of Company's Obligations to
Guarantors. Each Guarantor agrees that if, for any reason
whatsoever, Company now or hereafter owes any Indebtedness,
directly or indirectly, to any Guarantor, or any Guarantor now or
hereafter owes any Indebtedness, directly or indirectly, to any
other Guarantor, all such Indebtedness, together with all
interest thereon and fees and other charges in connection
therewith, and all Liens securing any such Indebtedness shall at
all times be second, subordinate and inferior in right of
payment, in lien priority and in all other respects to the Debt
and fulfillment of any such indebted Guarantor's obligations
hereunder or under any of the other Note Documents and all Liens
from time to time securing the Debt. The provisions of this
Section are in addition to, and cumulative of, any other
provisions contained in any other Note Document or other
document, instrument or writing.
Section 8.3. Waiver of Suretyship Rights. By signing this
Guaranty or executing a Joinder Agreement, each Guarantor, to the
fullest extent not prohibited by applicable law, waives each and
every right to which it may be entitled by virtue of any
suretyship law.
Section 8.4. Indemnification. To the fullest extent not
prohibited by applicable law, Guarantors, jointly and severally,
agree to indemnify, defend and hold the Purchasers and their
respective shareholders, directors, officers, agents, attorneys,
advisors and employees (collectively, the "Indemnified Parties")
harmless from and against any and all loss, liability,
obligation, damage, penalty, judgment, claim, deficiency,
expenses, action, suit, cost and disbursement of any kind or
nature whatsoever (including interest, penalties, attorneys' fees
and amounts paid in settlement) (the "Losses"), regardless of
whether caused in whole or in part by the negligence of any of
the Indemnified Parties, imposed on, incurred by or asserted
against the Indemnified Parties growing out of or resulting from
any Note Document or any transaction or event contemplated
therein, except to the extent determined by a final decision of a
court or competent jurisdiction that such Loss was due to the
gross negligence or willful misconduct of such Indemnified Party.
Any amount to be paid under this Section by Guarantors to any
Purchaser shall be a joint and several demand obligation owing by
Guarantors and shall bear interest from the date of expenditure
until paid at a per annum rate equal to 7.94%.
Section 8.5. Amendments in Writing. This Guaranty shall not
be changed orally but shall be changed only by agreement in
writing signed by each Guarantor and each Purchaser. Any waiver
or consent with respect to this Guaranty shall be effective only
in the specific instance and for the specific purpose for which
given. No course of dealing between the parties, no usage of
trade and no parole or extrinsic evidence of any nature shall be
used to supplement or modify any of the terms or provisions of
this Guaranty.
Section 8.6. Notices. Any notices or other communications
required or permitted to be given hereunder shall be given, made
and received in the manner provided in the Note Documents;
provided that with respect to the Guarantors, any such notices or
other communications shall be sent to them at the "Address for
Notices" specified below their respective names on the signature
pages hereof or on the signature pages of any Joinder Agreement
or at such other address as shall be designated by such recipient
in a notice to the other parties hereto given in accordances with
the Note Documents.
Section 8.7. Gender; "Including" is Not Limiting:
Section Headings. The masculine and neuter genders used in this
Guaranty each includes the masculine, feminine and neuter
genders, and the singular number includes the plural where
appropriate, and vice versa. Wherever the term "including" or a
similar term is used in this Guaranty, it shall be read as if it
were written "including by way of example only and without in any
way limiting the generality of the clause or concept referred
to." The headings used in this Guaranty are included for
reference only and shall not be considered in interpreting,
applying or enforcing this Guaranty.
Section 8.8. Offset Rights.
Section 8.8.1. Guarantors agree that, in addition to (and
without limitation of) any right of set-off, bankers' lien
or counterclaim a Purchaser may otherwise have, to the
fullest extent not prohibited by applicable law, each
Purchaser shall be entitled, at its option, upon the
occurrence and during the continuance of an Event of Default
to offset balances held by it for the account of any
Guarantor at any of its offices, in Dollars or in any other
currency, against any obligations of Guarantors hereunder or
under any other Note Document, which is not paid when due,
in which case it shall promptly notify the affected
Guarantor and the other Purchaser thereof, provided that
such Purchaser's failure to give such notice shall not
affect the validity thereof.
Section 8.8.2. If a Purchaser shall obtain payment of any
obligation then due hereunder or under any other Note
Document to such Purchaser, through the exercise of any
right of set-off, banker's lien, counterclaim or similar
right, or otherwise, it shall promptly purchase from the
other Purchasers participation in the obligations held by
the other Purchasers in such amounts, and make such other
adjustments from time to time as shall be equitable to the
end that all the Purchasers shall share the benefit of such
payment (net of any expenses which may be incurred by such
Purchaser in obtaining or preserving such benefit) pro rata
in accordance with the unpaid principal and interest on the
obligations then due to each of them. To such end all the
Purchasers shall make appropriate adjustments among
themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be
restored.
Section 8.8.3. Guarantors agree, that any Purchaser so
purchasing a participation in the obligations held by other
Purchasers may to the fullest extent it may effectively do
so under applicable law, exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect
to such participation as fully as if such Purchaser were a
direct holder of obligations in the amount of such
participation. Nothing contained herein shall require any
Purchaser to exercise any such right or shall affect the
right of any Purchaser to exercise, and retain the benefits
of exercising, any such right with respect to any other
indebtedness of Guarantors.
Section 8.9. Choice of Law. This Guaranty shall be governed
by and construed in accordance with the applicable laws of the
State of Kansas and the United States of America from time to
time in effect.
Section 8.10. Survival. The representations, covenants and
agreements set forth in this Guaranty shall continue and survive
until final termination of this Guaranty.
Section 8.11. Rights Cumulative: Delay Not Waiver. Any
Purchaser's exercise of any right, benefit or privilege under any
of the Note Documents or any other papers or at law or in equity
shall not preclude the concurrent or subsequent exercise of any
other present or future rights, benefits or privileges or any
Purchaser. The remedies provided in this Guaranty are cumulative
and not exclusive of any remedies provided by law, the Note
Documents or any other papers or in equity. No failure by any
Purchaser to exercise, and no delay in exercising, any right
under any Note Document or any other papers shall operate as a
waiver thereof.
Section 8.12. Severability. If any provision of this Guaranty
is held to be illegal, invalid or unenforceable under present or
future laws, the legality, validity and enforceability of the
remaining provisions of this Guaranty shall not be affected
thereby, and this Guaranty shall be liberally construed so as to
carry out the intent of the parties to it. Each waiver in this
Guaranty is subject to the overriding and controlling rule that
it shall be effective only if and to the extent that (a) it is
not prohibited by applicable law and (b) applicable law neither
provides for nor allows any material sanctions to be imposed
against any Purchaser for having bargained for and obtained it.
Section 8.13. Entire Agreement. This Guaranty embodies the
entire agreement and understanding between Guarantors and the
Purchasers with respect to its subject matter and supersedes all
prior conflicting or inconsistent agreements, consents and
understandings relating to such subject matter. Guarantors
acknowledge and agree that there is no oral agreement between any
Guarantor and any Purchaser which has not been incorporated in
this Guaranty.
Section 8.14. Usury Not Intended; Savings Provisions.
Notwithstanding any provision to the contrary contained in any
Note Document, it is expressly provided that in no case or event
shall the aggregate of any amounts accrued or paid pursuant to
this Guaranty which under applicable laws are or may be deemed to
constitute interest ever exceed the maximum nonusurious interest
rate permitted by applicable Kansas or federal laws, which ever
permit the higher rate. In this connection, each Guarantor and
each Purchaser stipulate and agree that it is their common and
overriding intent to contract in strict compliance with
applicable usury laws. In furtherance thereof, none of the terms
of this Guaranty shall ever be construed to create a contract to
pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the maximum rate permitted
by applicable laws. Guarantors shall never be liable for
interest in excess of the maximum rate permitted by applicable
laws. If, for any reason whatever, such interest paid or
received during the full term of the applicable indebtedness
produces a rate which exceeds the maximum rate permitted by
applicable laws, the Purchasers shall credit against the
principal of such indebtedness (or, if such indebtedness shall
have been paid in full, shall refund to the payor of such
interest) such portion of said interest as shall be necessary to
cause the interest paid to produce a rate equal to the maximum
rate permitted by applicable laws. All sums paid or agreed to be
paid to the Purchasers for the use, forbearance or detention of
money shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread in equal parts
throughout the full term of the applicable indebtedness, so that
the interest rate is uniform throughout the full term of such
indebtedness. The provisions of this Section shall control all
agreements, whether now or hereafter existing and whether written
or oral, between any Guarantor and any Purchaser.
Article IX
Section 9.1. It is contemplated by each Guarantor that
additional Subsidiaries of NPCI may from time to time become a
Guarantor hereunder (as required by the terms of the Note
Agreements) by their execution and delivery to the Purchasers of
a Joinder Agreement. Each Guarantor agrees, consents and
acknowledges that upon the execution and delivery to the
Purchasers by any such Subsidiary of a Joinder Agreement, such
Subsidiary shall become a Guarantor hereunder for all purposes,
jointly and severally liable hereunder as if such Subsidiary had
originally been a party hereto, without notice to any Guarantor
or any other Party.
This Guaranty is executed as of the date first above
written.
Address for Notices: NPC International, Inc.
___________________
___________________ By
___________________ Name:
Title:
Address for Notices: Romacorp, Inc.
___________________
___________________ By
___________________ Name:
Title:
Address for Notices: NPC Restaurants LP
___________________ By: NPC International,
Inc., general partner
___________________
___________________ By
Name:
Title:
Address for Notices: Roma Holdings, Inc.
___________________
___________________ By
___________________ Name:
Title:
Address for Notices: Roma Dining LP
___________________ By: Romacorp, Inc.,
general partner
___________________
___________________ By
Name:
Title:
Address for Notices: Roma Franchise Corporation
___________________
___________________ By
___________________ Name:
Title:
Address for Notices: Roma Systems, Inc.
___________________
___________________ By
___________________ Name:
Title:
Address for Notices: Seattle Restaurant
Equipment Company, Inc.
___________________
___________________ By
___________________ Name:
Title:
Address for Notices: Roma Ft. Worth, Inc.
___________________
___________________ By
___________________ Name:
Title:
Address for Notices: Roma Bar Management
Corporation
___________________
___________________ By
___________________ Name:
Title:
Address for Notices: Roma Huntington Beach,
Inc.
___________________
___________________ By
___________________ Name:
Title:
(Form of Joinder Guaranty)
Joinder Agreement
This Joinder Agreement (this "Joinder Agreement") is dated
effective as of _______, 19___, and is executed and delivered by
___________________________ (the "Joining Guarantor"), a
_____________________, to the holders of the 7.94% Senior Notes
due May 1, 2006 (the "2006 Notes" and the holders thereof, from
time to time being referred to as the "2006 Noteholders").
W I T N E S S E T H:
Recitals:
1. NPC Management, Inc., a Delaware corporation
("Company"), has entered into separate Note Agreements each dated
as of May 1, 1997, in the original principal amount of
$50,000,000 (as amended, modified, restated and supplemented from
time to time, the "Note Agreements) with the 2006 Noteholders
which are signatories thereto or which may become a party thereto
from time to time.
2. Pursuant to the terms of the Note Agreements, and as a
condition (among others) for making the issue and sale of the
2006 Notes, NPCI and certain Subsidiaries of NPCI executed and
delivered to the 2006 Noteholders a Master Guaranty of even date
with the Note Agreements, pursuant to which, among other things,
each of such Subsidiaries, jointly and severally, unconditionally
guaranteed the payment of all of the Debt (subject to certain
limitations, as provided therein). The Master Guaranty, as
amended, modified, supplemented, joined in and restated from time
to time, is herein called the "Guaranty." All Persons from time
to time a party to the Guaranty (whether originally or by
joinder) are herein collectively called the "Guarantors," and are
each a "Guarantor," herein.
3. Pursuant to the terms of the Note Agreements, the
Joining Guarantor is now required, among other things and subject
to certain terms and conditions, to join in the execution and
delivery to the 2006 Noteholders of the Guaranty by its execution
and delivery of this Joinder Agreement and otherwise by such
action as the 2006 Noteholders may reasonably require.
4. In order to comply with such requirement, the Joining
Guarantor executes and delivers this Joinder Agreement.
Agreements:
Now, in consideration of the credit and financial
accommodations extended and to be extended to Company pursuant to
the Note Agreements and the other Note Documents or otherwise,
which Joining Guarantor hereby agrees have and shall continue to
benefit Joining Guarantor and its shareholders as described in
the Guaranty, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
Joining Guarantor hereby agrees, assumes, ratifies, joins and
acknowledges as follows:
1. Assumption. Joining Guarantor hereby unconditionally,
jointly and severally, assumes liability for all Guarantees,
covenants, warranties, representations, indemnifications,
obligations and other Debt of Guarantors now existing or which
may hereafter arise under the Guaranty and shall be liable
therefor as though Joining Guarantor had originally been a party
to the Guaranty. Without limitation of the foregoing, Joining
Guarantor, as a primary obligor and not as a surety,
unconditionally, jointly and severally, guarantees unto the 2006
Noteholders the payment of the Debt when due (whether at the
stated maturity, by acceleration or otherwise) in accordance with
the terms of the Note Documents. Notwithstanding the foregoing
and the other provisions of this Joinder Agreement, to the extent
that in a legal proceeding brought within the applicable
limitations period it is determined by the final, non-appealable
order of a court having jurisdiction over the issue and the
applicable parties that Joining Guarantor received less than a
reasonably equivalent value in exchange for such Joining
Guarantor's incurrence of its obligations under the Guaranty,
then and only then the liability of Joining Guarantor under the
Guaranty shall be limited to the Guaranteed Debt applicable to
such Joining Guarantor. The 2006 Noteholders shall have the
right to determine and designate from time to time, without
notice or assent of Joining Guarantor, which portions of the Debt
shall be deemed included in the Guaranteed Debt. Joining
Guarantor acknowledges that such determination and designation
shall be conclusive, absent manifest error. The Guaranty shall
not fail or be ineffective or invalid or be considered too
indefinite or contingent with respect to Joining Guarantor
because the Guaranteed Debt applicable to Joining Guarantor may
fluctuate from time to time or for any other reason. Any payment
or prepayment by Company or any other Person against the Debt
(other than payments made by a Guarantor in accordance with the
procedures described in the definition of "Guaranteed Debt" in
the Guaranty and then only with respect to such Guarantor's
liability hereunder) shall be deemed paid first against that
portion of the Debt not included in "Guaranteed Debt" or
determined for any reason not to be a part of "Guaranteed Debt,"
and then shall be paid against any portion of the Debt that is
Guaranteed Debt, in such order and manner as the 2006 Noteholders
shall determine in their sole discretion.
2. Terms Ratified. Joining Guarantor hereby expressly
ratifies all Guaranties, terms, covenants, representations,
warranties, agreements, provisions, indemnifications, WAIVERS,
RELEASES, restrictions, duties and responsibilities of Guarantors
under the Guaranty and agrees that they shall apply to Joining
Guarantor as if Joining Guarantor had executed the Guaranty and
that any reference to "Guarantors" or a "Guarantor" contained in
the Guaranty, the Note Agreements or any other Note Documents
shall mean, without limitation, the Joining Guarantor.
3. Representations. Joining Guarantor (a) confirms that
it has received a copy of the Note Documents, together with such
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this
Joinder Agreement; (b) agrees that it will, independently and
without reliance upon any 2006 Noteholder and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under the Note Documents, and (c) represents that
the value of the consideration received and to be received by
Joining Guarantor is reasonably worth at least as much as the
liability and obligation of such Joining Guarantor hereunder, and
that such liability and obligation may reasonably be expected to
benefit Joining Guarantor directly or indirectly. The Board of
Directors of Joining Guarantor has duly adopted resolutions
certifying that the execution, delivery and performance of this
Joinder Agreement (and the effect thereof) will benefit Joining
Guarantor and its shareholders.
4. No Impairment. Nothing herein shall in any manner
impair or extinguish the Guaranty or any of the other Note
Documents or any lien or security interest now or hereafter
securing the payment of any of the Indebtedness arising pursuant
to the Note Documents.
5. Conditions. This Joinder Agreement shall not become
effective until the Joining Guarantor shall have delivered to
Agent each of the following:
5.1 a certificate of the Secretary or any Assistant
Secretary of Joining Guarantor (or other officer or director
of Joining Guarantor which is authorized in Joining
Guarantors organizational documents to keep the minute book
or similar record of Joining Guarantor), in form and
substance satisfactory to the 2006 Noteholders, dated as of
the date hereof, as to (i) the resolutions of the Board of
Directors (or similar governing body) of the Joining
Guarantor authorizing the execution, delivery and
performance of this Joinder Agreement and of all instruments
contemplated herein to be executed and delivered by Joining
Guarantor in connection herewith (a copy of such resolutions
to be incorporated into such certificate), such certificate
to state that said copy is a true and correct copy of such
resolutions and that such resolutions were duly adopted and
have not been amended, superseded, revoked or modified in
any respect and remain in full force and effect as of the
date of such certificate; (ii) the election, incumbency and
signatures of the officer or officers (or other official) of
Joining Guarantor executing and delivering this Joinder
Agreement and each other instrument or document furnished in
connection herewith; (iii) Joining Guarantor's
organizational documents in effect as of the date hereof (a
copy thereof to be attached to the certificate), and
(iv) such other documents and information any 2006
Noteholder shall reasonably request; and
5.2 a legal opinion from the legal counsel for Joining
Guarantor acceptable to Agent in form and substance
satisfactory to the 2006 Noteholders.
6. Governing Law. Unless otherwise specified therein,
this Joinder Agreement shall be governed by and construed in
accordance with the laws of the State of Kansas and the United
States of America.
7. Survival; Parties Bound. All representations,
warranties, covenants and agreements made by or on behalf of the
Joining Guarantor in connection herewith shall survive the
execution and delivery of this Joinder Agreement and the other
Note Documents, shall not be affected by any investigation made
by any Person, and shall bind the Joining Guarantor and its
successors, trustees, receivers and assigns and inure to the
benefit of the successors and assigns of the 2006 Noteholders.
The term of this Joinder Agreement shall be until the termination
of the Guaranty as to all Parties.
8. Captions. The headings and captions appearing in this
Joinder Agreement have been included solely for convenience and
shall not be considered in construing this Joinder Agreement.
9. Definitions. Terms used herein and not defined herein,
but which are defined in the Note Agreements or the Guaranty,
shall have the meanings herein assigned to them in the Note
Agreements or the Guaranty, respectively.
10. Parties Bound. This Joinder Agreement shall bind and
benefit the parties hereto and their respective successors and
assigns, except that Joining Guarantor and Company may not assign
their rights or obligations hereunder without the prior written
consent of the 2006 Noteholders.
11. Amendments, Etc., No amendment or waiver of any
provision of this Joinder Agreement or any other Note Document,
nor any consent to any departure by the Joining Guarantor
therefrom, shall in any event be effective unless the same shall
be agreed or consented to by the 2006 Noteholders and Joining
Guarantor, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given, unless otherwise specifically provided in the Note
Agreements.
In Witness Whereof, the Joining Guarantor has executed this
Agreement as of the date set forth above.
By:
Name:
Title:
Attest:
Name:
Title:
$160,000,000
REVOLVING CREDIT AGREEMENT
DATED AS OF MARCH 5, 1997
AMONG
NPC INTERNATIONAL, INC.,
VARIOUS BANKS
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Agent
AND
NATIONSBANK OF TEXAS, N.A.
as Documentation Agent
TABLE OF CONTENTS
page
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE
WITH FINANCIAL RESTRICTIONS. 1
1.1 Definitions. 1
1.2 Other Definitional Provisions. 11
1.3 Interpretation of Agreement. 11
1.4 Compliance with Financial Restrictions. 11
1.5 Accounting Principles. 11
2. COMMITMENTS OF THE BANKS; BORROWING PROCEDURES. 11
2.1 Commitments. 11
2.2 Loan Options. 12
2.3 Borrowing Procedure. 12
2.4 Continuation and/or Conversion of Loans. 12
2.5 Extension of the Termination Date. 13
3. NOTE EVIDENCING LOANS. 13
3.1 Reference Rate Loans; Eurodollar Loans. 13
3.2 Evidence of Loans. 14
4. LETTER OF CREDIT 14
4.1 Issuance of Letters of Credit. 14
4.2 Procedure for Issuance. 14
4.3 Purchase of Participations. 15
4.4 Presentment and Honor of Letter of Credit. 15
4.5 Obligations of the Company Absolute. 15
4.6 Liability of TCB. 16
4.7 Provisions of Agreement Control. 16
5. INTEREST AND FEES. 17
5.1 Interest. 17
5.2 Commitment Fee. 17
5.3 Letter of Credit Fees. 17
5.4 Method of Calculating Interest and Fees. 17
5.5 Agent's Fee. 18
6. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT 18
6.1 Place of Payment. 18
6.2 Prepayments. 18
6.3 Reduction of Credit. 18
6.4 Offset. 19
6.5 Proration of Payments. 19
7. INDEMNIFICATION: EURODOLLAR LOANS. 19
7.1 Indemnity for Funding Losses. 19
7.2 Capital Adequacy. 19
7.3 Additional Provisions Relating to Eurodollar Loans. 20
8. CONDITIONS PRECEDENT TO ALL LOANS. 22
8.1 Notice. 22
8.2 Default. 22
8.3 Insurance. 22
8.4 Warranties. 22
8.5 Certification. 22
9. CONDITIONS PRECEDENT TO EFFECTIVE DATE AND INITIAL
LOAN AND LETTER OF CREDIT THEREON OR THEREAFTER. 23
9.1 Note. 23
9.2 Resolutions; Consents and Approvals. 23
9.3 Incumbency. 23
9.4 Opinion. 23
9.5 General. 23
10. REPRESENTATIONS AND WARRANTIES. 23
10.1 Existence. 23
10.2 Authorization. 24
10.3 No Conflicts. 24
10.4 Validity and Binding Effect. 24
10.5 Financial Statements. 24
10.6 Litigation. 24
10.7 Taxes. 25
10.8 Liens. 25
10.9 No Default. 25
10.10Insurance. 25
10.11Subsidiaries. 25
10.12Partnerships. 25
10.13Regulation U. 25
10.14Compliance. 26
10.15Pension Plans. 26
11. COMPANY'S COVENANTS. 26
11.1 Financial Statements and Other Information. 26
11.2 Books, Records and Inspection. 27
11.3 Conduct of Business. 27
11.4 Taxes. 27
11.5 Notices. 28
11.6 Pension Plans. 28
11.7 Expenses. 28
11.8 Indebtedness. 29
11.9 Liens. 29
11.10Merger, Purchase and Sale. 29
11.11Nature of Business. 30
11.12Franchise Rights. 30
11.13Net Worth. 30
11.14Leverage Ratio. 30
11.15Fixed Charge Coverage. 30
11.16Insurance. 30
11.17Restricted Payments. 31
11.18Leases. 31
11.19Company's and Subsidiaries' Stock. 31
11.20Guaranties. 31
11.21Investments. 31
11.22Subsidiaries. 32
11.23Unconditional Purchase Obligation. 32
11.24Other Agreements. 32
11.25Use of Proceeds. 32
11.26Amendment to Loan Documents. 33
12. EVENTS OF DEFAULT AND REMEDIES. 33
12.1 Events of Default. 33
12.2 Remedies. 35
12.3 Preservation of Security for Unmatured
Reimbursement Obligations. 36
13. RELATIONSHIP AMONG BANKS. 36
13.1 Appointment and Grant of Authority. 36
13.2 Non-Reliance on Agent. 36
13.3 Responsibility of the Agent and Other Matters. 37
13.4 Action on Instructions. 37
13.5 Indemnification. 38
13.6 TCB and Affiliates. 38
13.7 Notice to Holder of Loans. 38
13.8 Successor Agent. 38
14. GENERAL. 39
14.1 Waiver and Amendments. 39
14.2 Notices. 39
14.3 Severability; Participations; Assignments. 40
14.4 Indemnification. 42
14.5 LAW. 42
14.6 Successors. 42
14.7 Subsidiary Reference. 42
14.8 ENTIRE AGREEMENT. 43
14.9 Counterparts. 43
14.10Interest. 43
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of March 5, 1997 (this
"Agreement"), is entered into among NPC INTERNATIONAL, INC., a Kansas
corporation (the "Company"), the banks listed on the signature pages hereof
(together with such other financial institutions that from time to time become
parties hereto, individually a "Bank" and collectively the "Banks"), TEXAS
COMMERCE BANK NATIONAL ASSOCIATION ("TCB"), as Agent for the Banks and
NATIONSBANK OF TEXAS, N.A., as Documentation Agent for the Banks..
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE WITH FINANCIAL
RESTRICTIONS.. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE WITH
FINANCIAL RESTRICTIONS.
1.1 Definitions..1 Definitions. In addition to the terms defined
elsewhere in this Agreement, the following terms shall have the meanings
indicated for purposes of this Agreement (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
Acquisition Agreement shall mean the Acquisition Agreement dated as of
March 25, 1996 by and among Seattle Crab Co., the Company and Skipper's, Inc.
Affiliate of any Person means any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan (hereinafter defined)). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners of such Person; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
Agent means TCB as Agent for the Banks hereunder and each successor, as
provided in Section 13.8, who shall act as Agent.
Alternate Base Rate means a per annum interest rate which is the greater at
any time of (i) the rate of interest then most recently announced by TCB at
Houston, Texas as its prime rate, or (ii) 0.5% plus the Federal Funds Rate.
Such prime rate of TCB is not necessarily intended to be the lowest rate of
interest determined by TCB in connection with extensions of credit. Changes in
the rate of interest on that portion of any Loans maintained as Alternate Base
Rate Loans shall take effect simultaneously with each change in the Alternate
Base Rate. The Agent shall give notice promptly to the Company and the Banks of
changes in the Alternate Base Rate.
Assignee shall have the meaning set forth in Section 14.3(c)(i).
Assignment and Acceptance shall have the meaning set forth in
Section 14.3(c)(i).
Bank -- see the Preamble.
Banking Day means any day on which banks are open for business in Houston,
Texas, and with respect to Eurodollar Loans, on which dealings in foreign
currencies and exchange may be carried on by the Agent in the interbank
Eurodollar market.
Capitalized Lease means any lease which is or should be capitalized on the
balance sheet of the lessee in accordance with GAAP.
Code means the Internal Revenue Code of 1986 and any successor statute of
similar import, together with the regulations thereunder, in each case as in
effect from time to time. References to sections of the Code shall be construed
to also refer to any successor sections.
Commitment means, as to any Bank, the amount set forth opposite said Bank's
name on the signature page hereof (or such reduced amount as may be fixed by the
Company pursuant to Section 6.3).
Company -- see the Preamble.
Computation Period means any period of four consecutive fiscal quarters of
the Company ending on the last day of a fiscal quarter.
Consolidated Net Earnings means the consolidated gross revenues of the
Company and its Subsidiaries less all operating and non-operating expenses of
the Company and its Subsidiaries including taxes on income, all determined in
accordance with GAAP consistent with those followed in the preparation of the
financial statements referred to in Section 10.5, provided that (i) there shall
not be included in revenues (a) any income representing the excess of equity in
any Subsidiary at the date of acquisition over the investment in such
Subsidiary, (b) any equity in the undistributed earnings of any corporation
which is not a Subsidiary, (c) any earnings of any Subsidiary for any period
prior to the fiscal year of the Company in which such Subsidiary was acquired,
or (d) any gains resulting from the write-up of assets, and (ii) capital gains
may be included in revenues only to offset capital losses; provided, further,
that for the purpose of calculating Consolidated Net Earnings with respect to
the last day of the fiscal quarter ended March 26, 1996, and with respect to the
last day of each of the next three successive fiscal quarters thereafter, there
shall not be included in calculating Consolidated Net Earnings any charges
against income in connection with the Skipper's Sale, or in connection with the
closure or relocation of up to eight Tony Roma's locations during calendar year
1996, which might otherwise be required under GAAP.
Consolidated Net Worth means, at any time, the total of stockholders'
equity (including capital stock, additional paid-in capital and retained
earnings after deducting treasury stock, ESOP obligations and similar contra
accounts) of the Company and its consolidated Subsidiaries calculated in
accordance with GAAP.
Credit means the aggregate Commitments of the Banks to make Loans and issue
Letters of Credit under the terms of this Agreement.
Dollars and the sign "$" mean lawful money of the United States of America.
EBITDA means Consolidated Net Earnings before interest expense, provision
for taxes (to the extent not excluded from Consolidated Net Earnings),
depreciation, amortization and the noncash portion of nonrecurring charges (as
defined by GAAP).
Effective Date means the date on which all the conditions precedent set
forth in Section 9 are met or waived in writing by the Agent and the Majority
Banks.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
ERISA Affiliate means any corporation, trade or business that is, along
with the Company, a member of a controlled group of corporations or a controlled
group of trades or businesses, as described in sections 414 (b) and 414 (c),
respectively, of the Code.
Eurocurrency Reserve Percentage means, with respect to any Interest Period,
a percentage (expressed as a decimal) equal to the daily average during such
Interest Period of the percentages in effect on each day of such Interest
Period, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor), for determining reserve requirements applicable to
"Eurocurrency liabilities" pursuant to Regulation D or any other then applicable
regulation of the Board of Governors which prescribes reserve requirements
applicable to "Eurocurrency liabilities," as presently defined in Regulation D.
For purposes of this definition, any Eurodollar Loans hereunder shall be deemed
to be "Eurocurrency liabilities" as defined in Regulation D.
Eurodollar Loan means any Loan which bears interest at a rate determined
with reference to the Interbank Rate (Reserve Adjusted).
Event of Default means any of the events described in Section 12.1.
Existing Letters of Credit means the Letters of Credit identified on
Exhibit P hereto.
Federal Funds Rate means for any date the weighted average of the rates on
overnight Federal Funds transactions, with members of the Federal Reserve System
only, arranged by Federal Funds brokers applicable to Federal Funds transactions
on that date. The Federal Funds Rate shall be determined by the Agent on the
basis of reports by Federal Funds brokers to, and published daily by, the
Federal Reserve Bank of New York in the Composite Closing Quotations for U.S.
Government Securities. If such publication is unavailable or the Federal Funds
Rate is not set forth therein, the Federal Funds Rate shall be determined on the
basis of any other source reasonably selected by the Agent. In the case of a
day which is not a Banking Day, the Federal Funds Rate shall be the Federal
Funds Rate for the immediately preceding Banking Day.
Franchise Agreement means any franchise agreement between the Company or
any Subsidiary and Pizza Hut, Inc., as such may be amended or modified from time
to time.
GAAP means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
Highest Lawful Rate shall have the meaning set forth in Section 14.10.
Indebtedness means, without duplication,
(i) any obligation, including, without limitation, any obligation for
borrowed money (and any notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money), which under GAAP is shown on the balance sheet as a liability
(including any obligation under a Capitalized Lease but excluding reserves
for deferred income taxes and other reserves to the extent that such
reserves do not constitute an obligation),
(ii) indebtedness which is secured by a Lien on, or payable out of the
proceeds of production from, property owned by the Company or any
Subsidiary, whether or not the indebtedness secured thereby shall have been
assumed by the Company or such Subsidiary,
(iii) guarantees, endorsements (other than endorsements of
negotiable instruments for collection in the ordinary course of business)
and other contingent liabilities (whether direct or indirect) in connection
with the obligations, stock or dividends of any Person,
(iv) obligations under any contract providing for the making of loans,
advances or capital contributions to any Person, or for the purchase of any
property from any Person, in each case in order to enable the Company or
any Subsidiary primarily to maintain working capital, net worth or any
other balance sheet condition or to pay debts, dividends or expenses of
such Person,
(v) obligations under any contract for the purchase of materials,
supplies or other property or services if such contract (or any related
document) requires that payment for such materials, supplies or other
property or services shall be made regardless of whether or not delivery of
such materials, supplies or other property or services is ever made or
tendered,
(vi) obligations under any contract to rent or lease (as lessee) any
real or personal property if such contract (or related document) provides
that the obligation to make payments thereunder is absolute and
unconditional under conditions not customarily found in commercial leases
then in general use and requires that the lessee purchase or otherwise
acquire material amounts of securities, assets or obligations of the
lessor,
(vii) obligations under any other contract which, in economic
effect, is substantially equivalent to a guarantee;
all as determined in accordance with GAAP; provided that Indebtedness shall not
include trade accounts payable, accrued expenses or income taxes payable, each
arising in the ordinary course of business.
Indebtedness to Pro Forma EBITDA Ratio means, as of the last day of any
fiscal quarter, the ratio of (a) all Indebtedness of the Company and its
Subsidiaries on such day to (b) Pro Forma EBITDA for the period of four
consecutive fiscal quarters ending on such day.
Indemnification Agreements shall mean, collectively, the Lease
Indemnification Agreement and the Liability Assumption Agreement, as those
agreements are defined and identified in the Acquisition Agreement.
Interbank Rate means, for any Interest Period, the rate per annum at which
Dollar deposits in immediately available funds are offered to the Agent two
Banking Days prior to the beginning of such Interest Period by major banks in
the interbank Eurodollar market as at or about 10:00 a.m., Houston time, for
delivery on the first day of such Interest Period, for the number of days
comprised therein and in an amount equal to the amount of TCB's Eurodollar Loan
for such Interest Period.
Interbank Rate (Reserve Adjusted) means a rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Interbank Rate = Interbank Rate
(Reserve Adjusted) 1.0-Eurocurrency Reserve Percentage
Interest Period means, with respect to any Eurodollar Loan, the one month,
two month, three month or six month period commencing on the applicable
borrowing date or conversion date of such Loan or the last day of the prior
Interest Period for such Loan, as the case may be; provided, however, that no
Interest Period shall extend beyond the Termination Date. Each Interest Period
which would otherwise end on a day which is not a Banking Day shall end on the
next succeeding Banking Day unless such next succeeding Banking Day is the first
Banking Day of a calendar month, in which case it shall end on the next
preceding Banking Day.
Investment means any investment, made in cash or by delivery of any kind of
property or asset, in any Person, whether by acquisition of shares of stock or
similar interest, Indebtedness or other obligation or security, or by loan,
advance or capital contribution, or otherwise.
Letters of Credit shall have the meaning set forth in Section 4.1.
Letter of Credit Application shall have the meaning set forth in
Section 4.2.
Lien means any mortgage, pledge, hypothecation, judgment lien or similar
legal process, title retention lien, or other lien or security interest,
including, without limitation, the interest of a vendor under any conditional
sale or other title retention agreement and the interest of a lessor under any
Capitalized Lease.
Loan -- see Section 2.1.
Loan Documents means this Agreement, the Note, any Letter of Credit
Application and any and all agreements or instruments now or hereafter executed
and delivered by the Company, any Subsidiary or any other Person guaranteeing,
securing or otherwise supporting payment or performance of the Note, this
Agreement or any other Loan Document, as they may be modified or amended from
time to time in accordance with the terms and provisions thereof.
Majority Banks means those Banks whose share in the aggregate principal
amount of the Loans outstanding constitutes (or, if no Loans are outstanding,
those whose Percentage constitutes) more than fifty percent (50%).
Margin means (a) initially, 1.00% and (b) on and after any date specified
below on which the Margin is to be adjusted, the rate per annum set forth in the
table below opposite the applicable Indebtedness to Pro Forma EBITDA Ratio:
Indebtedness
to
Pro Forma EBITDA Margin
2.75 < x 1.50%
2.50 < x < 2.75 1.25%
2.25 < x < 2.50 1.00%
1.50 < x < 2.25 .75%
x < 1.50 .50%
The Margin shall be adjusted, to the extent applicable, 45 days (or, in the case
of the last fiscal quarter of any fiscal year, 90 days) after the end of each
fiscal quarter based on the Indebtedness to Pro Forma EBITDA Ratio as of the
last day of such fiscal quarter; it being understood that if the Company fails
to deliver the financial statements required by Section 11.1(a) or 11.1(b), as
applicable, by the 45th day (or, if applicable, the 90th day) after any fiscal
quarter, the Margin shall be 1.50% until such financial statements are
delivered.
Note means the Note referred to in Section 3.
Payment Date means (a) as to any Eurodollar Loan, the last day of each
Interest Period with respect thereto and, if such Interest Period is in excess
of three months, the date that is three months after the commencement of such
Interest Period, and (b) as to any Reference Rate Loan, the last day of each
March, June, September and December.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Percentage means, for any Bank, the percentage which the amount of such
Bank's Commitment is of the amount of the Credit.
Permitted Liens means the following, provided that none of the following
materially adversely affect the financial condition or business operations of
the Company and its Subsidiaries taken as a whole:
(1) Liens of taxes, assessments, and governmental charges not yet
payable, or not delinquent and payable without interest or penalty so long
as so payable;
(2) Liens of taxes, assessments, governmental charges and other
Indebtedness, the validity of which are being contested in good faith by
appropriate action diligently pursued, provided that such proceeding shall
suspend the collection of such taxes, assessments, governmental charges, or
other Indebtedness and no property of the Company or any Subsidiary would
be in any danger of being forfeited during the period of such contest;
(3) Liens of employees and laborers for current wages, not yet due,
incidental to current operations or current construction, and Liens of
others for current indebtedness, not yet due, incidental to current
construction, including maintenance, repair, and alteration; mechanics',
materialmen's, workmen's, repairmen's or carriers' liens, or other similar
Liens arising in the ordinary course of business, or deposits, Liens, or
pledges of personal property to obtain the release of any such Liens;
(4) oil and gas leases, licenses, privileges, other leases, releases
of damages, easements, restrictions on the use of real property, zoning
laws and ordinances, rights-of-way, minor irregularities in title and other
similar encumbrances (including the right of vendors to occupy and use real
property previously sold to the Company or any Subsidiary not immediately
required by the Company or any Subsidiary for use in its business), not in
any case impairing the use by the Company or any Subsidiary in its business
of the property affected thereby;
(5) in the case of easements and right-of-way grants from
governmental bodies, the rights of the public;
(6) Liens existing prior to the time of acquisition upon any real or
personal property acquired by the Company or any Subsidiary through
purchase, merger, consolidation, or otherwise, whether or not assumed by
the Company or any Subsidiary;
(7) Liens in connection with the acquisition of property after the
date hereof by way of purchase money mortgage, conditional sale or other
title retention agreement, Capitalized Lease or other deferred payment
contract, and attaching only to the property being acquired, if the
Indebtedness secured thereby does not exceed 75% (100% in the case of a
Capitalized Lease) of the lesser of cost or fair market value of such
property at the time of acquisition thereof;
(8) deposits, Liens, or pledges of personal property or of securities
to secure payments of workers' compensation, unemployment insurance, old
age pensions or other Social Security, or to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money),
or leases to which the Company or any Subsidiary is a party, or to secure
public or statutory obligations of the Company or any Subsidiary, or
deposits of cash or United States government obligations to secure or in
lieu of surety, stay or appeal bonds to which the Company or any Subsidiary
is a party, or pledges, Liens, or deposits for similar purposes in the
ordinary course of business;
(9) Liens based on workers' compensation claims which are not due and
payable, or the validity of which is being contested in good faith; and
(10) minor discrepancies and encroachments that might be disclosed by
an accurate survey.
Should any of the preceding Permitted Liens occur, the Banks may reasonably
request, as to all the preceding matters referred to in paragraphs (1), (2),
(3), (7), (8) and (9) above, that adequate reserves be set aside and maintained
by the Company or any Subsidiary with respect thereto.
Person means an individual, partnership, corporation, trust, joint venture,
joint stock company, association, unincorporated organization, government or
agency or political subdivision thereof, or other entity.
Pizza Hut, Inc. means Pizza Hut, Inc., a Delaware corporation.
Plan means a "pension plan," as such term is defined in ERISA, established
or maintained by the Company or any ERISA Affiliate or as to which the Company
or any ERISA Affiliate contributes or is a member or otherwise may have any
liability.
Pro Forma EBITDA means EBITDA provided, however, that for the purpose of
calculating Pro Forma EBITDA (i) with respect to the last day of the fiscal
quarter ended March 26, 1996, and with respect to the last day of each of the
next three successive fiscal quarters thereafter, Pro Forma EBITDA shall be
calculated without regard for any charges against income in connection with the
Skipper's Sale, or in connection with the closure or relocation of up to eight
Tony Roma's locations during calendar year 1996, which might otherwise be
required under GAAP and (ii) with respect to any Person acquired pursuant to
Section 11.10(a) (the "Acquisition Target"), EBITDA of the Acquisition Target
for each full fiscal quarter included in the applicable Computation Period prior
to such Acquisition (including the fiscal quarter during which it was acquired)
shall be included and adjusted for tangible operational changes due to field
expense differentials, royalty payments to be made to Pizza Hut, Inc.,
contractual rent payments on real estate and equipment and general and
administrative cost differences, all as set forth in the most recent certificate
delivered pursuant to Section 11.1(c).
Reference Rate Loan means any Loan which bears interest at or by reference
to the Alternate Base Rate.
Reportable Event has the meaning given to such term in ERISA.
Responsible Officer means the Chief Operating Officer, the Chief Financial
Officer or the Chief Accounting Officer.
Romacorp, Inc. means Romacorp, Inc., a Delaware corporation.
Significant Subsidiary means, at any time of determination, a Subsidiary
(a) which has assets with a Value equal to three percent (3%) or more of the
value of the consolidated total assets of the Company and its Subsidiaries,
determined as of the last day of the immediately preceding fiscal year, or (b)
which had Cash Flow (hereinafter defined) during the immediately preceding
fiscal year equal to three percent (3%) or more of the consolidated Cash Flow of
the Company and its Subsidiaries during such fiscal year. "Cash Flow" for any
period means earnings before interest expense, provision for taxes,
depreciation, amortization and other noncash charges for such period. "Value"
as used in the first sentence of this definition means, with respect to any
asset at any date of determination, the book value of such asset as would appear
immediately prior to such determination on the balance sheet of the owner of
such asset prepared in accordance with GAAP.
Skipper's Sale shall mean the Company's sale of the common stock of
Skipper's Inc. in accordance with all of the terms and conditions of the
Acquisition Agreement.
Subsidiary means any Person which is directly or indirectly controlled by
the Company or its other Subsidiaries or of which or in which the Company or its
other Subsidiaries at any time own directly or indirectly 50% or more of (i) the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
Person, if it is a corporation, (ii) the capital interest or profits interest of
such Person, if it is a partnership, joint venture or similar entity, or (iii)
the beneficial interest of such Person, if it is a trust, association
Supermajority Banks means those Banks whose share in the aggregate
principal amount of the Loans outstanding constitutes (or, if no Loans are
outstanding, those whose Percentages constitute) at least sixty-seven percent
(67%).
TCB -- see the Preamble.
Termination Date means March 3, 2000, as such date may from time to time be
extended in accordance with Section 2.5, or such earlier date as may be fixed by
the Company on at least thirty (30) Banking Days' written notice to the Agent
and the Banks.
Termination Event with respect to any Plan means (i) the institution by the
Company, the PBGC or any other Person of steps to terminate such Plan, (ii) the
occurrence of a Reportable Event with respect to such Plan which the Agent
reasonably believes may be a basis for the PBGC to institute steps to terminate
such Plan, or (iii) the withdrawal from such Plan (or deemed withdrawal under
section 4062(f) of ERISA) by the Company or any ERISA Affiliate if the Company
or such ERISA Affiliate is a "substantial employer" within the meaning of
section 4063 of ERISA.
Unmatured Event of Default means any event or condition which, with the
lapse of time or giving of notice to the Company or both, would constitute an
Event of Default.
Value shall mean, with respect to any asset at any date of determination,
the greater of such asset's book or fair market value as of the date of
determination, with "book value" being the value of such asset as would appear
immediately prior to such determination on a balance sheet of the owner of such
asset prepared in accordance with GAAP.
1.2 Other Definitional Provisions..2 Other Definitional Provisions.
Unless otherwise defined or the context otherwise requires, all financial and
accounting terms used herein or in any certificate or other document made or
delivered pursuant hereto shall be defined in accordance with GAAP. Unless
otherwise defined therein, all terms defined in this Agreement shall have the
defined meanings when used in the Note or in any certificate or other document
made or delivered pursuant hereto.
1.3 Interpretation of Agreement..3 Interpretation of Agreement. A
Section, an Exhibit or a Schedule is, unless otherwise stated, a reference to a
section hereof, an exhibit hereto or a schedule hereto, as the case may be.
Section captions used in this Agreement are for convenience only, and shall not
affect the construction of this Agreement. The words "hereof," "herein,"
"hereto" and "hereunder" and words of similar purport when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
1.4 Compliance with Financial Restrictions..4 Compliance with Financial
Restrictions. Compliance with each of the financial ratios and restrictions
contained in Section 11 shall, except as otherwise provided herein, be
determined in accordance with GAAP consistently followed.
1.5 Accounting Principles..5 Accounting Principles. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP
consistent with those applied in the preparation of the audited financial
statements referred to in Section 11.1 hereof. All financial information
delivered to the Agent pursuant to Section 11.1 hereof shall be prepared in
accordance with GAAP applied on a basis consistent with those reflected by the
initial financial statements delivered to the Agent pursuant to Section 10.5,
except (i) where such principles are inconsistent with the requirements of this
Agreement and (ii) for those changes with which the independent certified public
accountants referred to in Section 11.1(a) hereof concur in rendering
unqualified certificates as to financial statements.
2. COMMITMENTS OF THE BANKS; BORROWING PROCEDURES.. COMMITMENTS OF THE BANKS;
BORROWING PROCEDURES.
2.1 Commitments..1 Commitments. Subject to the terms and conditions of
this Agreement, each Bank, severally but not jointly, agrees to make loans
(collectively the "Loans" and individually each a "Loan") to the Company, which
Loans the Company may prepay and reborrow during the period from the date hereof
to, but not including, the Termination Date, in such amounts as the Company may
from time to time request, but not exceeding in the aggregate at any one time
outstanding such Bank's Commitment less such Bank's Percentage of the aggregate
face amount of all Letters of Credit issued and outstanding at such time. All
Loans made hereunder shall be made by the Banks on a pro-rata basis according to
each Bank's Percentage.
2.2 Loan Options..2 Loan Options. Each Loan shall be either a
Reference Rate Loan or a Eurodollar Loan, except as otherwise provided herein.
Any combination of types of Loans may be outstanding at the same time; provided,
however, that the Company may not have more than ten borrowings of Eurodollar
Loans outstanding at the same time.
2.3 Borrowing Procedure..3 Borrowing Procedure.
(a) Subject to the terms of this Agreement, the Company shall give
the Agent (y) at least three Banking Days' prior notice of each proposed
borrowing of Eurodollar Loans not later than 10:00 a.m. Houston time on the date
of such notice, and (z) at least one Banking Day's prior notice of each proposed
borrowing of Reference Rate Loans not later than 10:00 a.m. Houston time on the
date of such notice. Each notice shall be by telephone (promptly confirmed in
writing in the form of Exhibit K hereto) and shall specify (i) the type of Loans
requested, (ii) in the case of Eurodollar Loans, the initial Interest Period
therefor, (iii) the borrowing date, which shall be a Banking Day and (iv) the
amount of Loans requested. The Agent shall promptly advise each Bank thereof.
Not later than 12:30 p.m., Houston time, on the date of a proposed borrowing,
each Bank shall provide the Agent at its principal office in Houston with
immediately available funds covering such Bank's ratable share (if any) of such
borrowing. Notwithstanding the foregoing, the notice for the initial borrowing
hereunder may be made on the date of the proposed borrowing and the Banks'
funding obligations referred to in the immediately preceding sentence shall be
extended to 2:30 p.m., Houston time.
(b) Each borrowing of Reference Rate Loans shall be in a minimum
amount of $100,000 or an integral multiple thereof. Each borrowing of
Eurodollar Loans shall be in a minimum amount of $500,000 or an integral
multiple thereof.
(c) The Agent, on behalf of the Banks, will pay to the Company, by
crediting its commercial demand deposit account at TCB, the amount of each Loan
on the date designated in the notice of borrowing upon receipt of the documents
required in Section 8 and, if applicable, Section 9, with respect to such Loan.
2.4 Continuation and/or Conversion of Loans..4 Continuation and/or
Conversion of Loans. The Company may elect (i) to continue any outstanding
Eurodollar Loan from the current Interest Period of such Loan into a subsequent
Interest Period to begin on the last day of such current Interest Period, or
(ii) to convert any outstanding Reference Rate Loan into a Eurodollar Loan or,
on the last day of the current Interest Period, to convert one type of Loan into
another, in each case by giving at least three (3) Banking Days' prior
telephonic notice not later than 10:00 a.m., Houston time, on the date of such
notice (promptly confirmed in writing in the form of Exhibit L hereto) to the
Agent (which shall promptly advise each Bank thereof) of such continuation or
conversion, specifying the date, amount and the Interest Period, if applicable.
Absent notice of continuation or conversion, each Eurodollar Loan shall
automatically convert into a Reference Rate Loan on the last day of the current
Interest Period for such Loan, unless paid in full on such last day. No Loan
shall be converted into a Eurodollar Loan and no Eurodollar Loan shall be
continued less than thirty days before the Termination Date or at any time that
an Event of Default or an Unmatured Event of Default exists.
2.5 Extension of the Termination Date..5 Extension of the Termination
Date.
(a) At least 60 but not more than 90 days before any anniversary of
the Effective Date, the Company may, by delivery of a written request to the
Agent in the form of Exhibit B, request that each Bank agree to extend the
then-scheduled Termination Date by one (1) year.
(b) The Agent shall, upon receipt of any such extension request,
promptly notify each Bank thereof, and request that each Bank promptly advise
the Agent of its approval or rejection of such request.
(c) Upon receipt of such notification from the Agent, each Bank may,
in its sole discretion, agree to extend for one (1) year, or decline to extend,
the Termination Date, and each Bank shall, within 30 days of receipt of the
notice described in clause (b), notify the Agent of its approval or denial of
such request. If any Bank does not so notify the Agent, such Bank shall be
deemed to have denied such extension request. The Agent shall, no later than 30
days following its receipt of any extension request from the Company, notify the
Company as to the Banks which have approved or denied such request.
(d) If all of the Banks approve any such request, the Termination
Date shall be extended to the date which is one (1) year after the Termination
Date in effect immediately prior to such extension. If fewer than all of the
Banks approve any such request, the Termination Date shall not be extended.
3. NOTE EVIDENCING LOANS.. NOTE EVIDENCING LOANS.
3.1 Reference Rate Loans; Eurodollar Loans..1 Reference Rate Loans;
Eurodollar Loans. The Reference Rate Loans and Eurodollar Loans of all Banks
shall be evidenced by the Company's promissory note (the "Note") in the form of
Exhibit A, with appropriate insertions, which Note shall (i) be dated the
Effective Date (or such other date satisfactory to the Agent), (ii) be made
payable to the order of the Agent for the account of the Banks ratably in
accordance with their Percentages, and (iii) mature on the Termination Date.
3.2 Evidence of Loans..2 Evidence of Loans. All Loans made by the
Banks to the Company pursuant to this Agreement and all payments of principal
shall be evidenced by the Agent in its records or, at its option, on the
schedule attached to the Note, which records or schedule(s) shall be rebuttable
presumptive evidence of the subject matter thereof, provided that the failure of
the Agent to make any endorsement or other notation, or any error in doing so,
shall not affect the obligations of the Borrower hereunder or under the Note.
4. LETTER OF CREDIT. LETTER OF CREDIT
4.1 Issuance of Letters of Credit..1 Issuance of Letters of Credit.
Subject to the terms and conditions of this Agreement, the Commitments may, in
addition to the Loans provided for in Section 2.1, be utilized, upon the request
of the Company, for the issuance of letters of credit by TCB for the Company's
account (such letters of credit issued by TCB being hereinafter collectively
referred to as the "Letters of Credit"); provided that TCB shall have no
obligation to issue any such Letter of Credit if, after giving effect to such
issuance of the proposed Letter of Credit, the aggregate face amount of all
Letters of Credit outstanding at such time would exceed (i) together with the
aggregate outstanding amount of Loans at such time, the Credit at such time, or
(ii) $12,000,000. The Existing Letters of Credit shall be deemed Letters of
Credit issued and outstanding hereunder.
4.2 Procedure for Issuance..2 Procedure for Issuance. (a) In order to
effect the issuance of each Letter of Credit, the Company shall deliver to the
Agent (which delivery may be by facsimile transmission) a letter of credit
application in substantially the form attached hereto as Exhibit O (the "Letter
of Credit Application") not later than 10:00 A.M., Houston time, two (2)
Business Days prior to the proposed date of issuance of the Letter of Credit.
The letter of credit application shall be duly executed by a Responsible Officer
of the Company, shall be irrevocable and shall (i) specify the day on which such
Letter of Credit is to be issued (which shall be a Business Day), and (ii) set
forth calculations evidencing availability for the Letter of Credit, as required
pursuant to Section 4.1 hereof; provided that, in no event shall the Letter of
Credit have an expiry date on or after a date which occurs (A) more than twelve
(12) months after its date of issuance or (B) later than ten (10) days prior to
the Termination Date.
(b) Upon receipt of the Letter of Credit Application, and
satisfaction of the applicable terms and conditions of this Agreement, and
provided that no Unmatured Event of Default or Event of Default exists, or
would, after giving effect to the issuance of the Letter of Credit, exist, TCB
shall issue such Letter of Credit to the beneficiary specified in the Letter of
Credit Application no later than the close of business, in Houston, Texas, on
the date so specified. The Agent shall provide the Company and each Bank with a
copy of the Letter of Credit which has been issued. Each Letter of Credit shall
(i) provide for the payment of drafts presented for honor thereunder by the
beneficiary in accordance with the terms thereof, when such drafts are
accompanied by the documents described in the Letter of Credit, if any, and
(ii) to the extent not inconsistent with the express terms hereof or the
applicable Letter of Credit Application, be subject to the Uniform Customs and
Practice for Documentary Credits, International Chamber of Commerce Publication
No. 500 (together with any subsequent revisions thereof approved by a Congress
of the International Chamber of Commerce and adhered to by TCB, the "UCP"), and
shall, as to matters not governed by the UCP, be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas.
4.3 Purchase of Participations..3 Purchase of Participations. Upon the
issuance date of each Letter of Credit, TCB shall be deemed, without further
action by any party hereto, to have sold to each other Bank, and each other Bank
shall be deemed, without further action by any party hereto, to have purchased
from TCB, a participation, to the extent of such Bank's Percentage, in the
Letter of Credit, the obligations thereunder and in the reimbursement
obligations of the Company due in respect of drawings made under the Letter of
Credit. If requested by TCB, the other Banks will execute any other documents
reasonably requested by TCB to evidence the purchase of such participations,
provided that such documents shall be in form and substance satisfactory to each
Bank. Upon issuance of a Letter of Credit and the purchase of participations
hereunder, in respect of clarification, each Bank (including TCB) hereby agrees
that the principal amount of each such Bank's interest in the reimbursement
obligation of the Company in respect of such Letter of Credit shall be deemed to
be included in the principal amount which constitutes the numerator in the
applicable calculation of such Bank's Percentage hereunder.
4.4 Presentment and Honor of Letter of Credit..4 Presentment and Honor of
Letter of Credit. Upon the presentment of a draft for honor under any Letter of
Credit by the beneficiary thereof which TCB has determined is in compliance with
the conditions for payment thereunder, TCB shall promptly notify the Company,
the Agent and each Bank of the intended date of honor of such draft and subject
to Section 3.1 hereof, the amount due and owing in respect of such draft shall
automatically and without any action by the Company be immediately due and
payable by the Company and until paid, shall be deemed to be a Loan as of the
date of payment of such draft by TCB, and each Bank shall, notwithstanding any
other provision of this Agreement (including the occurrence and continuance of
an Unmatured Event of Default or an Event of Default), make available to the
Agent for the benefit of TCB an amount equal to its Percentage of the presented
draft on the day TCB is required to honor such draft. If such amount is not in
fact made available to the Agent by such Bank on such date, such amount shall
bear interest at the lesser of (i) the Federal Funds Rate or (ii) the Highest
Lawful Rate, payable on demand by the Agent.
4.5 Obligations of the Company Absolute..5 Obligations of the Company
Absolute. The Company's obligation to reimburse TCB for the amount of any draft
drawn under a Letter of Credit shall be absolute, unconditional and irrevocable
and shall be paid immediately to the Agent for the account of the Banks upon
demand by the Agent, and otherwise strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including, without limitation,
the following circumstances:
(a) the existence of any claim, set-off, defense or other rights
which the Company may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), TCB, any Bank or any
other Person, whether in connection with this Agreement, any other Loan
Document, the transactions contemplated herein or therein or any unrelated
transaction;
(b) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent or invalid in any material respect
or any statement therein being untrue or inaccurate in any respect;
(c) payment by TCB under any Letter of Credit against presentation of
a draft or certificate which does not comply with the terms of such Letter
of Credit, provided that such payment shall not have been the result of
gross negligence or wilful misconduct of TCB; and
(d) any other circumstance or event whatsoever, whether or not
similar to the foregoing.
4.6 Liability of TCB..6 Liability of TCB. The Company assumes all risks
of the acts or omissions of the beneficiary and any transferee of each Letter of
Credit with respect to its use of such Letter of Credit. Neither TCB, the
Agent, nor any Bank shall be liable or responsible for, and the Company hereby
indemnifies and holds TCB, the Agent and each Bank harmless for: (a) the use
which may be made of any Letter of Credit or for any acts or omissions of the
beneficiary and any transferee thereof in connection therewith, or (b) the
validity or genuineness of documents, or of any endorsement(s) thereon, even if
such documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any other circumstances whatsoever in making or failing
to make payment, against TCB, the Agent or any Bank, except damages determined
to have been caused by gross negligence or willful misconduct of TCB in
determining whether documents presented under a Letter of Credit comply with the
terms of such Letter of Credit and there shall have been a wrongful payment as a
result thereof (for which only TCB shall be liable or responsible); provided
that, it is the intention of the Company hereunder to indemnify TCB, the Agent
and each Bank for its own negligence, other than negligence constituting gross
negligence or willful misconduct. In furtherance and not in limitation of the
foregoing, TCB may accept documents that appear on their face to be in order,
without responsibility for investigation, regardless of any notice or
information to the contrary.
4.7 Provisions of Agreement Control..7 Provisions of Agreement Control.
In the event that any provision of a Letter of Credit Application is
inconsistent, or in conflict with, any provisions of this Agreement, including
provisions for the rate of interest applicable to draws thereunder, delivery of
collateral or rights of setoff or any representations, warranties, covenants or
any events of default set forth therein, the provisions of this Agreement shall
govern.
5. INTEREST AND FEES.. INTEREST AND FEES.
5.1 Interest..1 Interest.
(a) Reference Rate Loan. The unpaid principal of the Reference Rate
Loans shall bear interest prior to maturity at a rate per annum equal to the
Alternate Base Rate in effect from time to time. Prior to maturity interest on
each Reference Rate Loan shall be payable on each Payment Date therefor and on
the Termination Date.
(b) Eurodollar Loans. The unpaid principal of each Eurodollar Loan
shall bear interest prior to maturity at a rate per annum equal to the Interbank
Rate (Reserve Adjusted) in effect for each Interest Period therefor plus the
Margin from time to time in effect. Interest on each Eurodollar Loan shall be
payable on each Payment Date therefor and on the Termination Date.
(c) Interest After Maturity. The Company shall pay to the Banks
interest on any amount of principal of any Loan which is not paid when due,
whether at stated maturity, by acceleration or otherwise, accruing from and
including the date such amount shall have become due to (but not including) the
date of payment thereof in full, at the rate per annum, which is equal to the
greater of (i) 2% in excess of the rate applicable to the unpaid amount
immediately before it became due or (ii) 2% in excess of the Alternate Base Rate
from time to time in effect. Interest after maturity shall be payable on
demand.
5.2 Commitment Fee..2 Commitment Fee. The Company agrees to pay to the
Banks ratably in accordance with their Percentages, a commitment fee, for the
period commencing on the Effective Date and ending on the earlier of (x) the
Termination Date and (y) the date of termination of the Credit, equal to 0.25%
per annum on the daily average of the unused amount of the Credit. The
commitment fee paid to the Banks pursuant to this Section 5.2 shall be payable
on the last day of each March, June, September and December and on the
Termination Date or the date of termination of the Credit, in each case for any
period then ending for which such commitment fee shall not have been theretofore
paid.
5.3 Letter of Credit Fees..3 Letter of Credit Fees. The Company agrees to
pay to the Agent for account of the Banks a letter of credit fee for the
issuance and maintenance of Letters of Credit in an amount equal to, for the
period from the Effective Date to the first adjustment of the Margin, the
greater of (i) $500 and (ii) 1.00% per annum of the face amount of each Letter
of Credit, and thereafter an amount equal to the greater of (i) $500 and
(ii) the face amount of such Letters of Credit multiplied by the then applicable
Margin, payable quarterly in arrears on the last Banking Day of each March,
June, September and December during the term of this Agreement and on the
Termination Date.
5.4 Method of Calculating Interest and Fees..4 Method of Calculating
Interest and Fees. Interest on each Eurodollar Loan (and on any Reference Rate
Loan bearing interest by reference to the Federal Funds Rate) shall be computed
on the basis of a year consisting of 360 days and paid for actual days elapsed,
calculated as to each Interest Period from and including the first day thereof
to but excluding the last day thereof. Interest on each Reference Rate Loan
(other than any Reference Rate Loan described in the preceding sentence) shall
be calculated on the basis of a 365 day or 366 day year, as applicable, and paid
for actual days elapsed. The fees payable pursuant to Section 5.2 and 5.3 shall
be computed on the basis of a year consisting of 360 days and paid for actual
days elapsed.
5.5 Agent's Fee..5 Agent's Fee. The Company shall pay the Agent the fees
separately agreed to between the Company and the Agent.
60 PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF THE CREDIT. PAYMENTS,
PREPAYMENTS, REDUCTION OR TERMINATION OF THE CREDIT.
6.1 Place of Payment..1 Place of Payment. All payments hereunder
(including payments with respect to the Note) shall be made without set-off or
counterclaim and shall be made to the Agent, for the account of the Banks
ratably in accordance with their Percentage of the Credit, in immediately
available funds prior to 12:30 p.m., Houston time, on the date due at the
Agent's office at 712 Main, Houston, Texas 77002, or at such other place as may
be designated by the Agent to the Company in writing. Any payments received
after such time shall be deemed received on the next Banking Day. The Agent
shall promptly remit in immediately available funds to each Bank its share of
all such payments received by the Agent for the account of such Bank. Whenever
any payment to be made hereunder or under the Note shall be stated to be due on
a date other than a Banking Day, such payment may be made on the next succeeding
Banking Day (unless, in the case of a payment with respect to a Eurodollar Loan,
such next succeeding Banking Day is the first Banking Day of a calendar month,
in which case such payment shall be due on the next preceding Banking Day), and
such extension of time shall be included in the computation of interest or any
fees.
6.2 Prepayments..2 Prepayments. The Company may from time to time, upon
prior written or telephonic notice received by the Agent (which shall promptly
advise each Bank thereof), prepay the principal of any Loan in whole or in part
without premium, as contemplated by Section 2.1; provided, however, that (a) any
partial prepayment of principal shall be in a minimum amount of $100,000 or an
integral multiple thereof and (b) any prepayment of a Eurodollar Loan on a day
other than the last day of an Interest Period therefor shall be subject to
Section 7.1.
6.3 Reduction of Credit..3 Reduction of Credit. The Company may from
time to time, upon at least five (5) Banking Days' prior written or telephonic
notice received by the Agent (which shall promptly advise each Bank thereof),
permanently reduce the amount of the Credit (such reduction to be made among the
Banks according to their Percentages) to an amount not less than the sum of the
principal amount of all outstanding Loans and the outstanding aggregate face
amount of the Letters of Credit. Any such reduction shall be in a minimum
amount of $500,000 or an integral multiple thereof. The Company may at any time
on like notice terminate the Credit upon payment in full of the Loans and other
liabilities of the Company hereunder. The Company shall promptly confirm any
telephonic notice of reduction or termination of the Credit in writing.
Notwithstanding the foregoing, at any time at which a Letter of Credit has been
issued and is outstanding, the Credit may not be reduced below an amount equal
to the aggregate undrawn face amount of such Letters of Credit.
6.4 Offset..4 Offset. In addition to and not in limitation of all rights
of offset that any Bank or other holder of any Loan may have under applicable
law, each Bank or other holder of any Loan shall, upon the occurrence of any
Event of Default described in Section 12.1 or any Unmatured Event of Default
described in Section 12.1(e), have the right to appropriate and apply to the
payment of each Loan any and all balances, credits, deposits, accounts or moneys
of the Company then or thereafter with such Bank or other holder.
6.5 Proration of Payments..5 Proration of Payments. If any Bank or other
holder of a Loan shall obtain any payment or other recovery (whether voluntary,
involuntary, by application of offset or otherwise) on account of principal of
or interest on any Loan in excess of its pro rata share of payments and other
recoveries obtained by all Banks or other holders on account of principal of and
interest on Loans then held by them, such Bank or other holder shall purchase
from the other Banks or holders such participation in the Loans held by them as
shall be necessary to cause such purchasing Bank or other holder to share the
excess payment or other recovery ratably with each of them; provided, however,
that if all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing holder, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
The Company agrees that the Bank so purchasing a participation from the other
Banks under this Section 6.5 may exercise all its rights of payment, including
the right of set-off, with respect to such participation as fully as if such
Bank were the direct creditor of the Company in the amount of such
participation.
70 INDEMNIFICATION: EURODOLLAR LOANS. INDEMNIFICATION EURODOLLAR LOANS.
7.1 Indemnity for Funding Losses..1 Indemnity for Funding Losses. The
Company will indemnify each Bank upon demand against any loss or expense which
such Bank may sustain or incur, including, without limitation, any loss or
expense sustained or incurred in obtaining, liquidating or employing deposits or
other funds acquired to effect funding or maintain a Loan, as a consequence of
(i) any failure of the Company to borrow any Loan on the date specified therefor
in the notice of borrowing with respect to such Loan, (ii) any failure of the
Company to make any payment when due of any amount due hereunder or under any
Note in connection with any Loan, or (iii) any payment or prepayment of any
Eurodollar Loan on a date other than the last day of the Interest Period for
such Loan. The Company's foregoing obligations shall survive termination of
this Agreement.
7.2 Capital Adequacy..2 Capital Adequacy. If any Bank shall determine at
any time after the date hereof that the adoption of any law, rule or regulation
regarding capital adequacy, or any change therein or 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 Bank with any request or directive regarding capital adequacy (whether
or not having the force of law) from any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital as a consequence of its obligations hereunder to a level
below that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy), by an amount deemed by such Bank to be material, then the
Company shall pay to such Bank upon demand such amount or amounts, in addition
to the amounts payable under the other provisions of this Agreement or under the
Note, as will compensate such Bank for such reduction. Determination by such
Bank for purposes of this Section 7.2 of the additional amount or amounts
required to compensate such Bank in respect of the foregoing shall be conclusive
in the absence of demonstrable error. In determining such amount or amounts,
such Bank may use any reasonable averaging and attribution methods.
7.3 Additional Provisions Relating to Eurodollar Loans..3 Additional
Provisions Relating to Eurodollar Loans.
(a) Increased Cost. If, as a result of any law, regulation, treaty
or directive, or any change therein, or in the interpretation or application
thereof, or compliance by any Bank with any request or directive (whether or not
having the force of law) from any court or governmental authority, agency or
instrumentality:
(i) the basis of taxation of payments to any Bank of the principal of
or interest on any Eurodollar Loan (other than taxes imposed on the overall
net income of such Bank by the jurisdiction in which such Bank has its
principal office) is changed; or
(ii) any reserve, special deposit, special assessment, or similar
requirement against assets of, deposits with or for the account of, or
credit extended by any Bank is imposed, modified or deemed applicable; or
(iii) any other condition affecting this Agreement or the
Eurodollar Loans is imposed on any Bank or the interbank eurodollar market;
and such Bank determines that, by reason thereof, the cost to such Bank of
making or maintaining any Eurodollar Loan is increased, or the amount of any sum
receivable by such Bank hereunder in respect of any Eurodollar Loan is reduced;
then, the Company shall pay to such Bank upon demand (which demand shall be
accompanied by a statement setting forth the basis for the calculation thereof
but only to the extent not theretofore provided to the Company) such additional
amount or amounts as will compensate such Bank for such additional cost or
reduction (provided such amount has not been compensated for in the calculation
of the Eurocurrency Reserve Percentage). Determinations by such Bank for
purposes of this section of the additional amounts required to compensate such
Bank in respect of the foregoing shall be conclusive, absent demonstrable error.
The provisions of this Section 7.3(a) shall only be applicable to Eurodollar
Loans which are outstanding on or after the date such Bank has notified the
Company that an event has occurred which will result in the imposition of a
liability on the Company under this Section 7.3 (a) , it being understood that
the Company may prepay any such Loan without any prepayment fee or penalty
(except as provided in Section 7.1).
(b) Eurodollar Deposits Unavailable or Interest Rate Unascertainable.
If the Company has any Eurodollar Loan outstanding, or has notified the Agent of
its intention to incur a Eurodollar Loan as provided herein, then in the event
that prior to any Interest Period any Bank shall have determined (which
determination shall be conclusive and binding on the parties hereto) that
deposits of the necessary amount for the relevant Interest Period are not
available to such Bank in the interbank Eurodollar market or that, by reason of
circumstances affecting such market, adequate and reasonable means do not exist
for ascertaining the Interbank Rate applicable to such Interest Period, such
Bank shall promptly give notice of such determination to the Company, the Agent
and the other Banks, and (i) any notice of new Eurodollar Loans previously given
by the Company and not yet borrowed shall be deemed a notice to make Reference
Rate Loans and (ii) the Company shall be obligated either to prepay or to
convert any outstanding Eurodollar Loans to Reference Rate Loans on the last day
of the then current Interest Period with respect thereto, subject to the
provisions of Section 7.1.
(c) Changes in Law Rendering Eurodollar Loans Unlawful. If at any
time due to any new law, treaty or regulation, or any interpretation thereof by
any governmental or other regulatory authority charged with the administration
thereof, or for any other reason arising subsequent to the date hereof, it shall
become unlawful for any Bank to fund any Eurodollar Loan which it is committed
to make hereunder, the obligation of such Bank to provide such Loan shall, upon
the happening of such event, forthwith be suspended for the duration of such
illegality. If any such change shall make it unlawful for such Bank to continue
any Eurodollar Loan previously made by it hereunder, such Bank shall, upon the
happening of such event, notify the Company, the Agent and the other Banks
thereof in writing stating the reasons therefor, and the Company shall on the
earlier of (i) the last day of the then current Interest Period for such
Eurodollar Loan or (ii) if required by such law, regulation or interpretation,
on such date as shall be specified in such notice, either convert such unlawful
Loans to Reference Rate Loans or prepay all such Eurodollar Loans without any
penalty (except as provided in Section 7.1), to such Bank in full.
(d) Discretion of any Bank as to Manner of Funding. Subject to the
provisions of Section 7.3(e), any Bank shall be entitled to fund and maintain
its funding of all or any part of its Eurodollar Loans in any manner it elects,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Eurodollar Loan through the purchase of deposits having a
maturity corresponding to the maturity of such Eurodollar Loan and being an
interest rate equal to the Interbank Rate. Any Bank may, if it so elects,
fulfill any commitment to make Eurodollar Loans by causing a foreign branch or
affiliate to make or continue such Eurodollar Loans, provided, however, that in
such event such Loans shall be deemed for the purposes of this Agreement to have
been made by such Bank, and the obligation of the Company to repay such Loans
shall nevertheless be to such Bank and shall be deemed held by such Bank, to the
extent of such Loans, for the account of such branch or affiliate.
(e) Mitigation of Circumstances. Each Bank shall promptly notify the
Company and the Agent of any event of which it has knowledge which will result
in, and will use reasonable commercial efforts available to it (and not, in such
Bank's good faith judgment, otherwise disadvantageous to such Bank) to mitigate
or avoid, (i) any obligation by the Company to pay any amount pursuant to
Section 7.3(a) or (ii) the occurrence of any circumstances of the nature
described in Section 7.3(b) or 7.3(c) (and, if any Bank has given notice of any
such event described in clause (i) or (ii) above and thereafter such event
ceases to exist, such Bank shall promptly so notify the Company and the Agent).
Without limiting the foregoing, each Bank will designate a different funding
office if such designation will avoid (or reduce the cost to the Company of) any
event described in clause (i) or (ii) of the preceding sentence and such
designation will not, in such Bank's sole judgment, be otherwise disadvantageous
to such Bank.
80 CONDITIONS PRECEDENT TO ALL LOANS. CONDITIONS PRECEDENT TO ALL LOANS.
The obligation of any Bank to make any Loan or issue any Letter of Credit
is subject to the satisfaction of each of the following conditions precedent:
8.1 Notice..1 Notice. The Agent shall have received timely notice of such
Loan or Letter of Credit in accordance with Section 2.3 or Section 4.2, as the
case may be.
8.2 Default..2 Default. Before and after giving effect to such Loan
or Letter of Credit, no Event of Default or Unmatured Event of Default shall
have occurred and be continuing.
8.3 Insurance..3 Insurance. There shall have been no material change,
or notice of prospective material change (whether such notice is formal or
informal) in the nature, extent, scope or cost of the insurance policies of the
Company or any Subsidiary listed on Exhibit E which change would have a material
adverse effect on the financial condition of the Company and its Subsidiaries
taken as a whole or would significantly adversely affect the ability of the
Company to perform its respective obligations under this Agreement or under the
Note or any other Loan Document to which it is a party.
8.4 Warranties..4 Warranties. Before and after giving effect to such
Loan or Letter of Credit, the warranties in Section 10 (other than the warranty
in the last sentence of Section 10.5 and in Section 10.10) shall be true and
correct as though made on the date of such Loan or Letter of Credit, except for
such changes as are specifically permitted hereunder.
8.5 Certification..5 Certification. Each request for a Loan or Letter
of Credit shall be deemed to be a certification that the conditions precedent
set out in Sections 8.2, 8.3 and 8.4 have been satisfied.
90 CONDITIONS PRECEDENT TO EFFECTIVE DATE AND INITIAL LOAN AND LETTER OF
CREDIT THEREON OR THEREAFTER. CONDITIONS PRECEDENT TO EFFECTIVE DATE AND
INITIAL LOAN AND LETTER OF CREDIT THEREON OR THEREAFTER.
The occurrence of the Effective Date and the obligation of the Banks to
make the initial Loan and of TCB to issue the initial Letter of Credit hereunder
on or after the Effective Date is subject to the satisfaction of the conditions
precedent, in addition to the applicable conditions precedent set forth in
Section 8 above, that the Company shall have delivered to the Agent all of the
following, each (i) duly executed and dated the Effective Date or such earlier
date as is satisfactory to the Agent, (ii) in form and substance satisfactory to
the Agent, and (iii) in sufficient number of signed counterparts to provide one
for each Bank (except for the Note, of which only the original shall be signed).
9.1 Note..1 Note. The Note payable to the order of the Agent for the
account of the Banks ratably in accordance with their respective Commitments.
9.2 Resolutions; Consents and Approvals..2 Resolutions; Consents and
Approvals. A copy, duly certified by the secretary or an assistant secretary of
the Company, of (i) the resolutions of the Company's Board of Directors
authorizing or ratifying the execution and delivery of the Loan Documents to
which it is a party and authorizing the borrowings hereunder, (ii) all documents
evidencing other necessary corporate action with respect to the Loan Documents
to which it is a party, and (iii) all approvals or consents, if any, with
respect to the Loan Documents to which it is a party.
9.3 Incumbency..3 Incumbency. A certificate of the secretary or an
assistant secretary of the Company certifying the names of the Company's
officers authorized to sign the Loan Documents to which it is a party, together
with the true signatures of such officers.
9.4 Opinion..4 Opinion. An opinion of Shook, Hardy & Bacon P.C.,
counsel to the Company addressed to the Agent and the Banks in substantially the
form of Exhibit J.
9.5 General..5 General. All other documents which are provided for
hereunder or which the Banks may reasonably request.
100 REPRESENTATIONS AND WARRANTIES. REPRESENTATIONS AND WARRANTIES.
To induce the Banks to grant the Credit and to make the Loans and to induce
TCB to issue the Letters of Credit, the Company represents and warrants that:
10.1 Existence..1 Existence. The Company and each corporate Subsidiary
are corporations duly organized, validly existing and in good standing under the
laws of the states of their respective incorporation. All of the other
Subsidiaries, if any, are entities duly organized, validly existing and in good
standing under the laws of the jurisdictions of their respective organization.
The Company and all of the Subsidiaries are in good standing and are duly
qualified to do business in each state where, because of the nature of their
respective activities or properties, such qualification is necessary.
10.2 Authorization..2 Authorization. The Company and each Subsidiary is
duly authorized to execute and deliver the Loan Documents to which it is a party
and is and will continue to be duly authorized to perform its respective
obligations under the Loan Documents to which it is a party. The Company is and
will continue to be duly authorized to borrow monies hereunder. The execution,
delivery and performance by the Company and each Subsidiary and the borrowings
hereunder do not and will not require any consent or approval of any
governmental agency or authority.
10.3 No Conflicts..3 No Conflicts. The execution, delivery and
performance by the Company and each Subsidiary of the Loan Documents to which it
is a party (a) do not and will not conflict with (i) any provision of law
applicable to such Person, (ii) the charter or by-laws of such Person, (iii) any
agreement binding upon such Person, or (iv) any court or administrative order or
decree applicable to such Person and (b) do not and will not require, or result
in, the creation or imposition of any Lien on any asset of the Company or any of
its Subsidiaries.
10.4 Validity and Binding Effect..4 Validity and Binding Effect. When
duly executed and delivered, the Loan Documents to which it is a party will be,
legal, valid and binding obligations of the Company and its Subsidiaries,
enforceable against such Person in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights and by general principles of equity limiting the availability of
equitable remedies.
10.5 Financial Statements..5 Financial Statements. The Company's audited
consolidated financial statement as at March 26, 1996 and the Company's
Quarterly Report on Form 10-Q dated December 24, 1996 and filed with the
Securities and Exchange Commission, copies of which have been furnished by the
Company to the Agent, and which the Agent has furnished to each Bank, have been
prepared in conformity with generally accepted accounting principles applied on
a basis consistent with that of the preceding fiscal year end period and present
fairly the financial condition of the Company and its Subsidiaries as at such
dates and the results of their operations for the periods then ended, subject
(in the case of the interim financial statement) to year-end audit adjustments.
Since December 24, 1996 there has been no material adverse change in the
financial condition, assets, liabilities, business operations, management or
prospects of the Company and its Subsidiaries taken as a whole.
10.6 Litigation..6 Litigation. No claims, litigation, arbitration
proceedings or governmental proceedings are pending or threatened against or are
affecting the Company or any of the Subsidiaries, the results of which might
materially and adversely affect the financial condition, assets, liabilities,
business operations, management or prospects of the Company and the Subsidiaries
taken as a whole, except those referred to in a schedule furnished to each Bank
contemporaneously herewith and attached hereto as Exhibit C. Other than any
liability incident to such claims, litigation or proceedings or provided for or
disclosed in the financial statements referred to in Section 10.5, neither the
Company nor any of the Subsidiaries has any contingent liabilities which are
material to the Company and the Subsidiaries taken as a whole.
10.7 Taxes..7 Taxes. Each of the Company and the Subsidiaries has filed
all tax returns, to the best of its knowledge, which are required to have been
filed and has paid, or made adequate provisions for the payment of all material
taxes, assessments and other governmental charges or levies imposed upon it, its
income or any of its properties, franchises or assets which are due and payable,
except such taxes, assessments and other governmental charges or levies, if any,
as are being contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be required by GAAP
have been maintained.
10.8 Liens..8 Liens. None of the assets of the Company or any of the
Subsidiaries is subject to any Lien, except for (a) Permitted Liens, (b) Liens
disclosed in the financial statements referred to in Section 10.5; and (c) Liens
listed on Exhibit D.
10.9 No Default..9 No Default. Neither the Company nor any of the
Subsidiaries is in default under any agreement or instrument to which the
Company or any Subsidiary is a party or by which any of their respective
properties or assets is bound or affected, which default might materially and
adversely affect the financial condition, assets, liabilities, business
operations, management or prospects of the Company and the Subsidiaries taken as
a whole. No Event of Default or Unmatured Event of Default has occurred and is
continuing.
10.10 Insurance..10 Insurance. The schedule that summarizes the
property and casualty insurance program carried by the Company and the
Subsidiaries (Exhibit E attached hereto) is complete and accurate in all
material aspects. This summary includes the insurer's(s') name(s), policy
numbers(s), expiration date(s), amount(s) of coverage, type(s) of coverage, the
annual premium(s), exclusions, deductibles and self-insured retention, and
describes any other self-insurance or risk assumption agreed to by the Company
or any Subsidiary or imposed upon the Company or any Subsidiary by any such
insurer.
10.11 Subsidiaries..11 Subsidiaries. The Company has no
Subsidiaries except as listed on Exhibit F (as updated from time to time
pursuant to Section 11.1(f)). The Company and its Subsidiaries own the
percentage of its Subsidiaries as set forth on Exhibit F.
10.12 Partnerships..12 Partnerships. Neither the Company nor any of
its Subsidiaries is a partner or joint venturer in any partnership or joint
venture other than the partnerships and joint ventures listed on Exhibit G (as
updated from time to time pursuant to Section 11.1(f)).
10.13 Regulation U..13 Regulation U. (i) The Company is not engaged
in the business of purchasing or selling margin stock (as defined in Regulation
U of the Board of Governors of the Federal Reserve System) or extending credit
to others for the purpose of purchasing or carrying margin stock, (ii) no part
of the proceeds of any Loan will be used to purchase or carry directly or
indirectly any margin stock, and (iii) no Loan will be used for any purpose
which would violate any of the margin regulations of said Board of Governors.
10.14 Compliance..14 Compliance. The Company and the Subsidiaries are
in material compliance with all statutes and governmental rules and regulations
applicable to them.
10.15 Pension Plans..15 Pension Plans. Each Plan complies in all
material respects with all material applicable statutes and governmental rules
and regulations, and (i) no Reportable Event has occurred and is continuing with
respect to any Plan, (ii) neither the Company nor any ERISA Affiliate has
withdrawn from any Plan or instituted steps to do so, and (iii) no steps have
been instituted to terminate any Plan. No condition exists or event or
transaction has occurred in connection with any Plan which could result in the
incurrence by the Company or any ERISA Affiliate of any material liability, fine
or penalty.
110 COMPANY'S COVENANTS. COMPANY'S COVENANTS.
From the date of this Agreement and thereafter until the expiration or
termination of the Credit and until the Note and other liabilities of the
Company hereunder are paid in full, the Company agrees that it will:
11.1 Financial Statements and Other Information..1 Financial Statements
and Other Information. Furnish to each Bank:
(a) within ninety-five (95) days after each fiscal year of the
Company, a copy of the annual audit and Form 10-K report of the Company and its
Subsidiaries prepared on a consolidated basis in conformity with GAAP and
bearing the unqualified opinion of an independent certified public accountant of
recognized national standing selected by the Company whose opinion shall be in
scope and substance satisfactory to the Banks;
(b) within fifty (50) days after each quarter (except the last
quarter) of each fiscal year of the Company, a copy of the Company's Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission and of the
unaudited financial statement of the Company and its Subsidiaries prepared in
the same manner as the audit report referred to in preceding clause (a) signed
by the Company's chairman, president or chief financial officer and consisting
of at least a balance sheet as at the close of such quarter, and statements of
income and cash flows for such quarter and for the period from the beginning of
such fiscal year to the close of such quarter;
(c) together with the financial statements furnished by the Company
under preceding clauses (a) and (b) and in connection with any acquisition
pursuant to Section 11.10(a), a certificate of a Responsible Officer in the form
attached hereto as Exhibit M, dated the date of such annual audit report or such
quarterly financial statement or acquisition, as the case may be, to the effect
that no Event of Default or Unmatured Event of Default has occurred and is
continuing or, if there is any such event, describing it and the steps, if any,
being taken to cure it, and containing a computation of, and showing compliance
with, each of the financial ratios and restrictions contained in this Section
11;
(d) copies of each filing and report made by the Company or any
Subsidiary with or to any securities exchange or the Securities and Exchange
Commission and of each communication from the Company or any Subsidiary to
stockholders generally, promptly upon the filing or making thereof;
(e) promptly from time to time, a written report of any change in the
list of the Company's Subsidiaries set forth on Exhibit F or in the list of
partnerships and joint ventures set forth on Exhibit G;
(f) promptly upon receipt thereof, a copy of any annual, interim or
special audit made by independent accountants, any management control letter
issued by them or any other report submitted to the Company's Board of Directors
by the independent accountants; and
(g) promptly from time to time, such other information as the Banks
may reasonably request.
11.2 Books, Records and Inspection..2 Books, Records and Inspection.
Maintain, and cause each Subsidiary to maintain, complete and accurate books and
records in which full and correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to its respective business and
activities; permit, and cause each Subsidiary to permit, any authorized
representative of any of the Banks to visit and inspect any of the properties of
the Company or any of the Subsidiaries, upon reasonable prior notice and during
regular business hours, including any books and records (and to make extracts
therefrom), and to discuss its affairs and finances as often as the Banks may
reasonably request.
11.3 Conduct of Business..3 Conduct of Business. Maintain and cause each
Subsidiary to maintain its respective existence and use its best efforts to
maintain in full force and effect all franchises (including but not limited to
all Pizza Hut, Inc. franchise agreements and licenses), licenses, leases,
contracts and other authority and rights which are material to the Company and
the Subsidiaries, taken as a whole.
11.4 Taxes..4 Taxes. Pay, and cause each Subsidiary to pay, when due, all
taxes, assessments and other governmental charges or levies imposed upon it, its
income or any of its properties, franchises or assets, unless and only to the
extent that the Company or such Subsidiary, as the case may be, is contesting
such taxes, assessments and other governmental charges or levies in good faith
and by appropriate proceedings and the Company or such Subsidiary has set aside
on its books such reserves or other appropriate provisions therefor as may be
required by GAAP.
11.5 Notices..5 Notices.
(a) Event of Default; Pension Plans. Immediately upon learning of
the occurrence of any of the following, provide to each Bank written notice
thereof, describing the same and the steps being taken by the Company or the
Subsidiary or the ERISA Affiliate affected with respect thereto: (i) the
occurrence of an Event of Default or an Unmatured Event of Default or (ii) the
occurrence of a Reportable Event with respect to any Plan, the institution of
any steps by the Company, any ERISA Affiliate, the PBGC or any other Person to
terminate any Plan, or the institution of any steps by the Company or any ERISA
Affiliate to withdraw from any Plan with respect to which it is a "substantial
employer" within the meaning of section 4063 of ERISA.
(b) Litigation. Notify each Bank (i) promptly upon learning thereof,
of the institution or existence of any litigation, arbitration or governmental
proceedings which is material to the Company and the Subsidiaries taken as a
whole and (ii) of any judgment or decree entered against the Company or any
Subsidiary within five business days after such entry if the aggregate amount of
all judgments and decrees then outstanding against the Company and all the
Subsidiaries exceed $1,500,000 after deducting (A) the amount with respect to
which the Company or any Subsidiary is insured and with respect to which the
insurer has not disclaimed liability, and (B) the amount for which the Company
or any Subsidiary is otherwise indemnified if the terms of such indemnification
are satisfactory to the Banks.
(c) Indebtedness. Notify each Bank of any Indebtedness incurred in
connection with Liens permitted under Section 11.8(c) if the amount thereof
exceeds $1,500,000.
11.6 Pension Plans..6 Pension Plans. Not permit, and not permit any
Subsidiary to permit, any condition to exist in connection with any Plan which
might constitute grounds for the PBGC to institute proceedings to have such Plan
terminated or a trustee appointed to administer such Plan, and not engage in, or
permit to exist or occur, or permit any of its Subsidiaries to engage in, or
permit to exist or occur, any other condition, event or transaction with respect
to any Plan which could result in the incurrence by the Company or any of its
Subsidiaries of any material liability, fine or penalty.
11.7 Expenses..7 Expenses. Whether or not any Loan is made hereunder,
pay the Banks upon demand for all reasonable expenses, including reasonable fees
of attorneys for the Agent and the Banks (who may be employees of the Agent and
the Banks) and other legal expenses and costs of collection, incurred by (i) the
Agent in connection with the preparation, negotiation, execution and amendment
of, and waivers to, this Agreement, the Note and any document required to be
furnished herewith, and (ii) the Agent and the Banks in connection with the
enforcement of the Company's obligations hereunder or under the Note. The
Company also agrees to (x) indemnify and hold the Agent harmless from any loss
or expense which may arise or be created by the acceptance of telephonic or
other instructions for making Loans or disbursing the proceeds thereof or
issuing Letters of Credit, and (y) pay, and save the Agent and the Banks
harmless from all liability for, any stamp or other taxes which may be payable
with respect to the execution or delivery of this Agreement or the issuance of
the Note or any other instrument or document provided for herein or delivered or
to be delivered hereunder or in connection herewith. The Company's foregoing
obligations shall survive any termination of this Agreement.
11.8 Indebtedness..8 Indebtedness. Not, and not permit any Subsidiary
to, incur or permit to exist any Indebtedness, except: (a) Indebtedness to the
Agent and the Banks under the terms of the Loan Documents; (b) Indebtedness of
the Company having maturities and terms, and which is subordinated to payment of
the Note in a manner, approved in writing by the Banks; (c) Indebtedness of the
Company or any Subsidiary hereafter incurred in connection with the Liens
permitted by paragraph (7) of the definition of Permitted Liens; (d)
Indebtedness outstanding on the date hereof and listed on Exhibit H; and (e)
other unsecured Indebtedness of the Company (including Indebtedness permitted by
Section 11.20) and unsecured Indebtedness of any Subsidiary permitted by
Section 11.20, provided that such Indebtedness is incurred when no Event of
Default or Unmatured Event of Default exists or would result therefrom and such
Indebtedness exists under agreements that contain representations, warranties,
covenants and defaults no more burdensome to the Company or any Subsidiary than
those set forth herein; provided that the aggregate of all Indebtedness of
Subsidiaries shall not exceed $15,000,000 at any time outstanding.
11.9 Liens..9 Liens. Not, and not permit any Subsidiary to, create or
permit to exist any Lien with respect to any assets now owned or hereafter
acquired, except for Permitted Liens and Liens referred to in Section 10.8.
11.10 Merger, Purchase and Sale..10 Merger, Purchase and Sale. Not,
and not permit any Subsidiary to, be a party to any merger or consolidation;
not, and not permit any Subsidiary to, in any one fiscal year, sell, transfer,
convey, lease or otherwise dispose of assets of the Company and its Subsidiaries
which exceed in the aggregate, for the Company and its Subsidiaries taken as a
whole, five percent (5%) of the Value of the Company's consolidated total assets
determined as of the end of the immediately preceding fiscal year, or purchase
or otherwise acquire all or substantially all the assets of any Person.
Notwithstanding the foregoing:
(a) subject to the last sentence of this Section 11.10 and the prior
delivery to the Agent of a certificate in the form of Exhibit M giving effect
thereto, the Company or any Subsidiary thereof may acquire any other franchisee
of Pizza Hut, Inc. or Romacorp, Inc.;
(b) any wholly-owned Subsidiary of the Company may merge into the
Company (provided that the Company is the surviving corporation) or into or with
any other wholly-owned Subsidiary of the Company;
(c) any wholly-owned Subsidiary of the Company may be consolidated
with any other wholly-owned Subsidiary thereof so long as immediately thereafter
100% of the voting stock or other ownership interest of the resulting Person is
owned by the Company or another wholly-owned Subsidiary of the Company; and
(d) any wholly-owned Subsidiary of the Company may sell, transfer,
convey, lease or assign all or a substantial part of its assets to the Company
or another wholly-owned Subsidiary of the Company;
provided, in each of the cases described in the preceding clauses, that
immediately thereafter and after giving effect thereto, no Event of Default or
Unmatured Event of Default shall have occurred and be continuing. Neither the
Company nor any Subsidiary shall use in excess of $50,000,000 of borrowings
hereunder for any single acquisition of, or Investment in, any Person or Persons
or the assets of any Person or Persons without the prior written consent of the
Majority Banks.
11.11 Nature of Business..11 Nature of Business. Engage, and cause
each Subsidiary to engage, in substantially the same fields of business as it is
engaged in on the date hereof.
11.12 Franchise Rights..12 Franchise Rights. Not permit any
change, termination, or loss of its or any Subsidiary's rights to operate as a
franchisee of Pizza Hut, Inc., which would have a material adverse affect on the
Company and its Subsidiaries taken as a whole.
11.13 Net Worth..13 Net Worth. Not permit the Company's Consolidated
Net Worth during any fiscal quarter ending after December 31, 1996, to be less
than the sum of (i) $83,000,000 plus (ii) fifty percent (50%) of the Company's
Consolidated Net Earnings for each fiscal quarter ending after December 31, 1996
(excluding any fiscal quarter in which there is a loss).
11.14 Leverage Ratio..14 Leverage Ratio. Not permit the Indebtedness
to Pro Forma EBITDA Ratio as of the last day of any Computation Period to exceed
3.00 to 1.00.
11.15 Fixed Charge Coverage..15 Fixed Charge Coverage. Not permit
the ratio of (a) Pro Forma EBITDA as of the last day of any Computation Period
plus the consolidated operating lease rental expense of the Company and its
Subsidiaries for such Computation Period to (b) the sum of (i) consolidated
interest expense of the Company and its Subsidiaries for such Computation
Period, plus (ii) the consolidated operating lease rental expense of the Company
and its Subsidiaries for such Computation Period to be less than 1.50 to 1.00 on
the last day of such Computation Period.
For purposes of this Section 11.15, interest expense shall include, without
limitation, implicit interest expenses on Capitalized Leases.
11.16 Insurance..16 Insurance. Maintain, and cause each Subsidiary to
maintain, insurance to such extent and against such hazards and liabilities as
is commonly maintained by companies similarly situated, and in any event such
types and in such amounts and with financially sound and reputable insurers of
at least the quality as is described in the certificate furnished pursuant to
Section 10.10. The Company agrees to notify each Bank prior to any material
change in or cancellation of any such insurance.
11.17 Restricted Payments..17 Restricted Payments. Not, and not
permit any Subsidiary to, purchase or redeem any shares of its stock, declare
or pay any dividends thereon (other than stock dividends), make any distribution
to stockholders as such or set aside any funds for any such purpose, and not,
and not permit any Subsidiary to, prepay, purchase or redeem any subordinated
Indebtedness of the Company or any Subsidiary if, before or after giving effect
to such transaction, an Event of Default or Unmatured Event of Default has
occurred and is continuing.
11.18 Leases..18 Leases. Not enter into or permit to exist, or
permit any Subsidiary to enter into or permit to exist, any arrangements for the
leasing by it or any of its Subsidiaries, as lessee, of any real or personal
property under leases (other than Capitalized Leases) if, immediately before and
after giving effect thereto, an Event of Default or Unmatured Event of Default
shall exist or be continuing. For purposes of determining whether the entering
into any lease results in a breach of Section 11.15, the Company shall make the
calculation required under such Section as of the date such lease is entered
into on assumption that the rental expense that is expected to be incurred
during the twelve-month period following the entering into the lease was
incurred during the twelve-month period ending on the date of such calculation.
11.19 Company's and Subsidiaries' Stock..19 Company's and
Subsidiaries' Stock. Not, and not permit any Subsidiary to, (i) purchase or
otherwise acquire any shares of the stock of the Company if, before or after
giving effect to such transaction, an Event of Default or Unmatured Event of
Default has occurred and is continuing, or (ii) take any action, or permit any
Subsidiary to take any action, which will result in a decrease in the Company's
or any Subsidiaries ownership interest in any Significant Subsidiary.
11.20 Guaranties..20 Guaranties. Not, and not permit any Subsidiary
to, become a guarantor or surety of, or otherwise become or be responsible in
any manner (whether by agreement to purchase any obligations, stock, assets,
goods or services, or to supply or advance any funds, assets, goods or services,
or otherwise) with respect to, any undertaking of any other Person, except for
(i) the endorsement, in the ordinary course of collection, of instruments
payable to it or its order and (ii) as to the Company, guarantees of obligations
which do not exceed $5,000,000.00 in the aggregate at any one time; provided,
however, that in addition to the foregoing, the Company may enter into and
perform its obligations under the Indemnification Agreements.
11.21 Investments..21 Investments. Not, and not permit any
Subsidiary to, make or permit to exist any Investment in any Person, except for:
(a) Investments in securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States of America or any agency thereof;
(b) Investments in commercial paper maturing in 270 days or less from
the date of issuance rated in the highest grade by a nationally recognized
credit rating agency;
(c) Investments in certificates of deposit maturing within one year
from the date of acquisition issued by a bank or trust company organized under
the laws of the United States or any state thereof having capital, surplus and
undivided profits aggregating at least $100,000,000;
(d) Subject to the last sentence of Section 11.10, Investments in
other Pizza Hut, Inc. or Romacorp, Inc. franchisees as long as, before or after
giving effect to such Investment, no Event of Default or Unmatured Event of
Default has occurred which is continuing;
(e) Investments outstanding on the date hereof and listed on Exhibit
I; and
(f) other liquid Investments (except Investments prohibited under
Section 11.10 or 11.20), as selected by the Company or a Subsidiary, not to
exceed $5,000,000 in the aggregate at any one time for the Company and all
Subsidiaries.
11.22 Subsidiaries..22 Subsidiaries. Except as permitted under
Section 11.21(d), not, without the Banks' prior written consent, create or
acquire, or permit any Subsidiary to create or acquire, any Significant
Subsidiaries in addition to those existing on the date of this Agreement. The
Company shall immediately cause each Subsidiary hereafter created or acquired by
the Company or any Subsidiary to provide to the Agent for the benefit of the
Banks the following: (a) all documents, agreements and other instruments
described in Sections 9.2, 9.3, 9.4 and 9.5 with respect to such Subsidiary; and
(b) all information regarding the condition (financial or otherwise), business
and operations of such Subsidiary as the Agent or any Bank may reasonably
request.
11.23 Unconditional Purchase Obligation..23 Unconditional Purchase
Obligation. Not, and not permit any Subsidiary to, enter into or be a party to
any contract for the purchase or lease of materials, supplies or other property
or services if (a) such contract requires that payment be made by it regardless
of whether or not delivery is ever made of such materials, supplies or other
property or services and (b) the aggregate amount payable over the full
remaining terms of all such contracts exceeds $1,500,000 in the aggregate for
the Company and its Subsidiaries.
11.24 Other Agreements..24 Other Agreements. Not, and not permit
any Subsidiary to, enter into any agreement containing any provision which would
be violated or breached by the Company's or any Subsidiaries performance of its
obligations hereunder or under any instrument or document delivered or to be
delivered by such Person hereunder or in connection herewith.
11.25 Use of Proceeds..25 Use of Proceeds. Not permit any proceeds of
the Loans to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of "purchasing or carrying any margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended from time to time, and furnish to each Bank, upon its
request, a statement in conformity with the requirements of Federal Reserve Form
U-1 (or such other form or forms as may be required by Regulation U) referred to
in Regulation U.
11.26 Amendment to Loan Documents..26 Amendment to Loan Documents.
Within 180 days after the date hereof, enter into, and cause its Subsidiaries to
enter into, an amendment to this Agreement and such other documents as the Agent
deems necessary, and in form and substance satisfactory to the Company and
Banks, to accomplish one of the following:
(a) Implement the tax restructuring outlined in that certain letter
from the Borrower to the Agent dated as of December 27, 1996, together with a
reorganization of the Loan Documents consistent with the Summary of Terms and
Conditions dated as of February 5, 1997 among the Agent, Chase Securities, Inc.
and the Borrower, whereby NPC Management, Inc. shall be the "Borrower" and all
of the Affiliates and Subsidiaries of NPC Management, Inc. shall guarantee its
obligations to the Agent and the Banks; or
(b) Add all direct and indirect Subsidiaries as co-Borrowers or
guarantors; or
(c) Such other reorganization and/or amendments as to which the
Company, the Agent and Banks may agree.
12. EVENTS OF DEFAULT AND REMEDIES.. EVENTS OF DEFAULT AND REMEDIES.
12.1 Events of Default..1 Events of Default. Each of the following
shall constitute an Event of Default under this Agreement:
(a Non-Payment. (i) Default in the payment, when due, of any
principal of the Note or any fee hereunder; or (ii) default, and the continuance
thereof for 10 days, in the payment, when due, of any interest on the Note or
any other amount owing by the Borrower to the Agent or the Banks pursuant to
this Agreement or any other Loan Document.
(b Non-Payment of Other Indebtedness. Default in the payment when
due, whether by acceleration or otherwise (subject to any applicable grace
period), of any Indebtedness of, or guaranteed by, the Company or any Subsidiary
(other than the Indebtedness evidenced by the Note) in excess of $1,000,000 in
the aggregate for the Company and its Subsidiaries.
(c Acceleration of Other Indebtedness. Any event or condition shall
occur which (i) results in the acceleration of the maturity of any Indebtedness
in excess (in the aggregate for the Company and its Subsidiaries) of $1,000,000
of, or guaranteed by, the Company or any Subsidiary (other than the Indebtedness
evidenced by the Note) or (ii) enables the holder or holders of such other
Indebtedness or any trustee or agent for such holders (any required notice of
default having been given and any applicable grace period having expired) to
accelerate the maturity of such other Indebtedness.
(d Other Obligations. Default in the payment when due, whether by
acceleration or otherwise, or in the performance or observance (subject to any
applicable grace period) of (i) any material obligation or agreement in excess
in the aggregate of $1,000,000 of the Company or any Subsidiary to or with any
Bank (other than any obligation or agreement of the Company of the Subsidiaries
under the Loan Documents), or (ii) any material obligation or agreement in
excess in the aggregate of $1,000,000 of the Company or any Subsidiary to or
with any other Person (other than (x) any such material obligation or agreement
constituting or related to Indebtedness, (y) accounts payable arising in the
ordinary course of business, and (z) any material obligation or agreement of any
Subsidiary to the Company or to any other Subsidiary), except only to the extent
that the existence of any such default is being contested by the Company or such
Subsidiary, as the case may be, in good faith and by appropriate proceedings and
the Company or such Subsidiary shall have set aside on its books such reserves
or other appropriate provisions therefor as may be required by GAAP.
(e Insolvency. The Company or any of the Subsidiaries becomes
insolvent, or generally fails to pay, or admits in writing its inability to pay,
its debts as they mature, or applies for, consents to, or acquiesces in the
appointment of a trustee, receiver or other custodian for the Company or such
Subsidiary or a substantial part of the property of the Company or such
Subsidiary, or makes a general assignment for the benefit of creditors; or, in
the absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any of the Subsidiaries or for a
substantial part of the property of the Company or any of the Subsidiaries and
is not discharged within 30 days; or any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is instituted by or against the Company
or any of the Subsidiaries and, if instituted against the Company or any of the
Subsidiaries, is consented to or acquiesced in by the Company or such Subsidiary
or remains for 30 days undismissed; or any warrant of attachment is issued
against any substantial part of the property of the Company or any of the
Subsidiaries which is not released within 30 days of service.
(f Pension Plans. A Termination Event occurs with respect to any
Plan if, at the time such Termination Event occurs, such Plan's then "vested
liabilities" (as defined in section 3(25) of ERISA) would exceed the then value
of such Plan's assets.
(g Financial Covenants; Agreements. The Company fails to perform or
observe any agreement contained in Section 11.8, 11.9, 11.10, 11.13, 11.14,
11.15, 11.16, 11.19, 11.20, 11.21 or 11.22 and such failure shall not be
remedied within five (5) days after the chairman, president or chief financial
officer of the Company obtains actual knowledge thereof; or the Company fails to
deliver the notice required by Section 11.5(a)(i) or fails to perform or observe
Section 11.26; or the Company or any Subsidiary fails to perform or observe any
other agreement set forth in this Agreement or any other Loan Document to which
it is a party (and not constituting an Event of Default under any of the other
subsections of this Section 12.1) and continuance of such failure for thirty
(30) days after the chairman, president or chief financial officer of the
Company obtains actual knowledge thereof.
(h Warranty. Any warranty made by the Company or any Subsidiary
herein or any other Loan Document to which it is a party is untrue in any
material respect, or any schedule, statement, report, notice, certificate or
other writing furnished by the Company or any Subsidiary to any Bank is untrue
in any material respect on the date as of which the facts set forth therein are
stated or certified, or any certification made or deemed made by the Company or
any Subsidiary to any Bank is untrue in any material respect on or as of the
date made or deemed made.
(i Litigation. There shall be entered against the Company or any
Subsidiary one or more judgments or decrees in excess of $1,500,000 in the
aggregate at any one time outstanding for the Company and all Subsidiaries,
excluding those judgments or decrees (i) that shall have been outstanding less
than 30 calendar days from the entry thereof or (ii) for and to the extent which
the Company or any Subsidiary is insured and with respect to which the insurer
has assumed responsibility in writing or for and to the extent which the Company
or any Subsidiary is otherwise indemnified if the terms of such indemnification
are satisfactory to the Banks.
(j Franchise Agreement. The Company or any Subsidiary takes any
action or fails to take action which results in the loss of any Franchise
Agreement, license or other permit which would preclude the Company or any
Subsidiary from operating such franchise under the name "Pizza Hut", and such
loss materially adversely affects the business operations or profitability of
the Company or such Subsidiary.
(k Pizza Hut, Inc. If (a) Pizza Hut, Inc. applies for, consents to,
or acquiesces in the appointment of a trustee, receiver or other custodian for
itself or a substantial part of its property, or makes a general assignment for
the benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for Pizza Hut,
Inc. or for a substantial part of its property and is not discharged within 30
days; or any bankruptcy, reorganization, debt arrangement or other proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against Pizza Hut, Inc. and, if instituted
against Pizza Hut, Inc., is consented to or acquiesced in by Pizza Hut, Inc. or
remains for 30 days undismissed; or any warrant of attachment is issued against
any substantial part of the property of Pizza Hut, Inc. which is not released
within 30 days of service; and (b) for the 12-month period ending on the last
day of the fiscal quarter end which coincides with or immediately precedes the
occurrence of the event described in clause (a), the ratio described in Section
11.15 is less than 2.5 to 1.0.
12.2 Remedies..2 Remedies. If any Event of Default described in Section
12.1 shall have occurred and be continuing, the Agent shall upon request of the
Supermajority Banks by written notice to the Company declare the Credit to be
terminated and entire unpaid principal amount of the Note, all interest accrued
and unpaid thereon and all other amounts payable under this Agreement and the
Note to be due and payable, whereupon the Credit shall immediately terminate and
such amounts shall, except as otherwise expressly provided in this Section 12.2,
become immediately due and payable without presentment, demand, protest,
declaration or notice of any kind, all of which are hereby expressly waived by
the Company (except that if an event described in Section 12.1(e) occurs, the
Credit shall immediately terminate and such amounts shall become immediately due
and payable without presentment, demand, protest, declaration or notice of any
kind, all of which are hereby expressly waived by the Company).
12.3 Preservation of Security for Unmatured Reimbursement Obligations..3
Preservation of Security for Unmatured Reimbursement Obligations. In the event
that, following the occurrence of an Event of Default, any Letters of Credit
shall remain outstanding and undrawn upon, the Borrower shall immediately pay to
the Agent an amount in immediately available funds equal to 100% of the then
aggregate amount of Letters of Credit outstanding, which funds shall be held by
the Agent in a collateral account to be maintained by the Agent. Such
collateral shall be held for the ratable benefit of TCB as issuer of such
Letters of Credit and the Banks holding participations therein. Notwithstanding
anything herein to the contrary, such collateral shall be applied solely to
unpaid reimbursement obligations arising in respect of any such Letters of
Credit and/or the payment of TCB's obligations under any such Letter of Credit
when such Letter of Credit is drawn upon. The Borrower hereby agrees to execute
and deliver to the Agent and the Banks such security agreements, pledges or
other documents as the Agent or any of the Banks may, from time to time,
reasonably require to perfect the pledge, lien and security interest in and to
any such collateral provided for in this Section 12.3. Upon the payment or
expiry of all such outstanding Letters of Credit all such collateral shall be
released to the Borrower in due form at the Borrower's cost.
12.4 Remedies Cumulative. No remedy, right or power conferred upon the
Agent or the Banks is intended to be exclusive of any other remedy, right or
power given hereunder or now or hereafter existing at law, in equity, or
otherwise, and all such remedies, rights and powers shall be cumulative.
13. RELATIONSHIP AMONG BANKS.. RELATIONSHIP AMONG BANKS.
13.1 Appointment and Grant of Authority..1 Appointment and Grant of
Authority. Each Bank hereby appoints the Agent, and the Agent hereby agrees to
act, as agent under this Agreement. The Agent shall have and may exercise such
powers under this Agreement as are specifically delegated to the Agent by the
terms hereof, together with such other powers as are reasonably incidental
thereto. Each Bank hereby authorizes, consents to, and directs the Company to
deal with the Agent as the true and lawful agent of such Bank to the extent set
forth herein.
13.2 Non-Reliance on Agent..2 Non-Reliance on Agent. Each Bank agrees that
it has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Company and its Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agent, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Agent shall not be
required to keep informed as to the performance or observance by the Company of
this Agreement or any other document referred to or provided for herein or to
inspect the properties or books of the Company or its Subsidiaries. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder, the Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Company, its
Subsidiaries (or any of its related companies) which may come into the Agent's
possession.
13.3 Responsibility of the Agent and Other Matters..3 Responsibility of
the Agent and Other Matters.
(a The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and those duties and liabilities shall be
subject to the limitations and qualifications set forth in this Section 13. The
duties of the Agent shall be mechanical and administrative in nature.
(b Neither the Agent nor any of its directors, officers or employees
shall be liable for any action taken or omitted (whether or not such action
taken or omitted is within or without the Agent's responsibilities and duties
expressly set forth in this Agreement) under or in connection with this
Agreement or any other instrument or document in connection herewith, except for
gross negligence or willful misconduct. Without limiting the foregoing, neither
the Agent nor any of its directors, officers or employees shall be responsible
for, or have any duty to examine into (i) the genuineness, execution, validity,
effectiveness, enforceability, value or sufficiency of (a) this Agreement, the
Note or the other Loan Documents, or (b) any document or instrument furnished
pursuant to or in connection with this Agreement, the Note or the other Loan
Documents, (ii) the collectibility of any amounts owed by the Company, (iii) any
recitals or statements or representations or warranties in connection with this
Agreement, the Note or the other Loan Documents, (iv) any failure of any party
to this Agreement to receive any communication sent, or (v) the assets,
liabilities, financial condition, results of operations, business or
creditworthiness of the Company and its Subsidiaries.
(c The Agent shall be entitled to act, and shall be fully protected
in acting upon, any communication in whatever form believed by the Agent in good
faith to be genuine and correct and to have been signed or sent or made by a
proper person or persons or entity. The Agent may consult counsel and shall be
entitled to act, and shall be fully protected in any action taken in good faith,
in accordance with advice given by counsel. The Agent may employ agents and
attorney-in-fact and shall not be liable for the default or misconduct of any
such agents or attorneys-in-fact selected by the Agent with reasonable care.
The Agent shall not be bound to ascertain or inquire as to the performance or
observance by the Company or any Subsidiary of any of the terms, provisions or
conditions of this Agreement or the Note or the other Loan Documents.
13.4 Action on Instructions..4 Action on Instructions. The Agent shall
be entitled to act or refrain from acting, and in all cases shall be fully
protected in acting or refraining from acting, under this Agreement or the Note
or any other instrument or document in connection herewith or therewith in
accordance with instructions in writing from the Majority Banks (or, if
required, all Banks or Supermajority Banks, as the case may be).
13.5 Indemnification..5 Indemnification. To the extent the Company does
not reimburse and save the Agent harmless according to the terms hereof for and
from all costs, expenses and disbursements in connection herewith, such costs,
expenses and disbursements shall be borne by the Banks ratably in accordance
with their Percentages and the Banks hereby agree on such basis (i) to reimburse
the Agent for all such costs, expenses and disbursements on request and (ii) to
indemnify and save harmless the Agent against and from any and all losses,
obligations, penalties, actions, judgments and suits and other costs, expenses
and disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent, other than as a consequence of the
gross negligence or willful misconduct on the part of the Agent, arising out of
or in connection with this Agreement, the Note or the other Loan Documents or
any instrument or document in connection herewith or therewith, or any request
of the Banks, including without limitation the costs, expenses and disbursements
in connection with defending itself against any claim or liability, or answering
any subpoena, related to the exercise or performance of any of its powers or
duties under this Agreement or the taking of any action under or in connection
with this Agreement, the Note or the other Loan Documents.
13.6 TCB and Affiliates..6 TCB and Affiliates. With respect to TCB's
Commitment and any Loans by TCB under this Agreement and the Note and any
interest of TCB in the Note, TCB shall have the same rights and powers under
this Agreement and such Note as any other Bank and may exercise the same as
though it were not the Agent. TCB and its affiliates may accept deposits from,
lend money to, and generally engage, and continue to engage, in any kind of
business with the Company as if TCB were not the Agent.
13.7 Notice to Holder of Loans..7 Notice to Holder of Loans. The Agent
may deem and treat the payees of the Note as the owners thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof has been
filed with the Agent. Any request, authority or consent of any holder of any
Loan shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Loan.
13.8 Successor Agent..8 Successor Agent. The Agent may resign at any time
by giving 30 days' written notice thereof to the Banks. Upon any such
resignation, the Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been appointed by the Banks and accepted such
appointment in connection herewith or therewith within 30 days after the
retiring Agent's giving notice of resignation, then the retiring Agent may, but
shall not be required to, on behalf of the Banks, appoint a successor Agent who
has accepted such appointment. Notwithstanding the foregoing provisions of this
Section 13.8, TCB may at any time resign as Agent if concurrently therewith an
affiliate of TCB agrees to assume the role of Agent hereunder. After any
resigning Agent's resignation hereunder, the provisions of this Section 13 shall
continue to be effective as to any action taken or omitted hereunder or in
connection herewith prior to such resignation.
14. GENERAL.. GENERAL.
14.1 Waiver and Amendments..1 Waiver and Amendments. No delay on the part
of any Bank or the holder of any Loan in the exercise of any power or right
shall operate as a waiver thereof, nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. The remedies provided for herein are cumulative and
not exclusive of any remedies which may be available to any Bank at law or in
equity. No amendment, modification or waiver of, or consent with respect to,
any provision of this Agreement or the Note or any other Loan Document shall in
any event be effective unless the same shall be in writing and signed by the
Company and the Majority Banks; provided, however, that in no event shall any
amendment, modification or waiver, or consent with respect to, Sections 11.13
through 11.15 be effective unless the same shall be in writing and signed by the
Supermajority Banks; provided, however, that no amendment, waiver or consent
shall, unless in writing and signed by all the Banks, do any of the following:
(a) waive any of the conditions specified in Section 8 or 9, (b) increase the
amounts or extend the terms of the Banks' Commitments or subject the Banks to
any additional obligations, (c) reduce the principal of, or interest on, the
Note or any fees hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Note or any fees hereunder, or change the
amount due on such date, (e) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Note, or the number of Banks, which
shall be required to take action hereunder, (f) release any collateral or any
guarantor, if any, from its obligations; (g) change the definition of Majority
Banks or Supermajority Banks; (h) change any provisions of Section 11.26; or
(i) change any provisions of this Section 14.1; provided, further, that no
amendment, waiver or consent to Section 13 shall be effective unless signed by
the Agent. Any waiver of any provision of this Agreement or the Note or any
other Loan Document, and any consent to any departure by the Company or any
Subsidiary from the terms of any provision of this Agreement, the Note or any
other Loan Document, shall be effective only in the specific instance and for
the specific purpose for which given.
14.2 Notices..2 Notices. Except as otherwise expressly provided
herein, any notice hereunder between the parties shall be in writing (including
telegraphic, telex or telecopy communication) and shall be given to the Company,
the Agent or any Bank at its address, telex number or telecopier number set
forth on the signature pages hereof or at such other address, telex number or
telecopier number as the Company, the Agent or such Bank may, by written notice,
designate as its address, telex number or telecopier number for purposes of
notice hereunder. All such notices shall be deemed to be given when transmitted
by telex and the appropriate answerback is received, transmitted by telecopier,
delivered to the telegraph office, personally delivered or, in the case of a
mailed notice, three Banking Days after the date sent by registered or certified
mail, postage prepaid, in each case addressed as specified in this Section 14.2;
provided, however, that notices to the Agent shall not be effective until
actually received by the Agent.
14.3 Severability; Participations; Assignments..3 Severability;
Participations; Assignments.
(a Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(b Participations. Any Bank may grant one or more participations in
any Loan or any Letters of Credit, and participant shall have the rights (and be
subject to the obligations) of a Bank set forth in Sections 6.4, 6.5, 7 and 11.7
hereof as if such participant were a Bank hereunder; provided, however, that
(i0 no participation contemplated in this Section 14.3 shall relieve
the participating Bank from its Commitment or its other obligations
hereunder,
(ii0 such Bank shall remain solely responsible for the performance of
its Commitment and such other obligations,
(iii0 the Company and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement, and
(iv0 no participant, unless such participant is an Affiliate of such
Bank, or is itself a Bank, shall be entitled to require such Bank to take
or refrain from taking any action hereunder, except that such Bank may
agree with any participant that such Bank will not, without such
participant's consent, take any actions of the type described in clauses
(a) through (f) of Section 14.1.
(c Assignments.
(i0 Subject to the prior written consent of the Company, such consent
not to be unreasonably withheld or delayed (provided that such consent
shall not be required if an Event of Default has occurred and is
continuing), each Bank may assign to any Person (the "Assignee") all or a
portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment); provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of all of the assigning Bank's rights and obligations under this
Agreement, (ii) the total amount of the Commitment so assigned to an
Assignee or to an Assignee and its affiliates taken as a whole shall equal
or exceed the lesser of (A) $5,000,000, or (B) the sum of the remaining
Commitment held by the assigning Bank, (iii) the parties to each such
assignment shall execute and deliver to the Agent for its acceptance an
Assignment and Acceptance in substantially the form attached hereto as
Exhibit N ("Assignment and Acceptance"), together with a processing and
recordation fee of $2,000, and (iv) the prior written consent of the
Company shall not be required for any assignment to such Bank's Affiliate.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be the date on which such Assignment and Acceptance is accepted
by the Agent, (x) the Assignee thereunder shall be a party hereto and, to
the Assignment and Acceptance, have the rights and obligations of a Bank
under the Loan Documents and (y) the Bank assignor thereunder shall be
deemed to have relinquished its rights and to be released from its
obligations under the Loan Documents, to the extent (and only to the
extent) that its rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an
assigning Bank's rights and obligations under the Loan Documents, such Bank
shall cease to be a party thereto).
(ii0 By executing and delivering an Assignment and Acceptance, the
Bank assignor thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
the Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any other
instrument or document furnished pursuant thereto; (ii) such assigning Bank
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or any Subsidiary or the
performance or observance by the Company or any Subsidiary of any of their
respective obligations under the Loan Documents or any other instrument or
document furnished pursuant hereto; (iii) such Assignee confirms that it
has received a copy of the Loan Documents, together with copies of the most
recent financial statements delivered pursuant to Section 11.1 and such
other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such Assignee will, independently and without reliance
upon the Agent, such assigning Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such Assignee appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers
under the Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto;
and (vi) such Assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Bank.
(iii0 The Agent shall maintain at its address referred to on the
signature pages hereto a copy of each Assignment and Acceptance delivered
to and accepted by it.
(iv0 Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank, the Agent shall, if such Assignment and Acceptance has been
completed, (i) accept such Assignment and Acceptance and (ii) give prompt
notice thereof to the Company.
(v0 Anything in this Section 14.3 to the contrary notwithstanding,
any Bank may at any time, without the consent of any Person, assign and
pledge all or any portion of its Commitment and the Loans owing to it to
any Federal Reserve Bank (and its transferees) as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Bank from its
obligations hereunder.
14.4 Indemnification..4 Indemnification. The Company hereby indemnifies
and holds harmless the Agent and each Bank and each of the Agent's and the
Banks' directors, counsels, officers, employees, agents, persons controlling or
controlled by any of them and their assigns (collectively the "Indemnified
Parties") from and against any and all losses, claims, damages, costs,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees, disbursements and any out-of-pocket expenses) to which any of the
Indemnified Parties may become subject, whether directly or indirectly, that
result or arise from, or relate to, any claim, action, lawsuit, or proceeding
related to (i) any tender offer, merger, purchase of stock, purchase of assets
or other similar transaction financed or proposed to be financed in whole or in
part, directly or indirectly, with the proceeds of any of the Loans or (ii) the
execution, delivery, performance or enforcement of this Agreement or any other
Loan Document by any of the Indemnified Parties; provided, however, that an
Indemnified Party shall refund to the Company any amount received from the
Company for losses, damages, costs and expenses incurred by such Person but
which a court of competent jurisdiction has found resulted solely from such
Person's own gross negligence or willful misconduct (individually and not as a
co-conspirator with the Company or any affiliate thereof); provided further,
that it is the intention of the Company to indemnify the Indemnified Parties
against the consequences of their own negligence. The foregoing obligations of
the Company shall survive termination of this Agreement.
14.5 LAW..5 LAW. THIS AGREEMENT AND THE NOTE SHALL BE CONTRACTS MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS.
14.6 Successors..6 Successors. This Agreement shall be binding upon the
Company, the Agent and the Banks and their respective successors and assigns,
and shall inure to the benefit of the Company, the Agent and the Banks and the
successors and assigns of the Agent and the Banks. The Company shall not assign
its rights or duties hereunder without the consent of all Banks.
14.7 Subsidiary Reference..7 Subsidiary Reference. Any reference herein
to a Subsidiary or Subsidiaries of any Person, and any financial ratio or
restriction or other provision of this Agreement which is stated to be
applicable to such Person "and its Subsidiaries" or which is to be determined on
a "consolidated" basis, shall apply only to the extent such Person has any
Subsidiaries and, where applicable, only to the extent any such Subsidiaries are
consolidated with such Person for financial reporting purposes.
14.8 ENTIRE AGREEMENT..8 ENTIRE AGREEMENT. THIS AGREEMENT, TOGETHER WITH
ALL OTHER WRITTEN AGREEMENTS BETWEEN THE PARTIES HERETO, IS THE FINAL EXPRESS OF
THE CREDIT AGREEMENT BETWEEN THE PARTIES HERETO, AND SUCH WRITTEN CREDIT
AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL CREDIT AGREEMENT
OR OF A CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN THE PARTIES HERETO.
14.9 Counterparts..9 Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties on separate counterparts
and each such counterpart shall be deemed an original, but all such counterparts
shall together constitute but one and the same Agreement.
14.10 Interest..10 Interest. All agreements between the Company, the
Agent and any Bank, whether now existing or hereafter arising and whether
written or oral, are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of demand being made on the Note or otherwise,
shall the amount contracted for, charged, reserved or received by the Agent or
any Bank for the use, forbearance, or detention of the money to be loaned under
this Agreement or otherwise or for the payment or performance of any covenant or
obligation contained herein exceed the Highest Lawful Rate. If, as a result of
any circumstances whatsoever, fulfillment by the Company of any provision hereof
or of the Note, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by applicable usury law or
result in the Agent or any Bank having or being deemed to have contracted for,
charged, reserved or received interest (or amounts deemed to be interest) in
excess of the maximum lawful rate or amount of interest allowed by applicable
law to be so contracted for, charged, reserved or received by the Agent or such
Bank, then, ipso facto, the obligation to be fulfilled by the Company shall be
reduced to the limit of such validity, and if, from any such circumstance, the
Agent or any Bank shall ever receive interest or anything which might be deemed
interest under applicable law which would exceed the Highest Lawful Rate, such
amount which would be excessive interest shall be refunded to the Company, or,
to the extent (i) permitted by applicable law and (ii) such excessive interest
does not exceed the unpaid principal balance of the Note and the amounts owing
on other obligations of the Company to the Agent or any Bank under this
Agreement and the Note, applied to the reduction of the principal amount owing
on account of the Note or the amounts owing on other obligations of the Company
to the Agent or any Bank under this Agreement and the Note and not to the
payment of interest. All sums paid or agreed to paid to the Agent or any Bank
for the use, forbearance of detention of the indebtedness of the Company, to the
Agent or to any Bank shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full term of such
indebtedness until payment in full of the principal thereof (including the
period of any renewal or extension thereof) so that the interest on account of
such indebtedness shall not exceed the Highest Lawful Rate. The terms and
provisions of this Section 14.10 shall control and supersede every other
provision hereof and of all other agreements between the Company, the Agent and
the Banks. "Highest Lawful Rate" shall mean with respect to each Bank, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged, or received with respect to the
Notes or on other amounts, if any, due to such Bank pursuant to this Agreement
or the Notes, under laws applicable to such Bank which presently in effect, or,
to the extent allowed by law, under such applicable laws that may hereafter be
in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow. To the extent required by applicable law in
determining the Highest Lawful Rate with respect to any Bank as of any date,
there shall be taken into account the aggregate amount of all payments and
charges theretofore charged, reserved or received by such Bank hereunder or
under the Note which constitute or are deemed to constitute interest under
applicable law.
TEXAS BUSINESS AND COMMERCE CODE
26.02 NOTICE
FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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 written above.
NPC INTERNATIONAL, INC.
By:
Name:
Title:
Address: 720 W. 20th Street
P. O. Box 643
Pittsburgh, KS 66762
Attention: James Schwartz
Fax: (316) 231-1199
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
Individually and as Agent
Initial Amount
of Commitment Share
$20,000,000 12.5% By:
Name:
Title:
Address: 712 Main
Houston, Texas 77002
Attn: John Sarvadi
Fax: (713) 216-6710
NATIONSBANK OF TEXAS, N.A.
Individually and as Documentation Agent
Initial Amount
of Commitment Share
$19,000,000 11.875% By:
Name:
Title:
Address: 901 Main St., 67th Floor
Dallas, Texas 75202
Attn: Suzanne Smith
Fax: (214) 508-0980
UNITED STATES NATIONAL BANK
OF OREGON
Initial Amount
of Commitment Share
$15,000,000 9.3750% By:
Name:
Title:
Address: 101 South Capital Blvd., 8th
Floor
Boise, ID 83733
Attn: Roger Weis
Fax: (208) 383-7563
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
Initial Amount
of Commitment Share
$15,000,000 9.3750% By:
Name:
Title:
Address: One First Union Center,
Floor #DC-5
Charlotte, NC 28288
Attn: Tom Bohrer
Fax: (704) 374-2802
HARRIS TRUST AND SAVINGS BANK
Initial Amount
of Commitment Share
$15,000,000 9.3750% By:
Name:
Title:
Address: 111 West Monroe Street,
Suite 2 West
Chicago, IL 60603
Attn: Michael Newton
Fax: (312) 293-4856
HIBERNIA NATIONAL BANK
Initial Amount
of Commitment Share
$12,000,000 7.5% By:
Name:
Title:
Address: 313 Carondelet,National Accounts
12th Floor
New Orleans, LA 70130
Attn: Jeffrey Peck
Fax: (504) 533-5344
SUNTRUST BANK, ATLANTA
Initial Amount
of Commitment Share
$12,000,000 7.5% By:
Name:
Title:
Address: 25 Park Place, 24th Floor
Atlanta, GA 30303
Attn: Charles Johnson
Fax: (404) 588-8505
MERCANTILE BANK NATIONAL
ASSOCIATION
Initial Amount
of Commitment Share
$12,000,000 7.5% By:
Name:
Title:
Address: One Mercantile Center, 12-3
St. Louis, MO 63101
Attn: Ann Kelly
Fax: (314) 425-8292
ABN AMRO BANK N.V.
Initial Amount
of Commitment Share
$12,000,000 7.5% By:
Name:
Title:
By:
Name:
Title:
Address: 135 S. LaSalle St.
Chicago, IL 60603
Attn: Amy Lauterjung
Fax: (312) 606-8425
FIRST NATIONAL BANK OF COMMERCE
Initial Amount
of Commitment Share
$7,000,000 4.3750% By:
Name:
Title:
Address: 201 St. Charles Ave., 28thFloor
New Orleans, LA 70170
Attn: Louis Ballero
Fax: (504) 623-1738
BANK OF OKLAHOMA, N.A.
Initial Amount
of Commitment Share
$7,000,000 4.3750% By:
Name:
Title:
Address: 1 Williams Center
Tulsa, OK 74172
Attn: Jane Faulkenberry
Fax: (918) 588-6880
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
Initial Amount
of Commitment Share
$7,000,000 4.3750% By:
Name:
Title:
Address: 10 South Wacker Dr., 31st Floor
Chicago, IL 60606
Attn: Gordon Holtby
Fax: (312) 346-6677
LIBERTY BANK & TRUST COMPANY
OF TULSA, NATIONAL ASSOCIATION
Initial Amount
of Commitment Share
$7,000,000 4.3750% By:
Name:
Title:
Address: 15 East 5th St.
Tulsa, OK 74103
Attn: Bob Mattax
Fax: (918) 586-5952
TOTAL AMOUNT OF TOTAL
INITIAL COMMITMENTS SHARES
$160,000,000 100%
EXHIBIT A Form of Note
EXHIBIT B Request for Extension of Termination Date
EXHIBIT C Litigation
EXHIBIT D Liens
EXHIBIT E Insurance
EXHIBIT F Subsidiaries
EXHIBIT G Partnerships/Joint Ventures
EXHIBIT H Indebtedness
EXHIBIT I Investments
EXHIBIT J Opinion of Counsel to
Company
EXHIBIT K Notice of Borrowing
EXHIBIT L Notice of Continuation/Conversion
EXHIBIT M Compliance Certificate
EXHIBIT N Assignment and Acceptance
EXHIBIT O Letter of Credit Application
EXHIBIT P Existing Letters of Credit
AMENDED AND RESTATED
REVOLVING CREDIT
AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT,
dated as of May 8, 1997 (but effective as of March 26,
1997) (this "Agreement"), is entered into among NPC
MANAGEMENT, INC., a Delaware corporation (the "Company"),
the banks listed on the signature pages hereof (together
with such other financial institutions that from time to
time become parties hereto, individually a "Bank" and
collectively the "Banks"), TEXAS COMMERCE BANK NATIONAL
ASSOCIATION ("TCB"), as Agent for the Banks and NATIONSBANK
OF TEXAS, N.A., as Documentation Agent for the Banks.
WHEREAS, NPC International, Inc., a Kansas
corporation ("NPCI"), the Banks, TCB as Agent and NationsBank
of Texas, N.A., as Documentation Agent, have entered into
the NPCI Credit Facility (as hereinafter defined) providing
for commitments from such Banks to make loans to NPCI and to
participate in letters of credit issued for the account of
NPCI;
WHEREAS, by its execution and delivery hereof the
Company hereby assumes effective as of the Closing Date (as
hereinafter defined), and by its execution and delivery hereof
NPCI hereby assigns to the Company effective as of the Closing
Date, all of the obligations and liabilities of NPCI
existing immediately prior to such assignment under the NPCI
Credit Facility and all related instruments (all such
obligations and liabilities collectively the "Assumed
Obligations");
WHEREAS, the Company has determined that it is in its
best interest to assume the Assumed Obligations and has
voluntarily requested that the Banks, and the Banks have
agreed to,
restructure, rearrange and renew the Assumed Obligations and
the respective commitments of the Banks and the Agent parties
to the NPCI Credit Facility into obligations and commitments
hereunder;
WHEREAS, any loans outstanding under any of the NPCI
Credit Facility, on the Closing Date bearing interest at the
Interbank Rate (Reserve Adjusted) (as defined therein) shall
be deemed continued as Eurodollar Loans under this Agreement
at such rate and for the Interest Period with respect thereto
under the NPCI Credit Facility; and
WHEREAS, the parties hereto intend to amend and restate
the Assumed Obligations and the NPCI Credit Facility in its
entirety as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual
covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE WITH
FINANCIAL RESTRICTIONS.. DEFINITIONS, INTERPRETATION
OF AGREEMENT AND COMPLIANCE WITH FINANCIAL
RESTRICTIONS.. DEFINITIONS, INTERPRETATION OF AGREEMENT
AND COMPLIANCE WITH FINANCIAL RESTRICTIONS.
1.1 Definitions..1 Definitions..1 Definitions. In
addition to the terms defined elsewhere in this Agreement,
the following
terms shall have the meanings indicated for purposes of
this Agreement (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
Acquisition Agreement shall mean the Acquisition
Agreement dated as of March 25, 1996 by and among Seattle
Crab Co., NPCI and Skipper's, Inc.
Affiliate of any Person means any other Person
that, directly or indirectly, controls, is controlled by or
is under common control with such Person (excluding any
trustee under, or any committee with responsibility for
administering, any Plan (hereinafter defined)). A Person
shall be deemed to
be "controlled by" any other Person if such other Person
possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully
diluted basis) having ordinary voting power for the
election of directors or managing general partners of such
Person; or
(b) to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise.
Agent means TCB as Agent for the Banks hereunder and
each successor, as provided in Section 13.8, who shall act as
Agent.
Alternate Base Rate means a per annum interest rate which
is the greater at any time of (i) the rate of interest then
most recently announced by TCB at Houston, Texas as its prime
rate, or (ii) 0.5% plus the Federal Funds Rate. Such prime
rate of TCB is not necessarily intended to be the lowest
rate of interest determined by TCB in connection with
extensions of credit. Changes in the rate of interest on
that portion of any Loans maintained as Alternate Base
Rate Loans shall take effect simultaneously with each
change in the Alternate Base Rate. The Agent shall give
notice promptly to the Company and the Banks of changes in the
Alternate Base Rate.
Assignee shall have the meaning set forth
in Section 14.3(c)(i).
Assignment and Acceptance shall have the meaning set
forth in Section 14.3(c)(i).
Assumed Obligations -- see the Preamble.
Bank -- see the Preamble.
Banking Day means any day on which banks are open
for business in Houston, Texas, and with respect to Eurodollar
Loans, on which dealings in foreign currencies and exchange
may be carried on by the Agent in the interbank Eurodollar
market.
Capitalized Lease means any lease which is or should
be capitalized on the balance sheet of the lessee in accordance
with GAAP.
Capitalized Lease Obligations shall mean the amount at
which the aggregate rentals due and to become due under all
Capitalized Leases under which NPCI or any Subsidiary thereof,
as a lessee, would be required to be reflected as a
liability on the consolidated balance sheet of NPCI.
Code means the Internal Revenue Code of 1986 and
any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from
time to time. References to sections of the Code shall be construed
to also refer to any successor sections.
Commitment means, as to any Bank, the amount set
forth opposite said Bank's name on the signature page hereof
(or such reduced amount as may be fixed by the Company
pursuant to Section 6.3).
Company -- see the Preamble.
Computation Period means any period of four
consecutive fiscal quarters of NPCI ending on the last day
of a fiscal quarter.
Consolidated Funded Debt shall mean all Funded Debt of
NPCI and its Subsidiaries, determined on a consolidated
basis eliminating intercompany items.
Consolidated Net Earnings means the consolidated
gross revenues of NPCI and its Subsidiaries less all operating
and nonoperating expenses of NPCI and its Subsidiaries
including taxes on income, all determined in accordance with
GAAP consistent with those followed in the preparation of
the financial statements referred to in Section 10.5, provided
that (i) there shall not be included in revenues (a) any
income representing the excess of equity in any Subsidiary
at the date of acquisition over the investment in such
Subsidiary, (b) any equity in the
undistributed earnings of any corporation which is not
a Subsidiary, (c) any earnings of any Subsidiary for any
period prior to the fiscal year of NPCI in which such
Subsidiary was acquired, or (d) any gains resulting from the
write-up of assets, and (ii) capital gains may be included in
revenues only to offset capital losses; provided, further,
that for the purpose of calculating Consolidated Net
Earnings with respect to the last day of the fiscal quarter
ended March 26, 1996, and with respect to the last day of
each of the next three successive fiscal quarters
thereafter, there shall not be included in calculating
Consolidated Net Earnings any charges against income
in connection with the Skipper's Sale, or in connection with
the closure or relocation of up to eight Tony Roma's locations
during calendar year 1996, which might otherwise be required
under GAAP.
Consolidated Net Income Available for Fixed Charges for
any period shall mean the sum of Consolidated Net Earnings
during such period, plus (to the extent deducted in
determining Consolidated Net Earnings during such period)
(i) interest expense, (ii) provision for income taxes, (iii)
depreciation and amortization, and (iv) operating lease
expense in each case on a consolidated basis.
Consolidated Net Worth means, at any time, the total
of stockholders' equity (including capital stock, additional
paid-in capital and retained earnings after deducting
treasury stock, ESOP obligations and similar contra accounts)
of NPCI and its Subsidiaries calculated in accordance with
GAAP.
Credit means the aggregate Commitments of the Banks to
make Loans and issue Letters of Credit under the terms
of this Agreement.
Dollars and the sign "$" mean lawful money of the
United States of America.
EBITDA means Consolidated Net Earnings before
interest expense, provision for taxes (to the extent not
excluded from Consolidated Net Earnings), depreciation,
amortization and the noncash portion of nonrecurring charges
(as defined by GAAP).
Effective Date means the date on which all the
conditions precedent set forth in Section 9 are met or waived
in writing by the Agent and the Majority Banks.
ERISA means the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar
import, together with the regulations thereunder, in each
case as in effect from time to time. References to sections
of ERISA shall be construed to also refer to any successor
sections.
ERISA Affiliate means any corporation, trade or
business that is, along with NPCI, a member of a controlled
group of corporations or a controlled group of trades or
businesses, as described in sections 414 (b) and 414 (c),
respectively, of the Code.
Eurocurrency Reserve Percentage means, with respect to
any Interest Period, a percentage (expressed as a decimal)
equal to the daily average during such Interest Period of the
percentages in effect on each day of such Interest Period, as
prescribed by the Board of Governors of the Federal Reserve
System (or any successor), for determining reserve
requirements applicable to "Eurocurrency liabilities"
pursuant to Regulation D or any other then applicable
regulation of the Board of Governors which prescribes
reserve requirements applicable to "Eurocurrency
liabilities," as presently defined in Regulation D. For
purposes of this definition, any Eurodollar Loans hereunder
shall be deemed to be "Eurocurrency liabilities" as defined
in Regulation D.
Eurodollar Loan means any Loan which bears interest at
a rate determined with reference to the Interbank Rate
(Reserve Adjusted).
Event of Default means any of the events described
in Section 12.1.
Existing Note shall mean that certain promissory note
dated as of March 5, 1997 in the original principal
amount of $160,000,000 executed and delivered by NPCI under
the NPCI Credit Facility.
Federal Funds Rate means for any date the weighted
average of the rates on overnight Federal Funds
transactions, with members of the Federal Reserve System
only, arranged by Federal Funds brokers applicable to Federal
Funds transactions on that date. The Federal Funds Rate
shall be determined by the Agent on the basis of reports by
Federal Funds brokers to, and published daily by, the Federal
Reserve Bank of New York in the Composite Closing Quotations
for U.S. Government Securities. If
such
publication is unavailable or the Federal Funds Rate is not
set forth therein, the Federal Funds Rate shall be determined
on the basis of any other source reasonably selected by the
Agent.
In
the case of a day which is not a Banking Day, the Federal
Funds Rate shall be the Federal Funds Rate for the
immediately preceding Banking Day.
Fixed Charges shall mean the sum of
consolidated (i) interest expense, (ii) operating lease expense and
(iii) current maturities of Consolidated Funded Debt as
reflected in the GAAP financial statements of NPCI and its
Subsidiaries (which maturities shall be determined as of the
last day of the period consisting of four fiscal quarters for
which Fixed Charges are to be determined).
Franchise Agreement means any franchise agreement
between NPCI or any Subsidiary and Pizza Hut, Inc., as
such may be amended or modified from time to time.
Funded Debt shall mean (i) all Indebtedness having a
final maturity of more than one year from the date of
incurrence thereof (or which is renewable or extendable at the
option of the obligor for a period or periods of more than one
year from the date of incurrence), including all payments
in respect thereof that are required to be made within one
year from the date of any determination of Funded Debt, whether
or not included in current liabilities, (ii) all Capitalized
Lease Obligations maturing more than one year after the date
as of which the computation was made, and (iii) all
Guaranties which extend for more than one year after the date
of determination.
GAAP means generally accepted accounting principles
set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board,
or in such other statements by such other entity as may be in
general use by significant segments of the accounting
profession, which are applicable to the
circumstances as of the date of determination.
Guaranties by any Person shall mean all obligations
(other than endorsements in the ordinary course of
business of negotiable instruments for deposit or collection) of such
Person guaranteeing, or in effect guaranteeing, any
Indebtedness, dividend or other obligation of any other
Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, all
obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or assets
constituting security therefor, (ii) to advance or supply funds
(x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other
balance sheet condition or otherwise to advance or make
available funds for the purchase or payment of such
Indebtedness or obligation, (iii) to lease property or to
purchase securities or other property or services
primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary
obligor to make payment of the Indebtedness or
obligation, or (iv) otherwise to assure the owner of
the Indebtedness or obligation of the primary obligor against
loss in respect thereof. For the purposes of all computations
made under this Agreement, a Guaranty in respect of any
Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such
Indebtedness for borrowed money which has been guaranteed,
and a Guaranty in respect of any other obligation or
liability or any dividend shall be deemed to be Indebtedness
equal to the maximum aggregate amount of such obligation,
liability or dividend.
Guarantors shall mean, at any time, each Person which
is then a party to the Master Guaranty, which shall be NPCI and
each Subsidiary thereof (other than the Company).
Highest Lawful Rate shall have the meaning set forth
in Section 14.10.
Indebtedness means, without duplication,
(i) any obligation, including, without limitation,
any obligation for borrowed money (and any notes
payable and drafts accepted representing extensions of
credit whether or
not representing obligations for borrowed money),
which under GAAP is shown on the balance sheet as a
liability (including any obligation under a Capitalized
Lease but excluding reserves for deferred income
taxes and other reserves to the extent that such
reserves do not constitute an obligation),
(ii) indebtedness which is secured by a Lien on,
or payable out of the proceeds of production from,
property owned by NPCI or any Subsidiary thereof, whether
or not the indebtedness secured thereby shall have been
assumed by NPCI or such Subsidiary,
(iii) guarantees, endorsements (other than
endorsements of negotiable instruments for collection in
the ordinary course of business) and other
contingent liabilities (whether direct or indirect) in
connection with the obligations, stock or dividends of
any Person,
(iv) obligations under any contract providing for
the making of loans, advances or capital contributions
to any Person, or for the purchase of any property from
any Person, in each case in order to enable NPCI or
any Subsidiary thereof primarily to maintain working
capital, net worth or any other balance sheet condition
or to pay debts, dividends or expenses of such Person,
(v) obligations under any contract for the purchase
of materials, supplies or other property or services if
such contract (or any related document) requires that
payment for such materials, supplies or other property or
services shall be made regardless of whether or not
delivery of such materials, supplies or other property
or services is ever made or tendered,
(vi) obligations under any contract to rent or
lease (as lessee) any real or personal property if such
contract (or related document) provides that the
obligation to make payments thereunder is absolute and
unconditional under conditions not customarily found in
commercial leases then in general use and requires
that the lessee purchase or otherwise acquire material
amounts of securities, assets or obligations of the
lessor,
(vii) obligations under any other contract
which, in economic effect, is substantially
equivalent to a guarantee;
all as determined in accordance with GAAP; provided
that Indebtedness shall not include trade accounts payable,
accrued expenses or income taxes payable, each arising in the
ordinary course of business.
Indebtedness to Pro Forma EBITDA Ratio means, as of the
last day of any fiscal quarter, the ratio of (a) all
Indebtedness of NPCI and its Subsidiaries on such day to (b)
Pro Forma EBITDA for the period of four consecutive fiscal
quarters ending on such day.
Indemnification Agreements shall mean, collectively,
the Lease Indemnification Agreement and the Liability
Assumption Agreement, as those agreements are defined and
identified in the Acquisition Agreement.
Interbank Rate means, for any Interest Period, the rate
per annum at which Dollar deposits in immediately available
funds are offered to the Agent two Banking Days prior to the beginning
of such Interest Period by major banks in the interbank
Eurodollar market as at or about 10:00 a.m., Houston time, for
delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount equal to
the amount of TCB's Eurodollar Loan for such Interest Period.
Interbank Rate (Reserve Adjusted) means a rate per
annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) determined pursuant to the following formula:
Interbank Rate = Interbank Rate
(Reserve Adjusted) 1.0-Eurocurrency Reserve Percentage
Interest Period means, with respect to any Eurodollar
Loan, the one month, two month, three month or six month
period commencing on the applicable borrowing date or
conversion date of such Loan or the last day of the prior
Interest Period for such Loan, as the case may be; provided,
however, that no Interest Period shall extend beyond the
Termination Date. Each Interest Period which would otherwise
end on a day which is not a Banking Day shall end on the next
succeeding Banking Day unless such next succeeding Banking Day
is the first Banking Day of a calendar month, in which case
it shall end on the next preceding Banking Day.
Investment means any investment, made in cash or by
delivery of any kind of property or asset, in any Person,
whether by acquisition of shares of stock or similar
interest, Indebtedness or other obligation or security, or by
loan, advance or capital contribution, or otherwise.
Joinder Agreement shall have the meaning set forth in
the Master Guaranty.
Letters of Credit shall have the meaning set forth
in Section 4.1.
Letter of Credit Application shall have the meaning
set forth in Section 4.2.
Lien means any mortgage, pledge, hypothecation,
judgment lien or similar legal process, title retention lien,
or other lien or security interest, including, without
limitation, the interest of a vendor under any conditional
sale or other title retention agreement and the interest of
a lessor under any Capitalized Lease.
Loan -- see Section 2.1.
Loan Documents means this Agreement, the Note, any Letter
of Credit Application, the Master Guaranty, each Joinder
Agreement and any and all agreements or instruments now
or hereafter executed and delivered by the Company, any
Guarantor or any other Person guaranteeing, securing or
otherwise supporting payment or performance of the Note,
this Agreement or any other Loan Document, as they may be
modified or amended from time to time in accordance with the
terms and provisions thereof.
Master Guaranty shall mean the Master Guaranty executed
and delivered pursuant hereto, to be substantially in the
form of Exhibit Q, as amended from time to time.
Majority Banks means those Banks whose share in
the aggregate principal amount of the Loans outstanding
constitutes (or, if no Loans are outstanding, those
whose Percentage constitutes) more than fifty percent (50%).
Margin means (a) initially, 1.00% and (b) on and after
any date specified below on which the Margin is to be
adjusted, the rate per annum set forth in the table below opposite the
applicable Indebtedness to Pro Forma EBITDA Ratio:
Indebtedness
to
Pro Forma EBITDA Margin
2.75 < x 1.50% 2.50 < x < 2.75
1.25% 2.25 < x < 2.50 1.00% 1.50 < x
< 2.25 .75% x < 1.50
.50%
The Margin shall be adjusted, to the extent applicable, (i)
45 days (or, in the case of the last fiscal quarter of any
fiscal year, 90 days) after the end of each fiscal quarter
based on the Indebtedness to Pro Forma EBITDA Ratio as of the
last day of such fiscal quarter; it being understood that if
the Company fails to deliver the financial statements
required by Section 11.1(a) or 11.1(b), as applicable, by the
45th day (or, if applicable, the 90th day) after any fiscal
quarter, the Margin shall be 1.50% until such financial
statements are delivered and (ii) upon the effective
date of any acquisition permitted pursuant to Section
11.10(a) based upon the change, if any, in the Indebtedness
to Pro Forma EBITDA Ratio set forth in the certificate
delivered in connection with such acquisition pursuant to
Section 11.1(c).
Note means the Note referred to in Section 3.
Note Agreements means the Note Agreements identified in
Exhibit H.
NPCI -- see the Preamble.
NPCI Credit Facility shall mean that certain Revolving
Credit Agreement dated as of March 5, 1997 among NPCI,
the financial institutions party thereto, and the Agent.
Payment Date means (a) as to any Eurodollar Loan, the
last day of each Interest Period with respect thereto and,
if such Interest Period is in excess of three months, the
date that is three months after the commencement of such
Interest Period, and (b) as to any Reference Rate Loan, the
last day of each March, June, September and December.
PBGC means the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under
ERISA.
Percentage means, for any Bank, the percentage which
the amount of such Bank's Commitment is of the amount of the
Credit.
Permitted Guaranty Debt means (1) Indebtedness evidenced
by the Master Guaranty, (2) Indebtedness evidenced by any guaranty agreement
given by any Guarantor in favor of any holder of any
Indebtedness listed on Exhibit H, and (3) Indebtedness
evidenced by any guaranty agreement given by any Guarantor in
favor of any holder of any Indebtedness of the Company that may
be incurred by the Company pursuant to Section 11.8(e).
Permitted Liens means the following, provided that none
of the following materially adversely affect the financial
condition or business operations of NPCI and its Subsidiaries
taken as a whole:
(1) Liens of taxes, assessments, and governmental
charges not yet payable, or not delinquent and
payable without interest or penalty so long as so payable;
(2) Liens of taxes, assessments, governmental charges
and other Indebtedness, the validity of which are
being contested in good faith by appropriate action
diligently pursued, provided that such proceeding shall
suspend the collection of such taxes, assessments,
governmental charges, or other Indebtedness and no
property of NPCI or any Subsidiary thereof would be in
any danger of being forfeited during the period of such
contest;
(3) Liens of employees and laborers for current
wages, not yet due, incidental to current operations or
current construction, and Liens of others for current
indebtedness, not yet due, incidental to current
construction, including maintenance, repair, and
alteration; mechanics', materialmen's, workmen's,
repairmen's or carriers' liens, or other similar Liens
arising in the ordinary course of business, or
deposits, Liens, or pledges of personal property to
obtain the release of any such Liens;
(4) oil and gas leases, licenses, privileges, other
leases, releases of damages, easements, restrictions on
the use of real property, zoning laws and ordinances,
rights-ofway, minor irregularities in title and
other similar encumbrances (including the right of
vendors to occupy and use real property previously sold
to NPCI or any Subsidiary thereof not immediately
required by NPCI or any Subsidiary thereof for use in
its business), not in any case impairing the use by NPCI
or any Subsidiary thereof in its business of the property
affected thereby;
(5) in the case of easements and right-of-way grants
from governmental bodies, the rights of the public;
(6) Liens existing prior to the time of acquisition
upon any real or personal property acquired by NPCI or
any Subsidiary thereof through purchase, merger,
consolidation, or otherwise, whether or not assumed
by NPCI or any Subsidiary thereof;
(7) Liens in connection with the acquisition of
property after the date hereof by way of purchase
money mortgage, conditional sale or other title
retention agreement, Capitalized Lease or other
deferred payment contract, and attaching only to the
property being acquired, if the Indebtedness secured
thereby does not exceed 75% (100% in the case of a
Capitalized Lease) of the lesser of cost or fair market
value of such property at the time of acquisition
thereof;
(8) deposits, Liens, or pledges of personal property
or of securities to secure payments of workers'
compensation, unemployment insurance, old age pensions
or other Social Security, or to secure the performance of
bids, tenders, contracts (other than contracts for the
payment of money), or leases to which NPCI or any
Subsidiary thereof is a party, or to secure public or
statutory obligations of
NPCI or any Subsidiary thereof, or deposits of cash
or United States government obligations to secure or in
lieu of surety, stay or appeal bonds to which NPCI or any
Subsidiary thereof is a party, or pledges, Liens, or
deposits for similar purposes in the ordinary course of
business;
(9) Liens based on workers' compensation claims
which are not due and payable, or the validity of which
is being contested in good faith; and
(10) minor discrepancies and encroachments that
might be disclosed by an accurate survey.
Should any of the preceding Permitted Liens occur, the Banks
may reasonably request, as to all the preceding matters
referred to in paragraphs (1), (2), (3), (7), (8) and
(9) above, that adequate reserves be set aside and
maintained by NPCI or any Subsidiary with respect thereto.
Person means an individual, partnership, corporation,
trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or
political subdivision thereof, or other entity.
Pizza Hut, Inc. means Pizza Hut, Inc., a
Delaware corporation.
Plan means a "pension plan," as such term is defined
in ERISA, established or maintained by NPCI or any ERISA
Affiliate or as to which NPCI or any ERISA Affiliate
contributes or is a member or otherwise may have any
liability.
Pro Forma EBITDA means EBITDA provided, however, that
for the purpose of calculating Pro Forma EBITDA (i) with
respect to the last day of the fiscal quarter ended March 26,
1996, and with respect to the last day of each of the next
three successive fiscal quarters thereafter, Pro Forma EBITDA
shall be calculated without regard for any charges against
income in connection with the Skipper's Sale, or in
connection with the closure or relocation of up to eight
Tony Roma's locations during calendar year 1996, which
might otherwise be required under GAAP and (ii) with
respect to any Person acquired pursuant to
Section 11.10(a) (the "Acquisition Target"), EBITDA of
the Acquisition Target for each full fiscal quarter included
in the applicable Computation Period prior to such
Acquisition (including the fiscal quarter during which it was
acquired) shall be included and adjusted for tangible
operational changes due to field expense differentials, royalty
payments to be made to Pizza Hut, Inc., contractual rent
payments on real estate and equipment and general and
administrative cost differences, all as set forth in
the most recent certificate delivered pursuant to
Section 11.1(c).
Reference Rate Loan means any Loan which bears interest
at or by reference to the Alternate Base Rate.
Reportable Event has the meaning given to such term
in ERISA.
Responsible Officer means the Chief Operating Officer,
the Chief Financial Officer or the Chief Accounting Officer.
Romacorp, Inc. means Romacorp, Inc., a Delaware
corporation.
Sharing Agreement shall mean the Sharing Agreement
executed and delivered as of the Closing Date, substantially
in the form of Exhibit R attached hereto, as amended from time
to time.
Skipper's Sale shall mean NPCI's sale of the common stock
of Skipper's Inc. in accordance with all of the terms and
conditions of the Acquisition Agreement.
Subsidiary means any Person which is directly or
indirectly controlled by NPCI or its other Subsidiaries or of
which or in which NPCI or its other Subsidiaries at any time
own directly or indirectly 50% or more of (i) the combined
voting power of all classes of stock having general voting
power under ordinary circumstances to elect a majority of
the board of directors of such Person, if it is a
corporation, (ii) the capital interest or profits interest of
such Person, if it is a partnership, joint venture or
similar entity, or (iii) the beneficial interest of such
Person, if it is a trust, association or other
unincorporated organization.
Supermajority Banks means those Banks whose share in
the aggregate principal amount of the Loans outstanding
constitutes (or, if no Loans are outstanding, those
whose Percentages constitute) at least sixty-seven percent
(67%).
TCB -- see the Preamble.
Termination Date means March 3, 2000, as such date may
from time to time be extended in accordance with Section 2.5,
or such earlier date as may be fixed by the Company on at
least thirty (30) Banking Days' written notice to the Agent
and the Banks.
Termination Event with respect to any Plan means (i)
the institution by NPCI, the PBGC or any other Person of
steps to terminate such Plan, (ii) the occurrence of a
Reportable Event with respect to such Plan which the Agent
reasonably believes may be a basis for the PBGC to
institute steps to terminate such Plan, or (iii) the
withdrawal from such Plan (or deemed withdrawal under
section 4062(f) of ERISA) by NPCI or any ERISA Affiliate if
NPCI or such ERISA Affiliate is a "substantial employer"
within the meaning of section 4063 of ERISA.
Unmatured Event of Default means any event or
condition which, with the lapse of time or giving of notice to
the Company or both, would constitute an Event of Default.
Value shall mean, with respect to any asset at any date
of determination, the greater of such asset's book or fair
market value as of the date of determination, with "book
value" being the value of such asset as would appear
immediately prior to such determination on a balance sheet
of the owner of such asset prepared in accordance with GAAP.
1.2 Other Definitional Provisions..2 Other
Definitional
Provisions..2 Other Definitional Provisions. Unless
otherwise defined or the context otherwise requires, all
financial and accounting terms used herein or in any
certificate or other document made or delivered pursuant
hereto shall be defined in accordance with GAAP. Unless
otherwise defined therein, all terms defined in this
Agreement shall have the defined meanings when used in the
Note or in any certificate or other document made or delivered
pursuant hereto.
1.3 Interpretation of Agreement..3 Interpretation of
Agreement..3 Interpretation of Agreement. A Section, an
Exhibit or a Schedule is, unless otherwise stated, a reference
to a section hereof, an exhibit hereto or a schedule hereto,
as the case may be. Section captions used in this Agreement
are for convenience only, and shall not affect the construction of this
Agreement. The words "hereof," "herein," "hereto" and
"hereunder" and words of similar purport when used in
this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement.
1.4 Compliance with Financial Restrictions..4 Compliance
with Financial Restrictions..4 Compliance with
Financial Restrictions. Compliance with each of the financial
ratios and restrictions contained in Section 11 shall, except
as otherwise provided herein, be determined in accordance with GAAP
consistently followed.
1.5 Accounting Principles..5 Accounting Principles..5
Accounting Principles. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent
with those applied in the preparation of the audited
financial statements referred to in Section 11.1 hereof. All
financial information delivered to the Agent pursuant to
Section 11.1 hereof shall be prepared in accordance with
GAAP applied on a basis consistent with those reflected by the
initial financial
statements delivered to the Agent pursuant to
Section 10.5, except (i) where such principles are inconsistent with the
requirements of this Agreement and (ii) for those
changes with which the independent certified public
accountants referred to in Section 11.1(a) hereof concur
in rendering unqualified certificates as to financial
statements.
2. COMMITMENTS OF THE BANKS; BORROWING PROCEDURES..
COMMITMENTS OF THE BANKS; BORROWING PROCEDURES.. COMMITMENTS
OF THE BANKS; BORROWING PROCEDURES.
2.1 Commitments..1 Commitments..1 Commitments. Subject to
the terms and conditions of this Agreement, each Bank,
severally but not jointly, agrees to make loans (collectively
the "Loans" and individually each a "Loan") to the Company,
which Loans the Company may prepay and reborrow during the
period from the date hereof to, but not including, the
Termination Date, in such amounts as the Company may from
time to time request, but not exceeding
in the aggregate at any one time outstanding such
Bank's Commitment less such Bank's Percentage of the
aggregate face amount of all Letters of Credit issued and
outstanding at such time. All Loans made hereunder shall be
made by the Banks on a pro-rata basis according to each Bank's
Percentage.
2.2 Loan Options..2 Loan Options..2 Loan Options.
Each Loan shall be either a Reference Rate Loan or a Eurodollar
Loan, except as otherwise provided herein. Any combination of types of
Loans may be outstanding at the same time; provided,
however, that the Company may not have more than ten
borrowings of Eurodollar Loans outstanding at the same time.
2.3 Borrowing Procedure..3 Borrowing Procedure..3
Borrowing Procedure.
(a) Subject to the terms of this Agreement,
the Company shall give the Agent (y) at least three Banking
Days' prior notice of each proposed borrowing of Eurodollar
Loans not later than 10:00 a.m. Houston time on the date of
such notice, and (z) at least one Banking Day's prior notice
of each proposed borrowing
of Reference Rate Loans not later than 10:00 a.m.
Houston time on the date of such notice. Each notice shall be
by telephone (promptly confirmed in writing in the form of
Exhibit K hereto) and shall specify (i) the type of Loans
requested, (ii) in the case of Eurodollar Loans, the
initial Interest Period therefor, (iii) the borrowing date,
which shall be a Banking Day and (iv) the amount of Loans
requested. The Agent shall promptly
advise each Bank thereof. Not later than 12:30 p.m.,
Houston time, on the date of a proposed borrowing, each
Bank shall provide the Agent at its principal office in
Houston with immediately available funds covering such Bank's
ratable share (if any) of such borrowing. Notwithstanding
the foregoing, the notice for the initial borrowing
hereunder may be made on the date of the proposed borrowing
and the Banks' funding obligations referred to in the
immediately preceding sentence shall be extended to 2:30
p.m., Houston time.
(b) Each borrowing of Reference Rate Loans shall be
in a minimum amount of $100,000 or an integral multiple
thereof. Each borrowing of Eurodollar Loans shall be in a
minimum amount of $500,000 or an integral multiple thereof.
(c) The Agent, on behalf of the Banks, will pay to
the Company, by crediting its commercial demand deposit
account at TCB, the amount of each Loan on the date designated
in the notice of borrowing upon receipt of the documents
required in Section 8 and, if applicable, Section 9, with
respect to such Loan.
2.4 Continuation and/or Conversion of Loans..4
Continuation and/or Conversion of Loans..4 Continuation
and/or Conversion of Loans. The Company may elect (i) to
continue any outstanding Eurodollar Loan from the current
Interest Period of such Loan into a subsequent Interest
Period to begin on the last day of such current Interest
Period, or (ii) to convert any outstanding Reference Rate
Loan into a Eurodollar Loan or, on the last day of the current
Interest Period, to convert one type of Loan into another,
in each case by giving at least three (3) Banking Days'
prior telephonic notice not later than 10:00 a.m., Houston
time, on the date of such notice (promptly confirmed in
writing in the form of Exhibit L hereto) to the Agent
(which shall promptly advise each Bank thereof) of such
continuation or conversion, specifying the date, amount and
the Interest Period, if applicable. Absent notice of
continuation or conversion, each Eurodollar Loan shall
automatically convert into a Reference Rate Loan on the last
day of the current Interest Period for such Loan, unless
paid in full on such last day. No Loan shall be converted
into a Eurodollar Loan and no Eurodollar Loan shall be
continued less than thirty days before the Termination Date or
at any time that an Event of Default or an Unmatured
Event of Default exists.
2.5 Extension of the Termination Date..5 Extension of
the Termination Date..5 Extension of the Termination Date.
(a) At least 60 but not more than 90 days before
any anniversary of the Effective Date, the Company may, by
delivery of a written request to the Agent in the form of
Exhibit B, request that each Bank agree to extend the
then-scheduled Termination Date by one (1) year.
(b) The Agent shall, upon receipt of any
such extension request, promptly notify each Bank thereof, and
request that each Bank promptly advise the Agent of its
approval or rejection of such request.
(c) Upon receipt of such notification from the
Agent, each Bank may, in its sole discretion, agree to extend
for one (1) year, or decline to extend, the Termination Date,
and each Bank shall, within 30 days of receipt of the notice
described in clause (b), notify the Agent of its approval or
denial of such request. If any Bank does not so notify the
Agent, such Bank shall be deemed to have denied such
extension request. The Agent shall, no later than 30 days
following its receipt of any extension request from the
Company, notify the Company as to the
Banks which have approved or denied such request.
(d) If all of the Banks approve any such request,
the Termination Date shall be extended to the date which is
one (1) year after the Termination Date in effect immediately
prior to such extension. If fewer than all of the Banks
approve any such request, the Termination Date shall not be
extended.
3. NOTE EVIDENCING LOANS.. NOTE EVIDENCING LOANS.. NOTE
EVIDENCING LOANS.
3.1 Reference Rate Loans; Eurodollar Loans..1 Reference
Rate Loans; Eurodollar Loans..1 Reference Rate Loans;
Eurodollar Loans. The Reference Rate Loans and Eurodollar
Loans of all Banks shall be evidenced by the Company's promissory note (the
"Note") in the form of Exhibit A, with appropriate
insertions, which Note shall (i) be dated the Effective Date
(or such other date satisfactory to the Agent), (ii) be made
payable to the order of the Agent for the account of the Banks
ratably in accordance with their Percentages, and (iii)
mature on the Termination Date. The Note shall be an
amendment and restatement of the Existing Note.
3.2 Evidence of Loans..2 Evidence of Loans..2
Evidence of Loans. All Loans made by the Banks to the
Company pursuant to this Agreement and all payments of
principal shall be evidenced by the Agent in its records or, at
its option, on the schedule attached to the Note, which
records or schedule(s) shall be rebuttable presumptive evidence
of the subject matter thereof, provided that the failure of the
Agent to make any endorsement or other notation, or any error
in doing so, shall not affect the obligations of the Company
hereunder or under the Note.
4. LETTER OF CREDIT. LETTER OF CREDIT. LETTER OF CREDIT
4.1 Issuance of Letters of Credit..1 Issuance of Letters
of Credit..1 Issuance of Letters of Credit. Subject to
the terms and conditions of this Agreement, the Commitments
may, in addition to the Loans provided for in Section 2.1, be
utilized, upon the request of the Company, for the issuance of
letters of credit
by TCB for the account of the Company (such letters of
credit issued by TCB being hereinafter collectively referred to
as the "Letters of Credit"); provided that TCB shall have
no obligation to issue any such Letter of Credit if, after giving effect
to such issuance of the proposed Letter of Credit, the
aggregate face amount of all Letters of Credit outstanding
at such time would exceed (i) together with the aggregate
outstanding amount of Loans at such time, the Credit at
such time, or (ii) $12,000,000.
4.2 Procedure for Issuance..2 Procedure for Issuance..2
Procedure for Issuance. (a) In order to effect the issuance
of each Letter of Credit, the Company shall deliver to the Agent (which
delivery may be by facsimile transmission) a letter of
credit application in substantially the form attached hereto as
Exhibit O (the "Letter of Credit Application") not later
than 10:00 A.M., Houston time, two (2) Business Days prior
to the proposed date of issuance of the Letter of Credit. The letter of credit
application shall be duly executed by a Responsible
Officer of the Company, shall be irrevocable and shall
(i) specify the day on which such Letter of Credit is to
be issued (which shall be a Business Day), and (ii) set forth
calculations evidencing availability for the Letter of Credit,
as required pursuant to Section 4.1 hereof; provided that,
in no event shall the Letter of Credit have an expiry date on
or after a date which occurs (A) more than twelve (12) months after its
date of issuance or (B) later than ten (10) days prior to
the Termination Date.
(b) Upon receipt of the Letter of Credit
Application, and satisfaction of the applicable terms and
conditions of this Agreement, and provided that no Unmatured
Event of Default or Event of Default exists, or would,
after giving effect to the issuance of the Letter of
Credit, exist, TCB shall issue such Letter of Credit to the
beneficiary specified in the Letter of Credit Application no
later than the close of business, in Houston, Texas, on
the date so specified. The Agent shall provide the
Company and each Bank with a copy of the Letter of Credit
which has been issued. Each Letter of Credit shall (i)
provide for the payment of drafts presented for honor
thereunder by the beneficiary in accordance with the
terms thereof, when such drafts are accompanied by the
documents described in the Letter of Credit, if any, and (ii)
to the extent not inconsistent with the express terms hereof
or the applicable Letter of Credit Application, be subject to
the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce Publication No. 500
(together with any subsequent revisions thereof approved
by a Congress of the International Chamber of Commerce and
adhered to by TCB, the "UCP"), and shall, as to matters not
governed by the UCP, be governed by, and construed and
interpreted in accordance with, the laws of the State of
Texas.
4.3 Purchase of Participations..3 Purchase of
Participations..3 Purchase of Participations. Upon the
issuance date of each Letter of Credit, TCB shall be
deemed, without further action by any party hereto, to have
sold to each other Bank, and each other Bank shall be deemed,
without further action by any party hereto, to have
purchased from TCB, a participation, to the extent of such
Bank's Percentage, in the Letter of Credit, the
obligations thereunder and in the
reimbursement obligations of the Company due in respect
of drawings made under the Letter of Credit. If requested by
TCB, the other Banks will execute any other documents
reasonably requested by TCB to evidence the purchase of such
participations, provided that such documents shall be in
form and substance satisfactory to each Bank. Upon issuance
of a Letter of Credit and the purchase of participations
hereunder, in respect of clarification, each Bank (including
TCB) hereby agrees that the principal amount of each
such Bank's interest in the
reimbursement obligation of the Company in respect of such
Letter of Credit shall be deemed to be included in the
principal amount which constitutes the numerator in the
applicable calculation of such Bank's Percentage hereunder.
4.4 Presentment and Honor of Letter of Credit..4
Presentment and Honor of Letter of Credit..4 Presentment
and Honor of Letter of Credit. Upon the presentment of a
draft for honor under any Letter of Credit by the beneficiary
thereof which TCB has determined is in compliance with the
conditions for payment thereunder, TCB shall promptly notify
the Company, the Agent and each Bank of the intended date of
honor of such draft and subject to Section 3.1 hereof, the
amount due and owing in respect of such draft shall
automatically and without any action by the Company be
immediately due and payable by the Company and until paid,
shall be deemed to be a Loan to the Company as of the date of
payment of such draft by TCB, and each Bank shall,
notwithstanding any other provision of this Agreement
(including the occurrence and continuance of an Unmatured
Event of Default or an Event of Default), make available to
the Agent for the benefit of TCB an amount equal to its
Percentage of the presented draft on the day TCB is required
to honor such draft. If such
amount is not in fact made available to the Agent by such Bank
on such date, such amount shall bear interest at the
lesser of (i) the Federal Funds Rate or (ii) the Highest
Lawful Rate, payable on demand by the Agent.
4.5 Obligations of the Company Absolute..5 Obligations
of the Company Absolute..5 Obligations of the Company
Absolute. The Company's obligation to reimburse TCB for the
amount of any draft drawn under a Letter of Credit
shall be absolute, unconditional and irrevocable and shall
be paid immediately to the Agent for the account of the
Banks upon demand by the Agent, and otherwise strictly in
accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without limitation, the
following circumstances:
(a) the existence of any claim, set-off, defense
or other rights which the Company may have at any time
against any beneficiary or any transferee of any Letter
of Credit (or any Person for whom any such beneficiary
or any such transferee may be acting), TCB, any Bank
or any other Person, whether in connection with this
Agreement, any other Loan Document, the transactions
contemplated herein or therein or any unrelated
transaction;
(b) any statement or any other document
presented under any Letter of Credit proving to be
forged, fraudulent or invalid in any material respect or
any statement therein being untrue or inaccurate in any
respect;
(c) payment by TCB under any Letter of Credit
against presentation of a draft or certificate which does
not comply with the terms of such Letter of Credit,
provided that such payment shall not have been the result
of gross negligence or wilful misconduct of TCB; and
(d) any other circumstance or event
whatsoever, whether or not similar to the foregoing.
4.6 Liability of TCB..6 Liability of TCB..6 Liability of TCB. The
Company assumes all risks of the acts or omissions of the beneficiary and any
transferee of each Letter of Credit with respect to its use of such Letter
of Credit. Neither TCB, the Agent, nor any Bank shall be liable or
responsible for, and the Company hereby indemnifies and holds TCB, the Agent
and each Bank harmless for: (a) the use which may be made of any Letter
of Credit or for any acts or omissions of the beneficiary and any
transferee thereof in connection therewith, or (b) the validity or
genuineness of documents, or of any endorsement(s) thereon, even if such
documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any other circumstances whatsoever in making or
failing to make payment, against TCB, the Agent or any Bank, except damages
determined to have been caused by gross negligence or willful misconduct of
TCB in determining whether documents presented under a Letter of Credit
comply with the terms of such Letter of Credit and there shall have been
a wrongful payment as a result thereof (for which only TCB shall be liable
or responsible); provided that, it is the intention of the Company
hereunder to indemnify TCB, the Agent and each Bank for its own
negligence, other than negligence constituting gross negligence or willful
misconduct. In furtherance and not in limitation of the foregoing, TCB may
accept documents that appear on their face to be in order, without
responsibility for investigation, regardless of any notice or information to
the contrary.
4.7 Provisions of Agreement Control..7 Provisions of Agreement
Control..7 Provisions of Agreement Control. In the event that any provision
of a Letter of Credit Application is inconsistent, or in conflict with, any
provisions of this Agreement, including provisions for the rate of interest
applicable to draws thereunder, delivery of collateral or rights of setoff
or any representations, warranties, covenants or any events of default set
forth therein, the provisions
of this Agreement shall govern.
50 INTEREST AND FEES. INTEREST AND FEES. INTEREST AND FEES.
5.1 Interest..1 Interest..1 Interest.
(a) Reference Rate Loan. The unpaid principal of the Reference Rate
Loans shall bear interest prior to maturity at a rate per annum equal to
the Alternate Base Rate in effect from time to time. Prior to maturity
interest on each Reference Rate Loan shall be payable on each Payment Date
therefor and on the Termination Date.
(b) Eurodollar Loans. The unpaid principal of each Eurodollar Loan
shall bear interest prior to maturity at a rate per annum equal to the
Interbank Rate (Reserve Adjusted) in effect for each Interest Period
therefor plus the Margin from time to time in effect. Interest on each
Eurodollar Loan shall be payable on each Payment Date therefor and on the
Termination Date.
(c) Interest After Maturity. The Company shall pay to the Banks
interest on any amount of principal of any Loan which is not paid when
due, whether at stated maturity, by acceleration or otherwise, accruing
from and including the date such amount shall have become due to (but not
including) the date of payment thereof in full, at the rate per annum, which
is equal to the greater of (i) 2% in excess of the rate applicable to
the unpaid amount immediately before it became due or (ii) 2% in excess of
the Alternate Base Rate from time to time in effect. Interest after
maturity shall be payable on demand.
5.2 Commitment Fee..2 Commitment Fee..2 Commitment Fee. The Company
agrees to pay to the Banks ratably in accordance with their Percentages,
a commitment fee, for the period commencing on March 31, 1997 and ending on
the earlier of (x) the Termination Date and (y) the date of termination
of the Credit, equal to 0.25% per annum on the daily average of the unused
amount of the Credit. The commitment fee paid to the Banks pursuant to this
Section 5.2 shall be payable on the last day of each March, June, September
and December and SEQ ParaNumbers2_0 \* Arabic \c7
$15,000,000
REVOLVING CREDIT AGREEMENT
DATED AS OF MARCH 5, 1997
AMONG
NPC INTERNATIONAL, INC.,
VARIOUS BANKS
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Agent
TABLE OF CONTENTS
page
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE
WITH FINANCIAL RESTRICTIONS. 1
1.1 Definitions. 1
1.2 Other Definitional Provisions. 11
1.3 Interpretation of Agreement. 11
1.4 Compliance with Financial Restrictions. 11
1.5 Accounting Principles. 11
2. COMMITMENTS OF THE BANKS; BORROWING PROCEDURES. 11
2.1 Commitments. 11
2.2 Loan Options. 12
2.3 Borrowing Procedure. 12
2.4 Continuation and/or Conversion of Loans. 13
2.5 Extension of the Termination Date. 13
3. NOTES EVIDENCING LOANS. 14
3.1 Reference Rate Loans; Eurodollar Loans. 14
3.2 Money Market Loans 14
3.3 Evidence of Loans 14
4. [intentionally omitted] 14
5. INTEREST AND FEES. 14
5.1 Interest. 14
5.2 Commitment Fee. 15
5.3 Method of Calculating Interest and Fees. 15
5.4 Agent's Fee. 15
6. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT 15
6.1 Place of Payment. 15
6.2 Prepayments. 16
6.3 Reduction of Credit. 16
6.4 Offset. 16
6.5 Proration of Payments. 16
7. INDEMNIFICATION: EURODOLLAR LOANS. 17
7.1 Indemnity for Funding Losses. 17
7.2 Capital Adequacy. 17
7.3 Additional Provisions Relating to Eurodollar Loans. 17
8. CONDITIONS PRECEDENT TO ALL LOANS. 19
8.1 Notice. 19
8.2 Default. 20
8.3 Insurance. 20
8.4 Warranties. 20
8.5 Certification. 20
9. CONDITIONS PRECEDENT TO EFFECTIVE DATE AND INITIAL LOAN
THEREON OR THEREAFTER. 20
9.1 Notes. 20
9.2 Resolutions; Consents and Approvals. 20
9.3 Incumbency. 21
9.4 Opinion. 21
9.5 General. 21
10. REPRESENTATIONS AND WARRANTIES. 21
10.1 Existence. 21
10.2 Authorization. 21
10.3 No Conflicts. 21
10.4 Validity and Binding Effect. 21
10.5 Financial Statements. 22
10.6 Litigation. 22
10.7 Taxes. 22
10.8 Liens. 22
10.9 No Default. 22
10.10Insurance. 23
10.11Subsidiaries. 23
10.12Partnerships. 23
10.13Regulation U. 23
10.14Compliance. 23
10.15Pension Plans. 23
11. COMPANY'S COVENANTS. 23
11.1 Financial Statements and Other Information. 24
11.2 Books, Records and Inspection. 25
11.3 Conduct of Business. 25
11.4 Taxes. 25
11.5 Notices. 25
11.6 Pension Plans. 26
11.7 Expenses. 26
11.8 Indebtedness. 26
11.9 Liens. 26
11.10Merger, Purchase and Sale. 27
11.11Nature of Business. 27
11.12Franchise Rights. 27
11.13Net Worth. 27
11.14Leverage Ratio. 28
11.15Fixed Charge Coverage. 28
11.16Insurance. 28
11.17Restricted Payments. 28
11.18Leases. 28
11.19Company's and Subsidiaries' Stock. 28
11.20Guaranties. 29
11.21Investments. 29
11.22Subsidiaries. 29
11.23Unconditional Purchase Obligation. 30
11.24Other Agreements. 30
11.25Use of Proceeds. 30
11.26Amendment to Loan Documents. 30
12. EVENTS OF DEFAULT AND REMEDIES. 30
12.1 Events of Default. 30
12.2 Remedies. 33
13. RELATIONSHIP AMONG BANKS. 33
13.1 Appointment and Grant of Authority. 33
13.2 Non-Reliance on Agent. 33
13.3 Responsibility of the Agent and Other Matters. 34
13.4 Action on Instructions. 35
13.5 Indemnification. 35
13.6 TCB and Affiliates. 35
13.7 Notice to Holder of Loans. 35
13.8 Successor Agent. 35
14. GENERAL. 36
14.1 Waiver and Amendments. 36
14.2 Notices. 36
14.3 Severability; Participations; Assignments. 37
14.4 Indemnification. 39
14.5 LAW. 39
14.6 Successors. 39
14.7 Subsidiary Reference. 39
14.8 ENTIRE AGREEMENT. 40
14.9 Counterparts. 40
14.10Interest. 40
EXHIBIT A-1 Form of Series A Note
EXHIBIT B-2 Form of Series B Note
EXHIBIT B Request for Extension of Termination Date
EXHIBIT C Litigation
EXHIBIT D Liens
EXHIBIT E Insurance
EXHIBIT F Subsidiaries
EXHIBIT G Partnerships/Joint Ventures
EXHIBIT H Indebtedness
EXHIBIT I Investments
EXHIBIT J Opinion of Counsel to
Company
EXHIBIT K Notice of Borrowing
EXHIBIT L Notice of Continuation/Conversion
EXHIBIT M Compliance Certificate
EXHIBIT N Assignment and Acceptance
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of March 5, 1997 (this
"Agreement"), is entered into among NPC INTERNATIONAL, INC., a Kansas
corporation (the "Company"), the banks listed on the signature pages hereof
(together with such other financial institutions that from time to time become
parties hereto, individually a "Bank" and collectively the "Banks") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION ("TCB"), as agent for the Banks.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE WITH FINANCIAL
RESTRICTIONS.. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE WITH
FINANCIAL RESTRICTIONS.. DEFINITIONS, INTERPRETATION OF AGREEMENT AND
COMPLIANCE WITH FINANCIAL RESTRICTIONS.
1.1 Definitions..1 Definitions..1 Definitions. In addition to the terms
defined elsewhere in this Agreement, the following terms shall have the meanings
indicated for purposes of this Agreement (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
Acquisition Agreement shall mean the Acquisition Agreement dated as of
March 25, 1996 by and among Seattle Crab Co., the Company and Skipper's, Inc.
Affiliate of any Person means any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan (hereinafter defined)). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners of such Person; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
Agent means TCB as Agent for the Banks hereunder and each successor, as
provided in Section 13.8, who shall act as Agent.
Alternate Base Rate means a per annum interest rate which is the greater at
any time of (i) the rate of interest then most recently announced by TCB at
Houston, Texas as its prime rate, or (ii) 0.5% plus the Federal Funds Rate.
Such prime rate of TCB is not necessarily intended to be the lowest rate of
interest determined by TCB in connection with extensions of credit. Changes in
the rate of interest on that portion of any Loans maintained as Alternate Base
Rate Loans shall take effect simultaneously with each change in the Alternate
Base Rate. The Agent shall give notice promptly to the Company and the Banks of
changes in the Alternate Base Rate.
Assignee shall have the meaning set forth in Section 14.3(c)(i).
Assignment and Acceptance shall have the meaning set forth in
Section 14.3(c)(i).
Bank -- see the Preamble.
Banking Day means any day on which banks are open for business in Houston,
Texas, and with respect to Eurodollar Loans, on which dealings in foreign
currencies and exchange may be carried on by the Agent in the interbank
Eurodollar market.
Capitalized Lease means any lease which is or should be capitalized on the
balance sheet of the lessee in accordance with GAAP.
Code means the Internal Revenue Code of 1986 and any successor statute of
similar import, together with the regulations thereunder, in each case as in
effect from time to time. References to sections of the Code shall be construed
to also refer to any successor sections.
Commitment means, as to each Bank, the amount set forth opposite said
Bank's name on the signature page hereof (or such reduced amount as may be fixed
by the Company pursuant to Section 6.3).
Company -- see the Preamble.
Computation Period means any period of four consecutive fiscal quarters of
the Company ending on the last day of a fiscal quarter.
Consolidated Net Earnings means the consolidated gross revenues of the
Company and its Subsidiaries less all operating and non-operating expenses of
the Company and its Subsidiaries including taxes on income, all determined in
accordance with GAAP consistent with those followed in the preparation of the
financial statements referred to in Section 10.5, provided that (i) there shall
not be included in revenues (a) any income representing the excess of equity in
any Subsidiary at the date of acquisition over the investment in such
Subsidiary, (b) any equity in the undistributed earnings of any corporation
which is not a Subsidiary, (c) any earnings of any Subsidiary for any period
prior to the fiscal year of the Company in which such Subsidiary was acquired,
or (d) any gains resulting from the write-up of assets, and (ii) capital gains
may be included in revenues only to offset capital losses; provided, further,
that for the purpose of calculating Consolidated Net Earnings with respect to
the last day of the fiscal quarter ended March 26, 1996, and with respect to the
last day of each of the next three successive fiscal quarters thereafter, there
shall not be included in calculating Consolidated Net Earnings any charges
against income in connection with the Skipper's Sale, or in connection with the
closure or relocation of up to eight Tony Roma's locations during calendar year
1996, which might otherwise be required under GAAP.
Consolidated Net Worth means, at any time, the total of stockholders'
equity (including capital stock, additional paid-in capital and retained
earnings after deducting treasury stock, ESOP obligations and similar contra
accounts) of the Company and its consolidated Subsidiaries calculated in
accordance with GAAP.
Credit means the aggregate Commitments of the Banks to make Loans and issue
Letters of Credit under the terms of this Agreement.
Dollars and the sign "$" mean lawful money of the United States of America.
EBITDA means Consolidated Net Earnings before interest expense, provision
for taxes (to the extent not excluded from Consolidated Net Earnings),
depreciation, amortization and the noncash portion of nonrecurring charges (as
defined by GAAP).
Effective Date means the date on which all the conditions precedent set
forth in Section 9 are met or waived in writing by the Agent and the Majority
Banks.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
ERISA Affiliate means any corporation, trade or business that is, along
with the Company, a member of a controlled group of corporations or a controlled
group of trades or businesses, as described in sections 414 (b) and 414 (c),
respectively, of the Code.
Eurocurrency Reserve Percentage means, with respect to any Interest Period,
a percentage (expressed as a decimal) equal to the daily average during such
Interest Period of the percentages in effect on each day of such Interest
Period, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor), for determining reserve requirements applicable to
"Eurocurrency liabilities" pursuant to Regulation D or any other then applicable
regulation of the Board of Governors which prescribes reserve requirements
applicable to "Eurocurrency liabilities," as presently defined in Regulation D.
For purposes of this definition, any Eurodollar Loans hereunder shall be deemed
to be "Eurocurrency liabilities" as defined in Regulation D.
Eurodollar Loan means any Loan which bears interest at a rate determined
with reference to the Interbank Rate (Reserve Adjusted).
Event of Default means any of the events described in Section 12.1.
Federal Funds Rate means for any date the weighted average of the rates on
overnight Federal Funds transactions, with members of the Federal Reserve System
only, arranged by Federal Funds brokers applicable to Federal Funds transactions
on that date. The Federal Funds Rate shall be determined by the Agent on the
basis of reports by Federal Funds brokers to, and published daily by, the
Federal Reserve Bank of New York in the Composite Closing Quotations for U.S.
Government Securities. If such publication is unavailable or the Federal Funds
Rate is not set forth therein, the Federal Funds Rate shall be determined on the
basis of any other source reasonably selected by the Agent. In the case of a
day which is not a Banking Day, the Federal Funds Rate shall be the Federal
Funds Rate for the immediately preceding Banking Day.
Franchise Agreement means any franchise agreement between the Company or
any Subsidiary and Pizza Hut, Inc., as such may be amended or modified from time
to time.
GAAP means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
Highest Lawful Rate shall have the meaning set forth in Section 14.10.
Indebtedness means, without duplication,
(i) any obligation, including, without limitation, any obligation for
borrowed money (and any notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money), which under GAAP is shown on the balance sheet as a liability
(including any obligation under a Capitalized Lease but excluding reserves
for deferred income taxes and other reserves to the extent that such
reserves do not constitute an obligation),
(ii) indebtedness which is secured by a Lien on, or payable out of the
proceeds of production from, property owned by the Company or any
Subsidiary, whether or not the indebtedness secured thereby shall have been
assumed by the Company or such Subsidiary,
(iii) guarantees, endorsements (other than endorsements of
negotiable instruments for collection in the ordinary course of business)
and other contingent liabilities (whether direct or indirect) in connection
with the obligations, stock or dividends of any Person,
(iv) obligations under any contract providing for the making of loans,
advances or capital contributions to any Person, or for the purchase of any
property from any Person, in each case in order to enable the Company or
any Subsidiary primarily to maintain working capital, net worth or any
other balance sheet condition or to pay debts, dividends or expenses of
such Person,
(v) obligations under any contract for the purchase of materials,
supplies or other property or services if such contract (or any related
document) requires that payment for such materials, supplies or other
property or services shall be made regardless of whether or not delivery of
such materials, supplies or other property or services is ever made or
tendered,
(vi) obligations under any contract to rent or lease (as lessee) any
real or personal property if such contract (or related document) provides
that the obligation to make payments thereunder is absolute and
unconditional under conditions not customarily found in commercial leases
then in general use and requires that the lessee purchase or otherwise
acquire material amounts of securities, assets or obligations of the
lessor,
(vii) obligations under any other contract which, in economic
effect, is substantially equivalent to a guarantee;
all as determined in accordance with GAAP; provided that Indebtedness shall not
include trade accounts payable, accrued expenses or income taxes payable, each
arising in the ordinary course of business.
Indebtedness to Pro Forma EBITDA Ratio means, as of the last day of any
fiscal quarter, the ratio of (a) all Indebtedness of the Company and its
Subsidiaries on such day to (b) Pro Forma EBITDA for the period of four
consecutive fiscal quarters ending on such day.
Indemnification Agreements shall mean, collectively, the Lease
Indemnification Agreement and the Liability Assumption Agreement, as those
agreements are defined and identified in the Acquisition Agreement.
Interbank Rate means, for any Interest Period, the rate per annum at which
Dollar deposits in immediately available funds are offered to the Agent two
Banking Days prior to the beginning of such Interest Period by major banks in
the interbank Eurodollar market as at or about 10:00 a.m., Houston time, for
delivery on the first day of such Interest Period, for the number of days
comprised therein and in an amount equal to the amount of TCB's Eurodollar Loan
for such Interest Period.
Interbank Rate (Reserve Adjusted) means a rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Interbank Rate = Interbank Rate
(Reserve Adjusted) 1.0-Eurocurrency Reserve Percentage
Interest Period means, with respect to any Eurodollar Loan, the one month,
two month, three month or six month period commencing on the applicable
borrowing date or conversion date of such Loan or the last day of the prior
Interest Period for such Loan, as the case may be; provided, however, that no
Interest Period shall extend beyond the Termination Date. Each Interest Period
which would otherwise end on a day which is not a Banking Day shall end on the
next succeeding Banking Day unless such next succeeding Banking Day is the first
Banking Day of a calendar month, in which case it shall end on the next
preceding Banking Day.
Investment means any investment, made in cash or by delivery of any kind of
property or asset, in any Person, whether by acquisition of shares of stock or
similar interest, Indebtedness or other obligation or security, or by loan,
advance or capital contribution, or otherwise.
Lien means any mortgage, pledge, hypothecation, judgment lien or similar
legal process, title retention lien, or other lien or security interest,
including, without limitation, the interest of a vendor under any conditional
sale or other title retention agreement and the interest of a lessor under any
Capitalized Lease.
Loan -- see Section 2.1.
Loan Documents means this Agreement, all Notes, and any and all agreements
or instruments now or hereafter executed and delivered by the Company, any
Subsidiary or any other Person guaranteeing, securing or otherwise supporting
payment or performance of the Notes, this Agreement or any other Loan Document,
as they may be modified or amended from time to time in accordance with the
terms and provisions thereof.
Majority Banks means those Banks whose share in the aggregate principal
amount of the Loans outstanding constitutes (or, if no Loans are outstanding,
those whose Percentage constitutes) more than fifty percent (50%).
Margin means (a) initially, 1.00% and (b) on and after any date specified
below on which the Margin is to be adjusted, the rate per annum set forth in the
table below opposite the applicable Indebtedness to Pro Forma EBITDA Ratio:
Indebtedness
to
Pro Forma EBITDA Margin
2.75 < x 1.50%
2.50 < x < 2.75 1.25%
2.25 < x < 2.50 1.00%
1.50 < x < 2.25 .75%
x < 1.50 .50%
The Margin shall be adjusted, to the extent applicable, 45 days (or, in the case
of the last fiscal quarter of any fiscal year, 90 days) after the end of each
fiscal quarter based on the Indebtedness to Pro Forma EBITDA Ratio as of the
last day of such fiscal quarter; it being understood that if the Company fails
to deliver the financial statements required by Section 11.1(a) or 11.1(b), as
applicable, by the 45th day (or, if applicable, the 90th day) after any fiscal
quarter, the Margin shall be 1.50% until such financial statements are
delivered.
Maturity Date means, for any Money Market Loan, the date that is from one
(1) to thirty (30) days from the date of such Loan as selected by the Company in
the notice of borrowing, but not later than the Termination Date.
Money Market Loan means any Loan designated as such which is made pursuant
to Section 2.3(c).
Money Market Rate means for any Money Market Loan the per annum interest
rate which is quoted by the Agent for such Money Market Loan at the making
thereof.
Notes means the Notes referred to in Section 3.
Payment Date means (a) as to any Eurodollar Loan, the last day of each
Interest Period with respect thereto and, if such Interest Period is in excess
of three months, the date that is three months after the commencement of such
Interest Period, and (b) as to any Reference Rate Loan, and any Money Market
Loan, the last day of each March, June, September and December.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Percentage means, for any Bank, the percentage which the amount of such
Bank's Commitment is of the amount of the Credit.
Permitted Liens means the following, provided that none of the following
materially adversely affect the financial condition or business operations of
the Company and its Subsidiaries taken as a whole:
(1) Liens of taxes, assessments, and governmental charges not yet
payable, or not delinquent and payable without interest or penalty so long
as so payable;
(2) Liens of taxes, assessments, governmental charges and other
Indebtedness, the validity of which are being contested in good faith by
appropriate action diligently pursued, provided that such proceeding shall
suspend the collection of such taxes, assessments, governmental charges, or
other Indebtedness and no property of the Company or any Subsidiary would
be in any danger of being forfeited during the period of such contest;
(3) Liens of employees and laborers for current wages, not yet due,
incidental to current operations or current construction, and Liens of
others for current indebtedness, not yet due, incidental to current
construction, including maintenance, repair, and alteration; mechanics',
materialmen's, workmen's, repairmen's or carriers' liens, or other similar
Liens arising in the ordinary course of business, or deposits, Liens, or
pledges of personal property to obtain the release of any such Liens;
(4) oil and gas leases, licenses, privileges, other leases, releases
of damages, easements, restrictions on the use of real property, zoning
laws and ordinances, rights-of-way, minor irregularities in title and other
similar encumbrances (including the right of vendors to occupy and use real
property previously sold to the Company or any Subsidiary not immediately
required by the Company or any Subsidiary for use in its business), not in
any case impairing the use by the Company or any Subsidiary in its business
of the property affected thereby;
(5) in the case of easements and right-of-way grants from
governmental bodies, the rights of the public;
(6) Liens existing prior to the time of acquisition upon any real or
personal property acquired by the Company or any Subsidiary through
purchase, merger, consolidation, or otherwise, whether or not assumed by
the Company or any Subsidiary;
(7) Liens in connection with the acquisition of property after the
date hereof by way of purchase money mortgage, conditional sale or other
title retention agreement, Capitalized Lease or other deferred payment
contract, and attaching only to the property being acquired, if the
Indebtedness secured thereby does not exceed 75% (100% in the case of a
Capitalized Lease) of the lesser of cost or fair market value of such
property at the time of acquisition thereof;
(8) deposits, Liens, or pledges of personal property or of securities
to secure payments of workers' compensation, unemployment insurance, old
age pensions or other Social Security, or to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money),
or leases to which the Company or any Subsidiary is a party, or to secure
public or statutory obligations of the Company or any Subsidiary, or
deposits of cash or United States government obligations to secure or in
lieu of surety, stay or appeal bonds to which the Company or any Subsidiary
is a party, or pledges, Liens, or deposits for similar purposes in the
ordinary course of business;
(9) Liens based on workers' compensation claims which are not due and
payable, or the validity of which is being contested in good faith; and
(10) minor discrepancies and encroachments that might be disclosed by
an accurate survey.
Should any of the preceding Permitted Liens occur, the Banks may reasonably
request, as to all the preceding matters referred to in paragraphs (1), (2),
(3), (7), (8) and (9) above, that adequate reserves be set aside and maintained
by the Company or any Subsidiary with respect thereto.
Person means an individual, partnership, corporation, trust, joint venture,
joint stock company, association, unincorporated organization, government or
agency or political subdivision thereof, or other entity.
Pizza Hut, Inc. means Pizza Hut, Inc., a Delaware corporation.
Plan means a "pension plan," as such term is defined in ERISA, established
or maintained by the Company or any ERISA Affiliate or as to which the Company
or any ERISA Affiliate contributes or is a member or otherwise may have any
liability.
Pro Forma EBITDA means EBITDA provided, however, that for the purpose of
calculating Pro Forma EBITDA (i) with respect to the last day of the fiscal
quarter ended March 26, 1996, and with respect to the last day of each of the
next three successive fiscal quarters thereafter, Pro Forma EBITDA shall be
calculated without regard for any charges against income in connection with the
Skipper's Sale, or in connection with the closure or relocation of up to eight
Tony Roma's locations during calendar year 1996, which might otherwise be
required under GAAP and (ii) with respect to any Person acquired pursuant to
Section 11.10(a) (the "Acquisition Target"), EBITDA of the Acquisition Target
for each full fiscal quarter included in the applicable Computation Period prior
to such Acquisition (including the fiscal quarter during which it was acquired)
shall be included and adjusted for tangible operational changes due to field
expense differentials, royalty payments to be made to Pizza Hut, Inc.,
contractual rent payments on real estate and equipment and general and
administrative cost differences, all as set forth in the most recent certificate
delivered pursuant to Section 11.1(c).
Reference Rate Loan means any Loan which bears interest at or by reference
to the Alternate Base Rate.
Reportable Event has the meaning given to such term in ERISA.
Responsible Officer means the Chief Operating Officer, the Chief Financial
Officer or the Chief Accounting Officer.
Romacorp, Inc. means Romacorp, Inc., a Delaware corporation.
Significant Subsidiary means, at any time of determination, a Subsidiary
(a) which has assets with a Value equal to three percent (3%) or more of the
value of the consolidated total assets of the Company and its Subsidiaries,
determined as of the last day of the immediately preceding fiscal year, or (b)
which had Cash Flow (hereinafter defined) during the immediately preceding
fiscal year equal to three percent (3%) or more of the consolidated Cash Flow of
the Company and its Subsidiaries during such fiscal year. "Cash Flow" for any
period means earnings before interest expense, provision for taxes,
depreciation, amortization and other noncash charges for such period. "Value"
as used in the first sentence of this definition means, with respect to any
asset at any date of determination, the book value of such asset as would appear
immediately prior to such determination on the balance sheet of the owner of
such asset prepared in accordance with GAAP.
Skipper's Sale shall mean the Company's sale of the common stock of
Skipper's Inc. in accordance with all of the terms and conditions of the
Acquisition Agreement.
Subsidiary means any Person which is directly or indirectly controlled by
the Company and its other Subsidiaries or of which or in which the Company and
its other Subsidiaries at any time own directly or indirectly 50% or more of (i)
the combined voting power of all classes of stock having general voting power
under ordinary circumstances to elect a majority of the board of directors of
such Person, if it is a corporation, (ii) the capital interest or profits
interest of such Person, if it is a partnership, joint venture or similar
entity, or (iii) the beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
Supermajority Banks means the Agent and those Banks whose share in the
aggregate principal amount of the Loans outstanding constitutes (or, if no Loans
are outstanding, those whose Percentages constitute) at least sixty-seven
percent (67%).
TCB -- see the Preamble.
Termination Date means March 3, 2000, as such date may from time to time be
extended in accordance with Section 2.5, or such earlier date as may be fixed by
the Company on at least thirty (30) Banking Days' written notice to the Agent
and the Banks.
Termination Event with respect to any Plan means (i) the institution by the
Company, the PBGC or any other Person of steps to terminate such Plan, (ii) the
occurrence of a Reportable Event with respect to such Plan which the Agent
reasonably believes may be a basis for the PBGC to institute steps to terminate
such Plan, or (iii) the withdrawal from such Plan (or deemed withdrawal under
section 4062(f) of ERISA) by the Company or any ERISA Affiliate if the Company
or such ERISA Affiliate is a "substantial employer" within the meaning of
section 4063 of ERISA.
Unmatured Event of Default means any event or condition which, with the
lapse of time or giving of notice to the Company or both, would constitute an
Event of Default.
Value shall mean, with respect to any asset at any date of determination,
the greater of such asset's book or fair market value as of the date of
determination, with "book value" being the value of such asset as would appear
immediately prior to such determination on a balance sheet of the owner of such
asset prepared in accordance with GAAP.
1.2 Other Definitional Provisions..2 Other Definitional Provisions..2
Other Definitional Provisions. Unless otherwise defined or the context
otherwise requires, all financial and accounting terms used herein or in any
certificate or other document made or delivered pursuant hereto shall be defined
in accordance with GAAP. Unless otherwise defined therein, all terms defined in
this Agreement shall have the defined meanings when used in any Note or in any
certificate or other document made or delivered pursuant hereto.
1.3 Interpretation of Agreement..3 Interpretation of Agreement..3
Interpretation of Agreement. A Section, an Exhibit or a Schedule is, unless
otherwise stated, a reference to a section hereof, an exhibit hereto or a
schedule hereto, as the case may be. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this Agreement.
The words "hereof," "herein," "hereto" and "hereunder" and words of similar
purport when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
1.4 Compliance with Financial Restrictions..4 Compliance with Financial
Restrictions..4 Compliance with Financial Restrictions. Compliance with
each of the financial ratios and restrictions contained in Section 11 shall,
except as otherwise provided herein, be determined in accordance with GAAP
consistently followed.
1.5 Accounting Principles..5 Accounting Principles..5 Accounting
Principles. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP consistent with those applied in the
preparation of the audited financial statements referred to in Section 11.1
hereof. All financial information delivered to the Agent pursuant to
Section 11.1 hereof shall be prepared in accordance with GAAP applied on a basis
consistent with those reflected by the initial financial statements delivered to
the Agent pursuant to Section 10.5, except (i) where such principles are
inconsistent with the requirements of this Agreement and (ii) for those changes
with which the independent certified public accountants referred to in
Section 11.1(a) hereof concur in rendering unqualified certificates as to
financial statements.
2. COMMITMENTS OF THE BANKS; BORROWING PROCEDURES.. COMMITMENTS OF THE BANKS;
BORROWING PROCEDURES.. COMMITMENTS OF THE BANKS; BORROWING PROCEDURES.
2.1 Commitments..1 Commitments..1 Commitments. Subject to the terms and
conditions of this Agreement, each Bank, severally but not jointly, agrees to
make loans (collectively the "Loans" and individually each a "Loan") to the
Company, which Loans the Company may prepay and reborrow during the period from
the date hereof to, but not including, the Termination Date, in such amounts as
the Company may from time to time request, but not exceeding in the aggregate at
any one time outstanding such Bank's Commitment less such Bank's Percentage of
the aggregate face amount of all Letters of Credit issued and outstanding at
such time. All Loans made hereunder shall be made by the Banks on a pro-rata
basis according to each Bank's Percentage.
2.2 Loan Options..2 Loan Options..2 Loan Options. Each Loan shall
be either a Reference Rate Loan or a Eurodollar Loan or a Money Market Loan,
except as otherwise provided herein. Any combination of types of Loans may be
outstanding at the same time; provided, however, that the Company may not have
more than ten borrowings of Eurodollar Loans outstanding at the same time.
2.3 Borrowing Procedure..3 Borrowing Procedure..3 Borrowing Procedure.
(a) Subject to the terms of this Agreement, the Company shall give
the Agent (x) at least three Banking Days' prior notice of each proposed
borrowing of Eurodollar Loans not later than 10:00 a.m. Houston time on the date
of such notice, (y) at least one Banking Day's prior notice of each proposed
borrowing of Reference Rate Loans not later than 10:00 a.m. Houston time on the
date of such notice and (z) notice not later than 10:00 a.m. Houston time on the
day of each proposed borrowing of Money Market Loans. Each notice shall be by
telephone (promptly confirmed in writing in the form of Exhibit K hereto) and
shall specify (i) the type of Loans requested, (ii) in the case of Eurodollar
Loans, the initial Interest Period therefor, (iii) the borrowing date, which
shall be a Banking Day, (iv) the amount of Loans requested and (v) in the case
of Money Market Loans, the Maturity Date therefor. The Agent shall promptly
advise each Bank thereof. Not later than 12:30 p.m., Houston time, on the date
of a proposed borrowing, each Bank shall provide the Agent at its principal
office in Houston with immediately available funds covering such Bank's ratable
share (if any) of such borrowing. Notwithstanding the foregoing, the notice for
the initial borrowing hereunder may be made on the date of the proposed
borrowing and the Banks' funding obligations referred to in the immediately
preceding sentence shall be extended to 2:30 p.m., Houston time.
(b) Each borrowing of Reference Rate Loans and Money Market Loans
shall be in a minimum amount of $100,000 or an integral multiple thereof. Each
borrowing of Eurodollar Loans shall be in a minimum amount of $500,000 or an
integral multiple thereof.
(c) If the Company requests a borrowing of Money Market Loans, the
Agent shall promptly provide to the Company a quotation of the interest rate
that would be applicable to a borrowing of Money Market Loans in the amount
requested and with a Maturity Date specified in the notice of borrowing;
provided, however, that in no event shall such quoted rate be less than the
lesser at any time of (i) the rate of interest then most recently announced by
TCB at Houston, Texas as its reference rate, or (ii) the sum of 0.5% plus the
Federal Funds Rate. If such interest rate is satisfactory to the Company, the
Company shall, not later than the time specified by the Agent when providing the
interest rate quotation, request that such Money Market Loan be made. The
principal amount of each Money Market Loan shall mature and, shall be payable in
full, on its respective Maturity Date. The Company shall not prepay the
principal of any Money Market Loan without the consent of all Banks.
(d) The Agent, on behalf of the Banks, will pay to the Company, by
crediting its commercial demand deposit account at TCB, the amount of each Loan
on the date designated in the notice of borrowing upon receipt of the documents
required in Section 8 and, if applicable, Section 9, with respect to such Loan.
2.4 Continuation and/or Conversion of Loans..4 Continuation and/or
Conversion of Loans..4 Continuation and/or Conversion of Loans. The Company
may elect (i) to continue any outstanding Eurodollar Loan from the current
Interest Period of such Loan into a subsequent Interest Period to begin on the
last day of such current Interest Period, or (ii) to convert any outstanding
Reference Rate Loan into a Eurodollar Loan or, on the last day of the current
Interest Period, to convert one type of Loan into another, in each case by
giving at least three (3) Banking Days' prior telephonic notice not later than
10:00 a.m., Houston time, on the date of such notice (promptly confirmed in
writing in the form of Exhibit L hereto) to the Agent (which shall promptly
advise each Bank thereof) of such continuation or conversion, specifying the
date, amount and the Interest Period, if applicable. Absent notice of
continuation or conversion, each Eurodollar Loan shall automatically convert
into a Reference Rate Loan on the last day of the current Interest Period for
such Loan, unless paid in full on such last day. No Loan shall be converted
into a Eurodollar Loan and no Eurodollar Loan shall be continued less than
thirty days before the Termination Date or at any time that an Event of Default
or an Unmatured Event of Default exists.
2.5 Extension of the Termination Date..5 Extension of the Termination
Date..5 Extension of the Termination Date.
(a) At least 60 but not more than 90 days before any anniversary of
the Effective Date, the Company may, by delivery of a written request to the
Agent in the form of Exhibit B, request that each Bank agree to extend the
then-scheduled Termination Date by one (1) year.
(b) The Agent shall, upon receipt of any such extension request,
promptly notify each Bank thereof, and request that each Bank promptly advise
the Agent of its approval or rejection of such request.
(c) Upon receipt of such notification from the Agent, each Bank may,
in its sole discretion, agree to extend for one (1) year, or decline to extend,
the Termination Date, and each Bank shall, within 30 days of receipt of the
notice described in clause (b), notify the Agent of its approval or denial of
such request. If any Bank does not so notify the Agent, such Bank shall be
deemed to have denied such extension request. The Agent shall, no later than 30
days following its receipt of any extension request from the Company, notify the
Company as to the Banks which have approved or denied such request.
(d) If all of the Banks approve any such request, the Termination
Date shall be extended to the date which is one (1) year after the Termination
Date in effect immediately prior to such extension. If fewer than all of the
Banks approve any such request, the Termination Date shall not be extended.
3. NOTES EVIDENCING LOANS.. NOTES EVIDENCING LOANS.. NOTES EVIDENCING LOANS.
3.1 Reference Rate Loans; Eurodollar Loans..1 Reference Rate Loans;
Eurodollar Loans..1 Reference Rate Loans; Eurodollar Loans. The Reference Rate
Loans and Eurodollar Loans of all Banks shall be evidenced by the Company's
promissory note (the "Series A Note") in the form of Exhibit A-1, with
appropriate insertions, which Note shall (i) be dated the Effective Date (or
such other date satisfactory to the Agent), (ii) be made payable to the order of
the Agent for the account of the Banks ratably in accordance with their
Percentages, and (iii) mature on the Termination Date.
3.2 Money Market Loans.2 Money Market Loans.2 Money Market Loans.
The Money Market Loans of all Banks shall be evidenced by the Company's
promissory note (the "Series B Note") in the form of Exhibit A-2, with
appropriate insertions, which Note shall (i) be dated the Effective Date (or
such other date satisfactory to the Agent), (ii) be made payable to the order of
the Agent for the account of the Banks ratably in accordance with their
Percentages, and (iii) mature on the Termination Date.
3.3 Evidence of Loans.3 Evidence of Loans.3 Evidence of Loans. All Loans
made by the Banks to the Company pursuant to this Agreement and all payments of
principal shall be evidenced by the Agent in its records or, at its option, on
the schedule attached to the applicable Note, which records or schedule(s) shall
be rebuttable presumptive evidence of the subject matter thereof, provided that
the failure of the Agent to make any endorsement or other notation, or any error
in doing so, shall not affect the obligations of the Borrower hereunder or under
the Notes.
4. [intentionally omitted]. [intentionally omitted]. [intentionally omitted]
5. INTEREST AND FEES.. INTEREST AND FEES.. INTEREST AND FEES.
5.1 Interest..1 Interest..1 Interest.
(a) Reference Rate Loan. The unpaid principal of the Reference Rate
Loans shall bear interest prior to maturity at a rate per annum equal to the
Alternate Base Rate in effect from time to time. Prior to maturity interest on
each Reference Rate Loan shall be payable on each Payment Date therefor and on
the Termination Date.
(b) Eurodollar Loans. The unpaid principal of each Eurodollar Loan
shall bear interest prior to maturity at a rate per annum equal to the Interbank
Rate (Reserve Adjusted) in effect for each Interest Period therefor plus the
Margin from time to time in effect. Interest on each Eurodollar Loan shall be
payable on each Payment Date therefor and on the Termination Date.
(c) Money Market Loans. The unpaid principal of each Money Market
Loan shall bear interest prior to maturity at the Money Market Rate applicable
to such Loan. Interest on each Money Market Loan shall be payable on the
Payment Date therefor and on the Termination Date.
(d) Interest After Maturity. The Company shall pay to the Banks
interest on any amount of principal of any Loan which is not paid when due,
whether at stated maturity, by acceleration or otherwise, accruing from and
including the date such amount shall have become due to (but not including) the
date of payment thereof in full, at the rate per annum, which is equal to the
greater of (i) 2% in excess of the rate applicable to the unpaid amount
immediately before it became due or (ii) 2% in excess of the Alternate Base Rate
from time to time in effect. Interest after maturity shall be payable on
demand.
5.2 Commitment Fee..2 Commitment Fee..2 Commitment Fee. The Company
agrees to pay to the Banks ratably in accordance with their Percentages, a
commitment fee, for the period commencing on the Effective Date and ending on
the earlier of (x) the Termination Date and (y) the date of termination of the
Credit, equal to 0.25% per annum on the daily average of the unused amount of
the Credit. The commitment fee paid to the Banks pursuant to this Section 5.2
shall be payable on the last day of each March, June, September and December and
on the Termination Date or the date of termination of the Credit, in each case
for any period then ending for which such commitment fee shall not have been
theretofore paid.
5.3 Method of Calculating Interest and Fees..3 Method of Calculating
Interest and Fees..3 Method of Calculating Interest and Fees. Interest on
each Eurodollar Loan and Money Market Loan (and on any Reference Rate Loan
bearing interest by reference to the Federal Funds Rate) shall be computed on
the basis of a year consisting of 360 days and paid for actual days elapsed,
calculated as to each Interest Period from and including the first day thereof
to but excluding the last day thereof. Interest on each Reference Rate Loan
(other than any Reference Rate Loan described in the preceding sentence) shall
be calculated on the basis of a 365 day or 366 day year, as applicable, and paid
for actual days elapsed. The fees payable pursuant to Section 5.2 shall be
computed on the basis of a year consisting of 360 days and paid for actual days
elapsed.
5.4 Agent's Fee..4 Agent's Fee..4 Agent's Fee. The Company shall pay the
Agent the fees separately agreed to between the Company and the Agent.
6. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF THE CREDIT.. PAYMENTS,
PREPAYMENTS, REDUCTION OR TERMINATION OF THE CREDIT.. PAYMENTS,
PREPAYMENTS, REDUCTION OR TERMINATION OF THE CREDIT.
6.1 Place of Payment..1 Place of Payment..1 Place of Payment. All
payments hereunder (including payments with respect to the Notes) shall be made
without set-off or counterclaim and shall be made to the Agent, for the account
of the Banks ratably in accordance with their Percentage of the Credit, in
immediately available funds prior to 12:30 p.m., Houston time, on the date due
at the Agent's office at 712 Main, Houston, Texas 77002, or at such other place
as may be designated by the Agent to the Company in writing. Any payments
received after such time shall be deemed received on the next Banking Day. The
Agent shall promptly remit in immediately available funds to each Bank its share
of all such payments received by the Agent for the account of such Bank.
Whenever any payment to be made hereunder or under any Note shall be stated to
be due on a date other than a Banking Day, such payment may be made on the next
succeeding Banking Day (unless, in the case of a payment with respect to a
Eurodollar Loan, such next succeeding Banking Day is the first Banking Day of a
calendar month, in which case such payment shall be due on the next preceding
Banking Day), and such extension of time shall be included in the computation of
interest or any fees.
6.2 Prepayments..2 Prepayments..2 Prepayments. The Company may from time
to time, upon prior written or telephonic notice received by the Agent (which
shall promptly advise each Bank thereof), prepay the principal of any Loan
(other than a Money Market Loan) in whole or in part without premium, as
contemplated by Section 2.1; provided, however, that (a) any partial prepayment
of principal shall be in a minimum amount of $30,000 or an integral multiple
thereof and (b) any prepayment of a Eurodollar Loan on a day other than the last
day of an Interest Period therefor shall be subject to Section 7.1.
6.3 Reduction of Credit..3 Reduction of Credit..3 Reduction of Credit.
The Company may from time to time, upon at least five (5) Banking Days' prior
written or telephonic notice received by the Agent (which shall promptly advise
each Bank thereof), permanently reduce the amount of the Credit (such reduction
to be made among the Banks according to their Percentages) to an amount not less
than the principal amount of all outstanding Loans. Any such reduction shall be
in a minimum amount of $250,000 or an integral multiple thereof. The Company
may at any time on like notice terminate the Credit upon payment in full of the
Loans and other liabilities of the Company hereunder. The Company shall
promptly confirm any telephonic notice of reduction or termination of the Credit
in writing.
6.4 Offset..4 Offset..4 Offset. In addition to and not in limitation of
all rights of offset that any Bank or other holder of any Loan may have under
applicable law, each Bank or other holder of any Loan shall, upon the occurrence
of any Event of Default described in Section 12.1 or any Unmatured Event of
Default described in Section 12.1(e), have the right to appropriate and apply to
the payment of each Loan any and all balances, credits, deposits, accounts or
moneys of the Company then or thereafter with such Bank or other holder.
6.5 Proration of Payments..5 Proration of Payments..5 Proration of
Payments. If any Bank or other holder of a Loan shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of offset or
otherwise) on account of principal of or interest on any Loan in excess of its
pro rata share of payments and other recoveries obtained by all Banks or other
holders on account of principal of and interest on Loans then held by them, such
Bank or other holder shall purchase from the other Banks or holders such
participation in the Loans held by them as shall be necessary to cause such
purchasing Bank or other holder to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
holder, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. The Company agrees that the Bank
so purchasing a participation from the other Banks under this Section 6.5 may
exercise all its rights of payment, including the right of set-off, with respect
to such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation.
70 INDEMNIFICATION: EURODOLLAR LOANS. INDEMNIFICATION EURODOLLAR LOANS.
INDEMNIFICATION EURODOLLAR LOANS.
7.1 Indemnity for Funding Losses..1 Indemnity for Funding Losses..1
Indemnity for Funding Losses. The Company will indemnify each Bank upon demand
against any loss or expense which such Bank may sustain or incur, including,
without limitation, any loss or expense sustained or incurred in obtaining,
liquidating or employing deposits or other funds acquired to effect funding or
maintain a Loan, as a consequence of (i) any failure of the Company to borrow
any Loan on the date specified therefor in the notice of borrowing with respect
to such Loan, (ii) any failure of the Company to make any payment when due of
any amount due hereunder or under any Note in connection with any Loan, or (iii)
any payment or prepayment of any Eurodollar Loan on a date other than the last
day of the Interest Period for such Loan. The Company's foregoing obligations
shall survive termination of this Agreement.
7.2 Capital Adequacy..2 Capital Adequacy..2 Capital Adequacy. If any Bank
shall determine at any time after the date hereof that the adoption of any law,
rule or regulation regarding capital adequacy, or any change therein or 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 Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) from any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Bank's capital as a consequence of its
obligations hereunder to a level below that which such Bank could have achieved
but for such adoption, change or compliance (taking into consideration such
Bank's policies with respect to capital adequacy), by an amount deemed by such
Bank to be material, then the Company shall pay to such Bank upon demand such
amount or amounts, in addition to the amounts payable under the other provisions
of this Agreement or under any Note, as will compensate such Bank for such
reduction. Determination by such Bank for purposes of this Section 7.2 of the
additional amount or amounts required to compensate such Bank in respect of the
foregoing shall be conclusive in the absence of demonstrable error. In
determining such amount or amounts, such Bank may use any reasonable averaging
and attribution methods.
7.3 Additional Provisions Relating to Eurodollar Loans..3 Additional
Provisions Relating to Eurodollar Loans..3 Additional Provisions Relating to
Eurodollar Loans.
(a) Increased Cost. If, as a result of any law, regulation, treaty
or directive, or any change therein, or in the interpretation or application
thereof, or compliance by any Bank with any request or directive (whether or not
having the force of law) from any court or governmental authority, agency or
instrumentality:
(i) the basis of taxation of payments to any Bank of the principal of
or interest on any Eurodollar Loan (other than taxes imposed on the overall
net income of such Bank by the jurisdiction in which such Bank has its
principal office) is changed; or
(ii) any reserve, special deposit, special assessment, or similar
requirement against assets of, deposits with or for the account of, or
credit extended by any Bank is imposed, modified or deemed applicable; or
(iii) any other condition affecting this Agreement or the
Eurodollar Loans is imposed on any Bank or the interbank eurodollar market;
and such Bank determines that, by reason thereof, the cost to such Bank of
making or maintaining any Eurodollar Loan is increased, or the amount of any sum
receivable by such Bank hereunder in respect of any Eurodollar Loan is reduced;
then, the Company shall pay to such Bank upon demand (which demand shall be
accompanied by a statement setting forth the basis for the calculation thereof
but only to the extent not theretofore provided to the Company) such additional
amount or amounts as will compensate such Bank for such additional cost or
reduction (provided such amount has not been compensated for in the calculation
of the Eurocurrency Reserve Percentage). Determinations by such Bank for
purposes of this section of the additional amounts required to compensate such
Bank in respect of the foregoing shall be conclusive, absent demonstrable error.
The provisions of this Section 7.3(a) shall only be applicable to Eurodollar
Loans which are outstanding on or after the date such Bank has notified the
Company that an event has occurred which will result in the imposition of a
liability on the Company under this Section 7.3 (a) , it being understood that
the Company may prepay any such Loan without any prepayment fee or penalty
(except as provided in Section 7.1).
(b) Eurodollar Deposits Unavailable or Interest Rate Unascertainable.
If the Company has any Eurodollar Loan outstanding, or has notified the Agent of
its intention to incur a Eurodollar Loan as provided herein, then in the event
that prior to any Interest Period any Bank shall have determined (which
determination shall be conclusive and binding on the parties hereto) that
deposits of the necessary amount for the relevant Interest Period are not
available to such Bank in the interbank Eurodollar market or that, by reason of
circumstances affecting such market, adequate and reasonable means do not exist
for ascertaining the Interbank Rate applicable to such Interest Period, such
Bank shall promptly give notice of such determination to the Company, the Agent
and the other Banks, and (i) any notice of new Eurodollar Loans previously given
by the Company and not yet borrowed shall be deemed a notice to make Reference
Rate Loans and (ii) the Company shall be obligated either to prepay or to
convert any outstanding Eurodollar Loans to Reference Rate Loans on the last day
of the then current Interest Period with respect thereto, subject to the
provisions of Section 7.1.
(c) Changes in Law Rendering Eurodollar Loans Unlawful. If at any
time due to any new law, treaty or regulation, or any interpretation thereof by
any governmental or other regulatory authority charged with the administration
thereof, or for any other reason arising subsequent to the date hereof, it shall
become unlawful for any Bank to fund any Eurodollar Loan which it is committed
to make hereunder, the obligation of such Bank to provide such Loan shall, upon
the happening of such event, forthwith be suspended for the duration of such
illegality. If any such change shall make it unlawful for such Bank to continue
any Eurodollar Loan previously made by it hereunder, such Bank shall, upon the
happening of such event, notify the Company, the Agent and the other Banks
thereof in writing stating the reasons therefor, and the Company shall on the
earlier of (i) the last day of the then current Interest Period for such
Eurodollar Loan or (ii) if required by such law, regulation or interpretation,
on such date as shall be specified in such notice, either convert such unlawful
Loans to Reference Rate Loans, or, if available, Money Market Loans, or prepay
all such Eurodollar Loans without any penalty (except as provided in
Section 7.1), to such Bank in full.
(d) Discretion of any Bank as to Manner of Funding. Subject to the
provisions of Section 7.3(e), any Bank shall be entitled to fund and maintain
its funding of all or any part of its Eurodollar Loans in any manner it elects,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Eurodollar Loan through the purchase of deposits having a
maturity corresponding to the maturity of such Eurodollar Loan and being an
interest rate equal to the Interbank Rate. Any Bank may, if it so elects,
fulfill any commitment to make Eurodollar Loans by causing a foreign branch or
affiliate to make or continue such Eurodollar Loans, provided, however, that in
such event such Loans shall be deemed for the purposes of this Agreement to have
been made by such Bank, and the obligation of the Company to repay such Loans
shall nevertheless be to such Bank and shall be deemed held by such Bank, to the
extent of such Loans, for the account of such branch or affiliate.
(e) Mitigation of Circumstances. Each Bank shall promptly notify the
Company and the Agent of any event of which it has knowledge which will result
in, and will use reasonable commercial efforts available to it (and not, in such
Bank's good faith judgment, otherwise disadvantageous to such Bank) to mitigate
or avoid, (i) any obligation by the Company to pay any amount pursuant to
Section 7.3(a) or (ii) the occurrence of any circumstances of the nature
described in Section 7.3(b) or 7.3(c) (and, if any Bank has given notice of any
such event described in clause (i) or (ii) above and thereafter such event
ceases to exist, such Bank shall promptly so notify the Company and the Agent).
Without limiting the foregoing, each Bank will designate a different funding
office if such designation will avoid (or reduce the cost to the Company of) any
event described in clause (i) or (ii) of the preceding sentence and such
designation will not, in such Bank's sole judgment, be otherwise disadvantageous
to such Bank.
80 CONDITIONS PRECEDENT TO ALL LOANS. CONDITIONS PRECEDENT TO ALL LOANS.
CONDITIONS PRECEDENT TO ALL LOANS.
The obligation of any Bank to make any Loan is subject to the satisfaction
of each of the following conditions precedent:
8.1 Notice..1 Notice..1 Notice. The Agent shall have received timely
notice of such Loan in accordance with Section 2.3.
8.2 Default..2 Default..2 Default. Before and after giving effect
to such Loan, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing.
8.3 Insurance..3 Insurance..3 Insurance. There shall have been no
material change, or notice of prospective material change (whether such notice
is formal or informal) in the nature, extent, scope or cost of the insurance
policies of the Company or any Subsidiary listed on Exhibit E which change would
have a material adverse effect on the financial condition of the Company and its
Subsidiaries taken as a whole or would significantly adversely affect the
ability of the Company to perform its respective obligations under this
Agreement or under the Note or any other Loan Document to which it is a party.
8.4 Warranties..4 Warranties..4 Warranties. Before and after giving
effect to such Loan, the warranties in Section 10 (other than the warranty in
the last sentence of Section 10.5 and in Section 10.10) shall be true and
correct as though made on the date of such Loan or Letter of Credit, except for
such changes as are specifically permitted hereunder.
8.5 Certification..5 Certification..5 Certification. Each request
for a Loan shall be deemed to be a certification that the conditions precedent
set out in Sections 8.2, 8.3 and 8.4 have been satisfied.
90 CONDITIONS PRECEDENT TO EFFECTIVE DATE AND INITIAL LOAN THEREON OR
THEREAFTER. CONDITIONS PRECEDENT TO EFFECTIVE DATE AND INITIAL LOAN
THEREON OR THEREAFTER. CONDITIONS PRECEDENT TO EFFECTIVE DATE AND INITIAL
LOAN THEREON OR THEREAFTER.
The occurrence of the Effective Date and the obligation of the Banks to
make the initial Loan hereunder on or after the Effective Date is subject to the
satisfaction of the conditions precedent, in addition to the applicable
conditions precedent set forth in Section 8 above, that the Company shall have
delivered to the Agent all of the following, each (i) duly executed and dated
the Effective Date or such earlier date as is satisfactory to the Agent, (ii) in
form and substance satisfactory to the Agent, and (iii) in sufficient number of
signed counterparts to provide one for each Bank (except for the Notes, of which
only the original shall be signed).
9.1 Notes..1 Notes..1 Notes. The Series A Note and Series B Note
payable to the order of the Agent for the account of the Banks ratably in
accordance with their respective Commitments.
9.2 Resolutions; Consents and Approvals..2 Resolutions; Consents and
Approvals..2 Resolutions; Consents and Approvals. A copy, duly certified by
the secretary or an assistant secretary of the Company, of (i) the resolutions
of the Company's Board of Directors authorizing or ratifying the execution and
delivery of the Loan Documents to which it is a party and authorizing the
borrowings hereunder, (ii) all documents evidencing other necessary corporate
action with respect to the Loan Documents to which it is a party, and (iii) all
approvals or consents, if any, with respect to the Loan Documents to which it is
a party.
9.3 Incumbency..3 Incumbency..3 Incumbency. A certificate of the
secretary or an assistant secretary of the Company certifying the names of the
Company's officers authorized to sign the Loan Documents to which it is a party,
together with the true signatures of such officers.
9.4 Opinion..4 Opinion..4 Opinion. An opinion of Shook, Hardy &
Bacon P.C., counsel to the Company addressed to the Agent and the Banks in
substantially the form of Exhibit J.
9.5 General..5 General..5 General. All other documents which are
provided for hereunder or which the Banks may reasonably request.
100 REPRESENTATIONS AND WARRANTIES. REPRESENTATIONS AND WARRANTIES.
REPRESENTATIONS AND WARRANTIES.
To induce the Banks to grant the Credit and to make the Loans, the Company
represents and warrants that:
10.1 Existence..1 Existence..1 Existence. The Company and each
corporate Subsidiary are corporations duly organized, validly existing and in
good standing under the laws of the states of their respective incorporation.
All of the other Subsidiaries, if any, are entities duly organized, validly
existing and in good standing under the laws of the jurisdictions of their
respective organization. The Company and all of the Subsidiaries are in good
standing and are duly qualified to do business in each state where, because of
the nature of their respective activities or properties, such qualification is
necessary.
10.2 Authorization..2 Authorization..2 Authorization. The Company
and each Subsidiary is duly authorized to execute and deliver the Loan Documents
to which it is a party and is and will continue to be duly authorized to perform
its respective obligations under the Loan Documents to which it is a party. The
Company is and will continue to be duly authorized to borrow monies hereunder.
The execution, delivery and performance by the Company and each Subsidiary and
the borrowings hereunder do not and will not require any consent or approval of
any governmental agency or authority.
10.3 No Conflicts..3 No Conflicts..3 No Conflicts. The execution,
delivery and performance by the Company and each Subsidiary of the Loan
Documents to which it is a party (a) do not and will not conflict with (i) any
provision of law applicable to such Person, (ii) the charter or by-laws of such
Person, (iii) any agreement binding upon such Person, or (iv) any court or
administrative order or decree applicable to such Person and (b) do not and will
not require, or result in, the creation or imposition of any Lien on any asset
of the Company or any of its Subsidiaries.
10.4 Validity and Binding Effect..4 Validity and Binding Effect..4
Validity and Binding Effect. When duly executed and delivered, the Loan
Documents to which it is a party will be, legal, valid and binding obligations
of the Company and its Subsidiaries, enforceable against such Person in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights and by general principles of equity
limiting the availability of equitable remedies.
10.5 Financial Statements..5 Financial Statements..5 Financial
Statements. The Company's audited consolidated financial statement as at
March 26, 1996 and the Company's Quarterly Report on Form 10-Q dated
December 24, 1996 and filed with the Securities and Exchange Commission, copies
of which have been furnished by the Company to the Agent, and which the Agent
has furnished to each Bank, have been prepared in conformity with generally
accepted accounting principles applied on a basis consistent with that of the
preceding fiscal year and period and present fairly the financial condition of
the Company and its Subsidiaries as at such dates and the results of their
operations for the periods then ended, subject (in the case of the interim
financial statement) to year-end audit adjustments. Since December 24, 1996
there has been no material adverse change in the financial condition, assets,
liabilities, business operations, management or prospects of the Company and its
Subsidiaries taken as a whole.
10.6 Litigation..6 Litigation..6 Litigation. No claims, litigation,
arbitration proceedings or governmental proceedings are pending or threatened
against or are affecting the Company or any of the Subsidiaries, the results of
which might materially and adversely affect the financial condition, assets,
liabilities, business operations, management or prospects of the Company and the
Subsidiaries taken as a whole, except those referred to in a schedule furnished
to each Bank contemporaneously herewith and attached hereto as Exhibit C. Other
than any liability incident to such claims, litigation or proceedings or
provided for or disclosed in the financial statements referred to in Section
10.5, neither the Company nor any of the Subsidiaries has any contingent
liabilities which are material to the Company and the Subsidiaries taken as a
whole.
10.7 Taxes..7 Taxes..7 Taxes. Each of the Company and the Subsidiaries
has filed all tax returns, to the best of its knowledge, which are required to
have been filed and has paid, or made adequate provisions for the payment of all
material taxes, assessments and other governmental charges or levies imposed
upon it, its income or any of its properties, franchises or assets which are due
and payable, except such taxes, assessments and other governmental charges or
levies, if any, as are being contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate provisions as may
be required by GAAP have been maintained.
10.8 Liens..8 Liens..8 Liens. None of the assets of the Company or any
of the Subsidiaries is subject to any Lien, except for (a) Permitted Liens, (b)
Liens disclosed in the financial statements referred to in Section 10.5; and (c)
Liens listed on Exhibit D.
10.9 No Default..9 No Default..9 No Default. Neither the Company nor any
of the Subsidiaries is in default under any agreement or instrument to which the
Company or any Subsidiary is a party or by which any of their respective
properties or assets is bound or affected, which default might materially and
adversely affect the financial condition, assets, liabilities, business
operations, management or prospects of the Company and the Subsidiaries taken as
a whole. No Event of Default or Unmatured Event of Default has occurred and is
continuing.
10.10 Insurance..10 Insurance..10 Insurance. The schedule that
summarizes the property and casualty insurance program carried by the Company
and the Subsidiaries (Exhibit E attached hereto) is complete and accurate in all
material aspects. This summary includes the insurer's(s') name(s), policy
numbers(s), expiration date(s), amount(s) of coverage, type(s) of coverage, the
annual premium(s), exclusions, deductibles and self-insured retention, and
describes any other self-insurance or risk assumption agreed to by the Company
or any Subsidiary or imposed upon the Company or any Subsidiary by any such
insurer.
10.11 Subsidiaries..11 Subsidiaries..11 Subsidiaries. The
Company has no Subsidiaries except as listed on Exhibit F (as updated from time
to time pursuant to Section 11.1(f)). The Company and its Subsidiaries own the
percentage of its Subsidiaries as set forth on Exhibit F.
10.12 Partnerships..12 Partnerships..12 Partnerships. Neither
the Company nor any of its Subsidiaries is a partner or joint venturer in any
partnership or joint venture other than the partnerships and joint ventures
listed on Exhibit G (as updated from time to time pursuant to Section 11.1(f)).
10.13 Regulation U..13 Regulation U..13 Regulation U. (i) The
Company is not engaged in the business of purchasing or selling margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve System)
or extending credit to others for the purpose of purchasing or carrying margin
stock, (ii) no part of the proceeds of any Loan will be used to purchase or
carry directly or indirectly any margin stock, and (iii) no Loan will be used
for any purpose which would violate any of the margin regulations of said Board
of Governors.
10.14 Compliance..14 Compliance..14 Compliance. The Company and the
Subsidiaries are in material compliance with all statutes and governmental rules
and regulations applicable to them.
10.15 Pension Plans..15 Pension Plans..15 Pension Plans. Each Plan
complies in all material respects with all material applicable statutes and
governmental rules and regulations, and (i) no Reportable Event has occurred and
is continuing with respect to any Plan, (ii) neither the Company nor any ERISA
Affiliate has withdrawn from any Plan or instituted steps to do so, and (iii) no
steps have been instituted to terminate any Plan. No condition exists or event
or transaction has occurred in connection with any Plan which could result in
the incurrence by the Company or any ERISA Affiliate of any material liability,
fine or penalty.
110 COMPANY'S COVENANTS. COMPANY'S COVENANTS. COMPANY'S COVENANTS.
From the date of this Agreement and thereafter until the expiration or
termination of the Credit and until the Notes and other liabilities of the
Company hereunder are paid in full, the Company agrees that it will:
11.1 Financial Statements and Other Information..1 Financial Statements
and Other Information..1 Financial Statements and Other Information. Furnish to
each Bank:
(a) within ninety-five (95) days after each fiscal year of the
Company, a copy of the annual audit and Form 10-K report of the Company and its
Subsidiaries prepared on a consolidated basis in conformity with GAAP and
bearing the unqualified opinion of an independent certified public accountant of
recognized national standing selected by the Company whose opinion shall be in
scope and substance satisfactory to the Banks;
(b) within fifty (50) days after each quarter (except the last
quarter) of each fiscal year of the Company, a copy of the Company's Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission and of the
unaudited financial statement of the Company and its Subsidiaries prepared in
the same manner as the audit report referred to in preceding clause (a) signed
by the Company's chairman, president or chief financial officer and consisting
of at least a balance sheet as at the close of such quarter, and statements of
income and cash flows for such quarter and for the period from the beginning of
such fiscal year to the close of such quarter;
(c) together with the financial statements furnished by the Company
under preceding clauses (a) and (b) and in connection with any acquisition
pursuant to Section 11.10(a), a certificate of a Responsible Officer in the form
attached hereto as Exhibit M, dated the date of such annual audit report or such
quarterly financial statement or acquisition, as the case may be, to the effect
that no Event of Default or Unmatured Event of Default has occurred and is
continuing or, if there is any such event, describing it and the steps, if any,
being taken to cure it, and containing a computation of, and showing compliance
with, each of the financial ratios and restrictions contained in this Section
11;
(d) copies of each filing and report made by the Company or any
Subsidiary with or to any securities exchange or the Securities and Exchange
Commission and of each communication from the Company or any Subsidiary to
stockholders generally, promptly upon the filing or making thereof;
(e) promptly from time to time, a written report of any change in the
list of the Company's Subsidiaries set forth on Exhibit F or in the list of
partnerships and joint ventures set forth on Exhibit G;
(f) promptly upon receipt thereof, a copy of any annual, interim or
special audit made by independent accountants, any management control letter
issued by them or any other report submitted to the Company's Board of Directors
by the independent accountants; and
(g) promptly from time to time, such other information as the Banks
may reasonably request.
11.2 Books, Records and Inspection..2 Books, Records and Inspection..2
Books, Records and Inspection. Maintain, and cause each Subsidiary to maintain,
complete and accurate books and records in which full and correct entries in
conformity with GAAP shall be made of all dealings and transactions in relation
to its respective business and activities; permit, and cause each Subsidiary to
permit, any authorized representative of any of the Banks to visit and inspect
any of the properties of the Company or any of the Subsidiaries, upon reasonable
prior notice and during regular business hours, including any books and records
(and to make extracts therefrom), and to discuss its affairs and finances as
often as the Banks may reasonably request.
11.3 Conduct of Business..3 Conduct of Business..3 Conduct of Business.
Maintain and cause each Subsidiary to maintain its respective existence and use
its best efforts to maintain in full force and effect all franchises (including
but not limited to all Pizza Hut, Inc. franchise agreements and licenses),
licenses, leases, contracts and other authority and rights which are material to
the Company and the Subsidiaries, taken as a whole.
11.4 Taxes..4 Taxes..4 Taxes. Pay, and cause each Subsidiary to pay,
when due, all taxes, assessments and other governmental charges or levies
imposed upon it, its income or any of its properties, franchises or assets,
unless and only to the extent that the Company or such Subsidiary, as the case
may be, is contesting such taxes, assessments and other governmental charges or
levies in good faith and by appropriate proceedings and the Company or such
Subsidiary has set aside on its books such reserves or other appropriate
provisions therefor as may be required by GAAP.
11.5 Notices..5 Notices..5 Notices.
(a) Event of Default; Pension Plans. Immediately upon learning of
the occurrence of any of the following, provide to each Bank written notice
thereof, describing the same and the steps being taken by the Company or the
Subsidiary or the ERISA Affiliate affected with respect thereto: (i) the
occurrence of an Event of Default or an Unmatured Event of Default or (ii) the
occurrence of a Reportable Event with respect to any Plan, the institution of
any steps by the Company, any ERISA Affiliate, the PBGC or any other Person to
terminate any Plan, or the institution of any steps by the Company or any ERISA
Affiliate to withdraw from any Plan with respect to which it is a "substantial
employer" within the meaning of section 4063 of ERISA.
(b) Litigation. Notify each Bank (i) promptly upon learning thereof,
of the institution or existence of any litigation, arbitration or governmental
proceedings which is material to the Company and the Subsidiaries taken as a
whole and (ii) of any judgment or decree entered against the Company or any
Subsidiary within five business days after such entry if the aggregate amount of
all judgments and decrees then outstanding against the Company and all the
Subsidiaries exceed $1,500,000 after deducting (A) the amount with respect to
which the Company or any Subsidiary is insured and with respect to which the
insurer has not disclaimed liability, and (B) the amount for which the Company
or any Subsidiary is otherwise indemnified if the terms of such indemnification
are satisfactory to the Banks.
(c) Indebtedness. Notify each Bank of any Indebtedness incurred in
connection with Liens permitted under Section 11.8(c) if the amount thereof
exceeds $1,500,000.
11.6 Pension Plans..6 Pension Plans..6 Pension Plans. Not permit,
and not permit any Subsidiary to permit, any condition to exist in connection
with any Plan which might constitute grounds for the PBGC to institute
proceedings to have such Plan terminated or a trustee appointed to administer
such Plan, and not engage in, or permit to exist or occur, or permit any of its
Subsidiaries to engage in, or permit to exist or occur, any other condition,
event or transaction with respect to any Plan which could result in the
incurrence by the Company or any of its Subsidiaries of any material liability,
fine or penalty.
11.7 Expenses..7 Expenses..7 Expenses. Whether or not any Loan is
made hereunder, pay the Banks upon demand for all reasonable expenses, including
reasonable fees of attorneys for the Agent and the Banks (who may be employees
of the Agent and the Banks) and other legal expenses and costs of collection,
incurred by (i) the Agent in connection with the preparation, negotiation,
execution and amendment of, and waivers to, this Agreement, the Notes and any
document required to be furnished herewith, and (ii) the Agent and the Banks in
connection with the enforcement of the Company's obligations hereunder or under
any Note. The Company also agrees to (x) indemnify and hold the Agent harmless
from any loss or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans or disbursing the proceeds
thereof, and (y) pay, and save the Agent and the Banks harmless from all
liability for, any stamp or other taxes which may be payable with respect to the
execution or delivery of this Agreement or the issuance of any Note or any other
instrument or document provided for herein or delivered or to be delivered
hereunder or in connection herewith. The Company's foregoing obligations shall
survive any termination of this Agreement.
11.8 Indebtedness..8 Indebtedness..8 Indebtedness. Not, and not
permit any Subsidiary to, incur or permit to exist any Indebtedness, except: (a)
Indebtedness to the Agent and the Banks under the terms of the Loan Documents;
(b) Indebtedness of the Company having maturities and terms, and which is
subordinated to payment of the Notes in a manner, approved in writing by the
Banks; (c) Indebtedness of the Company or any Subsidiary hereafter incurred in
connection with the Liens permitted by paragraph (7) of the definition of
Permitted Liens; (d) Indebtedness outstanding on the date hereof and listed on
Exhibit H; and (e) other unsecured Indebtedness of the Company (including
Indebtedness permitted by Section 11.20), and unsecured Indebtedness of any
Subsidiary permitted by Section 11.20, provided that such Indebtedness is
incurred when no Event of Default or Unmatured Event of Default exists or would
result therefrom and such Indebtedness exists under agreements that contain
representations, warranties, covenants and defaults no more burdensome to the
Company or any Subsidiary than those set forth herein; provided that the
aggregate of all Indebtedness of Subsidiaries shall not exceed $15,000,000 at
any time outstanding.
11.9 Liens..9 Liens..9 Liens. Not, and not permit any Subsidiary to,
create or permit to exist any Lien with respect to any assets now owned or
hereafter acquired, except for Permitted Liens and Liens referred to in Section
10.8.
11.10 Merger, Purchase and Sale..10 Merger, Purchase and Sale..10
Merger, Purchase and Sale. Not, and not permit any Subsidiary to, be a party to
any merger or consolidation; not, and not permit any Subsidiary to, in any one
fiscal year, sell, transfer, convey, lease or otherwise dispose of assets of the
Company and its Subsidiaries which exceed in the aggregate, for the Company and
its Subsidiaries taken as a whole, five percent (5%) of the Value of the
Company's consolidated total assets determined as of the end of the immediately
preceding fiscal year, or purchase or otherwise acquire all or substantially all
the assets of any Person. Notwithstanding the foregoing:
(a) subject to the last sentence of this Section 11.10, and the prior
delivery to the Agent of a certificate in the form of Exhibit M giving effect
thereto, the Company or any Subsidiary thereof may acquire any other franchisee
of Pizza Hut, Inc. or Romacorp, Inc.;
(b) any wholly-owned Subsidiary of the Company may merge into the
Company (provided that the Company is the surviving corporation) or into or with
any other wholly-owned Subsidiary of the Company;
(c) any wholly-owned Subsidiary of the Company may be consolidated
with any other wholly-owned Subsidiary thereof so long as immediately thereafter
100% of the voting stock or other ownership interest of the resulting Person is
owned by the Company or another wholly-owned Subsidiary of the Company; and
(d) any wholly-owned Subsidiary of the Company may sell, transfer,
convey, lease or assign all or a substantial part of its assets to the Company
or another wholly-owned Subsidiary of the Company;
provided, in each of the cases described in the preceding clauses, that
immediately thereafter and after giving effect thereto, no Event of Default or
Unmatured Event of Default shall have occurred and be continuing. Neither the
Company nor any Subsidiary shall use in excess of $50,000,000 of borrowings
hereunder for any single acquisition of, or Investment in, any Person or Persons
or the assets of any Person or Persons without the prior written consent of the
Majority Banks.
11.11 Nature of Business..11 Nature of Business..11 Nature of
Business. Engage, and cause each Subsidiary to engage, in substantially the
same fields of business as it is engaged in on the date hereof.
11.12 Franchise Rights..12 Franchise Rights..12 Franchise
Rights. Not permit any change, termination, or loss of its or any Subsidiary's
rights to operate as a franchisee of Pizza Hut, Inc., which would have a
material adverse affect on the Company and its Subsidiaries taken as a whole.
11.13 Net Worth..13 Net Worth..13 Net Worth. Not permit the
Company's Consolidated Net Worth during any fiscal quarter ending after
December 31, 1996, to be less than the sum of (i) $83,000,000 plus (ii) fifty
percent (50%) of the Company's Consolidated Net Earnings for each fiscal quarter
ending after December 31, 1996 (excluding any fiscal quarter in which there is a
loss).
11.14 Leverage Ratio..14 Leverage Ratio..14 Leverage Ratio. Not
permit the Indebtedness to Pro Forma EBITDA Ratio as of the last day of any
Computation Period to exceed 3.00 to 1.00.
11.15 Fixed Charge Coverage..15 Fixed Charge Coverage..15 Fixed
Charge Coverage. Not permit the ratio of (a) Pro Forma EBITDA as of the last
day of any Computation Period plus the consolidated operating lease rental
expense of the Company and its Subsidiaries for such Computation Period to
(b) the sum of (i) consolidated interest expense of the Company and its
Subsidiaries for such Computation Period, plus (ii) the consolidated operating
lease rental expense of the Company and its Subsidiaries for such Computation
Period to be less than 1.50 to 1.00 on the last day of such Computation Period.
For purposes of this Section 11.15, interest expense shall include, without
limitation, implicit interest expenses on Capitalized Leases.
11.16 Insurance..16 Insurance..16 Insurance. Maintain, and cause
each Subsidiary to maintain, insurance to such extent and against such hazards
and liabilities as is commonly maintained by companies similarly situated, and
in any event such types and in such amounts and with financially sound and
reputable insurers of at least the quality as is described in the certificate
furnished pursuant to Section 10.10. The Company agrees to notify each Bank
prior to any material change in or cancellation of any such insurance.
11.17 Restricted Payments..17 Restricted Payments..17 Restricted
Payments. Not, and not permit any Subsidiary to, purchase or redeem any shares
of its stock, declare or pay any dividends thereon (other than stock dividends),
make any distribution to stockholders as such or set aside any funds for any
such purpose, and not, and not permit any Subsidiary to, prepay, purchase or
redeem any subordinated Indebtedness of the Company or any Subsidiary if, before
or after giving effect to such transaction, an Event of Default or Unmatured
Event of Default has occurred and is continuing.
11.18 Leases..18 Leases..18 Leases. Not enter into or permit
to exist, or permit any Subsidiary to enter into or permit to exist, any
arrangements for the leasing by it or any of its Subsidiaries, as lessee, of any
real or personal property under leases (other than Capitalized Leases) if,
immediately before and after giving effect thereto, an Event of Default or
Unmatured Event of Default shall exist or be continuing. For purposes of
determining whether the entering into any lease results in a breach of Section
11.15, the Company shall make the calculation required under such Section as of
the date such lease is entered into on assumption that the rental expense that
is expected to be incurred during the twelve-month period following the entering
into the lease was incurred during the twelve-month period ending on the date of
such calculation.
11.19 Company's and Subsidiaries' Stock..19 Company's and
Subsidiaries' Stock..19 Company's and Subsidiaries' Stock. Not, and not permit
any Subsidiary to, (i) purchase or otherwise acquire any shares of the stock of
the Company if, before or after giving effect to such transaction, an Event of
Default or Unmatured Event of Default has occurred and is continuing, or
(ii) take any action, or permit any Subsidiary to take any action, which will
result in a decrease in the Company's or any Subsidiaries ownership interest in
any Significant Subsidiary.
11.20 Guaranties..20 Guaranties..20 Guaranties. Not, and not permit
any Subsidiary to, become a guarantor or surety of, or otherwise become or be
responsible in any manner (whether by agreement to purchase any obligations,
stock, assets, goods or services, or to supply or advance any funds, assets,
goods or services, or otherwise) with respect to, any undertaking of any other
Person, except for (i) the endorsement, in the ordinary course of collection, of
instruments payable to it or its order and (ii) as to the Company, guarantees of
obligations which do not exceed $5,000,000.00 in the aggregate at any one time;
provided, however, that in addition to the foregoing, the Company may enter into
and perform its obligations under the Indemnification Agreements.
11.21 Investments..21 Investments..21 Investments. Not, and
not permit any Subsidiary to, make or permit to exist any Investment in any
Person, except for:
(a) Investments in securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States of America or any agency thereof;
(b) Investments in commercial paper maturing in 270 days or less from
the date of issuance rated in the highest grade by a nationally recognized
credit rating agency;
(c) Investments in certificates of deposit maturing within one year
from the date of acquisition issued by a bank or trust company organized under
the laws of the United States or any state thereof having capital, surplus and
undivided profits aggregating at least $100,000,000;
(d) Subject to the last sentence of Section 11.10, Investments in
other Pizza Hut, Inc. or Romacorp, Inc. franchisees as long as, before or after
giving effect to such Investment, no Event of Default or Unmatured Event of
Default has occurred which is continuing;
(e) Investments outstanding on the date hereof and listed on Exhibit
I; and
(f) other liquid Investments (except Investments prohibited under
Section 11.10 or 11.20), as selected by the Company or a Subsidiary, not to
exceed $5,000,000 in the aggregate at any one time for the Company and all
Subsidiaries.
11.22 Subsidiaries..22 Subsidiaries..22 Subsidiaries. Except as
permitted under Section 11.21(d), not, without the Banks' prior written consent,
create or acquire, or permit any Subsidiary to create or acquire, any
Significant Subsidiaries in addition to those existing on the date of this
Agreement. The Company shall immediately cause each Subsidiary hereafter
created or acquired by the Company or any Subsidiary to provide to the Agent for
the benefit of the Banks the following: (a) all documents, agreements and other
instruments described in Sections 9.2, 9.3, 9.4 and 9.5 with respect to such
Subsidiary; and (b) all information regarding the condition (financial or
otherwise), business and operations of such Subsidiary as the Agent or any Bank
may reasonably request.
11.23 Unconditional Purchase Obligation..23 Unconditional Purchase
Obligation..23 Unconditional Purchase Obligation. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase or
lease of materials, supplies or other property or services if (a) such contract
requires that payment be made by it regardless of whether or not delivery is
ever made of such materials, supplies or other property or services and (b) the
aggregate amount payable over the full remaining terms of all such contracts
exceeds $1,500,000 in the aggregate for the Company and its Subsidiaries.
11.24 Other Agreements..24 Other Agreements..24 Other
Agreements. Not, and not permit any Subsidiary to, enter into any agreement
containing any provision which would be violated or breached by the Company's or
any Subsidiaries performance of its obligations hereunder or under any
instrument or document delivered or to be delivered by such Person hereunder or
in connection herewith.
11.25 Use of Proceeds..25 Use of Proceeds..25 Use of Proceeds. Not
permit any proceeds of the Loans to be used, either directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying any margin stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended from time to time, and
furnish to each Bank, upon its request, a statement in conformity with the
requirements of Federal Reserve Form U-1 (or such other form or forms as may be
required by Regulation U) referred to in Regulation U.
11.26 Amendment to Loan Documents..26 Amendment to Loan
Documents..26 Amendment to Loan Documents. Within 180 days after the date
hereof, enter into, and cause its Subsidiaries to enter into, an amendment to
this Agreement and such other documents as the Agent deems necessary, and in
form and substance satisfactory to the Company and Banks, to accomplish one of
the following:
(a) Implement the tax restructuring outlined in that certain letter
from the Borrower to the Agent dated as of December 27, 1996, together with a
reorganization of the Loan Documents consistent with the Summary of Terms and
Conditions dated as of February 5, 1997 among the Agent, Chase Securities, Inc.
and the Borrower, whereby NPC Management, Inc. shall be the "Borrower" and all
of the Affiliates and Subsidiaries of NPC Management, Inc. shall guarantee its
obligations to the Agent and the Banks; or
(b) Add all direct and indirect Subsidiaries as co-Borrowers or
guarantors; or
(c) Such other reorganization and/or amendments as to which the
Company, the Agent and Banks may agree.
120 EVENTS OF DEFAULT AND REMEDIES. EVENTS OF DEFAULT AND REMEDIES.
EVENTS OF DEFAULT AND REMEDIES.
12.1 Events of Default..1 Events of Default..1 Events of Default.
Each of the following shall constitute an Event of Default under this Agreement:
(a) Non-Payment. (i) Default in the payment, when due, of any
principal of any Note or any fee hereunder; or (ii) default, and the continuance
thereof for 10 days, in the payment, when due, of any interest on any Note or
any other amount owing by the Borrower to the Agent or the Banks pursuant to
this Agreement or any other Loan Document.
(b) Non-Payment of Other Indebtedness. Default in the payment when
due, whether by acceleration or otherwise (subject to any applicable grace
period), of any Indebtedness of, or guaranteed by, the Company or any Subsidiary
(other than the Indebtedness evidenced by the Notes) in excess of $1,000,000 in
the aggregate for the Company and its Subsidiaries.
(c) Acceleration of Other Indebtedness. Any event or condition shall
occur which (i) results in the acceleration of the maturity of any Indebtedness
in excess (in the aggregate for the Company and its Subsidiaries) of $1,000,000
of, or guaranteed by, the Company or any Subsidiary (other than the Indebtedness
evidenced by the Notes) or (ii) enables the holder or holders of such other
Indebtedness or any trustee or agent for such holders (any required notice of
default having been given and any applicable grace period having expired) to
accelerate the maturity of such other Indebtedness.
(d) Other Obligations. Default in the payment when due, whether by
acceleration or otherwise, or in the performance or observance (subject to any
applicable grace period) of (i) any material obligation or agreement in excess
in the aggregate of $1,000,000 of the Company or any Subsidiary to or with any
Bank (other than any obligation or agreement of the Company of the Subsidiaries
under the Loan Documents), or (ii) any material obligation or agreement in
excess in the aggregate of $1,000,000 of the Company or any Subsidiary to or
with any other Person (other than (x) any such material obligation or agreement
constituting or related to Indebtedness, (y) accounts payable arising in the
ordinary course of business, and (z) any material obligation or agreement of any
Subsidiary to the Company or to any other Subsidiary), except only to the extent
that the existence of any such default is being contested by the Company or such
Subsidiary, as the case may be, in good faith and by appropriate proceedings and
the Company or such Subsidiary shall have set aside on its books such reserves
or other appropriate provisions therefor as may be required by GAAP.
(e) Insolvency. The Company or any of the Subsidiaries becomes
insolvent, or generally fails to pay, or admits in writing its inability to pay,
its debts as they mature, or applies for, consents to, or acquiesces in the
appointment of a trustee, receiver or other custodian for the Company or such
Subsidiary or a substantial part of the property of the Company or such
Subsidiary, or makes a general assignment for the benefit of creditors; or, in
the absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any of the Subsidiaries or for a
substantial part of the property of the Company or any of the Subsidiaries and
is not discharged within 30 days; or any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is instituted by or against the Company
or any of the Subsidiaries and, if instituted against the Company or any of the
Subsidiaries, is consented to or acquiesced in by the Company or such Subsidiary
or remains for 30 days undismissed; or any warrant of attachment is issued
against any substantial part of the property of the Company or any of the
Subsidiaries which is not released within 30 days of service.
(f) Pension Plans. A Termination Event occurs with respect to any
Plan if, at the time such Termination Event occurs, such Plan's then "vested
liabilities" (as defined in section 3(25) of ERISA) would exceed the then value
of such Plan's assets.
(g) Financial Covenants; Agreements. The Company fails to perform or
observe any agreement contained in Section 11.8, 11.9, 11.10, 11.13, 11.14,
11.15, 11.16, 11.19, 11.20, 11.21 or 11.22 and such failure shall not be
remedied within five (5) days after the chairman, president or chief financial
officer of the Company obtains actual knowledge thereof; or the Company fails to
deliver the notice required by Section 11.5(a)(i) or fails to perform or observe
Section 11.26; or the Company or any Subsidiary fails to perform or observe any
other agreement set forth in this Agreement or any other Loan Document to which
it is a party (and not constituting an Event of Default under any of the other
subsections of this Section 12.1) and continuance of such failure for thirty
(30) days after the chairman, president or chief financial officer of the
Company obtains actual knowledge thereof.
(h) Warranty. Any warranty made by the Company or any Subsidiary
herein or any other Loan Document to which it is a party is untrue in any
material respect, or any schedule, statement, report, notice, certificate or
other writing furnished by the Company or any Subsidiary to any Bank is untrue
in any material respect on the date as of which the facts set forth therein are
stated or certified, or any certification made or deemed made by the Company or
any Subsidiary to any Bank is untrue in any material respect on or as of the
date made or deemed made.
(i) Litigation. There shall be entered against the Company or any
Subsidiary one or more judgments or decrees in excess of $1,500,000 in the
aggregate at any one time outstanding for the Company and all Subsidiaries,
excluding those judgments or decrees (i) that shall have been outstanding less
than 30 calendar days from the entry thereof or (ii) for and to the extent which
the Company or any Subsidiary is insured and with respect to which the insurer
has assumed responsibility in writing or for and to the extent which the Company
or any Subsidiary is otherwise indemnified if the terms of such indemnification
are satisfactory to the Banks.
(ji Franchise Agreement. The Company or any Subsidiary takes any
action or fails to take action which results in the loss of any Franchise
Agreement, license or other permit which would preclude the Company or any
Subsidiary from operating such franchise under the name "Pizza Hut", and such
loss materially adversely affects the business operations or profitability of
the Company or such Subsidiary.
(ki Pizza Hut, Inc. If (a) Pizza Hut, Inc. applies for, consents to,
or acquiesces in the appointment of a trustee, receiver or other custodian for
itself or a substantial part of its property, or makes a general assignment for
the benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for Pizza Hut,
Inc. or for a substantial part of its property and is not discharged within 30
days; or any bankruptcy, reorganization, debt arrangement or other proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against Pizza Hut, Inc. and, if instituted
against Pizza Hut, Inc., is consented to or acquiesced in by Pizza Hut, Inc. or
remains for 30 days undismissed; or any warrant of attachment is issued against
any substantial part of the property of Pizza Hut, Inc. which is not released
within 30 days of service; and (b) for the 12-month period ending on the last
day of the fiscal quarter end which coincides with or immediately precedes the
occurrence of the event described in clause (a), the ratio described in Section
11.15 is less than 2.5 to 1.0.
12.2 Remedies..2 Remedies..2 Remedies. If any Event of Default
described in Section 12.1 shall have occurred and be continuing, the Agent shall
upon request of the Supermajority Banks by written notice to the Company declare
the Credit to be terminated and entire unpaid principal amount of the Notes, all
interest accrued and unpaid thereon and all other amounts payable under this
Agreement and the Notes to be due and payable, whereupon the Credit shall
immediately terminate and such amounts shall, except as otherwise expressly
provided in this Section 12.2, become immediately due and payable without
presentment, demand, protest, declaration or notice of any kind, all of which
are hereby expressly waived by the Company (except that if an event described in
Section 12.1(e) occurs, the Credit shall immediately terminate and such amounts
shall become immediately due and payable without presentment, demand, protest,
declaration or notice of any kind, all of which are hereby expressly waived by
the Company).
12.3 Remedies Cumulative. No remedy, right or power conferred upon the
Agent or the Banks is intended to be exclusive of any other remedy, right or
power given hereunder or now or hereafter existing at law, in equity, or
otherwise, and all such remedies, rights and powers shall be cumulative.
13. RELATIONSHIP AMONG BANKS.. RELATIONSHIP AMONG BANKS.. RELATIONSHIP
AMONG BANKS.
13.1 Appointment and Grant of Authority..1 Appointment and Grant of
Authority..1 Appointment and Grant of Authority. Each Bank hereby appoints
the Agent, and the Agent hereby agrees to act, as agent under this Agreement.
The Agent shall have and may exercise such powers under this Agreement as are
specifically delegated to the Agent by the terms hereof, together with such
other powers as are reasonably incidental thereto. Each Bank hereby authorizes,
consents to, and directs the Company to deal with the Agent as the true and
lawful agent of such Bank to the extent set forth herein.
13.2 Non-Reliance on Agent..2 Non-Reliance on Agent..2 Non-Reliance on
Agent. Each Bank agrees that it has, independently and without reliance on the
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Company and its
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement.
The Agent shall not be required to keep informed as to the performance or
observance by the Company of this Agreement or any other document referred to or
provided for herein or to inspect the properties or books of the Company or its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or
business of the Company, its Subsidiaries (or any of its related companies)
which may come into the Agent's possession.
13.3 Responsibility of the Agent and Other Matters..3 Responsibility of
the Agent and Other Matters..3 Responsibility of the Agent and Other
Matters.
(ai The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and those duties and liabilities shall be
subject to the limitations and qualifications set forth in this Section 13. The
duties of the Agent shall be mechanical and administrative in nature.
(bi Neither the Agent nor any of its directors, officers or employees
shall be liable for any action taken or omitted (whether or not such action
taken or omitted is within or without the Agent's responsibilities and duties
expressly set forth in this Agreement) under or in connection with this
Agreement or any other instrument or document in connection herewith, except for
gross negligence or willful misconduct. Without limiting the foregoing, neither
the Agent nor any of its directors, officers or employees shall be responsible
for, or have any duty to examine into (i) the genuineness, execution, validity,
effectiveness, enforceability, value or sufficiency of (a) this Agreement, the
Notes or the other Loan Documents, or (b) any document or instrument furnished
pursuant to or in connection with this Agreement, the Notes or the other Loan
Documents, (ii) the collectibility of any amounts owed by the Company, (iii) any
recitals or statements or representations or warranties in connection with this
Agreement, the Notes or the other Loan Documents, (iv) any failure of any party
to this Agreement to receive any communication sent, or (v) the assets,
liabilities, financial condition, results of operations, business or
creditworthiness of the Company and its Subsidiaries.
(ci The Agent shall be entitled to act, and shall be fully protected
in acting upon, any communication in whatever form believed by the Agent in good
faith to be genuine and correct and to have been signed or sent or made by a
proper person or persons or entity. The Agent may consult counsel and shall be
entitled to act, and shall be fully protected in any action taken in good faith,
in accordance with advice given by counsel. The Agent may employ agents and
attorney-in-fact and shall not be liable for the default or misconduct of any
such agents or attorneys-in-fact selected by the Agent with reasonable care.
The Agent shall not be bound to ascertain or inquire as to the performance or
observance by the Company or any Subsidiary of any of the terms, provisions or
conditions of this Agreement or the Notes or the other Loan Documents.
13.4 Action on Instructions..4 Action on Instructions..4 Action on
Instructions. The Agent shall be entitled to act or refrain from acting, and in
all cases shall be fully protected in acting or refraining from acting, under
this Agreement or the Notes or any other instrument or document in connection
herewith or therewith in accordance with instructions in writing from the
Majority Banks (or, if required, all Banks or Supermajority Banks, as the case
may be).
13.5 Indemnification..5 Indemnification..5 Indemnification. To the
extent the Company does not reimburse and save the Agent harmless according to
the terms hereof for and from all costs, expenses and disbursements in
connection herewith, such costs, expenses and disbursements shall be borne by
the Banks ratably in accordance with their Percentages and the Banks hereby
agree on such basis (i) to reimburse the Agent for all such costs, expenses and
disbursements on request and (ii) to indemnify and save harmless the Agent
against and from any and all losses, obligations, penalties, actions, judgments
and suits and other costs, expenses and disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent,
other than as a consequence of the gross negligence or willful misconduct on the
part of the Agent, arising out of or in connection with this Agreement, the
Notes or the other Loan Documents or any instrument or document in connection
herewith or therewith, or any request of the Banks, including without limitation
the costs, expenses and disbursements in connection with defending itself
against any claim or liability, or answering any subpoena, related to the
exercise or performance of any of its powers or duties under this Agreement or
the taking of any action under or in connection with this Agreement, the Notes
or the other Loan Documents.
13.6 TCB and Affiliates..6 TCB and Affiliates..6 TCB and Affiliates.
With respect to TCB's Commitment and any Loans by TCB under this Agreement and
any Note and any interest of TCB in any Note, TCB shall have the same rights and
powers under this Agreement and such Note as any other Bank and may exercise the
same as though it were not the Agent. TCB and its affiliates may accept
deposits from, lend money to, and generally engage, and continue to engage, in
any kind of business with the Company as if TCB were not the Agent.
13.7 Notice to Holder of Loans..7 Notice to Holder of Loans..7 Notice to
Holder of Loans. The Agent may deem and treat the payees of the Notes as the
owners thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof has been filed with the Agent. Any request,
authority or consent of any holder of any Loan shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Loan.
13.8 Successor Agent..8 Successor Agent..8 Successor Agent. The Agent
may resign at any time by giving 30 days' written notice thereof to the Banks.
Upon any such resignation, the Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been appointed by the Banks and
accepted such appointment in connection herewith or therewith within 30 days
after the retiring Agent's giving notice of resignation, then the retiring Agent
may, but shall not be required to, on behalf of the Banks, appoint a successor
Agent who has accepted such appointment. Notwithstanding the foregoing
provisions of this Section 13.8, TCB may at any time resign as Agent if
concurrently therewith an affiliate of TCB agrees to assume the role of Agent
hereunder. After any resigning Agent's resignation hereunder, the provisions of
this Section 13 shall continue to be effective as to any action taken or omitted
hereunder or in connection herewith prior to such resignation.
14. GENERAL.. GENERAL.. GENERAL.
14.1 Waiver and Amendments..1 Waiver and Amendments..1 Waiver and
Amendments. No delay on the part of any Bank or the holder of any Loan in the
exercise of any power or right shall operate as a waiver thereof, nor shall any
single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right. The remedies
provided for herein are cumulative and not exclusive of any remedies which may
be available to any Bank at law or in equity. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement or any
Note or any other Loan Document shall in any event be effective unless the same
shall be in writing and signed by the Company and the Majority Banks; provided,
however, that in no event shall any amendment, modification or waiver, or
consent with respect to, Sections 11.13 through 11.15 be effective unless the
same shall be in writing and signed by the Supermajority Banks; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Banks, do any of the following: (a) waive any of the
conditions specified in Section 8 or 9, (b) increase the amounts or extend the
terms of the Banks' Commitments or subject the Banks to any additional
obligations, (c) reduce the principal of, or interest on, the Notes or any fees
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees hereunder, or change the amount due on such
date, (e) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Banks, which shall be required
to take action hereunder, (f) release any collateral or any guarantor, if any,
from its obligations; (g) change the definition of Majority Banks or
Supermajority Banks; (h) change any provisions of Section 11.26; or (i) change
any provisions of this Section 14.1; provided, further, that no amendment,
waiver or consent to Section 13 shall be effective unless signed by the Agent.
Any waiver of any provision of this Agreement or the Notes or any other Loan
Document, and any consent to any departure by the Company or any Subsidiary from
the terms of any provision of this Agreement, the Notes or any other Loan
Document, shall be effective only in the specific instance and for the specific
purpose for which given.
14.2 Notices..2 Notices..2 Notices. Except as otherwise expressly
provided herein, any notice hereunder between the parties shall be in writing
(including telegraphic, telex or telecopy communication) and shall be given to
the Company, the Agent or any Bank at its address, telex number or telecopier
number set forth on the signature pages hereof or at such other address, telex
number or telecopier number as the Company, the Agent or such Bank may, by
written notice, designate as its address, telex number or telecopier number for
purposes of notice hereunder. All such notices shall be deemed to be given when
transmitted by telex and the appropriate answerback is received, transmitted by
telecopier, delivered to the telegraph office, personally delivered or, in the
case of a mailed notice, three Banking Days after the date sent by registered or
certified mail, postage prepaid, in each case addressed as specified in this
Section 14.2; provided, however, that notices to the Agent shall not be
effective until actually received by the Agent.
14.3 Severability; Participations; Assignments..3 Severability;
Participations; Assignments..3 Severability; Participations; Assignments.
(ai Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(bi Participations. Any Bank may grant one or more participations in
any Loan, and participant shall have the rights (and be subject to the
obligations) of a Bank set forth in Sections 6.4, 6.5, 7 and 11.7 hereof as if
such participant were a Bank hereunder; provided, however, that
(i0 no participation contemplated in this Section 14.3 shall relieve
the participating Bank from its Commitment or its other obligations
hereunder,
(ii0 such Bank shall remain solely responsible for the performance of
its Commitment and such other obligations,
(iii0 the Company and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement, and
(iv0 no participant, unless such participant is an Affiliate of such
Bank, or is itself a Bank, shall be entitled to require such Bank to take
or refrain from taking any action hereunder, except that such Bank may
agree with any participant that such Bank will not, without such
participant's consent, take any actions of the type described in clauses
(a) through (f) of Section 14.1.
(ci Assignments.
(i0 Subject to the prior written consent of the Company, such consent
not to be unreasonably withheld or delayed (provided that such consent
shall not be required if an Event of Default has occurred and is
continuing), each Bank may assign to any Person (the "Assignee") all or a
portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment); provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of all of the assigning Bank's rights and obligations under this
Agreement, (ii) the total amount of the Commitment so assigned to an
Assignee or to an Assignee and its affiliates taken as a whole shall equal
or exceed the lesser of (A) $5,000,000, or (B) the sum of the remaining
Commitment held by the assigning Bank, (iii) the parties to each such
assignment shall execute and deliver to the Agent for its acceptance an
Assignment and Acceptance in substantially the form attached hereto as
Exhibit N ("Assignment and Acceptance"), together with a processing and
recordation fee of $2,000, and (iv) the prior written consent of the
Company shall not be required for any assignment to such Bank's Affiliate.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be the date on which such Assignment and Acceptance is accepted
by the Agent, (x) the Assignee thereunder shall be a party hereto and, to
the Assignment and Acceptance, have the rights and obligations of a Bank
under the Loan Documents and (y) the Bank assignor thereunder shall be
deemed to have relinquished its rights and to be released from its
obligations under the Loan Documents, to the extent (and only to the
extent) that its rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an
assigning Bank's rights and obligations under the Loan Documents, such Bank
shall cease to be a party thereto).
(ii0 By executing and delivering an Assignment and Acceptance, the
Bank assignor thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
the Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any other
instrument or document furnished pursuant thereto; (ii) such assigning Bank
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or any Subsidiary or the
performance or observance by the Company or any Subsidiary of any of their
respective obligations under the Loan Documents or any other instrument or
document furnished pursuant hereto; (iii) such Assignee confirms that it
has received a copy of the Loan Documents, together with copies of the most
recent financial statements delivered pursuant to Section 11.1 and such
other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such Assignee will, independently and without reliance
upon the Agent, such assigning Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such Assignee appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers
under the Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto;
and (vi) such Assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Bank.
(iii0 The Agent shall maintain at its address referred to on the
signature pages hereto a copy of each Assignment and Acceptance delivered
to and accepted by it.
(iv0 Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank, the Agent shall, if such Assignment and Acceptance has been
completed, (i) accept such Assignment and Acceptance and (ii) give prompt
notice thereof to the Company.
(v0 Anything in this Section 14.3 to the contrary notwithstanding,
any Bank may at any time, without the consent of any Person, assign and
pledge all or any portion of its Commitment and the Loans owing to it to
any Federal Reserve Bank (and its transferees) as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Bank from its
obligations hereunder.
14.4 Indemnification..4 Indemnification..4 Indemnification. The Company
hereby indemnifies and holds harmless the Agent and each Bank and each of the
Agent's and the Banks' directors, counsels, officers, employees, agents, persons
controlling or controlled by any of them and their assigns (collectively the
"Indemnified Parties") from and against any and all losses, claims, damages,
costs, liabilities and expenses (including, without limitation, reasonable
attorneys' fees, disbursements and any out-of-pocket expenses) to which any of
the Indemnified Parties may become subject, whether directly or indirectly, that
result or arise from, or relate to, any claim, action, lawsuit, or proceeding
related to (i) any tender offer, merger, purchase of stock, purchase of assets
or other similar transaction financed or proposed to be financed in whole or in
part, directly or indirectly, with the proceeds of any of the Loans or (ii) the
execution, delivery, performance or enforcement of this Agreement or any other
Loan Document by any of the Indemnified Parties; provided, however, that an
Indemnified Party shall refund to the Company any amount received from the
Company for losses, damages, costs and expenses incurred by such Person but
which a court of competent jurisdiction has found resulted solely from such
Person's own gross negligence or willful misconduct (individually and not as a
co-conspirator with the Company or any affiliate thereof); provided further,
that it is the intention of the Company to indemnify the Indemnified Parties
against the consequences of their own negligence. The foregoing obligations of
the Company shall survive termination of this Agreement.
14.5 LAW..5 LAW..5 LAW. THIS AGREEMENT AND THE NOTE SHALL BE
CONTRACTS MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS.
14.6 Successors..6 Successors..6 Successors. This Agreement shall be
binding upon the Company, the Agent and the Banks and their respective
successors and assigns, and shall inure to the benefit of the Company, the Agent
and the Banks and the successors and assigns of the Agent and the Banks. The
Company shall not assign its rights or duties hereunder without the consent of
all Banks.
14.7 Subsidiary Reference..7 Subsidiary Reference..7 Subsidiary
Reference. Any reference herein to a Subsidiary or Subsidiaries of any Person,
and any financial ratio or restriction or other provision of this Agreement
which is stated to be applicable to such Person "and its Subsidiaries" or which
is to be determined on a "consolidated" basis, shall apply only to the extent
such Person has any Subsidiaries and, where applicable, only to the extent any
such Subsidiaries are consolidated with such Person for financial reporting
purposes.
14.8 ENTIRE AGREEMENT..8 ENTIRE AGREEMENT..8 ENTIRE AGREEMENT. THIS
AGREEMENT, TOGETHER WITH ALL OTHER WRITTEN AGREEMENTS BETWEEN THE PARTIES
HERETO, IS THE FINAL EXPRESS OF THE CREDIT AGREEMENT BETWEEN THE PARTIES HERETO,
AND SUCH WRITTEN CREDIT AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY
PRIOR ORAL CREDIT AGREEMENT OR OF A CONTEMPORANEOUS ORAL CREDIT AGREEMENT
BETWEEN THE PARTIES HERETO.
14.9 Counterparts..9 Counterparts..9 Counterparts. This Agreement
may be executed in any number of counterparts and by the different parties on
separate counterparts and each such counterpart shall be deemed an original, but
all such counterparts shall together constitute but one and the same Agreement.
14.10 Interest..10 Interest..10 Interest. All agreements between
the Company, the Agent and any Bank, whether now existing or hereafter arising
and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand being made on any
Note or otherwise, shall the amount contracted for, charged, reserved or
received by the Agent or any Bank for the use, forbearance, or detention of the
money to be loaned under this Agreement or otherwise or for the payment or
performance of any covenant or obligation contained herein exceed the Highest
Lawful Rate. If, as a result of any circumstances whatsoever, fulfillment by
the Company of any provision hereof or of the Notes, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by applicable usury law or result in the Agent or any Bank having or
being deemed to have contracted for, charged, reserved or received interest (or
amounts deemed to be interest) in excess of the maximum lawful rate or amount of
interest allowed by applicable law to be so contracted for, charged, reserved or
received by the Agent or such Bank, then, ipso facto, the obligation to be
fulfilled by the Company shall be reduced to the limit of such validity, and if,
from any such circumstance, the Agent or any Bank shall ever receive interest or
anything which might be deemed interest under applicable law which would exceed
the Highest Lawful Rate, such amount which would be excessive interest shall be
refunded to the Company, or, to the extent (i) permitted by applicable law and
(ii) such excessive interest does not exceed the unpaid principal balance of the
Notes and the amounts owing on other obligations of the Company to the Agent or
any Bank under this Agreement and the Notes, applied to the reduction of the
principal amount owing on account of the Notes or the amounts owing on other
obligations of the Company to the Agent or any Bank under this Agreement and the
Notes and not to the payment of interest. All sums paid or agreed to paid to
the Agent or any Bank for the use, forbearance of detention of the indebtedness
of the Company, to the Agent or to any Bank shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full term of such indebtedness until payment in full of the principal thereof
(including the period of any renewal or extension thereof) so that the interest
on account of such indebtedness shall not exceed the Highest Lawful Rate. The
terms and provisions of this Section 14.10 shall control and supersede every
other provision hereof and of all other agreements between the Company, the
Agent and the Banks. "Highest Lawful Rate" shall mean with respect to each
Bank, the maximum nonusurious interest rate, if any, that at any time or from
time to time may be contracted for, taken, reserved, charged, or received with
respect to the Notes or on other amounts, if any, due to such Bank pursuant to
this Agreement or the Notes, under laws applicable to such Bank which presently
in effect, or, to the extent allowed by law, under such applicable laws that may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow. To the extent required by applicable law
in determining the Highest Lawful Rate with respect to any Bank as of any date,
there shall be taken into account the aggregate amount of all payments and
charges theretofore charged, reserved or received by such Bank hereunder or
under the Notes which constitute or are deemed to constitute interest under
applicable law.
TEXAS BUSINESS AND COMMERCE CODE
26.02 NOTICE
FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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 written above.
NPC INTERNATIONAL, INC.
By:
Name:
Title:
Address: 720 W. 20th Street
P. O. Box 643
Pittsburgh, KS 66762
Attention: James Schwartz
Fax: (316) 231-1199
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
Individually and as Agent
Amount of
Commitment Share
$15,000,000 100% By:
Name:
Title:
Address: 712 Main
Houston, Texas 77002
Attn: John Sarvadi
Fax: (713) 216-6710
$15,000,000
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED AS OF MAY 8, 1997
AMONG
NPC MANAGEMENT, INC.,
VARIOUS BANKS
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
as Agent
TABLE OF CONTENTS
Page
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE WITH
FINANCIAL RESTRICTIONS. 2
1.1 Definitions. 2
1.2 Other Definitional Provisions. 13
1.3 Interpretation of Agreement. 13
1.4 Compliance with Financial Restrictions. 13
1.5 Accounting Principles. 14
2. COMMITMENTS OF THE BANKS; BORROWING PROCEDURES. 14
2.1 Commitments. 14
2.2 Loan Options. 14
2.3 Borrowing Procedure. 14
2.4 Continuation and/or Conversion of Loans. 15
2.5 Extension of the Termination Date. 15
3. NOTES EVIDENCING LOANS. 16
3.1 Reference Rate Loans; Eurodollar Loans. 16
3.2 Money Market Loans 16
3.3 Evidence of Loans 16
4. [intentionally omitted] 17
5. INTEREST AND FEES. 17
5.1 Interest. 17
5.2 Commitment Fee. 17
5.3 Method of Calculating Interest and Fees. 18
5.4 Agent's Fee. 18
6. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF
THE CREDIT. 18
6.1 Place of Payment. 18
6.2 Prepayments. 18
6.3 Reduction of Credit. 18
6.4 Offset. 19
6.5 Proration of Payments. 19
7. INDEMNIFICATION: EURODOLLAR LOANS. 19
7.1 Indemnity for Funding Losses. 19
7.2 Capital Adequacy. 19
7.3 Additional Provisions Relating to Eurodollar Loans. 20
8. CONDITIONS PRECEDENT TO ALL LOANS. 22
8.1 Notice. 22
8.2 Default. 22
8.3 Insurance. 22
8.4 Warranties. 22
8.5 Certification. 22
9. CONDITIONS PRECEDENT TO EFFECTIVE DATE AND INITIAL LOAN
THEREON OR THEREAFTER. 23
9.1 Notes. 23
9.2 Master Guaranty 23
9.3 Resolutions; Consents and Approvals. 23
9.4 Incumbency. 23
9.5 Opinion. 23
9.6 Sharing Agreement 23
9.7 Officer's Certificate 23
9.8 General. 23
10. REPRESENTATIONS AND WARRANTIES. 24
10.1 Existence. 24
10.2 Authorization. 24
10.3 No Conflicts. 24
10.4 Validity and Binding Effect. 24
10.5 Financial Statements. 24
10.6 Litigation. 25
10.7 Taxes. 25
10.8 Liens. 25
10.9 No Default. 25
10.10 Insurance. 25
10.11 Subsidiaries. 26
10.12 Partnerships. 26
10.13 Regulation U. 26
10.14 Compliance. 26
10.15 Pension Plans. 26
11. COMPANY'S COVENANTS. 26
11.1 Financial Statements and Other Information. 26
11.2 Books, Records and Inspection. 27
11.3 Conduct of Business. 28
11.4 Taxes. 28
11.5 Notices. 28
11.6 Pension Plans. 28
11.7 Expenses. 29
11.8 Indebtedness. 29
11.9 Liens. 29
11.10 Merger, Purchase and Sale. 29
11.11 Nature of Business. 30
11.12 Franchise Rights. 30
11.13 Net Worth. 31
11.14 Leverage Ratio. 31
11.15 Fixed Charge Coverage. 31
11.16 Insurance. 31
11.17 Restricted Payments. 31
11.18 Leases. 31
11.19 NCPI's and Subsidiaries' Stock. 32
11.20 Guaranties. 32
11.21 Investments. 32
11.22 Subsidiaries. 33
11.23 Unconditional Purchase Obligation. 33
11.24 Other Agreements. 33
11.25 Use of Proceeds. 33
11.26 Restrictive Agreements. 33
11.27 Consolidated Fixed Charge Requirement. 34
12. EVENTS OF DEFAULT AND REMEDIES. 34
12.1 Events of Default 34
12.3 Preservation of Security for Unmatured
Reimbursement Obligations 37
12.4 Remedies Cumulative 37
13. RELATIONSHIP AMONG BANKS. 37
13.1 Appointment and Grant of Authority. 37
13.2 Non-Reliance on Agent. 37
13.3 Responsibility of the Agent and Other Matters. 38
13.4 Action on Instructions. 38
13.5 Indemnification. 39
13.6 TCB and Affiliates. 39
13.7 Notice to Holder of Loans. 39
13.8 Successor Agent. 39
14. GENERAL. 40
14.1 Waiver and Amendments. 40
14.2 Notices. 40
14.3 Severability; Participations; Assignments. 41
14.4 Indemnification. 43
14.5 LAW. 43
14.6 Successors. 43
14.7 Subsidiary Reference. 43
14.8 ENTIRE AGREEMENT. 44
14.9 Counterparts. 44
14.10 Interest. 44
14.11 Agreement of NPCI and its Subsidiaries. 45
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated
as of May 8, 1997 (but effective as of March 26, 1997) (this
"Agreement"), is entered into among NPC MANAGEMENT, INC., a
Delaware corporation (the "Company"), the banks listed on the
signature pages hereof (together with such other financial
institutions that from time to time become parties hereto,
individually a "Bank" and collectively the "Banks") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION ("TCB"), as agent for the
Banks.
WHEREAS, NPC International, Inc., a Kansas corporation
("NPCI"), the Banks and TCB as Agent, have entered into the NPCI
Credit Facility (as hereinafter defined) providing for
commitments from such Banks to make loans to NPCI;
WHEREAS, by its execution and delivery hereof the Company
hereby assumes effective as of the Closing Date (as hereinafter
defined), and by its execution and delivery hereof NPCI hereby
assigns to the Company effective as of the Closing Date, all of
the obligations and liabilities of NPCI under the NPCI Credit
Facility and all related instruments (all such obligations and
liabilities collectively the "Assumed Obligations");
WHEREAS, the Company has determined that it is in its best
interest to assume the Assumed Obligations and has voluntarily
requested that the Banks, and the Banks have agreed to,
restructure, rearrange and renew the Assumed Obligations and the
respective commitments of the Banks and the Agent parties to the
NPCI Credit Facility into obligations and commitments hereunder;
WHEREAS, any loans outstanding under any of the NPCI Credit
Facility, on the Closing Date bearing interest at the Interbank
Rate (Reserve Adjusted) (as defined therein) shall be deemed
continued as Eurodollar Loans under this Agreement at such rate
and for the Interest Period with respect thereto under the NPCI
Credit Facility; and
WHEREAS, the parties hereto intend to amend and restate the
Assumed Obligations and the NPCI Credit Facility in its entirety
as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE WITH
FINANCIAL RESTRICTIONS.. DEFINITIONS, INTERPRETATION OF
AGREEMENT AND COMPLIANCE WITH FINANCIAL RESTRICTIONS..
DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE WITH
FINANCIAL RESTRICTIONS.
1.1 Definitions..1 Definitions..1 Definitions. In addition
to the terms defined elsewhere in this Agreement, the following
terms shall have the meanings indicated for purposes of this
Agreement (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
Acquisition Agreement shall mean the Acquisition Agreement
dated as of March 25, 1996 by and among Seattle Crab Co., NPCI
and Skipper's, Inc.
Affiliate of any Person means any other Person that,
directly or indirectly, controls, is controlled by or is under
common control with such Person (excluding any trustee under, or
any committee with responsibility for administering, any Plan
(hereinafter defined)). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election
of directors or managing general partners of such Person; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
Agent means TCB as Agent for the Banks hereunder and each
successor, as provided in Section 13.8, who shall act as Agent.
Alternate Base Rate means a per annum interest rate which is
the greater at any time of (i) the rate of interest then most
recently announced by TCB at Houston, Texas as its prime rate, or
(ii) 0.5% plus the Federal Funds Rate. Such prime rate of TCB is
not necessarily intended to be the lowest rate of interest
determined by TCB in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans
maintained as Alternate Base Rate Loans shall take effect
simultaneously with each change in the Alternate Base Rate. The
Agent shall give notice promptly to the Company and the Banks of
changes in the Alternate Base Rate.
Assignee shall have the meaning set forth in
Section 14.3(c)(i).
Assignment and Acceptance shall have the meaning set forth
in Section 14.3(c)(i).
Assumed Obligations -- see the Preamble.
Bank -- see the Preamble.
Banking Day means any day on which banks are open for
business in Houston, Texas, and with respect to Eurodollar Loans,
on which dealings in foreign currencies and exchange may be
carried on by the Agent in the interbank Eurodollar market.
Capitalized Lease means any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with
GAAP.
Capitalized Lease Obligations shall mean the amount at which
the aggregate rentals due and to become due under all Capitalized
Leases under which NPCI or any Subsidiary thereof, as a lessee,
would be required to be reflected as a liability on the
consolidated balance sheet of NPCI.
Code means the Internal Revenue Code of 1986 and any
successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed to
also refer to any successor sections.
Commitment means, as to each Bank, the amount set forth
opposite said Bank's name on the signature page hereof (or such
reduced amount as may be fixed by the Company pursuant to
Section 6.3).
Company -- see the Preamble.
Computation Period means any period of four consecutive
fiscal quarters of NPCI ending on the last day of a fiscal
quarter.
Consolidated Funded Debt shall mean all Funded Debt of NPCI
and its Subsidiaries, determined on a consolidated basis
eliminating intercompany items.
Consolidated Net Earnings means the consolidated gross
revenues of NPCI and its Subsidiaries less all operating and non-
operating expenses of NPCI and its Subsidiaries including taxes
on income, all determined in accordance with GAAP consistent with
those followed in the preparation of the financial statements
referred to in Section 10.5, provided that (i) there shall not be
included in revenues (a) any income representing the excess of
equity in any Subsidiary at the date of acquisition over the
investment in such Subsidiary, (b) any equity in the
undistributed earnings of any corporation which is not a
Subsidiary, (c) any earnings of any Subsidiary for any period
prior to the fiscal year of NPCI in which such Subsidiary was
acquired, or (d) any gains resulting from the write-up of assets,
and (ii) capital gains may be included in revenues only to offset
capital losses; provided, further, that for the purpose of
calculating Consolidated Net Earnings with respect to the last
day of the fiscal quarter ended March 26, 1996, and with respect
to the last day of each of the next three successive fiscal
quarters thereafter, there shall not be included in calculating
Consolidated Net Earnings any charges against income in
connection with the Skipper's Sale, or in connection with the
closure or relocation of up to eight Tony Roma's locations during
calendar year 1996, which might otherwise be required under GAAP.
Consolidated Net Income Available for Fixed Charges for any
period shall mean the sum of Consolidated Net Earnings during
such period, plus (to the extent deducted in determining
Consolidated Net Earnings during such period) (i) interest
expense, (ii) provision for income taxes, (iii) depreciation and
amortization, and (iv) operating lease expense, in each case on a
consolidated basis.
Consolidated Net Worth means, at any time, the total of
stockholders' equity (including capital stock, additional paid-in
capital and retained earnings after deducting treasury stock,
ESOP obligations and similar contra accounts) of NPCI and its
Subsidiaries calculated in accordance with GAAP.
Credit means the aggregate Commitments of the Banks to make
Loans and issue Letters of Credit under the terms of this
Agreement.
Dollars and the sign "$" mean lawful money of the United
States of America.
EBITDA means Consolidated Net Earnings before interest
expense, provision for taxes (to the extent not excluded from
Consolidated Net Earnings), depreciation, amortization and the
noncash portion of nonrecurring charges (as defined by GAAP).
Effective Date means the date on which all the conditions
precedent set forth in Section 9 are met or waived in writing by
the Agent and the Majority Banks.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in
effect from time to time. References to sections of ERISA shall
be construed to also refer to any successor sections.
ERISA Affiliate means any corporation, trade or business
that is, along with NPCI, a member of a controlled group of
corporations or a controlled group of trades or businesses, as
described in sections 414 (b) and 414 (c), respectively, of the
Code.
Eurocurrency Reserve Percentage means, with respect to any
Interest Period, a percentage (expressed as a decimal) equal to
the daily average during such Interest Period of the percentages
in effect on each day of such Interest Period, as prescribed by
the Board of Governors of the Federal Reserve System (or any
successor), for determining reserve requirements applicable to
"Eurocurrency liabilities" pursuant to Regulation D or any other
then applicable regulation of the Board of Governors which
prescribes reserve requirements applicable to "Eurocurrency
liabilities," as presently defined in Regulation D. For purposes
of this definition, any Eurodollar Loans hereunder shall be
deemed to be "Eurocurrency liabilities" as defined in Regulation
D.
Eurodollar Loan means any Loan which bears interest at a
rate determined with reference to the Interbank Rate (Reserve
Adjusted).
Event of Default means any of the events described in
Section 12.1.
Existing Series A Note shall mean that certain Series A Note
dated as of March 5, 1997 in the original principal amount of
$15,000,000 executed and delivered by NPCI under the NPCI Credit
Facility.
Existing Series B Note shall mean that certain Series B Note
dated as of March 5, 1997 in the original principal amount of
$15,000,000 executed and delivered by NPCI under the NPCI Credit
Facility.
Federal Funds Rate means for any date the weighted average
of the rates on overnight Federal Funds transactions, with
members of the Federal Reserve System only, arranged by Federal
Funds brokers applicable to Federal Funds transactions on that
date. The Federal Funds Rate shall be determined by the Agent on
the basis of reports by Federal Funds brokers to, and published
daily by, the Federal Reserve Bank of New York in the Composite
Closing Quotations for U.S. Government Securities. If such
publication is unavailable or the Federal Funds Rate is not set
forth therein, the Federal Funds Rate shall be determined on the
basis of any other source reasonably selected by the Agent. In
the case of a day which is not a Banking Day, the Federal Funds
Rate shall be the Federal Funds Rate for the immediately
preceding Banking Day.
Fixed Charges shall mean the sum of consolidated
(i) interest expense, (ii) operating lease expense and
(iii) current maturities of Consolidated Funded Debt as reflected
in the GAAP financial statements of NPCI and its Subsidiaries
(which maturities shall be determined as of the last day of the
period consisting of four fiscal quarters for which Fixed Charges
are to be determined).
Franchise Agreement means any franchise agreement between
NPCI or any Subsidiary and Pizza Hut, Inc., as such may be
amended or modified from time to time.
Funded Debt shall mean (i) all Indebtedness having a final
maturity of more than one year from the date of incurrence
thereof (or which is renewable or extendable at the option of the
obligor for a period or periods of more than one year from the
date of incurrence), including all payments in respect thereof
that are required to be made within one year from the date of any
determination of Funded Debt, whether or not included in current
liabilities, (ii) all Capitalized Lease Obligations maturing more
than one year after the date as of which the computation was
made, and (iii) all Guaranties which extend for more than one
year after the date of determination.
GAAP means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of
the accounting profession, which are applicable to the
circumstances as of the date of determination.
Guaranties by any Person shall mean all obligations (other
than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing, or in effect guaranteeing, any Indebtedness,
dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly,
including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance
sheet condition or otherwise to advance or make available funds
for the purchase or payment of such Indebtedness or obligation,
(iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the
owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or
obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of all computations made under
this Agreement, a Guaranty in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which
has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend.
Guarantors shall mean, at any time, each Person which is
then a party to the Master Guaranty, which shall be NPCI and each
Subsidiary thereof (other than the Company).
Highest Lawful Rate shall have the meaning set forth in
Section 14.10.
Indebtedness means, without duplication,
(i) any obligation, including, without limitation, any
obligation for borrowed money (and any notes payable and
drafts accepted representing extensions of credit whether or
not representing obligations for borrowed money), which
under GAAP is shown on the balance sheet as a liability
(including any obligation under a Capitalized Lease but
excluding reserves for deferred income taxes and other
reserves to the extent that such reserves do not constitute
an obligation),
(ii) indebtedness which is secured by a Lien on, or
payable out of the proceeds of production from, property
owned by NPCI or any Subsidiary thereof, whether or not the
indebtedness secured thereby shall have been assumed by NPCI
or such Subsidiary,
(iii) guarantees, endorsements (other than
endorsements of negotiable instruments for collection in the
ordinary course of business) and other contingent
liabilities (whether direct or indirect) in connection with
the obligations, stock or dividends of any Person,
(iv) obligations under any contract providing for the
making of loans, advances or capital contributions to any
Person, or for the purchase of any property from any Person,
in each case in order to enable NPCI or any Subsidiary
thereof primarily to maintain working capital, net worth or
any other balance sheet condition or to pay debts, dividends
or expenses of such Person,
(v) obligations under any contract for the purchase of
materials, supplies or other property or services if such
contract (or any related document) requires that payment for
such materials, supplies or other property or services shall
be made regardless of whether or not delivery of such
materials, supplies or other property or services is ever
made or tendered,
(vi) obligations under any contract to rent or lease
(as lessee) any real or personal property if such contract
(or related document) provides that the obligation to make
payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then
in general use and requires that the lessee purchase or
otherwise acquire material amounts of securities, assets or
obligations of the lessor,
(vii) obligations under any other contract which,
in economic effect, is substantially equivalent to a
guarantee;
all as determined in accordance with GAAP; provided that
Indebtedness shall not include trade accounts payable, accrued
expenses or income taxes payable, each arising in the ordinary
course of business.
Indebtedness to Pro Forma EBITDA Ratio means, as of the last
day of any fiscal quarter, the ratio of (a) all Indebtedness of
NPCI and its Subsidiaries on such day to (b) Pro Forma EBITDA for
the period of four consecutive fiscal quarters ending on such
day.
Indemnification Agreements shall mean, collectively, the
Lease Indemnification Agreement and the Liability Assumption
Agreement, as those agreements are defined and identified in the
Acquisition Agreement.
Interbank Rate means, for any Interest Period, the rate per
annum at which Dollar deposits in immediately available funds are
offered to the Agent two Banking Days prior to the beginning of
such Interest Period by major banks in the interbank Eurodollar
market as at or about 10:00 a.m., Houston time, for delivery on
the first day of such Interest Period, for the number of days
comprised therein and in an amount equal to the amount of TCB's
Eurodollar Loan for such Interest Period.
Interbank Rate (Reserve Adjusted) means a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined pursuant to the following formula:
Interbank Rate = Interbank Rate
(Reserve Adjusted) 1.0-Eurocurrency Reserve Percentage
Interest Period means, with respect to any Eurodollar Loan,
the one month, two month, three month or six month period
commencing on the applicable borrowing date or conversion date of
such Loan or the last day of the prior Interest Period for such
Loan, as the case may be; provided, however, that no Interest
Period shall extend beyond the Termination Date. Each Interest
Period which would otherwise end on a day which is not a Banking
Day shall end on the next succeeding Banking Day unless such next
succeeding Banking Day is the first Banking Day of a calendar
month, in which case it shall end on the next preceding Banking
Day.
Investment means any investment, made in cash or by delivery
of any kind of property or asset, in any Person, whether by
acquisition of shares of stock or similar interest, Indebtedness
or other obligation or security, or by loan, advance or capital
contribution, or otherwise.
Joinder Agreement shall have the meaning set forth in the
Master Guaranty.
Lien means any mortgage, pledge, hypothecation, judgment
lien or similar legal process, title retention lien, or other
lien or security interest, including, without limitation, the
interest of a vendor under any conditional sale or other title
retention agreement and the interest of a lessor under any
Capitalized Lease.
Loan -- see Section 2.1.
Loan Documents means this Agreement, all Notes, the Master
Guaranty, each Joinder Agreement and any and all agreements or
instruments now or hereafter executed and delivered by the
Company, any Guarantor or any other Person guaranteeing, securing
or otherwise supporting payment or performance of the Notes, this
Agreement or any other Loan Document, as they may be modified or
amended from time to time in accordance with the terms and
provisions thereof.
Majority Banks means those Banks whose share in the
aggregate principal amount of the Loans outstanding constitutes
(or, if no Loans are outstanding, those whose Percentage
constitutes) more than fifty percent (50%).
Margin means (a) initially, 1.00% and (b) on and after any
date specified below on which the Margin is to be adjusted, the
rate per annum set forth in the table below opposite the
applicable Indebtedness to Pro Forma EBITDA Ratio:
Indebtedness
to
Pro Forma EBITDA Margin
2.75 < x 1.50%
2.50 < x < 2.75 1.25%
2.25 < x < 2.50 1.00%
1.50 < x < 2.25 .75%
x < 1.50 .50%
The Margin shall be adjusted, to the extent applicable, 45 days
(or, in the case of the last fiscal quarter of any fiscal year,
90 days) after the end of each fiscal quarter based on the
Indebtedness to Pro Forma EBITDA Ratio as of the last day of such
fiscal quarter; it being understood that if the Company fails to
deliver the financial statements required by Section 11.1(a) or
11.1(b), as applicable, by the 45th day (or, if applicable, the
90th day) after any fiscal quarter, the Margin shall be 1.50%
until such financial statements are delivered and (ii) upon the
effective date of any acquisition permitted.
Master Guaranty shall mean the Master Guaranty executed and
delivered pursuant hereto, to be substantially in the form of
Exhibit O, as amended from time to time.
Maturity Date means, for any Money Market Loan, the date
that is from one (1) to thirty (30) days from the date of such
Loan as selected by the Company in the notice of borrowing, but
not later than the Termination Date.
Money Market Loan means any Loan designated as such which is
made pursuant to Section 11.10(a) based upon the change, if any,
in the Indebtedness to Pro Forma EBITDA Ratio set forth in the
certificate delivered in connection with such acquisition
pursuant to Section 11.1(c).
Money Market Rate means for any Money Market Loan the per
annum interest rate which is quoted by the Agent for such Money
Market Loan at the making thereof.
NPCI -- see the Preamble.
NPCI Credit Facility shall mean that certain Revolving
Credit Agreement dated as of March 5, 1997 among NPCI, the
financial institutions party thereto, and the Agent.
Notes means the Notes referred to in Section 3.
Payment Date means (a) as to any Eurodollar Loan, the last
day of each Interest Period with respect thereto and, if such
Interest Period is in excess of three months, the date that is
three months after the commencement of such Interest Period, and
(b) as to any Reference Rate Loan, and any Money Market Loan, the
last day of each March, June, September and December.
PBGC means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
Percentage means, for any Bank, the percentage which the
amount of such Bank's Commitment is of the amount of the Credit.
Permitted Guaranty Debt means (1) Indebtedness evidenced by
the Master Guaranty, (2) Indebtedness evidenced by any guaranty
agreement given by any Guarantor in favor of any holder of any
Indebtedness listed on Exhibit H, and (3) Indebtedness evidenced
by any guaranty agreement given by any Guarantor in favor of any
holder of any Indebtedness of the Company that may be incurred by
the Company pursuant to Section 11.8(e)
Permitted Liens means the following, provided that none of
the following materially adversely affect the financial condition
or business operations of NPCI and its Subsidiaries taken as a
whole:
(1) Liens of taxes, assessments, and governmental
charges not yet payable, or not delinquent and payable
without interest or penalty so long as so payable;
(2) Liens of taxes, assessments, governmental charges
and other Indebtedness, the validity of which are being
contested in good faith by appropriate action diligently
pursued, provided that such proceeding shall suspend the
collection of such taxes, assessments, governmental charges,
or other Indebtedness and no property of NPCI or any
Subsidiary thereof would be in any danger of being
forfeited during the period of such contest;
(3) Liens of employees and laborers for current wages,
not yet due, incidental to current operations or current
construction, and Liens of others for current indebtedness,
not yet due, incidental to current construction, including
maintenance, repair, and alteration; mechanics',
materialmen's, workmen's, repairmen's or carriers' liens, or
other similar Liens arising in the ordinary course of
business, or deposits, Liens, or pledges of personal
property to obtain the release of any such Liens;
(4) oil and gas leases, licenses, privileges, other
leases, releases of damages, easements, restrictions on the
use of real property, zoning laws and ordinances, rights-of-
way, minor irregularities in title and other similar
encumbrances (including the right of vendors to occupy and
use real property previously sold to NPCI or any Subsidiary
thereof not immediately required by NPCI or any Subsidiary
thereof for use in its business), not in any case impairing
the use by NPCI or any Subsidiary thereof in its business of
the property affected thereby;
(5) in the case of easements and right-of-way grants
from governmental bodies, the rights of the public;
(6) Liens existing prior to the time of acquisition
upon any real or personal property acquired by NPCI or any
Subsidiary thereof through purchase, merger, consolidation,
or otherwise, whether or not assumed by NPCI or any
Subsidiary thereof;
(7) Liens in connection with the acquisition of
property after the date hereof by way of purchase money
mortgage, conditional sale or other title retention
agreement, Capitalized Lease or other deferred payment
contract, and attaching only to the property being acquired,
if the Indebtedness secured thereby does not exceed 75%
(100% in the case of a Capitalized Lease) of the lesser of
cost or fair market value of such property at the time of
acquisition thereof;
(8) deposits, Liens, or pledges of personal property
or of securities to secure payments of workers'
compensation, unemployment insurance, old age pensions or
other Social Security, or to secure the performance of bids,
tenders, contracts (other than contracts for the payment of
money), or leases to which NPCI or any Subsidiary thereof is
a party, or to secure public or statutory obligations of
NPCI or any Subsidiary thereof, or deposits of cash or
United States government obligations to secure or in lieu of
surety, stay or appeal bonds to which NPCI or any Subsidiary
thereof is a party, or pledges, Liens, or deposits for
similar purposes in the ordinary course of business;
(9) Liens based on workers' compensation claims which
are not due and payable, or the validity of which is being
contested in good faith; and
(10) minor discrepancies and encroachments that might
be disclosed by an accurate survey.
Should any of the preceding Permitted Liens occur, the Banks may
reasonably request, as to all the preceding matters referred to
in paragraphs (1), (2), (3), (7), (8) and (9) above, that
adequate reserves be set aside and maintained by NPCI or any
Subsidiary with respect thereto.
Person means an individual, partnership, corporation, trust,
joint venture, joint stock company, association, unincorporated
organization, government or agency or political subdivision
thereof, or other entity.
Pizza Hut, Inc. means Pizza Hut, Inc., a Delaware
corporation.
Plan means a "pension plan," as such term is defined in
ERISA, established or maintained by NPCI or any ERISA Affiliate
or as to which NPCI or any ERISA Affiliate contributes or is a
member or otherwise may have any liability.
Pro Forma EBITDA means EBITDA provided, however, that for
the purpose of calculating Pro Forma EBITDA (i) with respect to
the last day of the fiscal quarter ended March 26, 1996, and with
respect to the last day of each of the next three successive
fiscal quarters thereafter, Pro Forma EBITDA shall be calculated
without regard for any charges against income in connection with
the Skipper's Sale, or in connection with the closure or
relocation of up to eight Tony Roma's locations during calendar
year 1996, which might otherwise be required under GAAP and
(ii) with respect to any Person acquired pursuant to
Section 11.10(a) (the "Acquisition Target"), EBITDA of the
Acquisition Target for each full fiscal quarter included in the
applicable Computation Period prior to such Acquisition
(including the fiscal quarter during which it was acquired) shall
be included and adjusted for tangible operational changes due to
field expense differentials, royalty payments to be made to Pizza
Hut, Inc., contractual rent payments on real estate and equipment
and general and administrative cost differences, all as set forth
in the most recent certificate delivered pursuant to
Section 11.1(c).
Reference Rate Loan means any Loan which bears interest at
or by reference to the Alternate Base Rate.
Reportable Event has the meaning given to such term in
ERISA.
Responsible Officer means the Chief Operating Officer, the
Chief Financial Officer or the Chief Accounting Officer.
Romacorp, Inc. means Romacorp, Inc., a Delaware corporation.
Sharing Agreement shall mean the Sharing Agreement executed
and delivered as of the Closing Date, substantially in the form
of Exhibit P attached hereto, as amended from time to time.
Skipper's Sale shall mean NPCI's sale of the common stock of
Skipper's Inc. in accordance with all of the terms and conditions
of the Acquisition Agreement.
Subsidiary means any Person which is directly or indirectly
controlled by NPCI or its other Subsidiaries or of which or in
which NPCI or its other Subsidiaries at any time own directly or
indirectly 50% or more of (i) the combined voting power of all
classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of
such Person, if it is a corporation, (ii) the capital interest or
profits interest of such Person, if it is a partnership, joint
venture or similar entity, or (iii) the beneficial interest of
such Person, if it is a trust, association or other
unincorporated organization.
Supermajority Banks means the Agent and those Banks whose
share in the aggregate principal amount of the Loans outstanding
constitutes (or, if no Loans are outstanding, those whose
Percentages constitute) at least sixty-seven percent (67%).
TCB -- see the Preamble.
Termination Date means March 3, 2000, as such date may from
time to time be extended in accordance with Section 2.5, or such
earlier date as may be fixed by the Company on at least thirty
(30) Banking Days' written notice to the Agent and the Banks.
Termination Event with respect to any Plan means (i) the
institution by NPCI, the PBGC or any other Person of steps to
terminate such Plan, (ii) the occurrence of a Reportable Event
with respect to such Plan which the Agent reasonably believes may
be a basis for the PBGC to institute steps to terminate such
Plan, or (iii) the withdrawal from such Plan (or deemed
withdrawal under section 4062(f) of ERISA) by NPCI or any ERISA
Affiliate if NPCI or such ERISA Affiliate is a "substantial
employer" within the meaning of section 4063 of ERISA.
Unmatured Event of Default means any event or condition
which, with the lapse of time or giving of notice to the Company
or both, would constitute an Event of Default.
Value shall mean, with respect to any asset at any date of
determination, the greater of such asset's book or fair market
value as of the date of determination, with "book value" being
the value of such asset as would appear immediately prior to such
determination on a balance sheet of the owner of such asset
prepared in accordance with GAAP.
1.2 Other Definitional Provisions..2 Other Definitional
Provisions..2 Other Definitional Provisions. Unless otherwise
defined or the context otherwise requires, all financial and
accounting terms used herein or in any certificate or other
document made or delivered pursuant hereto shall be defined in
accordance with GAAP. Unless otherwise defined therein, all
terms defined in this Agreement shall have the defined meanings
when used in any Note or in any certificate or other document
made or delivered pursuant hereto.
1.3 Interpretation of Agreement..3 Interpretation of
Agreement..3 Interpretation of Agreement. A Section, an
Exhibit or a Schedule is, unless otherwise stated, a reference to
a section hereof, an exhibit hereto or a schedule hereto, as the
case may be. Section captions used in this Agreement are for
convenience only, and shall not affect the construction of this
Agreement. The words "hereof," "herein," "hereto" and
"hereunder" and words of similar purport when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
1.4 Compliance with Financial Restrictions..4 Compliance
with Financial Restrictions..4 Compliance with Financial
Restrictions. Compliance with each of the financial ratios and
restrictions contained in Section 11 shall, except as otherwise
provided herein, be determined in accordance with GAAP
consistently followed.
1.5 Accounting Principles..5 Accounting Principles..5
Accounting Principles. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP
consistent with those applied in the preparation of the audited
financial statements referred to in Section 11.1 hereof. All
financial information delivered to the Agent pursuant to
Section 11.1 hereof shall be prepared in accordance with GAAP
applied on a basis consistent with those reflected by the initial
financial statements delivered to the Agent pursuant to
Section 10.5, except (i) where such principles are inconsistent
with the requirements of this Agreement and (ii) for those
changes with which the independent certified public accountants
referred to in Section 11.1(a) hereof concur in rendering
unqualified certificates as to financial statements.
2. COMMITMENTS OF THE BANKS; BORROWING PROCEDURES..
COMMITMENTS OF THE BANKS; BORROWING PROCEDURES.. COMMITMENTS OF
THE BANKS; BORROWING PROCEDURES.
2.1 Commitments..1 Commitments..1 Commitments. Subject to
the terms and conditions of this Agreement, each Bank, severally
but not jointly, agrees to make loans (collectively the "Loans"
and individually each a "Loan") to the Company, which Loans the
Company may prepay and reborrow during the period from the date
hereof to, but not including, the Termination Date, in such
amounts as the Company may from time to time request, but not
exceeding in the aggregate at any one time outstanding such
Bank's Commitment less such Bank's Percentage of the aggregate
face amount of all Letters of Credit issued and outstanding at
such time. All Loans made hereunder shall be made by the Banks
on a pro-rata basis according to each Bank's Percentage.
2.2 Loan Options..2 Loan Options..2 Loan Options.
Each Loan shall be either a Reference Rate Loan or a Eurodollar
Loan or a Money Market Loan, except as otherwise provided herein.
Any combination of types of Loans may be outstanding at the same
time; provided, however, that the Company may not have more than
ten borrowings of Eurodollar Loans outstanding at the same time.
2.3 Borrowing Procedure..3 Borrowing Procedure..3
Borrowing Procedure.
(a) Subject to the terms of this Agreement, the
Company shall give the Agent (x) at least three Banking Days'
prior notice of each proposed borrowing of Eurodollar Loans not
later than 10:00 a.m. Houston time on the date of such notice,
(y) at least one Banking Day's prior notice of each proposed
borrowing of Reference Rate Loans not later than 10:00 a.m.
Houston time on the date of such notice and (z) notice not later
than 10:00 a.m. Houston time on the day of each proposed
borrowing of Money Market Loans. Each notice shall be by
telephone (promptly confirmed in writing in the form of Exhibit K
hereto) and shall specify (i) the type of Loans requested, (ii)
in the case of Eurodollar Loans, the initial Interest Period
therefor, (iii) the borrowing date, which shall be a Banking Day,
(iv) the amount of Loans requested and (v) in the case of Money
Market Loans, the Maturity Date therefor. The Agent shall
promptly advise each Bank thereof. Not later than 12:30 p.m.,
Houston time, on the date of a proposed borrowing, each Bank
shall provide the Agent at its principal office in Houston with
immediately available funds covering such Bank's ratable share
(if any) of such borrowing. Notwithstanding the foregoing, the
notice for the initial borrowing hereunder may be made on the
date of the proposed borrowing and the Banks' funding obligations
referred to in the immediately preceding sentence shall be
extended to 2:30 p.m., Houston time.
(b) Each borrowing of Reference Rate Loans and Money
Market Loans shall be in a minimum amount of $100,000 or an
integral multiple thereof. Each borrowing of Eurodollar Loans
shall be in a minimum amount of $500,000 or an integral multiple
thereof.
(c) If the Company requests a borrowing of Money
Market Loans, the Agent shall promptly provide to the Company a
quotation of the interest rate that would be applicable to a
borrowing of Money Market Loans in the amount requested and with
a Maturity Date specified in the notice of borrowing; provided,
however, that in no event shall such quoted rate be less than the
lesser at any time of (i) the rate of interest then most recently
announced by TCB at Houston, Texas as its reference rate, or
(ii) the sum of 0.5% plus the Federal Funds Rate. If such
interest rate is satisfactory to the Company, the Company shall,
not later than the time specified by the Agent when providing the
interest rate quotation, request that such Money Market Loan be
made. The principal amount of each Money Market Loan shall
mature and, shall be payable in full, on its respective Maturity
Date. The Company shall not prepay the principal of any Money
Market Loan without the consent of all Banks.
(d) The Agent, on behalf of the Banks, will pay to the
Company, by crediting its commercial demand deposit account at
TCB, the amount of each Loan on the date designated in the notice
of borrowing upon receipt of the documents required in Section 8
and, if applicable, Section 9, with respect to such Loan.
2.4 Continuation and/or Conversion of Loans..4
Continuation and/or Conversion of Loans..4 Continuation and/or
Conversion of Loans. The Company may elect (i) to continue any
outstanding Eurodollar Loan from the current Interest Period of
such Loan into a subsequent Interest Period to begin on the last
day of such current Interest Period, or (ii) to convert any
outstanding Reference Rate Loan into a Eurodollar Loan or, on the
last day of the current Interest Period, to convert one type of
Loan into another, in each case by giving at least three (3)
Banking Days' prior telephonic notice not later than 10:00 a.m.,
Houston time, on the date of such notice (promptly confirmed in
writing in the form of Exhibit L hereto) to the Agent (which
shall promptly advise each Bank thereof) of such continuation or
conversion, specifying the date, amount and the Interest Period,
if applicable. Absent notice of continuation or conversion, each
Eurodollar Loan shall automatically convert into a Reference Rate
Loan on the last day of the current Interest Period for such
Loan, unless paid in full on such last day. No Loan shall be
converted into a Eurodollar Loan and no Eurodollar Loan shall be
continued less than thirty days before the Termination Date or at
any time that an Event of Default or an Unmatured Event of
Default exists.
2.5 Extension of the Termination Date..5 Extension of
the Termination Date..5 Extension of the Termination Date.
(a) At least 60 but not more than 90 days before any
anniversary of the Effective Date, the Company may, by delivery
of a written request to the Agent in the form of Exhibit B,
request that each Bank agree to extend the then-scheduled
Termination Date by one (1) year.
(b) The Agent shall, upon receipt of any such
extension request, promptly notify each Bank thereof, and request
that each Bank promptly advise the Agent of its approval or
rejection of such request.
(c) Upon receipt of such notification from the Agent,
each Bank may, in its sole discretion, agree to extend for one
(1) year, or decline to extend, the Termination Date, and each
Bank shall, within 30 days of receipt of the notice described in
clause (b), notify the Agent of its approval or denial of such
request. If any Bank does not so notify the Agent, such Bank
shall be deemed to have denied such extension request. The Agent
shall, no later than 30 days following its receipt of any
extension request from the Company, notify the Company as to the
Banks which have approved or denied such request.
(d) If all of the Banks approve any such request, the
Termination Date shall be extended to the date which is one (1)
year after the Termination Date in effect immediately prior to
such extension. If fewer than all of the Banks approve any such
request, the Termination Date shall not be extended.
3. NOTES EVIDENCING LOANS.. NOTES EVIDENCING LOANS.. NOTES
EVIDENCING LOANS.
3.1 Reference Rate Loans; Eurodollar Loans..1 Reference
Rate Loans; Eurodollar Loans..1 Reference Rate Loans;
Eurodollar Loans. The Reference Rate Loans and Eurodollar Loans
of all Banks shall be evidenced by the Company's promissory note
(the "Series A Note") in the form of Exhibit A-1, with
appropriate insertions, which Note shall (i) be dated the
Effective Date (or such other date satisfactory to the Agent),
(ii) be made payable to the order of the Agent for the account of
the Banks ratably in accordance with their Percentages, and (iii)
mature on the Termination Date. The Series A Note shall be an
amendment and restatement of the Existing Series A Note.
3.2 Money Market Loans.2 Money Market Loans.2 Money
Market Loans. The Money Market Loans of all Banks shall be
evidenced by the Company's promissory note (the "Series B Note")
in the form of Exhibit A-2, with appropriate insertions, which
Note shall (i) be dated the Effective Date (or such other date
satisfactory to the Agent), (ii) be made payable to the order of
the Agent for the account of the Banks ratably in accordance with
their Percentages, and (iii) mature on the Termination Date. The
Series B Note shall be an amendment and restatement of the
Existing Series B Note.
3.3 Evidence of Loans.3 Evidence of Loans.3 Evidence of
Loans. All Loans made by the Banks to the Company pursuant to
this Agreement and all payments of principal shall be evidenced
by the Agent in its records or, at its option, on the schedule
attached to the applicable Note, which records or schedule(s)
shall be rebuttable presumptive evidence of the subject matter
thereof, provided that the failure of the Agent to make any
endorsement or other notation, or any error in doing so, shall
not affect the obligations of the Company hereunder or under the
Notes.
4. [intentionally omitted]. [intentionally omitted].
[intentionally omitted]
5. INTEREST AND FEES.. INTEREST AND FEES.. INTEREST AND FEES.
5.1 Interest..1 Interest..1 Interest.
(a) Reference Rate Loan. The unpaid principal of the
Reference Rate Loans shall bear interest prior to maturity at a
rate per annum equal to the Alternate Base Rate in effect from
time to time. Prior to maturity interest on each Reference Rate
Loan shall be payable on each Payment Date therefor and on the
Termination Date.
(b) Eurodollar Loans. The unpaid principal of each
Eurodollar Loan shall bear interest prior to maturity at a rate
per annum equal to the Interbank Rate (Reserve Adjusted) in
effect for each Interest Period therefor plus the Margin from
time to time in effect. Interest on each Eurodollar Loan shall
be payable on each Payment Date therefor and on the Termination
Date.
(c) Money Market Loans. The unpaid principal of each
Money Market Loan shall bear interest prior to maturity at the
Money Market Rate applicable to such Loan. Interest on each
Money Market Loan shall be payable on the Payment Date therefor
and on the Termination Date.
(d) Interest After Maturity. The Company shall pay to
the Banks interest on any amount of principal of any Loan which
is not paid when due, whether at stated maturity, by acceleration
or otherwise, accruing from and including the date such amount
shall have become due to (but not including) the date of payment
thereof in full, at the rate per annum, which is equal to the
greater of (i) 2% in excess of the rate applicable to the unpaid
amount immediately before it became due or (ii) 2% in excess of
the Alternate Base Rate from time to time in effect. Interest
after maturity shall be payable on demand.
5.2 Commitment Fee..2 Commitment Fee..2 Commitment Fee.
The Company agrees to pay to the Banks ratably in accordance with
their Percentages, a commitment fee, for the period commencing on
March 31, 1997 and ending on the earlier of (x) the Termination
Date and (y) the date of termination of the Credit, equal to
0.25% per annum on the daily average of the unused amount of the
Credit. The commitment fee paid to the Banks pursuant to this
Section 5.2 shall be payable on the last day of each March, June,
September and December and on the Termination Date or the date of
termination of the Credit, in each case for any period then
ending for which such commitment fee shall not have been
theretofore paid.
5.3 Method of Calculating Interest and Fees..3 Method of
Calculating Interest and Fees..3 Method of Calculating Interest
and Fees. Interest on each Eurodollar Loan and Money Market Loan
(and on any Reference Rate Loan bearing interest by reference to
the Federal Funds Rate) shall be computed on the basis of a year
consisting of 360 days and paid for actual days elapsed,
calculated as to each Interest Period from and including the
first day thereof to but excluding the last day thereof.
Interest on each Reference Rate Loan (other than any Reference
Rate Loan described in the preceding sentence) shall be
calculated on the basis of a 365 day or 366 day year, as
applicable, and paid for actual days elapsed. The fees payable
pursuant to Section 5.2 shall be computed on the basis of a year
consisting of 360 days and paid for actual days elapsed.
5.4 Agent's Fee..4 Agent's Fee..4 Agent's Fee. The Company
shall pay the Agent the fees separately agreed to between the
Company and the Agent.
60 PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF THE
CREDIT. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF
THE CREDIT. PAYMENTS, PREPAYMENTS, REDUCTION OR
TERMINATION OF THE CREDIT.
6.1 Place of Payment..1 Place of Payment..1 Place of
Payment. All payments hereunder (including payments with respect
to the Notes) shall be made without set-off or counterclaim and
shall be made to the Agent, for the account of the Banks ratably
in accordance with their Percentage of the Credit, in immediately
available funds prior to 12:30 p.m., Houston time, on the date
due at the Agent's office at 712 Main, Houston, Texas 77002, or
at such other place as may be designated by the Agent to the
Company in writing. Any payments received after such time shall
be deemed received on the next Banking Day. The Agent shall
promptly remit in immediately available funds to each Bank its
share of all such payments received by the Agent for the account
of such Bank. Whenever any payment to be made hereunder or under
any Note shall be stated to be due on a date other than a Banking
Day, such payment may be made on the next succeeding Banking Day
(unless, in the case of a payment with respect to a Eurodollar
Loan, such next succeeding Banking Day is the first Banking Day
of a calendar month, in which case such payment shall be due on
the next preceding Banking Day), and such extension of time shall
be included in the computation of interest or any fees.
6.2 Prepayments..2 Prepayments..2 Prepayments. The Company
may from time to time, upon prior written or telephonic notice
received by the Agent (which shall promptly advise each Bank
thereof), prepay the principal of any Loan (other than a Money
Market Loan) in whole or in part without premium, as contemplated
by Section 2.1; provided, however, that (a) any partial
prepayment of principal shall be in a minimum amount of $30,000
or an integral multiple thereof and (b) any prepayment of a
Eurodollar Loan on a day other than the last day of an Interest
Period therefor shall be subject to Section 7.1.
6.3 Reduction of Credit..3 Reduction of Credit..3
Reduction of Credit. The Company may from time to time, upon at
least five (5) Banking Days' prior written or telephonic notice
received by the Agent (which shall promptly advise each Bank
thereof), permanently reduce the amount of the Credit (such
reduction to be made among the Banks according to their
Percentages) to an amount not less than the principal amount of
all outstanding Loans. Any such reduction shall be in a minimum
amount of $250,000 or an integral multiple thereof. The Company
may at any time on like notice terminate the Credit upon payment
in full of the Loans and other liabilities of the Company
hereunder. The Company shall promptly confirm any telephonic
notice of reduction or termination of the Credit in writing.
6.4 Offset..4 Offset..4 Offset. In addition to and not in
limitation of all rights of offset that any Bank or other holder
of any Loan may have under applicable law, each Bank or other
holder of any Loan shall, upon the occurrence of any Event of
Default described in Section 12.1 or any Unmatured Event of
Default described in Section 12.1(e), have the right to
appropriate and apply to the payment of each Loan any and all
balances, credits, deposits, accounts or moneys of the Company
then or thereafter with such Bank or other holder.
6.5 Proration of Payments..5 Proration of Payments..5
Proration of Payments. If any Bank or other holder of a Loan
shall obtain any payment or other recovery (whether voluntary,
involuntary, by application of offset or otherwise) on account of
principal of or interest on any Loan in excess of its pro rata
share of payments and other recoveries obtained by all Banks or
other holders on account of principal of and interest on Loans
then held by them, such Bank or other holder shall purchase from
the other Banks or holders such participation in the Loans held
by them as shall be necessary to cause such purchasing Bank or
other holder to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter
recovered from such purchasing holder, the purchase shall be
rescinded and the purchase price restored to the extent of such
recovery, but without interest. The Company agrees that the Bank
so purchasing a participation from the other Banks under this
Section 6.5 may exercise all its rights of payment, including the
right of set-off, with respect to such participation as fully as
if such Bank were the direct creditor of the Company in the
amount of such participation.
70 INDEMNIFICATION: EURODOLLAR LOANS. INDEMNIFICATION
EURODOLLAR LOANS. INDEMNIFICATION EURODOLLAR LOANS.
7.1 Indemnity for Funding Losses..1 Indemnity for
Funding Losses..1 Indemnity for Funding Losses. The Company
will indemnify each Bank upon demand against any loss or expense
which such Bank may sustain or incur, including, without
limitation, any loss or expense sustained or incurred in
obtaining, liquidating or employing deposits or other funds
acquired to effect funding or maintain a Loan, as a consequence
of (i) any failure of the Company to borrow any Loan on the date
specified therefor in the notice of borrowing with respect to
such Loan, (ii) any failure of the Company to make any payment
when due of any amount due hereunder or under any Note in
connection with any Loan, or (iii) any payment or prepayment of
any Eurodollar Loan on a date other than the last day of the
Interest Period for such Loan. The Company's foregoing
obligations shall survive termination of this Agreement.
7.2 Capital Adequacy..2 Capital Adequacy..2 Capital
Adequacy. If any Bank shall determine at any time after the date
hereof that the adoption of any law, rule or regulation regarding
capital adequacy, or any change therein or 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 Bank with any
request or directive regarding capital adequacy (whether or not
having the force of law) from any such authority, central bank or
comparable agency, has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of its
obligations hereunder to a level below that which such Bank could
have achieved but for such adoption, change or compliance (taking
into consideration such Bank's policies with respect to capital
adequacy), by an amount deemed by such Bank to be material, then
the Company shall pay to such Bank upon demand such amount or
amounts, in addition to the amounts payable under the other
provisions of this Agreement or under any Note, as will
compensate such Bank for such reduction. Determination by such
Bank for purposes of this Section 7.2 of the additional amount or
amounts required to compensate such Bank in respect of the
foregoing shall be conclusive in the absence of demonstrable
error. In determining such amount or amounts, such Bank may use
any reasonable averaging and attribution methods.
7.3 Additional Provisions Relating to Eurodollar Loans..3
Additional Provisions Relating to Eurodollar Loans..3 Additional
Provisions Relating to Eurodollar Loans.
(a) Increased Cost. If, as a result of any law,
regulation, treaty or directive, or any change therein, or in the
interpretation or application thereof, or compliance by any Bank
with any request or directive (whether or not having the force of
law) from any court or governmental authority, agency or
instrumentality:
(i) the basis of taxation of payments to any Bank of
the principal of or interest on any Eurodollar Loan (other
than taxes imposed on the overall net income of such Bank by
the jurisdiction in which such Bank has its principal
office) is changed; or
(ii) any reserve, special deposit, special assessment,
or similar requirement against assets of, deposits with or
for the account of, or credit extended by any Bank is
imposed, modified or deemed applicable; or
(iii) any other condition affecting this Agreement
or the Eurodollar Loans is imposed on any Bank or the
interbank eurodollar market;
and such Bank determines that, by reason thereof, the cost to
such Bank of making or maintaining any Eurodollar Loan is
increased, or the amount of any sum receivable by such Bank
hereunder in respect of any Eurodollar Loan is reduced;
then, the Company shall pay to such Bank upon demand (which
demand shall be accompanied by a statement setting forth the
basis for the calculation thereof but only to the extent not
theretofore provided to the Company) such additional amount or
amounts as will compensate such Bank for such additional cost or
reduction (provided such amount has not been compensated for in
the calculation of the Eurocurrency Reserve Percentage).
Determinations by such Bank for purposes of this section of the
additional amounts required to compensate such Bank in respect of
the foregoing shall be conclusive, absent demonstrable error.
The provisions of this Section 7.3(a) shall only be applicable to
Eurodollar Loans which are outstanding on or after the date such
Bank has notified the Company that an event has occurred which
will result in the imposition of a liability on the Company under
this Section 7.3 (a) , it being understood that the Company may
prepay any such Loan without any prepayment fee or penalty
(except as provided in Section 7.1).
(b) Eurodollar Deposits Unavailable or Interest Rate
Unascertainable. If the Company has any Eurodollar Loan
outstanding, or has notified the Agent of its intention to incur
a Eurodollar Loan as provided herein, then in the event that
prior to any Interest Period any Bank shall have determined
(which determination shall be conclusive and binding on the
parties hereto) that deposits of the necessary amount for the
relevant Interest Period are not available to such Bank in the
interbank Eurodollar market or that, by reason of circumstances
affecting such market, adequate and reasonable means do not exist
for ascertaining the Interbank Rate applicable to such Interest
Period, such Bank shall promptly give notice of such
determination to the Company, the Agent and the other Banks, and
(i) any notice of new Eurodollar Loans previously given by the
Company and not yet borrowed shall be deemed a notice to make
Reference Rate Loans and (ii) the Company shall be obligated
either to prepay or to convert any outstanding Eurodollar Loans
to Reference Rate Loans on the last day of the then current
Interest Period with respect thereto, subject to the provisions
of Section 7.1.
(c) Changes in Law Rendering Eurodollar Loans
Unlawful. If at any time due to any new law, treaty or
regulation, or any interpretation thereof by any governmental or
other regulatory authority charged with the administration
thereof, or for any other reason arising subsequent to the date
hereof, it shall become unlawful for any Bank to fund any
Eurodollar Loan which it is committed to make hereunder, the
obligation of such Bank to provide such Loan shall, upon the
happening of such event, forthwith be suspended for the duration
of such illegality. If any such change shall make it unlawful
for such Bank to continue any Eurodollar Loan previously made by
it hereunder, such Bank shall, upon the happening of such event,
notify the Company, the Agent and the other Banks thereof in
writing stating the reasons therefor, and the Company shall on
the earlier of (i) the last day of the then current Interest
Period for such Eurodollar Loan or (ii) if required by such law,
regulation or interpretation, on such date as shall be specified
in such notice, either convert such unlawful Loans to Reference
Rate Loans, or, if available, Money Market Loans, or prepay all
such Eurodollar Loans without any penalty (except as provided in
Section 7.1), to such Bank in full.
(d) Discretion of any Bank as to Manner of Funding.
Subject to the provisions of Section 7.3(e), any Bank shall be
entitled to fund and maintain its funding of all or any part of
its Eurodollar Loans in any manner it elects, it being
understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had
actually funded and maintained each Eurodollar Loan through the
purchase of deposits having a maturity corresponding to the
maturity of such Eurodollar Loan and being an interest rate equal
to the Interbank Rate. Any Bank may, if it so elects, fulfill
any commitment to make Eurodollar Loans by causing a foreign
branch or affiliate to make or continue such Eurodollar Loans,
provided, however, that in such event such Loans shall be deemed
for the purposes of this Agreement to have been made by such
Bank, and the obligation of the Company to repay such Loans shall
nevertheless be to such Bank and shall be deemed held by such
Bank, to the extent of such Loans, for the account of such branch
or affiliate.
(e) Mitigation of Circumstances. Each Bank shall
promptly notify the Company and the Agent of any event of which
it has knowledge which will result in, and will use reasonable
commercial efforts available to it (and not, in such Bank's good
faith judgment, otherwise disadvantageous to such Bank) to
mitigate or avoid, (i) any obligation by the Company to pay any
amount pursuant to Section 7.3(a) or (ii) the occurrence of any
circumstances of the nature described in Section 7.3(b) or 7.3(c)
(and, if any Bank has given notice of any such event described in
clause (i) or (ii) above and thereafter such event ceases to
exist, such Bank shall promptly so notify the Company and the
Agent). Without limiting the foregoing, each Bank will designate
a different funding office if such designation will avoid (or
reduce the cost to the Company of) any event described in clause
(i) or (ii) of the preceding sentence and such designation will
not, in such Bank's sole judgment, be otherwise disadvantageous
to such Bank.
80 CONDITIONS PRECEDENT TO ALL LOANS. CONDITIONS PRECEDENT TO
ALL LOANS. CONDITIONS PRECEDENT TO ALL LOANS.
The obligation of any Bank to make any Loan is subject to
the satisfaction of each of the following conditions precedent:
8.1 Notice..1 Notice..1 Notice. The Agent shall have
received timely notice of such Loan in accordance with Section
2.3.
8.2 Default..2 Default..2 Default. Before and
after giving effect to such Loan, no Event of Default or
Unmatured Event of Default shall have occurred and be continuing.
8.3 Insurance..3 Insurance..3 Insurance. There shall
have been no material change, or notice of prospective material
change (whether such notice is formal or informal) in the nature,
extent, scope or cost of the insurance policies of NPCI or any
Subsidiary listed on Exhibit E which change would have a material
adverse effect on the financial condition of NPCI and its
Subsidiaries taken as a whole or would significantly adversely
affect the ability of the Company or any Guarantor to perform its
respective obligations under this Agreement or under the Note or
any other Loan Document to which it is a party.
8.4 Warranties..4 Warranties..4 Warranties. Before and
after giving effect to such Loan, the warranties in Section 10
(other than the warranty in the last sentence of Section 10.5 and
in Section 10.10) shall be true and correct as though made on the
date of such Loan or Letter of Credit, except for such changes as
are specifically permitted hereunder.
8.5 Certification..5 Certification..5 Certification.
Each request for a Loan shall be deemed to be a certification
that the conditions precedent set out in Sections 8.2, 8.3 and
8.4 have been satisfied.
90 CONDITIONS PRECEDENT TO EFFECTIVE DATE AND INITIAL LOAN
THEREON OR THEREAFTER. CONDITIONS PRECEDENT TO EFFECTIVE
DATE AND INITIAL LOAN THEREON OR THEREAFTER. CONDITIONS
PRECEDENT TO EFFECTIVE DATE AND INITIAL LOAN THEREON OR
THEREAFTER.
The occurrence of the Effective Date and the obligation of
the Banks to make the initial Loan hereunder on or after the
Effective Date is subject to the satisfaction of the conditions
precedent, in addition to the applicable conditions precedent set
forth in Section 8 above, that the Company shall have delivered
to the Agent all of the following, each (i) duly executed and
dated the Effective Date or such earlier date as is satisfactory
to the Agent, (ii) in form and substance satisfactory to the
Agent, and (iii) in sufficient number of signed counterparts to
provide one for each Bank (except for the Notes, of which only
the original shall be signed).
9.1 Notes..1 Notes..1 Notes. The Series A Note and
Series B Note payable to the order of the Agent for the account
of the Banks ratably in accordance with their respective
Commitments.
9.2 Master Guaranty.2 Master Guaranty.2 Master
Guaranty. The Master Guaranty, duly executed by NPCI and each
Subsidiary thereof (other than the Company).
9.3 Resolutions; Consents and Approvals..3 Resolutions;
Consents and Approvals..3 Resolutions; Consents and
Approvals. A copy, duly certified by the secretary or an
assistant secretary of the Company and each Guarantor, of (i) the
resolutions of such Person's Board of Directors authorizing or
ratifying the execution, delivery and performance of the Loan
Documents to which it is a party and its execution, delivery and
performance of the Sharing Agreement, (ii) all documents
evidencing other necessary corporate action with respect to the
Loan Documents to which it is a party and the Sharing Agreement,
and (iii) all approvals or consents, if any, with respect to the
Loan Documents to which it is a party and the Sharing Agreement.
9.4 Incumbency..4 Incumbency..4 Incumbency. A
certificate of the secretary or an assistant secretary of the
Company and each Guarantor certifying the names of such Person's
officers authorized to sign the Loan Documents to which it is a
party and the Sharing Agreement, together with the true
signatures of such officers.
9.5 Opinion..5 Opinion..5 Opinion. An opinion of
Shook, Hardy & Bacon L.L.P., counsel to the Company and each
Guarantor addressed to the Agent and the Banks in substantially
the form of Exhibit J.
9.6 Sharing Agreement.6 Sharing Agreement.6 Sharing
Agreement. The Sharing Agreement, in form and substance
satisfactory to the Banks, executed and delivered by the parties
thereto.
9.7 Officer's Certificate9.7 Officer's Certificate.7
Officer's Certificate. A certificate of a Responsible Officer
certifying to the Agent as to a true, correct and complete
attached copies of the Note Agreements.
9.8 General..8 General..8 General. All other
documents which are provided for hereunder or which the Banks may
reasonably request.
100 REPRESENTATIONS AND WARRANTIES. REPRESENTATIONS AND
WARRANTIES. REPRESENTATIONS AND WARRANTIES.
To induce the Banks to grant the Credit and to make the
Loans, the Company represents and warrants that:
10.1 Existence..1 Existence..1 Existence. The Company
and each corporate Guarantor are corporations duly organized,
validly existing and in good standing under the laws of the
states of their respective incorporation. All of the other
Guarantors, if any, are entities duly organized, validly existing
and in good standing under the laws of the jurisdictions of their
respective organization. The Company and all of the Guarantors
are in good standing and are duly qualified to do business in
each state where, because of the nature of their respective
activities or properties, such qualification is necessary.
10.2 Authorization..2 Authorization..2 Authorization.
The Company and each Guarantor is duly authorized to execute and
deliver the Loan Documents to which it is a party and is and will
continue to be duly authorized to perform its respective
obligations under the Loan Documents to which it is a party. The
Company is and will continue to be duly authorized to borrow
monies hereunder. The execution, delivery and performance by the
Company and each Guarantor and the borrowings hereunder do not
and will not require any consent or approval of any governmental
agency or authority.
10.3 No Conflicts..3 No Conflicts..3 No Conflicts.
The execution, delivery and performance by the Company and each
Guarantor of the Loan Documents to which it is a party (a) do not
and will not conflict with (i) any provision of law applicable to
such Person, (ii) the charter or by-laws of such Person,
(iii) any agreement binding upon such Person, or (iv) any court
or administrative order or decree applicable to such Person and
(b) do not and will not require, or result in, the creation or
imposition of any Lien on any asset of NPCI or any of its
Subsidiaries.
10.4 Validity and Binding Effect..4 Validity and Binding
Effect..4 Validity and Binding Effect. When duly executed and
delivered, the Loan Documents to which it is a party will be,
legal, valid and binding obligations of the Company and the
Guarantors, enforceable against such Person in accordance with
their respective terms, except as enforceability may be limited
by bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors' rights and by
general principles of equity limiting the availability of
equitable remedies.
10.5 Financial Statements..5 Financial Statements..5
Financial Statements. NPCI's audited consolidated financial
statement as at March 26, 1996 and NPCI's Quarterly Report on
Form 10-Q dated December 24, 1996 and filed with the Securities
and Exchange Commission, copies of which have been furnished by
NPCI to the Agent, and which the Agent has furnished to each
Bank, have been prepared in conformity with generally accepted
accounting principles applied on a basis consistent with that of
the preceding fiscal year end period and present fairly the
financial condition of NPCI and its Subsidiaries as at such dates
and the results of their operations for the periods then ended,
subject (in the case of the interim financial statement) to year-
end audit adjustments. Since December 24, 1996 there has been no
material adverse change in the financial condition, assets,
liabilities, business operations, management or prospects of NPCI
and its Subsidiaries taken as a whole.
10.6 Litigation..6 Litigation..6 Litigation. No claims,
litigation, arbitration proceedings or governmental proceedings
are pending or threatened against or are affecting the Company or
any of the Guarantors, the results of which might materially and
adversely affect the financial condition, assets, liabilities,
business operations, management or prospects of the Company, or
the Company and the Guarantors taken as a whole, except those
referred to in a schedule furnished to each Bank
contemporaneously herewith and attached hereto as Exhibit C.
Other than any liability incident to such claims, litigation or
proceedings or provided for or disclosed in the financial
statements referred to in Section 10.5, neither the Company nor
any of the Guarantors has any contingent liabilities which are
material to the Company, or to the Company and the Guarantors
taken as a whole.
10.7 Taxes..7 Taxes..7 Taxes. Each of the Company and the
Guarantors has filed all tax returns, to the best of its
knowledge, which are required to have been filed and has paid, or
made adequate provisions for the payment of all material taxes,
assessments and other governmental charges or levies imposed upon
it, its income or any of its properties, franchises or assets
which are due and payable, except such taxes, assessments and
other governmental charges or levies, if any, as are being
contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be
required by GAAP have been maintained.
10.8 Liens..8 Liens..8 Liens. None of the assets of the
Company or any of the Guarantors is subject to any Lien, except
for (a) Permitted Liens, (b) Liens disclosed in the financial
statements referred to in Section 10.5; and (c) Liens listed on
Exhibit D.
10.9 No Default..9 No Default..9 No Default. Neither the
Company nor any of the Guarantors is in default under any
agreement or instrument to which the Company or any Guarantors is
a party or by which any of their respective properties or assets
is bound or affected, which default might materially and
adversely affect the financial condition, assets, liabilities,
business operations, management or prospects of the Company, or
the Company and the Guarantors taken as a whole. No Event of
Default or Unmatured Event of Default has occurred and is
continuing.
10.10 Insurance..10 Insurance..10 Insurance. The
schedule that summarizes the property and casualty insurance
program carried by the Company and the Guarantors (Exhibit E
attached hereto) is complete and accurate in all material
aspects. This summary includes the insurer's(s') name(s), policy
numbers(s), expiration date(s), amount(s) of coverage, type(s) of
coverage, the annual premium(s), exclusions, deductibles and self-
insured retention, and describes any other self-insurance or risk
assumption agreed to by the Company or any Guarantors or imposed
upon the Company or any Guarantors by any such insurer.
10.11 Subsidiaries..11 Subsidiaries..11
Subsidiaries. NPCI has no Subsidiaries except as listed on
Exhibit F (as updated from time to time pursuant to Section
11.1(f)). NPCI and its Subsidiaries own the percentage of its
Subsidiaries as set forth on Exhibit F.
10.12 Partnerships..12 Partnerships..12
Partnerships. Neither NPCI nor any of its Subsidiaries is a
partner or joint venturer in any partnership or joint venture
other than the partnerships and joint ventures listed on
Exhibit G (as updated from time to time pursuant to Section
11.1(f)).
10.13 Regulation U..13 Regulation U..13 Regulation
U. (i) Neither NPCI nor any Subsidiary thereof is engaged in the
business of purchasing or selling margin stock (as defined in
Regulation U of the Board of Governors of the Federal Reserve
System) or extending credit to others for the purpose of
purchasing or carrying margin stock, (ii) no part of the proceeds
of any Loan will be used to purchase or carry directly or
indirectly any margin stock, and (iii) no Loan will be used for
any purpose which would violate any of the margin regulations of
said Board of Governors.
10.14 Compliance..14 Compliance..14 Compliance. The
Company and the Guarantors are in material compliance with all
statutes and governmental rules and regulations applicable to
them.
10.15 Pension Plans..15 Pension Plans..15 Pension
Plans. Each Plan complies in all material respects with all
material applicable statutes and governmental rules and
regulations, and (i) no Reportable Event has occurred and is
continuing with respect to any Plan, (ii) neither NPCI nor any
ERISA Affiliate has withdrawn from any Plan or instituted steps
to do so, and (iii) no steps have been instituted to terminate
any Plan. No condition exists or event or transaction has
occurred in connection with any Plan which could result in the
incurrence by NPCI or any ERISA Affiliate of any material
liability, fine or penalty.
110 COMPANY'S COVENANTS. COMPANY'S COVENANTS. COMPANY'S
COVENANTS.
From the date of this Agreement and thereafter until the
expiration or termination of the Credit and until the Notes and
other liabilities of the Company hereunder are paid in full, the
Company agrees that it will:
11.1 Financial Statements and Other Information..1
Financial Statements and Other Information..1 Financial
Statements and Other Information. Furnish to each Bank:
(a) within ninety-five (95) days after each fiscal
year of NPCI, a copy of the annual audit and Form 10-K report of
NPCI and its Subsidiaries prepared on a consolidated and
consolidating basis in conformity with GAAP and bearing the
unqualified opinion of an independent certified public accountant
of recognized national standing selected by NPCI whose opinion
shall be in scope and substance satisfactory to the Banks;
(b) within fifty (50) days after each quarter (except
the last quarter) of each fiscal year of NPCI, a copy of NPCI's
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission and of the unaudited financial statement of
NPCI and its Subsidiaries prepared in the same manner as the
audit report referred to in preceding clause (a) signed by NPCI's
chairman, president or chief financial officer and consisting of
at least a balance sheet as at the close of such quarter, and
statements of income and cash flows for such quarter and for the
period from the beginning of such fiscal year to the close of
such quarter;
(c) together with the financial statements furnished
by the Company under preceding clauses (a) and (b) and in
connection with any acquisition pursuant to Section 11.10(a), a
certificate of a Responsible Officer of the Company in the form
attached hereto as Exhibit M, dated the date of such annual audit
report or such quarterly financial statement or acquisition, as
the case may be, to the effect that no Event of Default or
Unmatured Event of Default has occurred and is continuing or, if
there is any such event, describing it and the steps, if any,
being taken to cure it, and containing a computation of, and
showing compliance with, each of the financial ratios and
restrictions contained in this Section 11;
(d) copies of each filing and report made by NPCI or
any Subsidiary thereof with or to any securities exchange or the
Securities and Exchange Commission and of each communication from
NPCI or any Subsidiary thereof to stockholders generally,
promptly upon the filing or making thereof;
(e) promptly from time to time, a written report of
any change in the list of NPCI's Subsidiaries set forth on
Exhibit F or in the list of partnerships and joint ventures set
forth on Exhibit G;
(f) promptly upon receipt thereof, a copy of any
annual, interim or special audit made by independent accountants,
any management control letter issued by them or any other report
submitted to the Company's Board of Directors or NPCI's Board of
Directors by the independent accountants; and
(g) promptly from time to time, such other information
as the Banks may reasonably request.
11.2 Books, Records and Inspection..2 Books, Records and
Inspection..2 Books, Records and Inspection. Maintain, and
cause each Guarantor to maintain, complete and accurate books and
records in which full and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to its
respective business and activities; permit, and cause each
Guarantor to permit, any authorized representative of any of the
Banks to visit and inspect any of the properties of the Company
or any of the Guarantors, upon reasonable prior notice and during
regular business hours, including any books and records (and to
make extracts therefrom), and to discuss its affairs and finances
as often as the Banks may reasonably request.
11.3 Conduct of Business..3 Conduct of Business..3
Conduct of Business. Maintain and cause each Guarantor to
maintain its respective existence and use its best efforts to
maintain in full force and effect all franchises (including but
not limited to all Pizza Hut, Inc. franchise agreements and
licenses), licenses, leases, contracts and other authority and
rights which are material to the Company, or to the Company and
the Guarantors, taken as a whole.
11.4 Taxes..4 Taxes..4 Taxes. Pay, and cause each
Guarantor to pay, when due, all taxes, assessments and other
governmental charges or levies imposed upon it, its income or any
of its properties, franchises or assets, unless and only to the
extent that the Company or such Guarantor, as the case may be, is
contesting such taxes, assessments and other governmental charges
or levies in good faith and by appropriate proceedings and the
Company or such Guarantor has set aside on its books such
reserves or other appropriate provisions therefor as may be
required by GAAP.
11.5 Notices..5 Notices..5 Notices.
(a) Event of Default; Pension Plans. Immediately upon
learning of the occurrence of any of the following, provide to
each Bank written notice thereof, describing the same and the
steps being taken by the Company or the Subsidiary or the ERISA
Affiliate affected with respect thereto: (i) the occurrence of an
Event of Default or an Unmatured Event of Default or (ii) the
occurrence of a Reportable Event with respect to any Plan, the
institution of any steps by the Company, any ERISA Affiliate, the
PBGC or any other Person to terminate any Plan, or the
institution of any steps by the Company or any ERISA Affiliate to
withdraw from any Plan with respect to which it is a "substantial
employer" within the meaning of section 4063 of ERISA.
(b) Litigation. Notify each Bank (i) promptly upon
learning thereof, of the institution or existence of any
litigation, arbitration or governmental proceedings which is
material to the Company, or to the Company and the Guarantors
taken as a whole, and (ii) of any judgment or decree entered
against the Company or any Guarantor within five business days
after such entry if the aggregate amount of all judgments and
decrees then outstanding against the Company and all the
Guarantors exceed $1,500,000 after deducting (A) the amount with
respect to which the Company or any Guarantor is insured and with
respect to which the insurer has not disclaimed liability, and
(B) the amount for which the Company or any Guarantor is
otherwise indemnified if the terms of such indemnification are
satisfactory to the Banks.
(c) Indebtedness. Notify each Bank of any
Indebtedness incurred in connection with Liens permitted under
Section 11.8(c) if the amount thereof exceeds $1,500,000.
11.6 Pension Plans..6 Pension Plans..6 Pension Plans.
Not permit, and not permit any Guarantor to permit, any condition
to exist in connection with any Plan which might constitute
grounds for the PBGC to institute proceedings to have such Plan
terminated or a trustee appointed to administer such Plan, and
not engage in, or permit to exist or occur, or permit any of the
Guarantors to engage in, or permit to exist or occur, any other
condition, event or transaction with respect to any Plan which
could result in the incurrence by the Company or any of the
Guarantors of any material liability, fine or penalty.
11.7 Expenses..7 Expenses..7 Expenses. Whether or not
any Loan is made hereunder, pay the Banks upon demand for all
reasonable expenses, including reasonable fees of attorneys for
the Agent and the Banks (who may be employees of the Agent and
the Banks) and other legal expenses and costs of collection,
incurred by (i) the Agent in connection with the preparation,
negotiation, execution and amendment of, and waivers to, this
Agreement, the Notes and any document required to be furnished
herewith, and (ii) the Agent and the Banks in connection with the
enforcement of the Company's obligations hereunder or under any
Note. The Company also agrees to (x) indemnify and hold the
Agent harmless from any loss or expense which may arise or be
created by the acceptance of telephonic or other instructions for
making Loans or disbursing the proceeds thereof, and (y) pay, and
save the Agent and the Banks harmless from all liability for, any
stamp or other taxes which may be payable with respect to the
execution or delivery of this Agreement or the issuance of any
Note or any other instrument or document provided for herein or
delivered or to be delivered hereunder or in connection herewith.
The Company's foregoing obligations shall survive any termination
of this Agreement.
11.8 Indebtedness..8 Indebtedness..8 Indebtedness.
Not, and not permit any Guarantor to, incur or permit to exist
any Indebtedness, except: (a) Indebtedness to the Agent and the
Banks under the terms of the Loan Documents; (b) Indebtedness of
the Company having maturities and terms, and which is
subordinated to payment of the Notes in a manner, approved in
writing by the Banks; (c) Indebtedness of the Company or any
Guarantor hereafter incurred in connection with the Liens
permitted by paragraph (7) of the definition of Permitted Liens;
(d) Indebtedness outstanding on the date hereof and listed on
Exhibit H, including, in the case of any Guarantor, any Permitted
Guaranty Debt in respect of such Indebtedness; and (e) other
unsecured Indebtedness of the Company (including Indebtedness
permitted by Section 11.20), and unsecured Indebtedness of any
Guarantor permitted by Section 11.20, provided that such
Indebtedness is incurred when no Event of Default or Unmatured
Event of Default exists or would result therefrom and such
Indebtedness exists under agreements that contain
representations, warranties, covenants and defaults no more
burdensome to the Company or any Guarantor than those set forth
herein; and (f) Indebtedness of the Company to any Guarantor and
Indebtedness of any Guarantor to the Company or any other
Guarantor provided that such Indebtedness is incurred when no
Event of Default or Unmatured Event of Default exists or would
result therefrom.
11.9 Liens..9 Liens..9 Liens. Not, and not permit any
Guarantor to, create or permit to exist any Lien with respect to
any assets now owned or hereafter acquired, except for Permitted
Liens and Liens referred to in Section 10.8.
11.10 Merger, Purchase and Sale..10 Merger, Purchase and
Sale..10 Merger, Purchase and Sale. Not, and not permit any
Guarantor to, be a party to any merger or consolidation; not, and
not permit any Guarantor to, in any one fiscal year, sell,
transfer, convey, lease or otherwise dispose of assets of NPCI
and its Subsidiaries which exceed in the aggregate, for NPCI and
its Subsidiaries taken as a whole, five percent (5%) of the Value
of NPCI's consolidated total assets determined as of the end of
the immediately preceding fiscal year, or purchase or otherwise
acquire all or substantially all the assets of any Person.
Notwithstanding the foregoing:
(a) subject to the next to last sentence of this
Section 11.10, and the prior delivery to the Agent of a
certificate in the form of Exhibit M giving effect thereto, the
Company or any Subsidiary thereof may acquire any other
franchisee of Pizza Hut, Inc. or Romacorp, Inc.;
(b) any wholly-owned Subsidiary of NPCI (other than
the Company) may merge into NPCI or into or with any other wholly-
owned Subsidiary of NPCI;
(c) any wholly-owned Subsidiary of NPCI (other than
the Company) may be consolidated with any other wholly-owned
Subsidiary thereof so long as immediately thereafter 100% of the
voting stock or other ownership interest of the resulting Person
is owned by NPCI or another wholly-owned Subsidiary of NPCI; and
(d) any Guarantor may sell, transfer, convey, lease or
assign any assets to the Company or to any other Guarantor, and
the Company may sell, transfer, convey, lease or assign any
assets to any Guarantor (provided that the Company may not sell,
transfer, convey, lease or assign any franchises).
provided, in each of the cases described in the preceding
clauses, that immediately thereafter and after giving effect
thereto, no Event of Default or Unmatured Event of Default shall
have occurred and be continuing. Neither NPCI nor any Subsidiary
shall use in excess of $50,000,000 of borrowings under the
$185,000,000 Amended and Restated Credit Agreement of even date
herewith (as amended from time to time) for any single
acquisition of, or Investment in, any Person or Persons or the
assets of any Person or Persons without the prior written consent
of the Majority Banks. No other provision in this Agreement
(including, without limitation, any provision in this Agreement
relating to restricted investments or transactions with
affiliates) shall prohibit the Company or any Guarantor from
selling, transferring, conveying, leasing, or assigning any
assets (including, without limitation, financial assets) to the
extent such sale, transfer, conveyance, lease or assignment is
permitted under Section 11.10(d).
11.11 Nature of Business..11 Nature of Business..11
Nature of Business. Engage, and cause each Guarantor to engage,
in substantially the same fields of business as it is engaged in
on the date hereof.
11.12 Franchise Rights..12 Franchise Rights..12
Franchise Rights. Not permit any change, termination, or loss of
its or any Guarantor's rights to operate as a franchisee of Pizza
Hut, Inc., which would have a material adverse effect on the
Company, or on NPCI and its Subsidiaries taken as a whole.
11.13 Net Worth..13 Net Worth..13 Net Worth. Not
permit NPCI's Consolidated Net Worth during any fiscal quarter
ending after December 31, 1996, to be less than the sum of (i)
$83,000,000 plus (ii) fifty percent (50%) of NPCI's Consolidated
Net Earnings for each fiscal quarter ending after December 31,
1996 (excluding any fiscal quarter in which there is a loss).
11.14 Leverage Ratio..14 Leverage Ratio..14 Leverage
Ratio. Not permit the Indebtedness to Pro Forma EBITDA Ratio as
of the last day of any Computation Period to exceed (i) prior to
March 31, 1998, 3.25 to 1.00 and (ii) thereafter, 3.00 to 1.00.
11.15 Fixed Charge Coverage..15 Fixed Charge
Coverage..15 Fixed Charge Coverage. Not permit the ratio of
(a) Pro Forma EBITDA as of the last day of any Computation Period
plus the consolidated operating lease rental expense of NPCI and
its Subsidiaries for such Computation Period to (b) the sum of
(i) consolidated interest expense of NPCI and its Subsidiaries
for such Computation Period, plus (ii) the consolidated operating
lease rental expense of NPCI and its Subsidiaries for such
Computation Period to be less than 1.50 to 1.00 on the last day
of such Computation Period.
For purposes of this Section 11.15, interest expense shall
include, without limitation, implicit interest expenses on
Capitalized Leases.
11.16 Insurance..16 Insurance..16 Insurance.
Maintain, and cause each Guarantor to maintain, insurance to such
extent and against such hazards and liabilities as is commonly
maintained by companies similarly situated, and in any event such
types and in such amounts and with financially sound and
reputable insurers of at least the quality as is described in the
certificate furnished pursuant to Section 10.10. The Company
agrees to notify each Bank prior to any material change in or
cancellation of any such insurance.
11.17 Restricted Payments..17 Restricted Payments..17
Restricted Payments. Not, and not permit any Guarantor to,
purchase or redeem any shares of its stock, declare or pay any
dividends thereon (other than stock dividends), make any
distribution to stockholders as such or set aside any funds for
any such purpose, and not, and not permit any Guarantor to,
prepay, purchase or redeem any subordinated Indebtedness of the
Company or any Guarantor if, before or after giving effect to
such transaction, an Event of Default or Unmatured Event of
Default has occurred and is continuing.
11.18 Leases..18 Leases..18 Leases. Not enter
into or permit to exist, or permit any Guarantor to enter into or
permit to exist, any arrangements for the leasing by it or any of
its Subsidiaries, as lessee, of any real or personal property
under leases (other than Capitalized Leases) if, immediately
before and after giving effect thereto, an Event of Default or
Unmatured Event of Default shall exist or be continuing. For
purposes of determining whether the entering into any lease
results in a breach of Section 11.15, the Company shall make the
calculation required under such Section as of the date such lease
is entered into on assumption that the rental expense that is
expected to be incurred during the twelve-month period following
the entering into the lease was incurred during the twelve-month
period ending on the date of such calculation.
11.19 NCPI's and Subsidiaries' Stock..19 NCPI's and
Subsidiaries' Stock..19 NCPI's and Subsidiaries' Stock. Not,
and not permit any Guarantor to, (i) purchase or otherwise
acquire any shares of the stock of NPCI if, before or after
giving effect to such transaction, an Event of Default or
Unmatured Event of Default has occurred and is continuing, or
(ii) take any action, or permit any Guarantor to take any action,
which will result in a decrease in NPCI's or any Subsidiaries
ownership interest in any Subsidiary (including, without
limitation, the Company).
11.20 Guaranties..20 Guaranties..20 Guaranties. Not,
and not permit any Guarantor to, become a guarantor or surety of,
or otherwise become or be responsible in any manner (whether by
agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or
services, or otherwise) with respect to, any undertaking of any
other Person, except for (i) the endorsement, in the ordinary
course of collection, of instruments payable to it or its order,
(ii) as to the Company, guarantees of obligations which do not
exceed $5,000,000.00 in the aggregate at any one time, and
(iii) Permitted Guaranty Debt; provided, however, that in
addition to the foregoing, NPCI may enter into and perform its
obligations under the Indemnification Agreements.
11.21 Investments..21 Investments..21
Investments. Not, and not permit any Guarantor to, make or
permit to exist any Investment in any Person, except for:
(a) Investments in securities with maturities of one
year or less from the date of acquisition issued or fully
guaranteed or insured by the United States of America or any
agency thereof;
(b) Investments in commercial paper maturing in 270
days or less from the date of issuance rated in the highest grade
by a nationally recognized credit rating agency;
(c) Investments in certificates of deposit maturing
within one year from the date of acquisition issued by a bank or
trust company organized under the laws of the United States or
any state thereof having capital, surplus and undivided profits
aggregating at least $100,000,000;
(d) Subject to the last sentence of Section 11.10,
Investments by NPCI or any Subsidiary thereof in other Pizza Hut,
Inc. or Romacorp, Inc. franchisees as long as, before or after
giving effect to such Investment, no Event of Default or
Unmatured Event of Default has occurred which is continuing;
(e) Investments outstanding on the date hereof and
listed on Exhibit I;
(f) other liquid Investments (except Investments
prohibited under Section 11.10 or 11.20), as selected by the
Company or any Guarantor, not to exceed $5,000,000 in the
aggregate at any one time for the Company and all Guarantors; and
(g) Investments permitted by Section 11.8(f).
11.22 Subsidiaries..22 Subsidiaries..22
Subsidiaries. Except as permitted under Section 11.21(d), not,
without the Banks' prior written consent, create or acquire, or
permit any Guarantor to create or acquire, any Subsidiaries in
addition to those existing on the date of this Agreement. The
Company shall immediately cause each Subsidiary of NPCI hereafter
created or acquired by NPCI or any Subsidiary thereof to provide
to the Agent for the benefit of the Banks the following: (a) a
Joinder Agreement, (b) all documents, agreements and other
instruments described in Sections 9.3, 9.4 and 9.5 with respect
to such Subsidiary; and (c) all information regarding the
condition (financial or otherwise), business and operations of
such Subsidiary as the Agent or any Bank may reasonably request.
It is agreed and understood that the agreement of the Company
under this Section 11.22 to cause any Subsidiary of NPCI to
provide to the Agent for the benefit of the Banks a Joinder
Agreement is a condition precedent to the making of the Loans
pursuant to this Agreement and that the entry into this Agreement
by the Banks constitutes good and adequate consideration for the
provision of such Joinder Agreement.
11.23 Unconditional Purchase Obligation..23
Unconditional Purchase Obligation..23 Unconditional Purchase
Obligation. Not, and not permit any Guarantor to, enter into or
be a party to any contract for the purchase or lease of
materials, supplies or other property or services if (a) such
contract requires that payment be made by it regardless of
whether or not delivery is ever made of such materials, supplies
or other property or services and (b) the aggregate amount
payable over the full remaining terms of all such contracts
exceeds $1,500,000 in the aggregate for the Company and the
Guarantors.
11.24 Other Agreements..24 Other Agreements..24
Other Agreements. Not, and not permit any Guarantor to, enter
into any agreement containing any provision which would be
violated or breached by the Company's or any Guarantor's
performance of its obligations hereunder or under any instrument
or document delivered or to be delivered by such Person hereunder
or in connection herewith.
11.25 Use of Proceeds..25 Use of Proceeds..25 Use of
Proceeds. Not permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of "purchasing or carrying any
margin stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended from time to
time, and furnish to each Bank, upon its request, a statement in
conformity with the requirements of Federal Reserve Form U-1 (or
such other form or forms as may be required by Regulation U)
referred to in Regulation U.
11.26 Restrictive Agreements..26 Restrictive
Agreements..26 Restrictive Agreements. Neither the Company, nor
any Guarantor, will, directly or indirectly, enter into, create
or otherwise allow to exist any contract or other consensual
prohibition or restriction on the ability of (A) any Guarantor
(i) to pay dividends or make other distributions or contributions
or advances to the Company, (ii) to repay loans and other
indebtedness owing by it to the Company, (iii) to redeem equity
interests held by it by Company, or (iv) to transfer any of its
assets to the Company, or (B) the Company or any Guarantor to
make any payments required or permitted under the Loan Documents
or otherwise prohibit or restrict compliance by the Company and
the Guarantors thereunder (unless, with respect to subparts (i)
through (iv), such prohibitions or restrictions are not
materially more burdensome on the Guarantors than the
prohibitions and restrictions contained in this Agreement).
11.27 Consolidated Fixed Charge Requirement..27
Consolidated Fixed Charge Requirement..27 Consolidated Fixed
Charge Requirement. The Company covenants that, on the last day
of each fiscal quarter, the ratio of (a) Consolidated Net Income
Available for Fixed Charges to (b) Fixed Charges will be not less
than 2.0 to 1.0 for the period consisting of the four (4)
consecutive fiscal quarters ending on the date of such
determination.
12. EVENTS OF DEFAULT AND REMEDIES.. EVENTS OF DEFAULT AND
REMEDIES.. EVENTS OF DEFAULT AND REMEDIES.
12.1 Events of Default12.1 Events of Default.1 Events of
Default. Each of the following shall constitute an Event of
Default under this Agreement:
(ai Non-Payment. (i) Default in the payment, when
due, of any principal of any Note or any fee hereunder; or
(ii) default, and the continuance thereof for 10 days, in the
payment, when due, of any interest on any Note or any other
amount owing by the Company or any Guarantor to the Agent or the
Banks pursuant to this Agreement or any other Loan Document.
(bi Non-Payment of Other Indebtedness. Default in the
payment when due, whether by acceleration or otherwise (subject
to any applicable grace period), of any Indebtedness of, or
guaranteed by, the Company or any Guarantor (other than the
Indebtedness evidenced by the Notes) in excess of $1,000,000 in
the aggregate for NPCI and its Subsidiaries.
(ci Acceleration of Other Indebtedness. Any event or
condition shall occur which (i) results in the acceleration of
the maturity of any Indebtedness in excess (in the aggregate for
NPCI and its Subsidiaries) of $1,000,000 of, or guaranteed by,
the Company or any Guarantor (other than the Indebtedness
evidenced by the Notes) or (ii) enables the holder or holders of
such other Indebtedness or any trustee or agent for such holders
(any required notice of default having been given and any
applicable grace period having expired) to accelerate the
maturity of such other Indebtedness.
(di Other Obligations. Default in the payment when
due, whether by acceleration or otherwise, or in the performance
or observance (subject to any applicable grace period) of (i) any
material obligation or agreement in excess in the aggregate of
$1,000,000 of the Company or any Guarantor to or with any Bank
(other than any obligation or agreement of the Company or the
Guarantors under the Loan Documents), or (ii) any material
obligation or agreement in excess in the aggregate of $1,000,000
of the Company or any Guarantor to or with any other Person
(other than (x) any such material obligation or agreement
constituting or related to Indebtedness, (y) accounts payable
arising in the ordinary course of business, and (z) any material
obligation or agreement of any Guarantor to the Company or to any
other Guarantor), except only to the extent that the existence of
any such default is being contested by the Company or such
Guarantor, as the case may be, in good faith and by appropriate
proceedings and the Company or such Guarantor shall have set
aside on its books such reserves or other appropriate provisions
therefor as may be required by GAAP.
(ei Insolvency. The Company or any of the Guarantors
becomes insolvent, or generally fails to pay, or admits in
writing its inability to pay, its debts as they mature, or
applies for, consents to, or acquiesces in the appointment of a
trustee, receiver or other custodian for the Company or such
Guarantor or a substantial part of the property of the Company or
such Guarantor, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed
for the Company or any of the Guarantors or for a substantial
part of the property of the Company or any of the Guarantors and
is not discharged within 30 days; or any bankruptcy,
reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against the Company or any of the
Guarantors and, if instituted against the Company or any of the
Guarantors, is consented to or acquiesced in by the Company or
such Guarantor or remains for 30 days undismissed; or any warrant
of attachment is issued against any substantial part of the
property of the Company or any of the Guarantors which is not
released within 30 days of service.
(fi Pension Plans. A Termination Event occurs with
respect to any Plan if, at the time such Termination Event
occurs, such Plan's then "vested liabilities" (as defined in
section 3(25) of ERISA) would exceed the then value of such
Plan's assets.
(gi Financial Covenants; Agreements. The Company
fails to perform or observe any agreement contained in Section
11.8, 11.9, 11.10, 11.13, 11.14, 11.15, 11.16, 11.19, 11.20,
11.21, 11.22 or 11.27 and such failure shall not be remedied
within five (5) days after the chairman, president or chief
financial officer of the Company or any Guarantor obtains actual
knowledge thereof; or the Company fails to deliver the notice
required by Section 11.5(a)(i) or fails to perform or observe
Section 11.26; or the Company or any Guarantor fails to perform
or observe any other agreement set forth in this Agreement or any
other Loan Document to which it is a party (and not constituting
an Event of Default under any of the other subsections of this
Section 12.1) and continuance of such failure for thirty (30)
days after the chairman, president or chief financial officer of
the Company or such Guarantor, as the case may be, obtains actual
knowledge thereof.
(hi Warranty. Any warranty made by the Company or any
Guarantor herein or any other Loan Document to which it is a
party is untrue in any material respect, or any schedule,
statement, report, notice, certificate or other writing furnished
by the Company or any Guarantor to any Bank is untrue in any
material respect on the date as of which the facts set forth
therein are stated or certified, or any certification made or
deemed made by the Company or any Guarantor to any Bank is untrue
in any material respect on or as of the date made or deemed made.
(ii Litigation. There shall be entered against the
Company or any Guarantor one or more judgments or decrees in
excess of $1,500,000 in the aggregate at any one time outstanding
for NPCI and all its Subsidiaries, excluding those judgments or
decrees (i) that shall have been outstanding less than 30
calendar days from the entry thereof or (ii) for and to the
extent which the Company or any Guarantor is insured and with
respect to which the insurer has assumed responsibility in
writing or for and to the extent which the Company or any
Guarantor is otherwise indemnified if the terms of such
indemnification are satisfactory to the Banks.
(ji Franchise Agreement. The Company or any Guarantor
takes any action or fails to take action which results in the
loss of any Franchise Agreement, license or other permit which
would preclude the Company or any Guarantor from operating such
franchise under the name "Pizza Hut", and such loss materially
adversely affects the business operations or profitability of the
Company or such Guarantor.
(ki Pizza Hut, Inc. If (a) Pizza Hut, Inc. applies
for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for itself or a substantial part of
its property, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed
for Pizza Hut, Inc. or for a substantial part of its property and
is not discharged within 30 days; or any bankruptcy,
reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against Pizza Hut, Inc. and, if
instituted against Pizza Hut, Inc., is consented to or acquiesced
in by Pizza Hut, Inc. or remains for 30 days undismissed; or any
warrant of attachment is issued against any substantial part of
the property of Pizza Hut, Inc. which is not released within 30
days of service; and (b) for the 12-month period ending on the
last day of the fiscal quarter end which coincides with or
immediately precedes the occurrence of the event described in
clause (a), the ratio described in Section 11.15 is less than 2.5
to 1.0.
(l) Nullity of Loan Documents. Except pursuant to the
express terms of any Loan Document, any Loan Document shall, at
any time after its execution and delivery and for any reason,
cease to be in full force and effect or be declared to be null
and void, or the validity or enforceability thereof shall be
contested by NPCI or any Affiliate thereof, or NPCI or any
Affiliate thereof shall deny that it has any or any further
liability or obligations under any Loan Document to which NPCI or
any Subsidiary thereof is a party.
12.2 Remedies. If any Event of Default described in Section
12.1 shall have occurred and be continuing, the Agent shall upon
request of the Supermajority Banks by written notice to the
Company declare the Credit to be terminated and entire unpaid
principal amount of the Notes, all interest accrued and unpaid
thereon and all other amounts payable under this Agreement and
the Notes to be due and payable, whereupon the Credit shall
immediately terminate and such amounts shall, except as otherwise
expressly provided in this Section 12.2, become immediately due
and payable without presentment, demand, protest, declaration or
notice of any kind, all of which are hereby expressly waived by
the Company (except that if an event described in Section 12.1(e)
occurs, the Credit shall immediately terminate and such amounts
shall become immediately due and payable without presentment,
demand, protest, declaration or notice of any kind, all of which
are hereby expressly waived by the Company).
12.3 Preservation of Security for Unmatured Reimbursement
Obligations..3 Preservation of Security for Unmatured
Reimbursement Obligations..3 Preservation of Security for
Unmatured Reimbursement Obligations. In the event that,
following the occurrence of an Event of Default, any Letters of
Credit shall remain outstanding and undrawn upon, the Company
shall immediately pay to the Agent an amount in immediately
available funds equal to 100% of the then aggregate amount of
Letters of Credit outstanding, which funds shall be held by the
Agent in a collateral account to be maintained by the Agent.
Such collateral shall be held for the ratable benefit of TCB as
issuer of such Letters of Credit and the Banks holding
participations therein. Notwithstanding anything herein to the
contrary, such collateral shall be applied solely to unpaid
reimbursement obligations arising in respect of any such Letters
of Credit and/or the payment of TCB's obligations under any such
Letter of Credit when such Letter of Credit is drawn upon. The
Company hereby agrees to execute and deliver to the Agent and the
Banks such security agreements, pledges or other documents as the
Agent or any of the Banks may, from time to time, reasonably
require to perfect the pledge, lien and security interest in and
to any such collateral provided for in this Section 12.3. Upon
the payment or expiry of all such outstanding Letters of Credit
all such collateral shall be released to the Company in due form
at the Company's cost.
12.4 Remedies Cumulative12.4 Remedies Cumulative.4
Remedies Cumulative. No remedy, right or power conferred upon
the Agent or the Banks is intended to be exclusive of any other
remedy, right or power given hereunder or now or hereafter
existing at law, in equity, or otherwise, and all such remedies,
rights and powers shall be cumulative.
13. RELATIONSHIP AMONG BANKS.. RELATIONSHIP AMONG BANKS..
RELATIONSHIP AMONG BANKS.
13.1 Appointment and Grant of Authority..1 Appointment and
Grant of Authority..1 Appointment and Grant of Authority.
Each Bank hereby appoints the Agent, and the Agent hereby agrees
to act, as agent under this Agreement. The Agent shall have and
may exercise such powers under this Agreement as are specifically
delegated to the Agent by the terms hereof, together with such
other powers as are reasonably incidental thereto. Each Bank
hereby authorizes, consents to, and directs the Company to deal
with the Agent as the true and lawful agent of such Bank to the
extent set forth herein.
13.2 Non-Reliance on Agent..2 Non-Reliance on Agent..2 Non-
Reliance on Agent. Each Bank agrees that it has, independently
and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made
its own credit analysis of NPCI and its Subsidiaries and decision
to enter into this Agreement and that it will, independently and
without reliance upon the Agent, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking
action under this Agreement. The Agent shall not be required to
keep informed as to the performance or observance by the Company
of this Agreement or any other document referred to or provided
for herein or to inspect the properties or books of NPCI or its
Subsidiaries. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks
by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or
business of NPCI, its Subsidiaries (or any of its related
companies) which may come into the Agent's possession.
13.3 Responsibility of the Agent and Other Matters..3
Responsibility of the Agent and Other Matters..3 Responsibility
of the Agent and Other Matters.
(ai The Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and those
duties and liabilities shall be subject to the limitations and
qualifications set forth in this Section 13. The duties of the
Agent shall be mechanical and administrative in nature.
(bi Neither the Agent nor any of its directors,
officers or employees shall be liable for any action taken or
omitted (whether or not such action taken or omitted is within or
without the Agent's responsibilities and duties expressly set
forth in this Agreement) under or in connection with this
Agreement or any other instrument or document in connection
herewith, except for gross negligence or willful misconduct.
Without limiting the foregoing, neither the Agent nor any of its
directors, officers or employees shall be responsible for, or
have any duty to examine into (i) the genuineness, execution,
validity, effectiveness, enforceability, value or sufficiency of
(a) this Agreement, the Notes or the other Loan Documents, or (b)
any document or instrument furnished pursuant to or in connection
with this Agreement, the Notes or the other Loan Documents, (ii)
the collectibility of any amounts owed by the Company, (iii) any
recitals or statements or representations or warranties in
connection with this Agreement, the Notes or the other Loan
Documents, (iv) any failure of any party to this Agreement to
receive any communication sent, or (v) the assets, liabilities,
financial condition, results of operations, business or
creditworthiness of NPCI and its Subsidiaries.
(ci The Agent shall be entitled to act, and shall be
fully protected in acting upon, any communication in whatever
form believed by the Agent in good faith to be genuine and
correct and to have been signed or sent or made by a proper
person or persons or entity. The Agent may consult counsel and
shall be entitled to act, and shall be fully protected in any
action taken in good faith, in accordance with advice given by
counsel. The Agent may employ agents and attorney-in-fact and
shall not be liable for the default or misconduct of any such
agents or attorneys-in-fact selected by the Agent with reasonable
care. The Agent shall not be bound to ascertain or inquire as to
the performance or observance by the Company or any Guarantor of
any of the terms, provisions or conditions of this Agreement or
the Notes or the other Loan Documents.
13.4 Action on Instructions..4 Action on Instructions..4
Action on Instructions. The Agent shall be entitled to act or
refrain from acting, and in all cases shall be fully protected in
acting or refraining from acting, under this Agreement or the
Notes or any other instrument or document in connection herewith
or therewith in accordance with instructions in writing from the
Majority Banks (or, if required, all Banks or Supermajority
Banks, as the case may be).
13.5 Indemnification..5 Indemnification..5
Indemnification. To the extent the Company does not reimburse
and save the Agent harmless according to the terms hereof for and
from all costs, expenses and disbursements in connection
herewith, such costs, expenses and disbursements shall be borne
by the Banks ratably in accordance with their Percentages and the
Banks hereby agree on such basis (i) to reimburse the Agent for
all such costs, expenses and disbursements on request and (ii) to
indemnify and save harmless the Agent against and from any and
all losses, obligations, penalties, actions, judgments and suits
and other costs, expenses and disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted
against the Agent, other than as a consequence of the gross
negligence or willful misconduct on the part of the Agent,
arising out of or in connection with this Agreement, the Notes or
the other Loan Documents or any instrument or document in
connection herewith or therewith, or any request of the Banks,
including without limitation the costs, expenses and
disbursements in connection with defending itself against any
claim or liability, or answering any subpoena, related to the
exercise or performance of any of its powers or duties under this
Agreement or the taking of any action under or in connection with
this Agreement, the Notes or the other Loan Documents.
13.6 TCB and Affiliates..6 TCB and Affiliates..6 TCB
and Affiliates. With respect to TCB's Commitment and any Loans
by TCB under this Agreement and any Note and any interest of TCB
in any Note, TCB shall have the same rights and powers under this
Agreement and such Note as any other Bank and may exercise the
same as though it were not the Agent. TCB and its affiliates may
accept deposits from, lend money to, and generally engage, and
continue to engage, in any kind of business with the Company as
if TCB were not the Agent.
13.7 Notice to Holder of Loans..7 Notice to Holder of
Loans..7 Notice to Holder of Loans. The Agent may deem and
treat the payees of the Notes as the owners thereof for all
purposes unless a written notice of assignment, negotiation or
transfer thereof has been filed with the Agent. Any request,
authority or consent of any holder of any Loan shall be
conclusive and binding on any subsequent holder, transferee or
assignee of such Loan.
13.8 Successor Agent..8 Successor Agent..8 Successor
Agent. The Agent may resign at any time by giving 30 days'
written notice thereof to the Banks. Upon any such resignation,
the Banks shall have the right to appoint a successor Agent. If
no successor Agent shall have been appointed by the Banks and
accepted such appointment in connection herewith or therewith
within 30 days after the retiring Agent's giving notice of
resignation, then the retiring Agent may, but shall not be
required to, on behalf of the Banks, appoint a successor Agent
who has accepted such appointment. Notwithstanding the foregoing
provisions of this Section 13.8, TCB may at any time resign as
Agent if concurrently therewith an affiliate of TCB agrees to
assume the role of Agent hereunder. After any resigning Agent's
resignation hereunder, the provisions of this Section 13 shall
continue to be effective as to any action taken or omitted
hereunder or in connection herewith prior to such resignation.
14. GENERAL.. GENERAL.. GENERAL.
14.1 Waiver and Amendments..1 Waiver and Amendments..1
Waiver and Amendments. No delay on the part of any Bank or the
holder of any Loan in the exercise of any power or right shall
operate as a waiver thereof, nor shall any single or partial
exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right. The
remedies provided for herein are cumulative and not exclusive of
any remedies which may be available to any Bank at law or in
equity. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or any Note or any
other Loan Document shall in any event be effective unless the
same shall be in writing and signed by the Company and the
Majority Banks; provided, however, that in no event shall any
amendment, modification or waiver, or consent with respect to,
Sections 11.13 through 11.15 be effective unless the same shall
be in writing and signed by the Supermajority Banks; provided,
however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Banks, do any of the following: (a)
waive any of the conditions specified in Section 8 or 9, (b)
increase the amounts or extend the terms of the Banks'
Commitments or subject the Banks to any additional obligations,
(c) reduce the principal of, or interest on, the Notes or any
fees hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees hereunder, or
change the amount due on such date, (e) change the percentage of
the Commitments or of the aggregate unpaid principal amount of
the Notes, or the number of Banks, which shall be required to
take action hereunder, (f) release any collateral or any
guarantor, if any, from its obligations; (g) change the
definition of Majority Banks or Supermajority Banks; (h) change
any provisions of Section 11.26; or (i) change any provisions of
this Section 14.1; provided, further, that no amendment, waiver
or consent to Section 13 shall be effective unless signed by the
Agent. Any waiver of any provision of this Agreement or the
Notes or any other Loan Document, and any consent to any
departure by the Company or any Guarantor from the terms of any
provision of this Agreement, the Notes or any other Loan
Document, shall be effective only in the specific instance and
for the specific purpose for which given.
14.2 Notices..2 Notices..2 Notices. Except as
otherwise expressly provided herein, any notice hereunder between
the parties shall be in writing (including telegraphic, telex or
telecopy communication) and shall be given to the Company, the
Agent or any Bank at its address, telex number or telecopier
number set forth on the signature pages hereof or at such other
address, telex number or telecopier number as the Company, the
Agent or such Bank may, by written notice, designate as its
address, telex number or telecopier number for purposes of notice
hereunder. All such notices shall be deemed to be given when
transmitted by telex and the appropriate answerback is received,
transmitted by telecopier, delivered to the telegraph office,
personally delivered or, in the case of a mailed notice, three
Banking Days after the date sent by registered or certified mail,
postage prepaid, in each case addressed as specified in this
Section 14.2; provided, however, that notices to the Agent shall
not be effective until actually received by the Agent.
14.3 Severability; Participations; Assignments..3
Severability; Participations; Assignments..3 Severability;
Participations; Assignments.
(ai Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(bi Participations. Any Bank may grant one or more
participations in any Loan, and participant shall have the rights
(and be subject to the obligations) of a Bank set forth in
Sections 6.4, 6.5, 7 and 11.7 hereof as if such participant were
a Bank hereunder; provided, however, that
(i0 no participation contemplated in this Section 14.3
shall relieve the participating Bank from its Commitment or
its other obligations hereunder,
(ii0 such Bank shall remain solely responsible for the
performance of its Commitment and such other obligations,
(iii0 the Company and the Agent shall continue to
deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement, and
(iv0 no participant, unless such participant is an
Affiliate of such Bank, or is itself a Bank, shall be
entitled to require such Bank to take or refrain from taking
any action hereunder, except that such Bank may agree with
any participant that such Bank will not, without such
participant's consent, take any actions of the type
described in clauses (a) through (f) of Section 14.1.
(ci Assignments.
(i0 Subject to the prior written consent of the
Company, such consent not to be unreasonably withheld or
delayed (provided that such consent shall not be required if
an Event of Default has occurred and is continuing), each
Bank may assign to any Person (the "Assignee") all or a
portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its
Commitment); provided, however, that (i) each such
assignment shall be of a constant, and not a varying,
percentage of all of the assigning Bank's rights and
obligations under this Agreement, (ii) the total amount of
the Commitment so assigned to an Assignee or to an Assignee
and its affiliates taken as a whole shall equal or exceed
the lesser of (A) $5,000,000, or (B) the sum of the
remaining Commitment held by the assigning Bank, (iii) the
parties to each such assignment shall execute and deliver to
the Agent for its acceptance an Assignment and Acceptance in
substantially the form attached hereto as Exhibit N
("Assignment and Acceptance"), together with a processing
and recordation fee of $2,000, and (iv) the prior written
consent of the Company shall not be required for any
assignment to such Bank's Affiliate. Upon such execution,
delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance,
which effective date shall be the date on which such
Assignment and Acceptance is accepted by the Agent, (x) the
Assignee thereunder shall be a party hereto and, to the
Assignment and Acceptance, have the rights and obligations
of a Bank under the Loan Documents and (y) the Bank assignor
thereunder shall be deemed to have relinquished its rights
and to be released from its obligations under the Loan
Documents, to the extent (and only to the extent) that its
rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance (and, in the case
of an Assignment and Acceptance covering all or the
remaining portion of an assigning Bank's rights and
obligations under the Loan Documents, such Bank shall cease
to be a party thereto).
(ii0 By executing and delivering an Assignment and
Acceptance, the Bank assignor thereunder and the Assignee
thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Bank makes
no representation or warranty and assumes no responsibility
with respect to any statements, warranties or
representations made in or in connection with the Loan
Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
Loan Documents or any other instrument or document furnished
pursuant thereto; (ii) such assigning Bank makes no
representation or warranty and assumes no responsibility
with respect to the financial condition of the Company or
any Guarantor or the performance or observance by the
Company or any Guarantor of any of their respective
obligations under the Loan Documents or any other instrument
or document furnished pursuant hereto; (iii) such Assignee
confirms that it has received a copy of the Loan Documents,
together with copies of the most recent financial statements
delivered pursuant to Section 11.1 and such other documents
and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment
and Acceptance; (iv) such Assignee will, independently and
without reliance upon the Agent, such assigning Bank or any
other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this
Agreement; (v) such Assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with
such powers as are reasonably incidental thereto; and
(vi) such Assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms
of the Loan Documents are required to be performed by it as
a Bank.
(iii0 The Agent shall maintain at its address
referred to on the signature pages hereto a copy of each
Assignment and Acceptance delivered to and accepted by it.
(iv0 Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank, the Agent shall, if such
Assignment and Acceptance has been completed, (i) accept
such Assignment and Acceptance and (ii) give prompt notice
thereof to the Company.
(v0 Anything in this Section 14.3 to the contrary
notwithstanding, any Bank may at any time, without the
consent of any Person, assign and pledge all or any portion
of its Commitment and the Loans owing to it to any Federal
Reserve Bank (and its transferees) as collateral security
pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank. No such assignment shall
release the assigning Bank from its obligations hereunder.
14.4 Indemnification..4 Indemnification..4
Indemnification. The Company hereby indemnifies and holds
harmless the Agent and each Bank and each of the Agent's and the
Banks' directors, counsels, officers, employees, agents, persons
controlling or controlled by any of them and their assigns
(collectively the "Indemnified Parties") from and against any and
all losses, claims, damages, costs, liabilities and expenses
(including, without limitation, reasonable attorneys' fees,
disbursements and any out-of-pocket expenses) to which any of the
Indemnified Parties may become subject, whether directly or
indirectly, that result or arise from, or relate to, any claim,
action, lawsuit, or proceeding related to (i) any tender offer,
merger, purchase of stock, purchase of assets or other similar
transaction financed or proposed to be financed in whole or in
part, directly or indirectly, with the proceeds of any of the
Loans or (ii) the execution, delivery, performance or enforcement
of this Agreement or any other Loan Document by any of the
Indemnified Parties; provided, however, that an Indemnified Party
shall refund to the Company any amount received from the Company
for losses, damages, costs and expenses incurred by such Person
but which a court of competent jurisdiction has found resulted
solely from such Person's own gross negligence or willful
misconduct (individually and not as a co-conspirator with the
Company or any affiliate thereof); provided further, that it is
the intention of the Company to indemnify the Indemnified Parties
against the consequences of their own negligence. The foregoing
obligations of the Company shall survive termination of this
Agreement.
14.5 LAW..5 LAW..5 LAW. THIS AGREEMENT AND THE NOTE
SHALL BE CONTRACTS MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF TEXAS.
14.6 Successors..6 Successors..6 Successors. This
Agreement shall be binding upon the Company, the Agent and the
Banks and their respective successors and assigns, and shall
inure to the benefit of the Company, the Agent and the Banks and
the successors and assigns of the Agent and the Banks. The
Company shall not assign its rights or duties hereunder without
the consent of all Banks.
14.7 Subsidiary Reference..7 Subsidiary Reference..7
Subsidiary Reference. Any reference herein to a Subsidiary or
Subsidiaries of any Person, and any financial ratio or
restriction or other provision of this Agreement which is stated
to be applicable to such Person "and its Subsidiaries" or which
is to be determined on a "consolidated" basis, shall apply only
to the extent such Person has any Subsidiaries and, where
applicable, only to the extent any such Subsidiaries are
consolidated with such Person for financial reporting purposes.
14.8 ENTIRE AGREEMENT..8 ENTIRE AGREEMENT..8 ENTIRE
AGREEMENT. THIS AGREEMENT, TOGETHER WITH ALL OTHER WRITTEN
AGREEMENTS BETWEEN THE PARTIES HERETO, IS THE FINAL EXPRESS OF
THE CREDIT AGREEMENT BETWEEN THE PARTIES HERETO, AND SUCH WRITTEN
CREDIT AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR
ORAL CREDIT AGREEMENT OR OF A CONTEMPORANEOUS ORAL CREDIT
AGREEMENT BETWEEN THE PARTIES HERETO.
14.9 Counterparts..9 Counterparts..9 Counterparts.
This Agreement may be executed in any number of counterparts and
by the different parties on separate counterparts and each such
counterpart shall be deemed an original, but all such
counterparts shall together constitute but one and the same
Agreement.
14.10 Interest..10 Interest..10 Interest. All
agreements between the Company, the Agent and any Bank, whether
now existing or hereafter arising and whether written or oral,
are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of demand being made on any Note or
otherwise, shall the amount contracted for, charged, reserved or
received by the Agent or any Bank for the use, forbearance, or
detention of the money to be loaned under this Agreement or
otherwise or for the payment or performance of any covenant or
obligation contained herein exceed the Highest Lawful Rate. If,
as a result of any circumstances whatsoever, fulfillment by the
Company of any provision hereof or of the Notes, at the time
performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by applicable usury
law or result in the Agent or any Bank having or being deemed to
have contracted for, charged, reserved or received interest (or
amounts deemed to be interest) in excess of the maximum lawful
rate or amount of interest allowed by applicable law to be so
contracted for, charged, reserved or received by the Agent or
such Bank, then, ipso facto, the obligation to be fulfilled by
the Company shall be reduced to the limit of such validity, and
if, from any such circumstance, the Agent or any Bank shall ever
receive interest or anything which might be deemed interest under
applicable law which would exceed the Highest Lawful Rate, such
amount which would be excessive interest shall be refunded to the
Company, or, to the extent (i) permitted by applicable law and
(ii) such excessive interest does not exceed the unpaid principal
balance of the Notes and the amounts owing on other obligations
of the Company to the Agent or any Bank under this Agreement and
the Notes, applied to the reduction of the principal amount owing
on account of the Notes or the amounts owing on other obligations
of the Company to the Agent or any Bank under this Agreement and
the Notes and not to the payment of interest. All sums paid or
agreed to paid to the Agent or any Bank for the use, forbearance
of detention of the indebtedness of the Company, to the Agent or
to any Bank shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full
term of such indebtedness until payment in full of the principal
thereof (including the period of any renewal or extension
thereof) so that the interest on account of such indebtedness
shall not exceed the Highest Lawful Rate. The terms and
provisions of this Section 14.10 shall control and supersede
every other provision hereof and of all other agreements between
the Company, the Agent and the Banks. "Highest Lawful Rate"
shall mean with respect to each Bank, the maximum nonusurious
interest rate, if any, that at any time or from time to time may
be contracted for, taken, reserved, charged, or received with
respect to the Notes or on other amounts, if any, due to such
Bank pursuant to this Agreement or the Notes, under laws
applicable to such Bank which presently in effect, or, to the
extent allowed by law, under such applicable laws that may
hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow. To the
extent required by applicable law in determining the Highest
Lawful Rate with respect to any Bank as of any date, there shall
be taken into account the aggregate amount of all payments and
charges theretofore charged, reserved or received by such Bank
hereunder or under the Notes which constitute or are deemed to
constitute interest under applicable law.
14.11 Agreement of NPCI and its Subsidiaries..11
Agreement of NPCI and its Subsidiaries..11 Agreement of NPCI
and its Subsidiaries. By its execution and delivery hereof, NPCI
agrees to perform, and cause each Subsidiary of NPCI to perform,
each obligation hereunder which the Company has agreed to cause
NPCI and such Subsidiaries to perform, and further agrees to not
take any action which the Company has agreed to not permit NPCI
or any such Subsidiary to take.
14.12 Release of NPCI..12 Release of NPCI..12 Release of
NPCI. The Banks hereby release and discharge NPCI from all of
its obligations under the NPCI Credit Facility, the promissory
notes issued thereunder and the related instruments.
TEXAS BUSINESS AND COMMERCE CODE
26.02 NOTICE
FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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 written above.
NPC MANAGEMENT, INC.
By:
Name:
Title:
Address: 720 W. 20th Street
P. O. Box 643
Pittsburgh, KS 66762
Attn: James Schwartz
Fax: (316) 231-1199
NPC INTERNATIONAL, INC.
By:
Name:
Title:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
Individually and as Agent
Amount of
Commitment Share
$15,000,000 100% By:
Name:
Title:
Address: 712 Main
Houston, Texas 77002
Attn: John Sarvadi
Fax: (713) 216-6710
EXHIBIT A-1 Form of Series A Note
EXHIBIT B-2 Form of Series B Note
EXHIBIT B Request for Extension of
Termination Date
EXHIBIT C Litigation
EXHIBIT D Liens
EXHIBIT E Insurance
EXHIBIT F Subsidiaries
EXHIBIT G Partnerships/Joint Ventures
EXHIBIT H Indebtedness
EXHIBIT I Investments
EXHIBIT J Opinion of
Counsel to Company
EXHIBIT K Notice of Borrowing
EXHIBIT L Notice of
Continuation/Conversion
EXHIBIT M Compliance Certificate
EXHIBIT N Assignment and Acceptance
EXHIBIT O Form of Master Guaranty
EXHIBIT P Form of Sharing Agreement
_________________________________________________________________
_________________________________________________________________
__________________________
NPC MANAGEMENT, INC.
(assignee of NPC International, Inc.)
up to $60,000,000 Senior Notes
______________________________________________________
Amended and restated Master Shelf
And Assumption Agreement
_______________________________________________________
Dated effective as of March 26, 1997
_________________________________________________________________
_________________________________________________________________
__________________________
Table of Contents
(not part of Agreement)
Page
1. AUTHORIZATION OF ISSUE OF ORIGINAL SHELF NOTES;
ISSUANCE OF REPLACEMENT NOTES - 2 -
1A. Authorization of Issue of Original Shelf Notes. - 2 -
1B. Issuance of Replacement Notes. - 2 -
1C. Authorization of Assumption of Original Shelf Notes and
Issueof Additional Shelf Notes. - 2 -
2. ASSUMPTION OF ORIGINAL SHELF NOTES; INITIAL CLOSING. - 3 -
2A. Assumption of Original Shelf Notes. - 3 -
2B. Initial Closing. - 3 -
3. PURCHASE AND SALE OF NEW SHELF NOTES - 3 -
3A. Facility - 3 -
3B. Issuance Period - 3 -
3C. Periodic Spread Information - 4 -
3D. Request for Purchase - 4 -
3E. Rate Quotes - 5 -
3F. Acceptance - 5 -
3G. Market Disruption - 5 -
3H. Closing - 6 -
3I. Fees - 6 -
4. CONDITIONS OF INITIAL CLOSING. - 8 -
4A. Certain Documents. - 8 -
4B. Representations and Warranties; No Default. - 9 -
4C. Proceedings. - 9 -
5. CONDITIONS OF CLOSING WITH RESPECT TO NEW SHELF NOTES - 10 -
5A. Certain Documents - 10 -
5B. Representations and Warranties; No Default - 11 -
5C. Purchase Permitted by Applicable Laws - 11 -
5D. Proceedings. - 11 -
6. PREPAYMENTS. - 11 -
6A. Required Prepayments - 11 -
6B. Optional Prepayment With Yield-Maintenance Amount- 12 -
6C. Notice of Optional Prepayment - 12 -
6D. Application of Prepayments. - 12 -
6E. Retirement of Notes. - 12 -
7. AFFIRMATIVE COVENANTS - 13 -
7A. Financial Statements - 13 -
7B. Inspection of Property - 15 -
7C. Covenant to Secure Notes Equally - 15 -
7D. Subsidiary Guarantors. - 16 -
7E. Compliance with Laws, Etc. - 16 -
7F. Maintenance of Insurance. - 16 -
7G. Maintenance of Properties, Etc. - 16 -
7H. Corporate Existence - 17 -
7I. Claims for Labor and Materials - 17 -
8. NEGATIVE COVENANTS - 17 -
8A. Consolidated Net Worth Requirement. - 17 -
8B. Consolidated Fixed Charge Requirement - 17 -
8C. Lien, Debt, and Other Restrictions - 17 -
8D. Interest and Rents Coverage. - 23 -
9. EVENTS OF DEFAULT - 23 -
9A. Acceleration - 23 -
9B. Rescission of Acceleration - 26 -
9C. Notice of Acceleration or Rescission - 26 -
9D. Other Remedies. - 26 -
10. REPRESENTATIONS, COVENANTS AND WARRANTIES. - 27 -
10A. Organization; Qualification; Corporate Authority.- 27 -
10B. Financial Statements. - 27 -
10C. Conflicting Agreements and Other Matters. - 28 -
10D. Governmental Consent. - 28 -
10E. Enforceability. - 28 -
10F. Actions Pending - 28 -
10G. Outstanding Debt. - 29 -
10H. Title to Properties - 29 -
10I. Taxes. - 29 -
10J. Offering of Notes - 29 -
10K. Use of Proceeds. - 29 -
10L. ERISA - 30 -
10M. Disclosure. - 30 -
10N. Investment Company Act. - 30 -
10O. Public Utility Holding Company Act. - 31 -
10P. Environmental Compliance - 31 -
10Q. Funded Debt Agreements. - 31 -
10R. Hostile Tender Offers - 31 -
10S. Subsidiaries. - 31 -
11. REPRESENTATIONS OF THE PURCHASER. - 31 -
11A. Nature of Purchase - 31 -
11B. Source of Funds - 31 -
12. DEFINITIONS AND ACCOUNTING TERMS. - 32 -
12A. Certain Defined Terms. - 32 -
12B. Accounting Principles, Terms and Determinations - 42 -
13. MISCELLANEOUS. - 42 -
13A. Note Payments. - 42 -
13B. Expenses. - 42 -
13C. Consent to Amendments. - 43 -
13D. Form, Registration, Transfer and Exchange of Notes;
Lost Notes. - 43 -
13E. Persons Deemed Owners; Participations. - 44 -
13F. Survival of Representations and Warranties; Entire
Agreement. - 44 -
13G. Successors and Assigns. - 44 -
13H. Disclosure to Other Persons; Confidentiality. - 44 -
13I. Notices. - 45 -
13J. Descriptive Headings. - 45 -
13K. Satisfaction Requirement. - 45 -
13L. Governing Law. - 46 -
13M. Integration. - 46 -
13N. Maximum Interest Payable. - 46 -
13O. Counterparts; Fax. - 47 -
13P. Payments Due on Non-Business Days - 47 -
13Q. Agreement of NPC International and its Subsidiaries.- 47 -
Information Schedule
Exhibit A -- Form of Note
Exhibit B -- Form of Request to Purchase
Exhibit C -- Form of Confirmation of Acceptance
Exhibit D-1A -- Form of Shook, Hardy & Bacon Opinion
Exhibit D-1B -- Form of Opinion of Company's Counsel
Exhibit D-2A -- Form of Shook, Hardy & Bacon Opinion
Exhibit D-2B -- Form of Opinion of Company's Counsel
Exhibit E -- Guaranty Agreement
Exhibit F -- Sharing Agreement
Schedule 8C(2) -- Existing Funded Debt
Schedule 10C -- List of Agreements Restricting Debt
Schedule 10S -- List of Subsidiaries
AMENDED AND RESTATED
MASTER SHELF AND ASSUMPTION AGREEMENT
This AMENDED AND RESTATED MASTER SHELF AND ASSUMPTION
AGREEMENT (the "Agreement") is entered into May 8, 1997, but is
agreed effective as of March 26, 1997, between NPC Management,
Inc., a Delaware corporation (the "Company"), and The Prudential
Insurance Company of America ("Prudential").
WITNESSETH
WHEREAS, NPC International, Inc., a Kansas corporation
("NPC International"), and Prudential have entered into that
certain Amended and Restated Master Shelf Agreement dated as of
June 9, 1994 (Restated as of June 29, 1995) (the "Original Note
Agreement") pursuant to which NPC International issued and sold
to Prudential its senior notes with the interest rates and
maturities as described therein in the aggregate original
principal amount of $30,000,000 (collectively, the "Original
Shelf Notes");
WHEREAS, in connection with a corporate restructuring
(the "Restructuring"), and by its execution and delivery hereof,
NPC International hereby assigns to the Company, and by its
execution and delivery hereof, the Company assumes, effective as
of the Initial Date of Closing (as hereinafter defined), all of
the obligations and liabilities of NPC International existing
immediately prior to such assignment under the Original Note
Agreement and all Original Shelf Notes (all such obligations and
liabilities collectively, the "Assumed Obligations");
WHEREAS, the Company has determined that it is in its
best interest to assume the Assumed Obligations and has
voluntarily requested that Prudential, and Prudential has agreed
to, restructure, rearrange and renew the Assumed Obligations and
the obligations of Prudential under the Original Shelf Agreement
into obligations hereunder;
WHEREAS, the transfer of assets and liabilities from
NPC International to the Company, as well as certain other
actions incident to the Restructuring, would constitute an Event
of Default under the Original Note Agreement;
WHEREAS, as partial consideration for Prudential's
agreement to consent to the Restructuring and for other good and
valuable consideration (i) the Company agrees, and Prudential
agrees, to amend and restate the Original Note Agreement as
hereinafter set forth, and (ii) each of the Guarantors
(hereinafter defined) will guarantee the payment of the Original
Shelf Notes and any Notes issued by the Company in replacement
thereof or otherwise pursuant hereto.
NOW, THEREFORE, to accomplish the matters contemplated
by the immediately preceding recitals and in consideration of the
mutual premises herein contained and for other valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Original Note Agreement is hereby amended and
restated in its entirety as follows:
1. AUTHORIZATION OF ISSUE OF ORIGINAL SHELF NOTES;
ISSUANCE OF REPLACEMENT NOTES1. AUTHORIZATION OF ISSUE OF
ORIGINAL SHELF NOTES; ISSUANCE OF REPLACEMENT NOTES1.
AUTHORIZATION OF ISSUE OF ORIGINAL SHELF NOTES; ISSUANCE OF
REPLACEMENT NOTES
1A. Authorization of Issue of Original Shelf Notes..
Authorization of Issue of Original Shelf Notes.. Authorization
of Issue of Original Shelf Notes. Pursuant to the Original Note
Agreement, NPC International has previously authorized, issued
and delivered the Original Shelf Notes in the aggregate original
principal amount of $30,000,000; dated the respective dates of
issue thereof; to mature on the dates, to bear interest on the
respective unpaid balances thereof from the respective dates
thereof at the respective rates per annum and to have such other
particular terms as are specified in such Original Shelf Notes.
The term "Original Shelf Notes" as used herein shall include each
Original Shelf Note delivered pursuant to any provision of this
Agreement and each Note delivered in substitution or exchange for
any such Original Shelf Note pursuant to any such provision.
1B. Issuance of Replacement Notes.. Issuance of
Replacement Notes.. Issuance of Replacement Notes. Upon the
request of any Purchaser of the Original Shelf Notes, the Company
agrees to execute and deliver to such Purchaser, in replacement
of one or more of the Original Shelf Notes executed by NPC
International and now outstanding, one or more Notes registered
in the name of Prudential or another Purchaser or that of
Prudential's or such others Purchaser's nominee, as Prudential or
such other Purchaser shall request, in the aggregate principal
amount equal to the aggregate principal amount of the Original
Shelf Notes so exchanged. No Purchaser shall be under any
obligation to request the issuance of such replacement notes and,
in the event that no such request is made, the existing Original
Shelf Notes shall remain valid and binding obligations of the
Company by virtue of its assumption under paragraph 2A below.
1C. Authorization of Assumption of Original Shelf
Notes and Issue
of Additional Shelf Notes.. Authorization of Assumption of
Original Shelf Notes and Issueof Additional Shelf Notes..
Authorization of Assumption of Original Shelf Notes and Issueof
Additional Shelf Notes. The Company has authorized the
assumption of the Original Shelf Notes in the aggregate original
principal amount of $30,000,000 and will authorize the issue of
additional senior promissory notes in the aggregate principal
amount of $30,000,000 (collectively called the "New Shelf Notes"
and individually called a "New Shelf Note" which, along with the
Original Shelf Notes and any Notes of the Company issued in
replacement thereof, are herein referred to as the "Shelf
Notes"); to be dated the date of issue thereof; to mature, in the
case of each New Shelf Note so issued, no more than 9 years after
the date of original issuance thereof; to have an average life,
in the case of each New Shelf Note so issued, of no more than 7
years after the date of original issuance thereof; to bear
interest on the unpaid balance thereof from the date thereof at
the rate per annum, and to have such other particular terms, as
shall be set forth, in the case of each Shelf Note so issued, in
the Confirmation of Acceptance with respect to such New Shelf
Note delivered pursuant to paragraph 3F; and to be substantially
in the form of Exhibit A attached hereto. The term "New Shelf
Notes" as used herein shall include each New Shelf Note delivered
pursuant to this Agreement and each New Shelf Note delivered in
substitution or exchange therefor. Shelf Notes which have (a)
the same final maturity, (b) the same installment payment dates,
(c) the same installment payment amounts (as a percentage of the
original principal amount of each Note), (d) the same interest
rate, (e) the same interest payment periods, and (f) the same
original date of issuance are herein called a "Series" of Shelf
Notes.
2. ASSUMPTION OF ORIGINAL SHELF NOTES; INITIAL
CLOSING.. ASSUMPTION OF ORIGINAL SHELF NOTES; INITIAL CLOSING..
ASSUMPTION OF ORIGINAL SHELF NOTES; INITIAL CLOSING.
2A. Assumption of Original Shelf Notes.. Assumption
of Original Shelf Notes.. Assumption of Original Shelf Notes.
Effective upon the Initial Date of Closing (as hereinafter
defined), the Company hereby expressly assumes the due and
punctual payment of the principal of, Yield-Maintenance Amount,
if any, and interest on all the Original Shelf Notes according to
their tenor, and the due and punctual performance and observance
of all of the covenants and conditions to be performed by NPC
International under the Original Note Agreement, as such
agreement is amended and restated hereby. In connection with
such assumption, NPC International is hereby released from its
obligations as primary obligor under the Original Note Agreement
and the Original Shelf Notes. Nothing is this paragraph 2A,
however, shall affect the obligations of NPC International under
the Guaranty Agreement.
2B. Initial Closing.. Initial Closing.. Initial
Closing. To evidence the assumption contemplated by paragraph 2A
and in furtherance thereof, on May 8, 1997, or any other date
upon which the Company and Prudential may mutually agree (the
"Initial Closing" or "Initial Date of Closing"), the Company and
each Guarantor shall execute and deliver the documents
contemplated by this Agreement.
3. PURCHASE AND SALE OF NEW SHELF NOTES. PURCHASE
AND SALE OF NEW SHELF NOTES. PURCHASE AND SALE OF NEW SHELF
NOTES.
3A. Facility. Facility. Facility. Prudential is
willing to consider, in its sole discretion and within limits
which may be authorized for purchase by Prudential and Prudential
Affiliates from time to time, the purchase of New Shelf Notes
pursuant to this Agreement. The willingness of Prudential to
consider such purchase of New Shelf Notes, together with the
willingness of Prudential to maintain the $30,000,000 aggregate
principal amount of outstanding Original Shelf Notes
(constituting an aggregate principal amount of $60,000,000) is
herein called the "Facility". At any time, the aggregate
principal amount stated in the preceding sentence, minus the
original principal amount of Original Shelf Notes stated in
paragraph 1A, minus the aggregate principal amount of New Shelf
Notes purchased and sold pursuant to this Agreement prior to such
time, minus the aggregate principal amount of Accepted Shelf
Notes (as hereinafter defined) which have not yet been purchased
and sold hereunder prior to such time, is herein called the
"Available Facility Amount" at such time. NOTWITHSTANDING THE
WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF NEW SHELF
NOTES, THIS AGREEMENT IS ENTERED INTO ON THE EXPRESS
UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL
AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE
NEW SHELF NOTES OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH
RESPECT TO SPECIFIC PURCHASES OF NEW SHELF NOTES, AND THE
FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY
PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.
3B. Issuance Period. Issuance Period. Issuance
Period. New Shelf Notes may be issued and sold pursuant to this
Agreement until the earlier of (i) June 29, 1997 and (ii) the
thirtieth day after Prudential shall have given to the Company,
or the Company shall have given to Prudential, a notice stating
that it elects to terminate the issuance and sale of New Shelf
Notes pursuant to this Agreement (or if such thirtieth day is not
a Business Day, the Business Day next preceding such thirtieth
day). The period during which New Shelf Notes may be issued and
sold pursuant to this Agreement is herein called the "Issuance
Period".
3C. Periodic Spread Information. Periodic Spread
Information. Periodic Spread Information. Not later than 9:30
A.M. (New York City local time) on a Business Day during the
Issuance Period if there is an Available Facility Amount on such
Business Day, the Company may request by telecopier or telephone,
and Prudential will, to the extent reasonably practicable,
provide to the Company on such Business Day (or, if such request
is received after 9:30 A.M. (New York City local time) on such
Business Day, on the following Business Day), information (by
telecopier or telephone) with respect to various spreads at which
Prudential or Prudential Affiliates might be interested in
purchasing Notes of different average lives; provided, however,
that the Company may not make such requests more frequently than
once in every five Business Days or such other period as shall be
mutually agreed to by the Company and Prudential. The amount and
content of information so provided shall be in the sole
discretion of Prudential but it is the intent of Prudential to
provide information which will be of use to the Company in
determining whether to initiate procedures for use of the
Facility. Information so provided shall not constitute an offer
to purchase New Shelf Notes, and neither Prudential nor any
Prudential Affiliate shall be obligated to purchase New Shelf
Notes at the spreads specified. Information so provided shall be
representative of potential interest only for the period
commencing on the day such information is provided and ending on
the earlier of the fifth Business Day after such day and the
first day after such day on which further spread information is
provided. Prudential may suspend or terminate providing
information pursuant to this paragraph 3C in its sole discretion.
3D. Request for Purchase. Request for Purchase.
Request for Purchase. The Company may from time to time during
the Issuance Period make requests for purchases of New Shelf
Notes (each such request being herein called a "Request for
Purchase"). Each Request for Purchase shall be made to
Prudential by telecopier and confirmed by nationwide overnight
delivery service, and shall (i) specify the aggregate principal
amount of New Shelf Notes covered thereby, which shall not be
less than $5,000,000 and not be greater than the Available
Facility Amount at the time such Request for Purchase is made,
(ii) specify the principal amounts, final maturities, installment
payment dates and amounts and interest payment periods (quarterly
or semi-annual in arrears) of the New Shelf Notes covered
thereby, (iii) specify the use of proceeds of such New Shelf
Notes, (iv) specify the proposed Closing Day of the purchase and
sale of such New Shelf Notes, which shall be a Business Day
during the Issuance Period not less than 5 Business Days and not
more than 20 Business Days after the making of such Request for
Purchase, (v) specify the number of the account and the name and
address of the depository institution to which the purchase
prices of such New Shelf Notes are to be transferred on the
Closing Day for such purchase and sale, (vi) certify that the
representations and warranties contained in paragraph 10 are true
on and as of the date of such Request for Purchase except to the
extent of changes caused by the transactions herein contemplated
and that there exists on the date of such Request for Purchase no
Event of Default or Default, and (vii) be substantially in the
form of Exhibit B attached hereto. Each Request for Purchase
shall be in writing and shall be deemed made when received by
Prudential.
3E. Rate Quotes. Rate Quotes. Rate Quotes. Not
later than five Business Days after the Company shall have given
Prudential a Request for Purchase pursuant to paragraph 3D,
Prudential may provide (by telephone promptly thereafter
confirmed by telecopier, in each case no earlier than 9:30 A.M.
and no later than 1:30 P.M. New York City local time) interest
rate quotes for the several principal amounts, maturities,
installment payment schedules, and interest payment periods of
New Shelf Notes specified in such Request for Purchase. Each
quote shall represent the interest rate per annum payable on the
outstanding principal balance of such New Shelf Notes until such
balance shall have become due and payable, at which Prudential or
a Prudential Affiliate would be willing to purchase such New
Shelf Notes at 100% of the principal amount thereof.
3F. Acceptance. Acceptance. Acceptance. Within
30 minutes after Prudential shall have provided any interest rate
quotes pursuant to paragraph 3E or in the event that due to
conditions in the market place it shall not be feasible to hold
such interest rate quotes open 30 minutes, such shorter period as
Prudential may specify to the Company at the time such interest
rate quotes are provided to the Company (such period herein
called the "Acceptance Window"), the Company may, subject to
paragraph 3G, elect to accept such interest rate quotes as to not
less than $5,000,000 aggregate principal amount of the New Shelf
Notes specified in the related Request for Purchase. Such
election shall be made by an Authorized Officer of the Company
notifying Prudential by telephone or telecopier within the
Acceptance Window (but not earlier than 9:30 A.M. or later than
2:00 P.M., New York City local time) that the Company elects to
accept such interest rate quotes, specifying the New Shelf Notes
(each such Shelf Note being herein called an "Accepted Shelf
Note") as to which such acceptance (herein called an
"Acceptance") relates. The day the Company notifies an
Acceptance with respect to any Accepted Shelf Notes is herein
called the "Acceptance Day" for such Accepted Shelf Notes. Any
interest rate quotes as to which Prudential does not receive an
Acceptance within the Acceptance Window shall expire, and no
purchase or sale of New Shelf Notes hereunder shall be made based
on such expired interest rate quotes. Subject to paragraph 3G
and the other terms and conditions hereof, the Company agrees to
sell to Prudential or a Prudential Affiliate, and Prudential
agrees to purchase, or to cause the purchase by a Prudential
Affiliate of, the Accepted Shelf Notes at 100% of the principal
amount of such New Shelf Notes. As soon as practicable following
the Acceptance Day, the Company, Prudential and each Prudential
Affiliate which is to purchase any such Accepted Shelf Notes will
execute a confirmation of such Acceptance substantially in the
form of Exhibit C attached hereto (herein called a "Confirmation
of Acceptance").
3G. Market Disruption. Market Disruption. Market
Disruption. Notwithstanding the provisions of paragraph 3F, if
Prudential shall have provided interest rate quotes pursuant to
paragraph 3E and thereafter prior to the time an Acceptance with
respect to such quotes shall have been notified to Prudential in
accordance with paragraph 3F there shall occur a general
suspension, material limitation, or significant disruption of
trading in securities generally on the New York Stock Exchange or
in the domestic public market for U.S. Treasury securities or
derivatives thereof, then such interest rate quotes shall expire,
and no purchase or sale of New Shelf Notes hereunder shall be
made based on such expired interest rate quotes. If the Company
thereafter notifies Prudential of the Acceptance of any such
interest rate quotes, such Acceptance shall be ineffective for
all purposes of this Agreement, and Prudential shall promptly
notify the Company that the provisions of this paragraph 3G are
applicable with respect to such Acceptance.
3H. Closing. Closing. Closing.
3H(i) Closings -- Not later than 11:30 A.M. (New
York City local time) on the Closing Day for any Accepted
Shelf Notes, the Company will deliver to each Purchaser
listed in the Confirmation of Acceptance relating thereto at
the offices of the Prudential Capital Group, at 2200 Ross
Ave., Suite 4200E, Dallas, Texas 75201, the Accepted Shelf
Notes to be purchased by such Purchaser in the form of a one
or more Notes in authorized denominations as such Purchaser
may request for each Series of Accepted Shelf Notes to be
purchased on the Closing Day, dated the Closing Day and
registered in such Purchaser's name (or in the name of its
nominee), against payment of the purchase price thereof by
transfer of immediately available funds for credit to the
Company's account specified in the Request for Purchase of
such New Shelf Notes.
3H(ii) Rescheduled Closings -- If the Company fails to
tender to any Purchaser the Accepted Shelf Notes to be
purchased by such Purchaser on the scheduled Closing Day for
such Accepted Shelf Notes as provided above in this
paragraph 3H, or any of the conditions specified in
paragraph 5 shall not have been fulfilled by the time
required on such scheduled Closing Day, the Company shall,
prior to 1:00 P.M., New York City local time, on such
scheduled Closing Day notify such Purchaser in writing
whether (i) such closing is to be rescheduled (such
rescheduled date to be a Business Day during the Issuance
Period not less than one Business Day and not more than 10
Business Days after such scheduled Closing Day (the
"Rescheduled Closing Day")), and certify to such Purchaser
that the Company reasonably believes that it will be able to
comply with the conditions set forth in paragraph 5 on such
Rescheduled Closing Day and that the Company will pay the
Delayed Delivery Fee in accordance with paragraph 3I(iii) or
(ii) such closing is to be canceled as provided in paragraph
3I(iv). In the event that the Company shall fail to give
such notice referred to in the preceding sentence, such
Purchaser may at its election, at any time after 1:00 P.M.,
New York City local time, on such scheduled Closing Day,
notify the Company in writing that such closing is to be
canceled as provided in paragraph 3I(iv).
3I. Fees. Fees. Fees.
3I(i) Facility Fee -- At the time of the execution
of this Agreement by the Company and Prudential, the Company will
pay to Prudential in immediately available funds a fee (herein
called the "Facility Fee") in an amount equal to $30,000.
3I(ii) Issuance Fee -- The Company will pay to
Prudential in immediately available funds a fee (herein called
the "Issuance Fee") on each Closing Day in an amount equal to
0.25% (25/100ths of 1%) of the aggregate principal amount of New
Shelf Notes sold on such Closing Day.
3I(iii) Delayed Delivery Fee -- If the closing of the
purchase and sale of any Accepted Shelf Note is delayed for any
reason beyond the original Closing Day for such Accepted Shelf
Note, the Company will pay to Prudential (a) on the Cancellation
Date or actual closing date of such purchase and sale and (b) if
earlier, the next Business Day following 90 days after the
Acceptance Day for such Accepted Shelf Notes and on each Business
Day following 90 days after the prior payment hereunder, a fee
(herein called the "Delayed Delivery Fee") calculated as follows:
(BEY - MMY) X DTS/360 X PA
where "BEY" means Bond Equivalent Yield, i.e., the bond
equivalent yield per annum of such Accepted Shelf Note, "MMY"
means Money Market Yield, i.e., the yield per annum on a
commercial paper investment of the highest quality selected by
Prudential on the date Prudential receives notice of the delay in
the closing for such Accepted Shelf Notes having a maturity date
or dates the same as, or closest to, the Rescheduled Closing Day
or Rescheduled Closing Days (a new alternative investment being
selected by Prudential each time such closing is delayed); "DTS"
means Days to Settlement, i.e., the number of actual days elapsed
from and including the originally scheduled Closing Day with
respect to such Accepted Shelf Note (in the case of the first
such Delayed Delivery Fee payment with respect to such Accepted
Shelf Note) or from and including the date of the next preceding
Delayed Delivery Fee payment (in the case of any subsequent
Delayed Delivery Fee payment with respect to such Accepted Shelf
Note) to but excluding the date of such Delayed Delivery Fee
payment; and "PA" means Principal Amount, i.e., the principal
amount of the Accepted Shelf Note for which such calculation is
being made. In no case shall the Delayed Delivery Fee be less
than zero. Nothing contained herein shall obligate any Purchaser
to purchase any Accepted Shelf Note on any day other than the
Closing Day for such Accepted Shelf Note, as the same may be
rescheduled from time to time in compliance with paragraph 3H.
3I(iv) Cancellation Fee -- If the Company at any
time notifies the Purchasers in writing that the Company is
canceling the closing of the purchase and sale of any Accepted
Shelf Note, or if the Purchasers notify the Company in writing
under the circumstances set forth in the last sentence of
paragraph 3H that the closing of the purchase and sale of such
Accepted Shelf Note is to be canceled, or if the closing of the
purchase and sale of such Accepted Shelf Note is not consummated
on or prior to the last day of the Issuance Period (the date of
any such notification, or the last day of the Issuance Period, as
the case may be, being herein called the "Cancellation Date"),
the Company will pay the Purchasers in immediately available
funds an amount (the "Cancellation Fee") calculated as follows:
PI X PA
where "PI" means Price Increase, i.e., the quotient (expressed in
decimals) obtained by dividing (a) the excess of the ask price
(as reasonably determined by Prudential) of the Hedge Treasury
Note(s) on the Cancellation Date over the bid price (as
reasonably determined by Prudential) of the Hedge Treasury
Notes(s) on the Acceptance Day for such Accepted Shelf Note by
(b) such bid price; and "PA" has the meaning ascribed to it in
paragraph 3I(iii). The foregoing bid and ask prices shall be as
reported by Telerate Systems, Inc. (or, if such data for any
reason ceases to be available through Telerate Systems, Inc., any
publicly available source of similar market data). Each price
shall be based on a U.S. Treasury security having a par value of
$100.00 and shall be rounded to the second decimal place. In no
case shall the Cancellation Fee be less than zero.
4. CONDITIONS OF INITIAL CLOSING.. CONDITIONS OF
INITIAL CLOSING.. CONDITIONS OF INITIAL CLOSING.
Prudential's obligation to execute and deliver this Agreement is
subject to the satisfaction, prior to or at the Initial Closing,
of the following conditions:
4A. Certain Documents.. Certain Documents.. Certain
Documents. Prudential shall have received the following, each
dated the date of the Initial Date of Closing:
(i) The replacement Note(s), if any, requested by each
applicable Purchaser pursuant to paragraph 1B.
(ii) Certified copies of the resolutions of the Board
of Directors of NPC International approving the
Restructuring and all of the documents evidencing other
necessary corporate action and governmental approvals, if
any, with respect to the Restructuring.
(iii) Certified copies of the resolutions of the
Board of Directors of the Company approving the assumption
of the Original Shelf Notes, this Agreement and the Notes,
and all documents evidencing other necessary corporate
action and government approvals, if any, with respect to the
assumption of the Original Shelf Notes, this Agreement and
the Notes.
(iv) Certified copies of the resolutions of each Board
of Directors (or other governing body) of each Guarantor
approving the execution and delivery of the Guaranty
Agreement and all documents evidencing other necessary
corporate, company, or partnership action and governmental
approvals, if any, with respect to the Guaranty Agreement.
(v) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true
signatures of the Authorized Officers of the Company
authorized to sign this Agreement and the Notes and the
other documents to be delivered hereunder.
(vi) A certificate of the Secretary or an Assistant
Secretary of each Guarantor certifying the names and true
signatures of the officers of each Guarantor authorized to
sign the Guaranty Agreement and the other documents to be
delivered hereunder or thereunder;
(vii) Certified copies of the Certificate of
Incorporation and By-laws of the Company.
(viii) Certified copies of the Articles of
Incorporation and By-laws of NPC International.
(ix) A favorable opinion of Shook, Hardy & Bacon,
special counsel to the Company satisfactory to Prudential
and substantially in the form of Exhibit D-1A attached
hereto and as to such other matters as Prudential may
reasonably request and a favorable opinion of David G.
Short, General Counsel of the Company, satisfactory to
Prudential and substantially in the form of Exhibit D-1B
attached hereto and as to such matters as Prudential may
reasonably request. The Company hereby directs each such
counsel to deliver such opinion and understands and agrees
that each Purchaser receiving such an opinion will and is
hereby authorized to rely on such opinion.
(x) Good standing certificates for the Company and NPC
International from the Secretary of State of Delaware and
Kansas, respectively, dated of a recent date and such other
evidence of the status of the Company and NPC International
as Prudential may reasonably request.
(xi) The Guaranty Agreement in substantially the form
of Exhibit E attached hereto and the Sharing Agreement in
substantially the Form of Exhibit F attached hereto.
(xii) Certified copies of the Certificate of
Incorporation and By-laws (or other applicable charter or
organizational documents) of each Guarantor (other than NPC
International).
(xiii) Good standing certificates for each Guarantor
from the Secretary of State of their respective state of
incorporation or organization, as applicable, dated as of a
recent date.
(xiv) Copies of the agreements constituting the
Bank Facility as each has been amended as of the date
hereof.
(xv) Additional documents or certificates with respect
to legal matters or corporate or other proceedings related
to the transaction contemplated hereby as may be reasonably
requested by Prudential.
4B. Representations and Warranties; No Default..
Representations and Warranties; No Default.. Representations and
Warranties; No Default. The representations and warranties
contained in paragraph 10 shall be true on and as of such Initial
Date of Closing, except to the extent of changes caused by the
transactions herein contemplated; there shall exist on such
Initial Date of Closing no Event of Default or Default; and the
Company shall have delivered to such Purchaser an Officer's
Certificate, dated such Initial Date of Closing, to both such
effects.
4C. Proceedings.. Proceedings.. Proceedings. All
corporate, company, partnership and other proceedings taken or to
be taken in connection with the transactions contemplated hereby
and all documents incident thereto shall be satisfactory in
substance and form to Prudential, and Prudential shall have
received all such counterpart originals or certified or other
copies of such documents as Prudential may reasonably request.
5. CONDITIONS OF CLOSING WITH RESPECT TO NEW SHELF
NOTES5. CONDITIONS OF CLOSING WITH RESPECT TO NEW SHELF NOTES5.
CONDITIONS OF CLOSING WITH RESPECT TO NEW SHELF NOTES. The
obligation of any Purchaser to purchase and pay for any Accepted
Shelf Notes is subject to the satisfaction, on or before the
Closing Day for such Accepted Shelf Notes, of the following
conditions:
5A. Certain Documents. Certain Documents. Certain
Documents. Such Purchaser shall have received the following,
each dated the date of the applicable Closing Day:
(i) The Accepted Shelf Note(s) to be purchased by such
Purchaser.
(ii) Certified copies of the resolutions of the Board
of Directors of the Company approving this Agreement and the
Accepted Shelf Notes, and of all documents evidencing other
necessary corporate action and governmental approvals, if
any, with respect to this Agreement and the Accepted Shelf
Notes.
(iii) A certificate of the Secretary or an
Assistant Secretary of the Company certifying the names and
true signatures of the Authorized Officers of the Company
authorized to sign this Agreement and the Accepted Shelf
Notes and the other documents to be delivered hereunder.
(iv) Certified copies of the Certificate of
Incorporation and By-laws of the Company.
(v) A favorable opinion of Shook, Hardy & Bacon,
special counsel to the Company satisfactory to such
Purchaser and substantially in the form of Exhibit D-2A
attached hereto and as to such other matters as such
Purchaser may reasonably request and a favorable opinion of
David G. Short, General Counsel of the Company, satisfactory
to such Purchaser and substantially in the form of Exhibit D-
2B attached hereto and as to such matters as such Purchaser
may reasonably request. The Company hereby directs each
such counsel to deliver such opinion, agrees that the
issuance and sale of any Accepted Shelf Notes will
constitute a reconfirmation of such direction, and
understands and agrees that each Purchaser receiving such an
opinion will and is hereby authorized to rely on such
opinion.
(vi) A good standing certificate for the Company from
the Secretary of State of Delaware dated of a recent date
and such other evidence of the status of the Company as such
Purchaser may reasonably request.
(vii) Certified copies of Requests for Information
or Copies (Form UCC-11) or equivalent reports of a recent
date listing all effective financing statements which name
the Company or any Guarantor (under its present name and
previous names) as debtor and which are filed in the offices
of the Secretaries of State of Kansas, Texas and such other
states in which a "chief executive office" (as such term is
used in the Uniform Commercial Code) is located as may be
reasonably requested, with copies of such financing
statements.
(viii) Additional documents or certificates with
respect to legal matters or corporate or other proceedings
related to the transactions contemplated hereby including,
without limitation, documents or certificates similar to
those required by paragraph 4 hereof, as may be reasonably
requested by such Purchaser.
5B. Representations and Warranties; No Default5B.
Representations and Warranties; No Default5B. Representations
and Warranties; No Default. The representations and warranties
contained in paragraph 10 shall be true on and as of such Closing
Day, except to the extent of changes caused by the transactions
herein contemplated; there shall exist on such Closing Day no
Event of Default or Default; and the Company shall have delivered
to such Purchaser an Officer's Certificate, dated such Closing
Day, to both such effects.
5C. Purchase Permitted by Applicable Laws5C.
Purchase Permitted by Applicable Laws5C. Purchase Permitted
by Applicable Laws. The purchase of and payment for the Accepted
Shelf Notes to be purchased by such Purchaser on the terms and
conditions herein provided (including the use of the proceeds of
such Notes by the Company) shall not violate any applicable law
or governmental regulation (including, without limitation,
Section 5 of the Securities Act or Regulation G, T or X of the
Board of Governors of the Federal Reserve System) and shall not
subject such Purchaser to any tax, penalty, liability or other
onerous condition under or pursuant to any applicable law or
governmental regulation, and such Purchaser shall have received
such certificates or other evidence as it may request to
establish compliance with this condition.
5D. Proceedings.. Proceedings.. Proceedings. All
corporate, company, partnership and other proceedings taken or to
be taken in connection with the transactions contemplated hereby
and all documents incident thereto shall be satisfactory in
substance and form to Prudential, and Prudential shall have
received all such counterpart originals or certified or other
copies of such documents as Prudential may reasonably request.
6. PREPAYMENTS.. PREPAYMENTS.. PREPAYMENTS. Any
Accepted Shelf Notes shall be subject to prepayment with respect
to any required prepayments set forth in such Accepted Shelf
Notes as provided in paragraph 6A and with respect to the
optional prepayments permitted by paragraph 6B. The Original
Shelf Notes shall be subject to prepayment with respect to the
required prepayments specified in the Original Shelf Notes, as
provided in paragraph 6A, and the optional prepayments permitted
by paragraph 6B.
6A. Required Prepayments. Required Prepayments.
Required Prepayments. Until the Original Shelf Notes shall have
been paid in full, the Company shall apply to the prepayment of
the Original Shelf Notes, without premium, such principal
amounts, together with interest thereon to the prepayment dates,
as set forth in the Original Shelf Notes. The remaining
outstanding principal amount(s) of the Original Shelf Notes,
together with interest accrued thereon, shall become due and
payable on the maturity date(s) set forth in the Original Shelf
Notes. The Shelf Notes of each Series shall be subject to
required prepayments, if any, set forth in the Shelf Notes of
such Series.
6B. Optional Prepayment With Yield-Maintenance Amount.
Optional Prepayment With Yield-Maintenance Amount. Optional
Prepayment With Yield-Maintenance Amount. The Notes of each
Series shall be subject to prepayment, in whole at any time or
from time to time in part (in integral multiples of $1,000,000),
at the option of the Company, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the
Yield-Maintenance Amount, if any, with respect to each such Note.
Any partial prepayment of Notes pursuant to this paragraph 6B
shall be applied in the case of the Original Shelf Notes, in
satisfaction of the required payments of principal in inverse
order of their scheduled due dates and, in the case of the
partial prepayment of a Series of Shelf Notes, in satisfaction of
required payments of principal in inverse order of their
scheduled due dates.
6C. Notice of Optional Prepayment6C. Notice of
Optional Prepayment6C. Notice of Optional Prepayment. The
Company shall give the holder of each Note to be prepaid pursuant
to paragraph 6B irrevocable written notice of such prepayment not
less than 10 Business Days prior to the prepayment date,
specifying such prepayment date, specifying the aggregate
principal amount of either the Original Shelf Notes or the Series
of Shelf Notes to be prepaid on such date, identifying each Note
held by such holder, and the principal amount of each such Note,
to be prepaid on such date and stating that such prepayment is to
be made pursuant to paragraph 6B. Notice of prepayment having
been given as aforesaid, the principal amount of the Notes
specified in such notice, together with interest thereon to the
prepayment date and together with the Yield-Maintenance Amount,
if any, herein provided, shall become due and payable on such
prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment pursuant to
paragraph 6B, give telephonic notice of the principal amount of
the Notes to be prepaid and the prepayment date to each
Significant Holder which shall have designated a recipient for
such notices in the Information Schedule attached hereto or by
notice in writing to the Company.
6D. Application of Prepayments.. Application of
Prepayments.. Application of Prepayments. In the case of each
prepayment of less than the entire unpaid principal amount of all
outstanding Original Shelf Notes or any Series Shelf Notes, the
amount to be prepaid shall be applied pro rata to all outstanding
Original Shelf Notes or any Series Shelf Notes, as the case may
be (including, for the purpose of this paragraph 6D only, all
Notes prepaid or otherwise retired or purchased or otherwise
acquired by the Company or NPC International or any of their
Subsidiaries or Affiliates other than by prepayment pursuant to
paragraph 6A or 6B), according to the respective unpaid principal
amounts thereof. The amounts so prepaid on each outstanding Note
shall be credited against the last maturing installment or
installments of principal then remaining unpaid on such Note.
6E. Retirement of Notes.. Retirement of Notes..
Retirement of Notes. The Company and NPC International shall
not, and shall not permit any of their Subsidiaries or Affiliates
to, prepay or otherwise retire in whole or in part prior to their
stated final maturity (other than by prepayment pursuant to
paragraph 6A or 6B or upon acceleration of such final maturity
pursuant to paragraph 9A), or purchase or otherwise acquire,
directly or indirectly, Notes of any Series held by any holder
unless the Company, NPC International or such Subsidiary or
Affiliate shall have offered to prepay or otherwise retire or
purchase or otherwise acquire, as the case may be, the same
proportion of the aggregate principal amount of Notes of such
Series held by each other holder of Notes of such Series at the
time outstanding upon the same terms and conditions. Any Notes
so prepaid or otherwise retired or purchased or otherwise
acquired by the Company, NPC International or any of their
Subsidiaries or Affiliates shall not be deemed to be outstanding
for any purpose under this Agreement, except as provided in
paragraph 6D.
7. AFFIRMATIVE COVENANTS. AFFIRMATIVE COVENANTS.
AFFIRMATIVE COVENANTS. During the Issuance Period and thereafter
so long as any Note shall remain unpaid, the Company covenants as
follows:
7A. Financial Statements. Financial Statements.
Financial Statements. The Company covenants that it will deliver
to each Significant Holder in triplicate:
(i) as soon as practicable and in any event within 50
days after the end of each quarterly period (other than the
last quarterly period) in each fiscal year, consolidated
statements of income, consolidated statements of
shareholder's equity and consolidated statements of cash
flows of NPC International and its Subsidiaries (including
the Company) for the period from the beginning of the
current fiscal year to the end of such quarterly period, and
consolidated balance sheets of NPC International and its
Subsidiaries (including the Company) as at the end of such
quarterly period, setting forth in each case in comparative
form figures for the corresponding period or as of the end
of such corresponding period, as applicable, in the
preceding fiscal year, all in reasonable detail and certi
fied by an authorized financial officer of NPC
International, subject to changes resulting from year-end
adjustments; provided, however, that, so long as such
delivery is made within the time requirement set forth above
in this clause (i), delivery pursuant to clause (iv) below
of copies of the Quarterly Report on Form 10-Q of NPC
International for such quarterly period filed with the
Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (i);
(ii) as soon as practicable and in any event within 50
days after the end of each quarterly period in each fiscal
year (or, at the Company's option, more frequently), balance
sheets at the end of each fiscal quarter and income
statements for the period from the beginning of the current
fiscal year to the end of such fiscal quarter for each
material operating division of NPC International (whether
incorporated or not), setting forth in each case in
comparative form figures as of the end of the corresponding
period or for the corresponding period, as applicable, in
the preceding fiscal year, all in reasonable detail and
certified by an authorized financial officer of NPC
International as fairly presenting the financial condition
and operations of such divisions in accordance with prior
practices of NPC International consistently applied;
provided, however, that, so long as such delivery is made
within the time requirement set forth above in this clause
(ii), it is agreed and acknowledged that the continued
delivery of the financial statements currently provided by
NPC International in its director packages shall be deemed
to satisfy the requirements of this clause (ii);
(iii) as soon as practicable and in any event
within 95 days after the end of each fiscal year,
consolidated statements of income, shareholder's equity and
cash flows of NPC International and its Subsidiaries
(including the Company) for such year, and a consolidated
balance sheet of NPC International and its Subsidiaries
(including the Company) as at the end of such year, setting
forth in each case in comparative form corresponding
consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in scope to the Required
Holders and certified to NPC International by independent
public accountants of recognized national standing selected
by NPC International whose certificate shall be in scope and
substance satisfactory to the Required Holders; provided,
however, that, so long as such delivery is made within the
time requirement set forth above in the clause (iii),
delivery pursuant to clause (iv) below of copies of the
Annual Report on Form 10-K of NPC International for such
fiscal year filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of
this clause (iii);
(iv) promptly upon transmission thereof, copies of all
such financial statements, proxy statements, notices and
reports as NPC International shall send to its stockholders
and copies of all registration statements (without exhibits)
and all reports which NPC International files with the
Securities and Exchange Commission (or any governmental body
or agency succeeding to the functions of the Securities and
Exchange Commission);
(v) promptly upon receipt thereof, a copy of each
other report submitted to the boards of directors of NPC
International (or any executive committee thereof) or any
Subsidiary (including the Company) by independent
accountants in connection with any annual, interim or
special audit made by them of the books of NPC International
or any Subsidiary (including the Company);
(vi) promptly after the filing or receiving thereof,
copies of all reports and notices which NPC International or
any Subsidiary (including the Company) files under ERISA
with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or
which NPC International or any Subsidiary (including the
Company) receives from such corporation;
(vii) promptly after receipt of notice thereof by
the Company or NPC International or after the Company or NPC
International obtains knowledge thereof, notice of any
default under any Franchise Agreement and any notice
received by the Company or NPC International pursuant to
Article XXI. C. of the existing Franchise Agreement (or any
similar provision of any Franchise Agreement hereafter
entered into by the Company or NPC International or any
Subsidiary) of any Franchise Agreement in effect on the Date
of Closing;
(viii) promptly from time to time, a written report
of any change in the list of Subsidiaries set forth on Schedule
10S attached hereto; and
(ix) with reasonable promptness, such other information
respecting the condition or operations, financial or
otherwise, of the Company or NPC International or any of
their Subsidiaries as such Significant Holder may reasonably
request.
Together with each delivery of financial statements required
by clauses (i) and (iii) above the Company will deliver to each
Significant Holder an Officer's Certificate demonstrating (with
computations in reasonable detail) compliance by the Company, NPC
International and their Subsidiaries with the provisions of
paragraph 8 and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specify
ing the nature and period of existence thereof and what action
the Company or NPC International, as applicable, proposes to take
with respect thereto. Together with each delivery of financial
statements required by clause (iii) above, the Company shall
cause to be delivered to each Significant Holder a certificate of
such accountants stating that, in making the audit necessary to
the certification of such consolidated financial statements, they
have obtained no knowledge of any Event of Default or Default,
or, if they have obtained knowledge of any Event of Default or
Default, specifying the nature and period of existence thereof.
Such accountants, however, shall not be liable to anyone by
reason of their failure to obtain knowledge of any Event of
Default or Default which would not be disclosed in the course of
an audit conducted in accordance with generally accepted auditing
standards.
The Company also covenants that forthwith upon the President
or Chief Financial Officer or principal accounting officer of the
Company obtaining knowledge of an Event of Default or Default, it
will deliver to each Significant Holder an Officer's Certificate
specifying the nature and period of existence thereof and what
action the Company or NPC International, as applicable, propose
to take with respect thereto.
7B. Inspection of Property. Inspection of Property.
Inspection of Property. The Company and NPC International will
permit any Person designated by any Significant Holder in
writing, at such Significant Holder's expense, to visit and
inspect any of the properties of the Company, NPC International
and their Subsidiaries, to examine the corporate books and
financial records of the Company, NPC International and their
Subsidiaries and make copies thereof or extracts therefrom and to
discuss the affairs, finances and accounts of any of such
corporations with the principal officers of each such company and
their independent public accountants (and by this provision each
of the Company and NPC International authorizes their accountants
to discuss with such Person the finances and affairs of the
Company, NPC International and their Subsidiaries), all at such
reasonable times with reasonable notice and as often as such
Significant Holder may reasonably request.
7C. Covenant to Secure Notes Equally. Covenant to
Secure Notes Equally. Covenant to Secure Notes Equally. The
Company covenants that if the Company, NPC International or any
Subsidiary shall create or assume any Lien upon any of their
property or assets, whether now owned or hereafter acquired,
other than Liens permitted by the provisions of paragraph 8C(1)
(unless prior written consent to the creation or assumption
thereof shall have been obtained pursuant to paragraph 13C), the
Company will make or cause to be made effective provision whereby
the Notes will be secured by such Lien equally and ratably with
any and all other Debt thereby secured so long as any such other
Debt shall be so secured. In the event the Company shall propose
to secure the Notes pursuant to this paragraph, the mortgage or
other instrument creating such Lien shall be satisfactory in form
and substance (including without limitation the portion thereof
pertaining to the release of the collateral secured thereby and
the application of the proceeds from the sale or other
disposition of such collateral) to the Required Holders.
7D. Subsidiary Guarantors.. Subsidiary Guarantors..
Subsidiary Guarantors. The Company and NPC International shall
immediately cause each Subsidiary hereafter created or acquired
by the Company, NPC International or any Subsidiary to provide to
each Purchaser the following: (a) a Joinder Agreement, (b) all
documents, agreements and other instruments described in
paragraph 4A(iv), (vi), (ix), (xii) and (xiii) with respect to
such Subsidiary; and (c) all information regarding the condition
(financial or otherwise), business and operations of such
Subsidiary as any Purchaser may reasonably request. It is agreed
and understood that the agreement of the Company under this
paragraph 7D to cause any Subsidiary to provide to each Purchaser
a Joinder Agreement is a condition precedent to the execution of
this Agreement and that the entry into this Agreement by
Prudential constitutes good and adequate consideration for the
provision of such Joinder Agreement.
7E. Compliance with Laws, Etc.. Compliance with
Laws, Etc.. Compliance with Laws, Etc. The Company and NPC
International will comply, and cause each of its Subsidiaries to
comply, in all material respects with all applicable laws, rules,
regulations and orders the noncompliance with which could result
in a material adverse effect on the Company, NPC International or
any of their Subsidiaries, such compliance to include, without
limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its
property; provided, that neither the Company, NPC International
nor such Subsidiary shall be required to pay any such taxes,
assessments or governmental charges if (i) the validity,
applicability or amount thereof is being contested in good faith
by appropriate actions or proceedings which will prevent the
forfeiture or sale of any property of the Company, NPC
International or such Subsidiary or any material interference
with the use thereof by the Company, NPC International or such
Subsidiary, and (ii) the Company, NPC International or such
Subsidiary shall set aside on its books, reserves deemed by it to
be adequate with respect thereto.
7F. Maintenance of Insurance.. Maintenance of
Insurance.. Maintenance of Insurance. The Company, NPC
International and each Subsidiary will maintain insurance in such
amounts and against such liabilities and hazards as customarily
is maintained by other companies of similar size operating
similar businesses, and upon the written request of any
Significant Holder, and together with each delivery of financial
statements under clause (iii) of paragraph 7A, the Company will
deliver an Officer's Certificate specifying the details of such
insurance in effect.
7G. Maintenance of Properties, Etc.7G. Maintenance of
Properties, Etc.7G. Maintenance of Properties, Etc. The Company
and NPC International will maintain and preserve, and cause each
Subsidiary to maintain and preserve, to the extent that a failure
to so maintain or preserve would have a material adverse effect
on the Company, NPC International or any Subsidiary's business,
property or assets (i) all of their properties which are used or
useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted and (ii) all of their
rights, title, licenses, trademarks and other permits used or
useful in the conduct of their business; provided, however, that
NPC International may effect the Skipper's Sale.
7H. Corporate Existence7H. Corporate Existence7H.
Corporate Existence. The Company, NPC International and each
Subsidiary shall maintain its corporate, partnership or company
existence, as applicable.
7I. Claims for Labor and Materials. Claims for
Labor and Materials. Claims for Labor and Materials. The
Company and NPC International will promptly pay and discharge,
and will cause each Subsidiary promptly to pay and discharge, all
trade accounts payable in accordance with usual and customary
business terms, and all claims for work, labor or materials,
which if unpaid might become a Lien upon any property of the
Company, NPC International or such Subsidiary; provided that
neither the Company, NPC International nor any Subsidiary shall
be required to pay any such account payable or claim if either
(i)(a) the validity, applicability or amount thereof is being
contested in good faith by appropriate actions or proceedings
which will prevent the forfeiture or sale of any property of the
Company, NPC International or such Subsidiary or any material
interference with the use thereof by the Company, NPC
International or such Subsidiary, and (b) the Company, NPC
International or such Subsidiary shall set aside on its books,
reserves deemed by it to be adequate with respect thereto or (ii)
the failure to pay any such account payable or claim would not
have a material adverse effect on the business, prospects,
profits, properties or condition (financial or otherwise) of the
Company, NPC International and their Subsidiaries taken as a
whole.
8. NEGATIVE COVENANTS. NEGATIVE COVENANTS. NEGATIVE
COVENANTS. During the Issuance Period and thereafter so long as
any Note shall remain unpaid, the Company covenants as follows:
8A. Consolidated Net Worth Requirement..
Consolidated Net Worth Requirement.. Consolidated Net Worth
Requirement. NPC International will not permit Consolidated Net
Worth at any time to be less than the sum of (i) $83,000,000 plus
(ii) an amount equal to 50% of Consolidated Net Earnings (without
reduction for any deficit in Consolidated Net Earnings for any
quarterly fiscal period) for the period from and after December
31, 1996 to and including the date of determination thereof,
computed on a cumulative basis for such period.
8B. Consolidated Fixed Charge Requirement.
Consolidated Fixed Charge Requirement. Consolidated Fixed Charge
Requirement. NPC International will not permit Consolidated Net
Income Available for Fixed Charges for the four fiscal quarters
most recently ended as of the date of determination, at any time
to be less than 200% of Fixed Charges as of the last day of the
fiscal quarter most recently ended as of the date of
determination.
8C. Lien, Debt, and Other Restrictions. Lien,
Debt, and Other Restrictions. Lien, Debt, and Other Restrictions.
The Company and NPC International will not and will not permit
any Subsidiary to:
8C(1) Liens -- Create, assume or suffer to exist any
Lien upon any of its properties or assets, whether now owned
or hereafter acquired (whether or not provision is made for
the equal and ratable securing of the Notes in accordance
with the provisions of paragraph 7C), except
(i) Liens for taxes or governmental charges and
liens securing claims or demands of mechanics and
materialmen provided that the payment is not at the
time required by paragraph 7E or 7I;
(ii) other Liens incidental to the conduct of its
business or the ownership of its property and assets
which are not incurred in connection with the borrowing
of money or the obtaining of advances or credit, and
which do not in the aggregate materially detract from
the value of its property or assets or materially
impair the use thereof in the operation of its
business;
(iii) survey exceptions which, when taken as a
whole, would not have a material adverse effect on the
Company, NPC International and the Subsidiaries, taken
as a whole;
(iv) Liens on property or assets of a Subsidiary
to secure obligations of such Subsidiary to the
Company, NPC International or another Subsidiary;
(v) Liens existing on property acquired by the
Company, NPC International or any Subsidiary at the
time such property is acquired or Liens existing on
property of a Person immediately prior to such Person
being consolidated with or merged into the Company, NPC
International or a Subsidiary or such Person becoming a
Subsidiary provided that (x) no such Lien shall have
been created or assumed in contemplation of such
acquisition, consolidation or merger or such Person's
becoming a Subsidiary, (y) each such Lien shall at all
times be confined solely to the property so acquired,
and (z) any Debt secured by such Liens shall be within
the applicable limitations of paragraph 8C(2)(a); and
(vi) other Liens on the property of the Company,
NPC International and all Subsidiaries, provided that
(a) the aggregate amount of (I) Debt secured by such
Liens plus (II) Debt of Subsidiaries (collectively,
"Priority Debt") does not exceed at any time an amount
equal to 20% of Consolidated Net Worth and (b) all such
Debt shall be within the applicable limitations of
paragraph 8C(2)(a).
8C(2) Debt -- (a) Create, incur, assume or in any
manner be or become liable in respect of any Debt, except
(i) Funded Debt of NPC Management represented by
the Notes;
(ii) Funded Debt of each Guarantor represented by
the Guaranty Agreement;
(iii) Debt existing on the date hereof and
described on Schedule 8(C)(2) attached hereto,
including, in the case of any Guarantor, any Permitted
Guaranty Debt in respect of such Debt;
(iv) Debt of the Company to any Guarantor and Debt
of any Guarantor to the Company or any other Guarantor;
provided that, such Debt is incurred when no Event of
Default or Default exists or would result therefrom; and
(v) additional Debt of the Company, NPC
International and their Subsidiaries; provided that (x)
the aggregate amount of all Debt of the Company, NPC
International and their Subsidiaries (determined on a
consolidated basis) shall not exceed at any time an
amount equal to (1) prior to March 31, 1998 three and one-
fourth (3.25) times Pro Forma EBITDA, and (2) thereafter, three
(3.0) times Pro Forma EBITDA, in each case for the four
fiscal quarters immediately preceding the date of
determination, and (y) in the case of Priority Debt, such Debt is
within the applicable limitations of paragraphs 8C(1) and 8C(4).
(b) Any entity which becomes a Subsidiary after the date
hereof shall for all purposes of this Agreement be deemed to have
created, assumed or incurred at the time it becomes a Subsidiary
all Debt of such entity existing immediately after it becomes a
Subsidiary.
8C(3) Loans, Advances, Investments and Contingent
Liabilities -- Make or permit to remain outstanding any loan or
advance to, or guarantee, endorse or otherwise be or become
contingently liable, directly or indirectly, in connection with
the obligations, stock or dividends of, or own, purchase or
acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any Person,
except that the Company, NPC International or any Subsidiary may
(i) make or permit to remain outstanding loans or
advances to any Subsidiary as permitted by paragraph
8C(2)(iv) and enter into and perform NPC
International's obligations under the Indemnification
Agreements,
(ii) own, purchase or acquire stock, obligations
or securities of a Subsidiary or of a corporation which
immediately after such purchase or acquisition will be
a Subsidiary,
(iii) acquire and own stock, obligations or
securities received in settlement of debts (created in
the ordinary course of business) owing to the Company,
NPC International or any Subsidiary,
(iv) own, purchase or acquire prime commercial
paper and certificates of deposit of United States
commercial banks (having capital surplus in excess of
$250,000,000), in each case due within one year from
the date of purchase and payable in the United States
in United States dollars, and obligations of the United
States Government or any agency thereof, and
obligations guaranteed by the United States Government,
and repurchase agreements of such banks for terms of
less than one year in respect of the foregoing
certificates and obligations,
(v) own, purchase or acquire securities issued by
state and local governments (or subdivisions thereof)
maturing in twelve months or less from the date of
acquisition by the Company, NPC International or any
Subsidiary which securities at the time of acquisition
thereof by the Company, NPC International or such
Subsidiary are rated AA or better by Standard & Poor's
Corporation or AA or better by Moody's Investors
Service, Inc.,
(vi) make or permit to remain outstanding travel
and other like advances to officers and employees in
the ordinary course of business,
(vii) make or permit to remain outstanding loans
to officers and employees of the Company and NPC
International pursuant to the Executive Loan Program in
an aggregate amount not to exceed $1,500,000
outstanding at any time that are approved by the Audit
Committee of the Board of Directors of NPC
International,
(viii) promissory notes and other receivables
arising from the sale of goods and services or other
assets; provided that the aggregate outstanding amounts
of such notes and receivables shall not at any time
exceed $7,500,000, and
(ix) make or permit to remain outstanding loans
or advances to, or guarantee, endorse or otherwise be
or become contingently liable in connection with the
obligations, stock or dividends of, or own, purchase or
acquire stock, obligations or securities of, any other
Person, provided that the aggregate principal amount of
such loans and advances, plus the aggregate amount of
such contingent liabilities, at any time outstanding
for the Company, NPC International and all Subsidiaries
shall not exceed an amount equal to 10% of Consolidated
Net Worth.
8C(4) Subsidiary Debt. The Company and NPC
International will not permit Subsidiaries to create, incur
or assume or in any manner be or become liable in any
respect of any Debt (other than Permitted Guaranty Debt), if
the aggregate amount of Priority Debt of the Company, NPC
International and Subsidiaries would exceed an amount equal
to twenty percent (20%) of Consolidated Net Worth.
8C(5) Sale of Stock and Debt of Subsidiaries --
Sell or otherwise dispose of, or part with control of, any
shares of stock or Debt of any Subsidiary, except to the
Company, NPC International or another Subsidiary, and except
that all shares of stock and Debt of any Subsidiary at the
time owned by or owed to the Company, NPC International and
all Subsidiaries may be sold as an entirety for a cash
consideration which represents the fair value (as determined
in good faith by the Board of Directors of NPC
International) at the time of sale of the shares of stock
and Debt so sold, provided that the assets of such
Subsidiary could be sold within the limitations of paragraph
8C(6) and that the earnings of such Subsidiary shall not
have constituted more than 5% of Consolidated Net Earnings
for any of the three fiscal years then most recently ended,
and provided further that, at the time of such sale, such
Subsidiary shall not own, directly or indirectly, any shares
of stock or Debt of any other Subsidiary (unless all of the
shares of stock and Debt of such other Subsidiary owned,
directly or indirectly, by the Companies and all
Subsidiaries are simultaneously being sold as permitted by
this paragraph 8C(5)) or any Debt of the Company or NPC
International; provided, however, that NPC International may
effect the Skipper's Sale.
8C(6) Merger and Sale of Assets -- Merge or
consolidate with or into any other Person or during any 12
month period, sell, lease, transfer or otherwise dispose of
any assets which in the aggregate have a book value in
excess of 5% of the consolidated assets of the Company, NPC
International and all Subsidiaries to any Person (determined
as of the end of the fiscal year immediately preceding the
date of such sale or disposition), except that
(i) any Subsidiary (other than the Company) may
merge into NPC International or into any one or more
other Subsidiaries;
(ii) any Subsidiary (other than the Company) may
be consolidated with any other Subsidiary;
(iii) any Guarantor may sell, lease, transfer
or otherwise dispose of any of its assets to the
Company or any other Guarantor, and the Company may
sell, lease, transfer or otherwise dispose of any of
its assets (other than any Franchise Agreement or
interest therein) to any Guarantor, and
(iv) any Subsidiary (other than the Company) may
sell, or otherwise dispose of all or substantially all
of its assets subject to the conditions specified in
paragraph 8C(5) with respect to a sale of the stock of
such Subsidiary.
provided, in each of the cases described in the preceding
clauses, that immediately thereafter and after giving effect
thereto, no Event of Default or Default shall have occurred and
be continuing. No other provision in this Agreement
(including, without limitation, any provision in this
Agreement relating to restricted investments or transactions with
affiliates) shall prohibit the Company or any Guarantor from
selling, transferring, conveying, leasing, or assigning any
assets (including, without limitation, financial assets) to the
extent such sale, transfer, conveyance, lease or assignment is
permitted under paragraph 8(C)(6)(iii).
8C(7) Sale or Discount of Receivables -- Sell with
recourse, or discount or otherwise sell for less than face
value thereof, any of their notes or accounts receivable.
8C(8) Transactions with Affiliates -- Directly or
indirectly, purchase, acquire or lease any property from, or
sell, transfer or lease property (other than shares of stock
of NPC International) to, or otherwise deal with, in the
ordinary course of business or otherwise (i) any Substantial
Stockholder, or (ii) any corporation (except a Subsidiary)
in which a Substantial Stockholder, the Company or NPC
International (either directly or through Subsidiaries) own
5% or more of the outstanding voting stock of such
corporation except that (a) any Substantial Stockholder may
be a director, officer or employee of the Company, NPC
International or any Subsidiary and may be paid reasonable
compensation in connection therewith and (b) such acts and
transactions prohibited by this paragraph 8C(8) may be
performed or engaged in if upon terms not less favorable to
the Company, NPC International or any Subsidiary than if no
relationship described in clause (i) and (ii) above existed.
The provisions of this paragraph 8C(8) shall not apply to
transactions with stockholders initiated prior to September
26, 1989 and which have been reported to the Securities and
Exchange Commission or loans to stockholders permitted by
paragraph 8C(3)(vi).
8C(9) Intangible Assets -- (a) The Company and
NPC International will not and will not permit any
Subsidiary to enter into, assume or otherwise be bound or
obligated under any agreement creating or evidencing Debt or
any agreement executed and delivered in connection with any
Debt containing one or more Intangible Asset Covenants
unless prior written consent to such agreement shall have
been obtained pursuant to paragraph 13C; provided, however,
in the event the Company, NPC International or any
Subsidiary shall enter into, assume or otherwise become
bound by or obligated under any such agreement without the
prior written consent of the Required Holders, the terms of
this Agreement shall without any further action on the part
of the Company or any of the holders of the Notes, be deemed
to be amended automatically to include each Intangible Asset
Covenant contained in such agreement. The Company and NPC
International further covenant to promptly execute and
deliver at its expense an amendment to this Agreement in
form and substance satisfactory to the Required Holders
evidencing the amendment of this Agreement to include such
Intangible Asset Covenants provided that the execution and
delivery of such amendment shall not be a precondition to
the effectiveness of such amendment as provided for in this
paragraph 8C(9), but shall merely be for the convenience of
the parities hereto.
(b) For the purposes of this Agreement, the term
"Intangible Asset Covenant" shall mean (i)(A) any
affirmative or negative covenant or similar restriction
applicable to the Company, NPC International or any
Subsidiary (regardless of whether such provision is labeled
or otherwise characterized as a covenant) or (B) any
provision which permits the holder of Debt of the Company,
NPC International or any Subsidiary to accelerate (with the
passage of time or giving of notice or both) the maturity
thereof or otherwise require the Company, NPC International
or any Subsidiary to purchase such Debt prior to its stated
maturity and (ii) such provision provides for a financial
covenant or default the calculation of which involves as a
specific component thereof the level of intangible assets of
the Company, NPC International or any Subsidiary.
8D. Interest and Rents Coverage.. Interest and Rents
Coverage.. Interest and Rents Coverage. The Company
covenants that, on the last day of each fiscal quarter, the ratio
of (a) consolidated Pro Forma EBITDA plus the consolidated
operating lease rental expense of NPC International and its
Subsidiaries to (b) Fixed Charges will be not less than 1.5 to
1.0, for the period consisting of the four (4) consecutive fiscal
quarters ending on the date of such determination. For purposes
of determining whether the entering into of any lease results in
a breach of this paragraph 8D, the Company shall make the
calculation required under the paragraph 8D, as of the date such
lease is entered into on the assumption that the rental expense
that is expected to be incurred during the twelve-month period
following the entering into of the lease was incurred during the
twelve-month period ending on the date of such calculation.
9. EVENTS OF DEFAULT. EVENTS OF DEFAULT. EVENTS OF
DEFAULT.
9A. Acceleration. Acceleration. Acceleration. If
any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary
or involuntary or come about or be effected by operation of law
or otherwise):
(i) the Company defaults in the payment of any
principal of, or Yield-Maintenance Amount payable with
respect to, any Note when the same shall become due, either
by the terms thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any
interest on any Note for more than five (5) Business Days
after the date due; or
(iii) the Company or any Guarantor defaults in any
payment of principal of or interest on any other obligation
for money borrowed (or any Capitalized Lease Obligation, any
obligation under a conditional sale or other title retention
agreement, any obligation issued or assumed as full or
partial payment for property whether or not secured by a
purchase money mortgage or any obligation under notes
payable or drafts accepted representing extensions of
credit) beyond any period of grace provided with respect
thereto, or the Company or any Guarantor fails to perform or
observe any other agreement, term or condition contained in
any agreement under which any such obligation is created (or
if any other event of default thereunder or under any such
agreement shall occur and be continuing) and the effect of
such failure or other event of default is to cause, or to
permit the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) to cause, such
obligation to become due (or to be repurchased by the
Company or any Guarantor) prior to any stated maturity or
the Company or any Guarantor fails to pay any guaranty in
accordance with its terms, provided that the aggregate
amount of all obligations as to which such a payment default
shall occur and be continuing or such a failure or other
event causing or permitting acceleration (or resale to the
Company or any Guarantor) shall occur and be continuing
exceeds $2,500,000; or
(iv) any representation or warranty made by the Company
herein or by the Company or any of its officers in any
writing furnished in connection with or pursuant to this
Agreement shall be false in any material respect on the date
as of which made; or
(v) the Company or NPC International fails to perform
or observe any term, covenant or agreement contained in
paragraphs 6C, 6D or 8 (other than paragraph 8C(8)) and such
failure shall not be remedied within 5 Business Days after
any officer of the Company or NPC International obtains
actual knowledge thereof; or
(vi) the Company or NPC International fails to perform
or observe any other agreement, covenant, term or condition
contained herein including paragraph 8C(8) and such failure
shall not be remedied within 30 days after any officer of
the Company or NPC International obtains actual knowledge
thereof; or
(vii) the Company or any Guarantor takes any action
or fails to take action which results in the loss of any
franchise agreement, license or other permit which would
preclude the Company or NPC International from operating
such franchise under the name "Pizza Hut", and such loss
materially adversely affects the business operations or
profitability of the Company or NPC International; or
(viii) the Company or any Guarantor makes an
assignment for the benefit of creditors or is generally not
paying its debts as such debts become due; or
(ix) any decree or order for relief in respect of the
Company or any Guarantor is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency,
readjustment of debt (with respect to the bankruptcy or
insolvency of the Company or any Guarantor), dissolution or
liquidation or similar law, whether now or hereafter in
effect (herein called the "Bankruptcy Law"), of any jurisdic
tion; or
(x) the Company or any Guarantor petitions or applies
to any tribunal for, or consents to, the appointment of, or
taking possession by, a trustee, receiver, custodian,
liquidator or similar official of the Company or any
Guarantor, or of any substantial part of the assets of the
Company or any Guarantor, or commences a voluntary case
under the Bankruptcy Law of the United States or any
proceedings (other than proceedings for the voluntary
liquidation and dissolution of a Guarantor) relating to the
Company or any Guarantor under the Bankruptcy Law of any
other jurisdiction; or
(xi) any such petition or application is filed, or any
such proceedings are commenced, against the Company or any
Guarantor and the Company or such Guarantor by any act
indicates its approval thereof, consent thereto or
acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian,
liquidator or similar official, or approving the petition in
any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 30 days; or
(xii) any order, judgment or decree is entered in
any proceedings against the Company or NPC International
decreeing the dissolution of the Company or NPC
International and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(xiii) any order, judgment or decree is entered in
any proceedings against the Company or any Guarantor
decreeing a split-up of the Company or such Guarantor which
requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a
Guarantor whose assets represent a substantial part, of the
consolidated assets of NPC International and its
Subsidiaries (determined in accordance with generally
accepted accounting principles) or which requires the
divestiture of assets, or stock of a Guarantor, which shall
have contributed a substantial part of the Consolidated Net
Earnings for any of the three fiscal years then most
recently ended, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(xiv) any judgment or order, or series of judgments
or orders, for the payment of money in an amount in excess
of $2,500,000 (exclusive of any amount covered by insurance
and with respect to which the insurer has assumed
responsibility in writing) is rendered against the Company
or any Guarantor and either (i) enforcement proceedings have
been commenced by any creditor upon such judgment or order
or (ii) within 30 days after entry thereof, such judgment is
not discharged or execution thereof stayed pending appeal,
or within 30 days after the expiration of any such stay,
such judgment is not discharged; or
(xv) any Termination Event with respect to a Plan shall
have occurred, and, within 30 days after the occurrence
thereof, (i) such Termination Event (if correctable) shall
not have been corrected and (ii) the then present value of
such Plan's vested benefits exceeds the then current value
of assets accumulated in such Plan by more than the amount
of $2,500,000 (or in the case of a Termination Event
involving the withdrawal of a "substantial employer" (as
defined in Section 4001(a)(2) of ERISA), the withdrawing
employer's proportionate share of such excess shall exceed
such amount); or
(xvi) the Company, NPC International or any of
their ERISA Affiliates as employer under a Multiemployer
Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing
employer that such employer has incurred a withdrawal
liability in an annual amount exceeding $2,500,000;
then (a) if such event is an Event of Default specified in clause
(i) or (ii) of this paragraph 9A, any holder of any Note subject
to such a payment default may at its option during the
continuance of such Event of Default, by notice in writing to the
Company, declare all of such Notes held by such holder to be, and
all of such Notes held by such holder shall thereupon be and
become, immediately due and payable together with interest
accrued thereon, without presentment, demand, protest or notice
of any kind, all of which are hereby waived by the Company, (b)
if such event is an Event of Default specified in clause (viii),
(ix), (x), (xi) or (xii) of this paragraph 9A with respect to the
Company or NPC International, all of the Notes at the time
outstanding shall automatically become immediately due and
payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which
are hereby waived by the Company, and (c) if such event is any
other Event of Default, the Required Holder(s) of the Notes of
any Series may at its or their option during the continuance of
such Event of Default, by notice in writing to the Company,
declare all of the Notes of such Series to be, and all of the
Notes of such Series shall thereupon be and become, immediately
due and payable together with interest accrued thereon and
together with the Yield-Maintenance Amount, if any, with respect
to each Note of such Series, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the
Company, provided that the Yield-Maintenance Amount, if any, with
respect to each Note shall be due and payable upon any
declaration pursuant to this paragraph 9A only if (I) the event
whose occurrence permits such declaration is an Event of Default
specified in any of clauses (i) to (vi), inclusive, of this
paragraph 9A, (II) the Required Holders of the Notes of any
Series which shall have been accelerated shall have given to the
Company, at least 10 Business Days before such declaration,
written notice stating its or their intention to declare the
Notes held by such Required Holders (or all of the Notes of such
Series) to be immediately due and payable and identifying one or
more such Events of Default whose occurrence on or before the
date of such notice permits such declaration, and (III) one or
more of the Events of Default so identified shall be continuing
at the time of such declaration.
9B. Rescission of Acceleration. Rescission of
Acceleration. Rescission of Acceleration. At any time after any
or all of the Notes shall have been declared immediately due and
payable pursuant to paragraph 9A, the Required Holder(s) may, by
notice in writing to the Company, rescind and annul such
declaration and its consequences if (i) the Company shall have
paid all overdue interest on the Notes, the principal of and
Yield-Maintenance Amount, if any, payable with respect to any
Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue
principal and Yield-Maintenance Amount at the rate specified in
the Notes, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all
Events of Default and Defaults, other than non-payment of amounts
which have become due solely by reason of such declaration, shall
have been cured or waived pursuant to paragraph 13C, and (iv) no
judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent
Event of Default or Default or impair any right arising
therefrom.
9C. Notice of Acceleration or Rescission. Notice of
Acceleration or Rescission. Notice of Acceleration or
Rescission. Whenever any Note shall be declared immediately due
and payable pursuant to paragraph 9A or any such declaration
shall be rescinded and annulled pursuant to paragraph 9B, the
Company shall forthwith give written notice thereof to the holder
of each Note at the time outstanding.
9D. Other Remedies.. Other Remedies.. Other
Remedies. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by
exercising such remedies as are available to such holder in
respect thereof under applicable law, either by suit in equity or
by action at law, or both, whether for specific performance of
any covenant or other agreement contained in this Agreement or in
aid of the exercise of any power granted in this Agreement. No
remedy conferred in this Agreement upon the holder of any Note is
intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every
other remedy conferred herein or now or hereafter existing at law
or in equity or by statute or otherwise.
10. REPRESENTATIONS, COVENANTS AND WARRANTIES..
REPRESENTATIONS, COVENANTS AND WARRANTIES.. REPRESENTATIONS,
COVENANTS AND WARRANTIES. The Company represents, covenants and
warrants:
10A. Organization; Qualification; Corporate Authority..
Organization; Qualification; Corporate Authority..
Organization; Qualification; Corporate Authority. The Company is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; and each
Guarantor is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated or organized. The Company has and each Guarantor
has the corporate, company or partnership power, as applicable,
to own its respective property and to carry on its respective
business as now being conducted, and the Company and each
Guarantor is duly qualified as a foreign corporation, company or
partnership, as applicable, to do business and is in good
standing in every jurisdiction in which the nature of the
business conducted by it makes such qualification necessary. The
execution, delivery and performance by the Company of this
Agreement and the Notes are within the Company's corporate powers
and have been duly authorized by all necessary corporate action.
10B. Financial Statements.. Financial Statements..
Financial Statements. The Company has furnished Prudential with
the following financial statements, identified by a principal
financial officer of NPC International: (i) a consolidated
balance sheet of NPC International and its Subsidiaries
(including the Company) as at the last day of each of the three
fiscal years of NPC International most recently completed prior
to the date as of which this representation is made or repeated
to such Purchaser (other than fiscal years completed within 90
days prior to such date for which audited financial statements
have not been released) and consolidated statements of income,
stockholders' equity and cash flows of NPC International and its
Subsidiaries (including the Company) for each such year, all
reported on by Ernst & Young; and (ii) a consolidated balance
sheet of NPC International and its Subsidiaries (including the
Company) as at the end of the quarterly period (if any) most
recently completed prior to such date and after the end of such
fiscal year (other than quarterly periods completed within 60
days prior to such date for which financial statements have not
been released) and the comparable quarterly period in the
preceding fiscal year and consolidated statements of income,
stockholders' equity and cash flows for the periods from the
beginning of the fiscal years in which such quarterly periods are
included to the end of such quarterly periods, prepared by NPC
International. Such financial statements (including any related
schedules and/or notes) are true and correct in all material
respects (subject, as to interim statements, to changes resulting
from audits and year-end adjustments), have been prepared in
accordance with generally accepted accounting principles
consistently followed throughout the periods involved and show
all liabilities, direct and contingent, of NPC International and
its Subsidiaries (including the Company) required to be shown in
accordance with such principles. The balance sheets fairly
present the condition of NPC International and its Subsidiaries
(including the Company) as at the dates thereof, and the
statements of income, stockholders' equity and cash flows fairly
present the results of the operations of NPC International and
its Subsidiaries (including the Company) and their cash flows for
the periods indicated. There has been no material adverse change
in the business, property or assets, condition (financial or
otherwise), or operations of the Company, NPC International and
their Subsidiaries taken as a whole since the end of the most
recent fiscal year for which such audited financial statements
have been furnished.
10C. Conflicting Agreements and Other Matters..
Conflicting Agreements and Other Matters.. Conflicting
Agreements and Other Matters. Neither the Company nor any
Guarantor is a party to any contract or agreement or subject to
any charter or other corporate restriction which materially and
adversely affects its business, property or assets, or financial
condition. Neither the execution nor delivery of this Agreement
or the Notes, nor the offering, issuance and sale of the Notes,
nor fulfillment of nor compliance with the terms and provisions
hereof and of the Notes will conflict with, or result in a breach
of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the
Company or any Guarantor pursuant to, the charter, by-laws or
organizational documents of the Company or any Guarantor or any
award of any arbitrator or any agreement (including any agreement
with stockholders), instrument, order, judgment, decree, statute,
law, rule or regulation to which the Company or any Guarantor is
subject. Neither the Company nor any Guarantor is a party to, or
otherwise subject to any provision contained in, any instrument
evidencing indebtedness of the Company or such Guarantor, any
agreement relating thereto or any other contract or agreement
(including its charter) which limits the amount of, or otherwise
imposes restrictions on the incurring of, Debt of the Company of
the type to be evidenced by the Notes except as set forth in the
agreements listed in Schedule 10C attached hereto.
10D. Governmental Consent.. Governmental Consent..
Governmental Consent. Neither the nature of the Company or of
any Guarantor, nor any of their respective businesses or
properties, nor any relationship between the Company or any
Guarantor and any other Person, nor any circumstance in
connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval,
exemption or other action by or notice to or filing with any
court or administrative or governmental or regulatory body (other
than routine filings after the Date of Closing with the
Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of
this Agreement, the offering, issuance, sale or delivery of the
Notes or fulfillment of or compliance with the terms and
provisions hereof or of the Notes.
10E. Enforceability.. Enforceability..
Enforceability. This Agreement is, and the Notes when delivered
hereunder will be, legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their
terms.
10F. Actions Pending. Actions Pending. Actions
Pending. There is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against
the Company or any Guarantor, or any properties or rights of the
Company or any Guarantor, by or before any court, arbitrator or
administrative or governmental body which might result in any
material adverse change in the business, condition or operations
of the Company and the Guarantors taken as a whole. There is no
action, suit, investigation or proceeding pending or threatened
against the Company or any Guarantor which purports to affect the
validity or enforceability of this Agreement or any Note.
10G. Outstanding Debt.. Outstanding Debt..
Outstanding Debt. Neither the Company nor any Guarantors has
outstanding any Debt except as permitted by paragraphs 8C(2) and
8C(4). There exists no default under the provisions of any
instrument evidencing such Debt or of any agreement relating
thereto.
10H. Title to Properties. Title to Properties.
Title to Properties. The Company has and each Guarantor has good
and marketable title to substantially all of its respective real
properties (other than properties which it leases) and good title
to substantially all of their other respective properties and
assets, including the properties and assets reflected in the most
recent audited balance sheet referred to in paragraph 10B (other
than properties and assets disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted
by paragraph 8C(1). The Company and each Guarantor enjoys
peaceful and undisturbed possession under all leases necessary in
any material respect for the operation of their respective
properties and assets, none of which contains any unusual or
burdensome provisions which might materially affect or impair the
operation of such properties and assets. All leases necessary in
any material respect for the conduct of the respective businesses
of the Company and the Guarantors are valid and subsisting and
are in full force and effect.
10I. Taxes.. Taxes.. Taxes. The Company has and
each Guarantor has filed all Federal, State and other income tax
returns which, to the best knowledge of the officers of the
Company, are required to be filed, and each has paid all taxes as
shown on such returns and on all assessments received by it to
the extent that such taxes have become due, except such taxes as
are being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with
generally accepted accounting principles. Federal income tax
returns of NPC International have been examined and reported on
by the taxing authorities or closed by applicable statutes and
satisfied for all fiscal years prior to and including the fiscal
year ended on March 30, 1993.
10J. Offering of Notes. Offering of Notes. Offering
of Notes. Neither the Company, NPC International nor any agent
acting on their behalf has, directly or indirectly, offered the
Notes or any similar security of the Company or NPC International
or the Guaranty Agreement or any similar security of any
Guarantor for sale to, or solicited any offers to buy the Notes
or any similar security of the Company or NPC International or
any Guarantor or any similar security of a Guarantor from, or
otherwise approached or negotiated with respect thereto with, any
Person other than institutional investors, and neither the
Company, NPC International nor any agent acting on their behalf
has taken or will take any action which would subject the
issuance or sale of the Notes to the provisions of section 5 of
the Securities Act or to the provisions of any securities or Blue
Sky law of any applicable jurisdiction.
10K. Use of Proceeds.. Use of Proceeds.. Use of
Proceeds. Neither the Company nor any Guarantor owns or has any
present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System (herein called "margin stock"). None of
the proceeds of the sale of any Notes will be used, directly or
indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock or for the
purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that
is currently a margin stock or for any other purpose which might
constitute the purchase of such Notes a "purpose credit" within
the meaning of such Regulation G, unless the Company shall have
delivered to the Purchaser which is purchasing such Notes, on the
Closing Day for such Notes, an opinion of counsel satisfactory to
such Purchaser stating that the purchase of such Notes does not
constitute a violation of such Regulation G. Neither the
Company, any Guarantor nor any agent acting on their behalf has
taken or will take any action which might cause this Agreement or
the Notes to violate Regulation G, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve
System or to violate the Exchange Act, in each case as in effect
now or as the same may hereafter be in effect.
10L. ERISA. ERISA. ERISA. No accumulated funding
deficiency (as defined in section 302 of ERISA and section 412 of
the Code), whether or not waived, exists with respect to any Plan
(other than a Multiemployer Plan). No liability to the Pension
Benefit Guaranty Corporation has been, or is expected by the
Company, any Guarantor or any Affiliate to be, incurred with
respect to any Plan (other than a Multiemployer Plan) by the
Company or any Guarantor which is or would be materially adverse
to the Company and the Guarantors taken as a whole. Neither the
Company nor any Guarantor has incurred or presently expects to
incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan which is or would be materially
adverse to the Company and the Guarantors taken as a whole. The
execution and delivery of this Agreement and the issuance and
sale of the Notes will be exempt from or will not involve any
transaction which is subject to the prohibitions of section 406
of ERISA and will not involve any transaction in connection with
which a penalty could be imposed under section 502(i) of ERISA or
a tax could be imposed pursuant to section 4975 of the Code. The
representation by the Company in the next preceding sentence is
made in reliance upon and subject to the accuracy of the
representation of each Purchaser in paragraph 11B as to the
source of funds to be used by it to purchase any Notes.
10M. Disclosure.. Disclosure.. Disclosure. Neither
this Agreement nor any other document, certificate or statement
furnished to any Purchaser by or on behalf of the Company in
connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading.
There is no fact peculiar to the Company or any Guarantor which
materially adversely affects or in the future may (so far as the
Company can now foresee) materially adversely affect the
business, property or assets, or financial condition of the
Company or any Guarantor and which has not been set forth in this
Agreement or in the other documents, certificates and statements
furnished to any Purchaser by or on behalf of the Company prior
to the date hereof in connection with the transactions
contemplated hereby.
10N. Investment Company Act.. Investment Company Act..
Investment Company Act. Neither the Company nor NPC
International is an "investment company" or a company
"controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
10O. Public Utility Holding Company Act.. Public
Utility Holding Company Act.. Public Utility Holding Company Act.
Neither the Company nor NPC International is a "holding company"
or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", or a "public utility" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
10P. Environmental Compliance10P. Environmental
Compliance10P. Environmental Compliance. The Company and the
Guarantors and all of their respective properties and facilities
have complied at all times and in all respects with all federal,
state, local and regional statutes, laws, ordinances and judicial
or administrative orders, judgments, rulings and regulations
relating to protection of the environment except, in any such
case, where failure to comply would not result in a material
adverse effect on the business, condition (financial or
otherwise) or operations of the Company and the Guarantors taken
as a whole.
10Q. Funded Debt Agreements.. Funded Debt Agreements..
Funded Debt Agreements. The form of agreements evidencing the
Bank Facilities (delivered to Prudential on the date hereof) are
true, correct and complete in all respects and there exists no
amendments, waivers or other modifications to such agreements
except as previously provided to Prudential.
10R. Hostile Tender Offers10R. Hostile Tender
Offers10R. Hostile Tender Offers. None of the proceeds of
the sale of any Notes will be used to finance a Hostile Tender
Offer.
10S. Subsidiaries. . Subsidiaries. .
Subsidiaries. NPC International has no Subsidiaries except as
listed on Schedule 10S (as updated from time to time pursuant to
paragraph 7A(viii)).
11. REPRESENTATIONS OF THE PURCHASER.. REPRESENTATIONS
OF THE PURCHASER.. REPRESENTATIONS OF THE PURCHASER.
Each Purchaser represents as follows:
11A. Nature of Purchase. Nature of Purchase. Nature of
Purchase. Such Purchaser is not acquiring the Notes purchased by
it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act,
provided that the disposition of such Purchaser's property shall
at all times be and remain within its control.
11B. Source of Funds. Source of Funds. Source of
Funds. All of the funds to be used by such Purchaser to purchase
the Notes are assets of an insurance company general account and,
if any assets in the general account are, or may be, assets of
any "employee benefit plan" within the meaning of Section 3(3) of
ERISA, such Purchaser meets the conditions for application of the
general exemption in Section I of the Proposed Class Exemption
for Certain Transactions Involving Insurance Company General
Accounts (59 Fed. Reg. 43134 (1994)).
12. DEFINITIONS AND ACCOUNTING TERMS.. DEFINITIONS AND
ACCOUNTING TERMS.. DEFINITIONS AND ACCOUNTING TERMS.
12A. Certain Defined Terms.. Certain Defined Terms..
Certain Defined Terms. As used in this Agreement the following
terms shall have the meanings specified with respect thereto
below (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Acceptance" shall have the meaning specified in
paragraph 3F.
"Acceptance Day" shall have the meaning specified in
paragraph 3F.
"Acceptance Window" shall have the meaning specified in
paragraph 3F.
"Accepted Shelf Note" shall have the meaning specified
in paragraph 3F.
"Acquisition Agreement" shall mean the Acquisition
Agreement dated as of March 25, 1996, by and among Seattle Crab
Co., NPC International and Skipper's Inc.
"Affiliate" shall mean any Person directly or
indirectly controlling, controlled by, or under direct or
indirect common control with, the Company or NPC International,
except a Subsidiary. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and poli
cies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Authorized Officer" shall mean (i) in the case of the
Company, its chief executive officer, its chief financial
officer, any vice president of the Company designated as an
"Authorized Officer" of the Company in the Information Schedule
attached hereto or any vice president of the Company designated
as an "Authorized Officer" of the Company for the purpose of this
Agreement in an Officer's Certificate executed by the Company's
chief executive officer or chief financial officer and delivered
to Prudential, and (ii) in the case of Prudential, any officer of
Prudential designated as its "Authorized Officer" in the
Information Schedule or any officer of Prudential designated as
its "Authorized Officer" for the purpose of this Agreement in a
certificate executed by one of its Authorized Officers. Any
action taken under this Agreement on behalf of the Company by any
individual who on or after the date of this Agreement shall have
been an Authorized Officer of the Company and whom Prudential in
good faith believes to be an Authorized Officer of the Company at
the time of such action shall be binding on the Company even
though such individual shall have ceased to be an Authorized
Officer of the Company, and any action taken under this Agreement
on behalf of Prudential by any individual who on or after the
date of this Agreement shall have been an Authorized Officer of
Prudential and whom the Company in good faith believes to be an
Authorized Officer of Prudential at the time of such action shall
be binding on Prudential even though such individual shall have
ceased to be an Authorized Officer of Prudential.
"Available Facility Amount" shall have the meaning
specified in paragraph 3A.
"Bank Facility" shall mean, together (i) the
$185,000,000 Amended and Restated Revolving Credit Agreement,
dated the date hereof, among the Company, Texas Commerce Bank
National Association, individually and as agent for the
institutions party thereto, as amended or otherwise modified from
time to time, and (ii) the $15,000,000 Amended and Restated
Revolving Credit Agreement, dated the date hereof between the
Company and Texas Commerce Bank National Association, as amended
or otherwise modified from time to time.
"Bankruptcy Law" shall have the meaning specified in
clause (ix) of paragraph 9A.
"Business Day" shall mean any day other than (i) a
Saturday or a Sunday, (ii) a day on which commercial banks in New
York City are required or authorized to be closed and (iii) for
purposes of paragraph 3C hereof only, a day on which The
Prudential Insurance Company of America is not open for business.
"Called Principal" shall mean, with respect to any
Note, the principal of such Note that is to be prepaid pursuant
to paragraph 6B (any partial prepayment being applied in
satisfaction of required payments of principal in inverse order
of their scheduled due dates) or is declared to be immediately
due and payable pursuant to paragraph 9A, as the context
requires.
"Capitalized Lease Obligation" shall mean any rental
obligation which, under generally accepted accounting principles,
is or will be required to be capitalized on the books of the
Company or any Guarantor, taken at the amount thereof accounted
for as indebtedness (net of interest expense) in accordance with
such principles.
"Closing Day" for any Accepted Shelf Note shall mean
the Business Day specified for the closing of the purchase and
sale of such Note in the Request for Purchase of such Note,
provided that (i) if the Acceptance Day for such Accepted Shelf
Note is less than five Business Days after the Company shall have
made such Request for Purchase and the Company and the Purchaser
which is obligated to purchase such Note agree on an earlier
Business Day for such closing, the "Closing Day" for such
Accepted Shelf Note shall be such earlier Business Day, and (ii)
if the closing of the purchase and sale of such Accepted Shelf
Note is rescheduled pursuant to paragraph 3H, the Closing Day for
such Accepted Shelf Note, for all purposes of this Agreement
except paragraph 3I(iv), shall mean the Rescheduled Closing Day
with respect to such Closing.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" shall mean NPC Management, Inc., a Delaware
corporation.
"Confirmation of Acceptance" shall have the meaning
specified in paragraph 3F.
"Consolidated Net Earnings" shall mean for any period
the net income or net loss of NPC International and its
Subsidiaries on a consolidated basis as determined in accordance
with generally accepted accounting principles consistent with
those followed in the preparation of the financial statements
referred to in paragraph 10B, provided that (i) there shall not
be included in calculating such amount (a) any income
representing the excess of equity in any Subsidiary at the date
of acquisition over the investment in such Subsidiary, (b) any
equity in the undistributed earnings of any corporation which is
not a Subsidiary, (c) any earnings of any Subsidiary for any
period prior to the fiscal year of NPC International in which
such Subsidiary was acquired, or (d) any gains resulting from the
write-up of assets, (ii) there shall not be included in
calculating such amount any gain resulting from the sale of any
capital assets other than in the ordinary course of business or
any extraordinary or nonrecurring gains, except that such gains
may be included only to offset the aggregate amount of losses
(net of any tax effect) resulting from the sale of capital assets
other than in the ordinary course of business and extraordinary
or nonrecurring losses and (iii) for the purposes of calculating
Consolidating Net Earnings with respect to the last day of the
fiscal quarter ending March 26, 1996, and with respect to the
last day of each of the next three successive fiscal quarters
thereafter, there shall not be included in calculating
Consolidated Net Earnings any charges against income in
connection with the Skipper's Sale or in connection with the
closure or relocation of up to eight Tony Roma's locations
during calendar year 1996, which might otherwise be required
under such generally accepted accounting principles.
"Consolidated Net Income Available for Fixed Charges"
for any period shall mean the sum of Consolidated Net Earnings
during such period plus (to the extent deducted in determining
Consolidated Net Earnings during such period) consolidated (i)
interest expense, (ii) provision for income taxes, (iii)
depreciation and amortization, and (iv) operating lease expense.
"Consolidated Net Worth" shall mean the sum of (i) the
par value (or value stated on the books of the corporation) of
the capital stock of all classes of NPC International, plus (or
minus in the case of a deficit) (ii) the amount of paid in
capital plus retained earnings (netting any treasury stock, ESOP
obligations or similar contra accounts), whether capital or
earned, of NPC International.
"Current Debt" shall mean any obligation for borrowed
money (and any notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for
borrowed money) payable on demand or within a period of one year
from the date of the creation thereof; provided that any
obligation shall be treated as Funded Debt, regardless of its
term, if such obligation is renewable pursuant to the terms
thereof or of a revolving credit or similar agreement effective
for more than one year after the date of the creation of such
obligation, or may be payable out of the proceeds of a similar
obligation pursuant to the terms of such obligation or of any
such agreement. Any obligation secured by a Lien on, or payable
out of the proceeds of production from, property of the Company
or any Guarantor shall be deemed to be Funded Debt or Current
Debt, as the case may be, of the Company or such Guarantor even
though such obligation shall not be assumed by the Company or
such Guarantor. For purposes of this definition, "borrowed
money" shall not include trade accounts payable, accrued expenses
or income taxes payable.
"Current Maturities of Funded Debt" shall mean any
Funded Debt obligation payable on demand or within a period of
one year from the date of determination; provided that an
obligation shall not be included herein if such Funded Debt
obligation (i) is renewable beyond one year from the date of
determination at the sole election of the Company (or a
Guarantor, if applicable) pursuant to the terms thereof, (ii) is
created pursuant to a revolving credit or similar agreement which
is renewable beyond one year from the date of determination at
the sole election of the Company (or a Guarantor, if applicable)
pursuant to the terms thereof, or (iii) may be repaid out of the
uncommitted proceeds of a revolving credit or similar agreement,
the maturity of which is more than one year from the date of
determination.
"Debt" shall mean Funded Debt and/or Current Debt, as
the case may be; provided, however, that the term Funded Debt
and/or Current Debt, as the case may be, shall not include any of
NPC International's obligations under the Indemnification
Agreements.
"Delayed Delivery Fee" shall have the meaning specified
in paragraph 3I(iii).
"Discounted Value" shall mean, with respect to the
Called Principal of any Note, the amount obtained by discounting
all Remaining Scheduled Payments with respect to such Called
Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount
factor (applied on a semiannual basis) equal to the Reinvestment
Yield with respect to such Called Principal.
"EBITDA" for any period shall mean the sum of
Consolidated Operating Income (as defined according to GAAP)
during such period, plus (to the extent deducted in determining
Consolidated Operating Income during such period) consolidated
depreciation and amortization.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" shall mean any trade or business
(whether or not incorporated) which is a member of a group of
which the Company or NPC International is a member and which is
under common control within the meaning of the regulations under
Section 414 of the Code.
"Event of Default" shall mean any of the events
specified in paragraph 9A, provided that there has been satisfied
any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further
condition, event or act, and "Default" shall mean any of such
events, whether or not any such requirement has been satisfied.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Facility" shall have the meaning specified in
paragraph 3A.
"Facility Fee" shall have the meaning specified in
paragraph 3I(i).
"Fixed Charges" shall mean the sum of consolidated (i)
interest expense and (ii) operating lease expense, each for the
four fiscal quarters most recently ended as of the date of
determination, and (iii) Current Maturities of consolidated
Funded Debt of the Company and all Guarantors as of the end of
the fiscal quarter most recently ended as of the date of
determination.
"Franchise Agreement" shall mean any franchise
agreement, license or other permit necessary to permit the
Company or any Guarantor to operate under the name "Pizza Hut".
"Funded Debt" shall mean and include without
duplication,
(i) any obligation payable more than one year from the
date of creation thereof, which under generally accepted
accounting principles is shown on the balance sheet as a
liability (including Capitalized Lease Obligations but
excluding reserves for deferred income taxes and other
reserves to the extent that such reserves do not constitute
an obligation),
(ii) indebtedness payable more than one year from the
date of creation thereof which is secured by any Lien on
property owned by the Company or any Guarantor, whether or
not the indebtedness secured thereby shall have been assumed
by the Company or such Guarantor,
(iii) guarantees, endorsements (other than endorsements
of negotiable instruments for collection in the ordinary
course of business) and other contingent liabilities
(whether direct or indirect) in connection with the
obligations, stock or dividends of any Person,
(iv) obligations under any contract providing for the
making of loans, advances or capital contributions to any
Person, or for the purchase of any property from any Person,
in each case in order to enable such Person primarily to
maintain working capital, net worth or any other balance
sheet condition or to pay debts, dividends or expenses,
(v) obligations under any contract for the purchase of
materials, supplies or other property or services if such
contract (or any related document) requires that payment for
such materials, supplies or other property or services shall
be made regardless of whether or not delivery of such
materials, supplies or other property or services is ever
made or tendered,
(vi) obligations under any contract to rent or lease
(as lessee) any real or personal property if such contract
(or any related document) provides that the obligation to
make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then
in general use or requires that the lessee purchase or
otherwise acquire securities or obligations of the lessor,
(vii) obligations under any contract for the sale or
use of materials, supplies or other property or services if
such contract (or any related document) requires that
payment for such materials, supplies or other property or
services, or the use thereof, shall be subordinated to any
indebtedness (of the purchaser or user of such materials,
supplies or other property or the Person entitled to the
benefit of such services) owed or to be owed to any Person,
(viii) obligations under any other contract which, in
economic effect, is substantially equivalent to a guarantee,
and
(ix) liabilities in respect of unfunded vested benefits
under plans covered by Title IV of ERISA,
all as determined in accordance with generally accepted
accounting principles.
"Guarantors" shall mean NPC International and all
existing and future Subsidiaries of the Company or NPC
International who, at any time, is a party to the Guaranty
Agreement, collectively, and references to a "Guarantor" shall
mean any of such entities individually.
"Guaranty Agreement" shall mean that certain Master
Guaranty executed and delivered by the Guarantors on the date
hereof.
"Hedge Treasury Note(s)" shall mean, with respect to
any Accepted Shelf Note, the United States Treasury Note or Notes
whose duration (as reasonably determined by Prudential) most
closely matches the duration of such Accepted Note.
"Hostile Tender Offer" shall mean, with respect to the
use of proceeds of any Note, any offer to purchase, or any
purchase of, shares of capital stock of any corporation or equity
interests in any other entity, or securities convertible into or
representing the beneficial ownership of, or rights to acquire,
any such shares or equity interests, if such shares, equity
interests, securities or rights are of a class which is publicly
traded on any securities exchange or in any over-the-counter
market, other than purchases of such shares, equity interests,
securities or rights representing less than 5% of the equity
interests or beneficial ownership of such corporation or other
entity for portfolio investment purposes, and such offer or
purchase has not been duly approved by the board of directors of
such corporation or the equivalent governing body of such other
entity prior to the date on which the Company makes the Request
for Purchase of such Note.
"Indemnification Agreements" shall mean, collectively,
the Lease Indemnification Agreement and the Liability Assumption
Agreement, as those agreements are defined and identified in the
Acquisition Agreement.
"Initial Closing" shall have the meaning specified in
paragraph 2B.
"Initial Date of Closing" shall have the meaning
specified in paragraph 2B.
"Issuance Period" shall have the meaning specified in
paragraph 3B.
"Joinder Agreement" shall mean the Joinder Agreement
referenced in, and attached as Exhibit A to, the Guaranty
Agreement.
"Lien" shall mean any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof,
and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code of any jurisdiction) or any
other type of preferential arrangement encumbering property.
"Multiemployer Plan" shall mean any plan which is a
"multiemployer plan" (as such term is defined in section
4001(a)(3) of ERISA).
"New Shelf Notes" shall have the meaning specified in
paragraph 1C.
"Notes" shall mean all senior notes issued by the
Company pursuant to this Agreement, including the Shelf Notes and
each note delivered in substitution or exchange thereof.
"Officer's Certificate" shall mean a certificate signed
in the name of the Company by its President, one of its Vice
Presidents or its Treasurer.
"Original Note Agreement" shall have the meaning
specified in the recitals hereto.
"Original Shelf Notes" shall have the meaning specified
in the recitals and paragraph 1A.
"Permitted Guaranty Debt" shall mean any Debt evidenced
by the Guaranty Agreement and, so long as the Sharing Agreement
is in effect and the beneficiary of such guaranty agreement is a
party to the Sharing Agreement, (i) any Debt evidenced by any
guaranty agreement given by any Guarantor in favor of any holder
of any Debt described on Schedule 8(C)(2) attached hereto, and
(ii) any Debt evidenced by any guaranty agreement given by any
Guarantor in favor of any holder of any Debt that may be incurred
in the future pursuant to, and in accordance with the terms and
conditions of, paragraph 8C(2)(a)(v) whereby such Guarantor
guarantees the payment of all principal, interest and other
amounts, if any, payable in respect of such Debt.
"Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or
agency thereof.
"Plan" shall mean an "employee pension benefit plan"
(as defined in section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have
been made, by the Company or NPC International or by any trade or
business, whether or not incorporated, which, together with the
Company, is under common control, as described in section 414(b)
or (c) of the Code.
"Priority Debt" shall have the meaning specified in
paragraph 8C(1).
"Pro Forma EBITDA" shall mean EBITDA provided, however,
for the purpose of calculating Pro Forma EBITDA (i) with respect
to the last day of the fiscal quarter ending March 26, 1996, and
with respect to the last day of each of the next three successive
fiscal quarters thereafter, Pro Forma EBITDA shall be calculated
without regard for any charges against income in connection with
the Skipper's Sale or in connection with the closure or
relocation of up to eight Tony Roma's locations during calendar
year 1996, which might otherwise be required under GAAP and (ii)
with respect to any Pizza Hut or Tony Roma's restaurant acquired
(the "Acquisition Target"), EBITDA of the Acquisition Target for
each full fiscal quarter included in the applicable Computation
Period prior to such acquisition (including the fiscal quarter
during which it was acquired) shall be included without
duplication and reasonably adjusted for tangible operational
changes due to field expense differentials, royalty payments to
be made to Pizza Hut, Inc., contractual rent payments on real
estate and equipment and general and administrative cost
differences (collectively, the "Acquisition Adjustments"). Prior
to, and in connection with, the calculation of Pro Forma EBITDA,
the Company shall provide each Purchaser with appropriate
documentation, certified by an authorized financial officer of
the Company, supporting the reasonableness of the Acquisition
Adjustments.
"Prudential" shall mean The Prudential Insurance
Company of America.
"Prudential Affiliate" shall mean any corporation or
other entity all of the Voting Stock (or equivalent voting
securities or interests) of which is owned by Prudential either
directly or through Prudential Affiliates.
"Prudential Documents" shall mean this Agreement, the
Notes, the Guaranty Agreement, each Joinder Agreement and any and
all agreements or instruments now or hereafter executed and
delivered by the Company, any Guarantor or any other person
guaranteeing, securing or otherwise supporting payment or
performance of the Notes, this Agreement or any other Prudential
Document, as they may be modified or amended from time to time in
accordance with the terms and provision thereof.
"Purchasers" shall mean, with respect to any Accepted
Shelf Notes the Persons, either Prudential or a Prudential
Affiliate, who are purchasing such Accepted Shelf Notes.
"Reinvestment Yield" shall mean, with respect to the
Called Principal of any Note, the yield to maturity implied by
(i) the yields reported, as of 10:00 A.M. (New York City time) on
the Business Day next preceding the Settlement Date with respect
to such Called Principal, on the display designated as "Page 678"
on the Telerate Service (or such other display as may replace
Page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date,
or if such yields shall not be reported as of such time or the
yields reported as of such time shall not be ascertainable, (ii)
the Treasury Constant Maturity Series yields reported, for the
latest day for which such yields shall have been so reported as
of the Business Day next preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield shall
be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between
reported yields.
"Remaining Average Life" shall mean, with respect to
the Called Principal of any Note, the number of years (calculated
to the nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained by
multiplying (a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will
elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments" shall mean, with respect
to the Called Principal of any Note, all payments of such Called
Principal and interest thereon that would be due on or after the
Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled
due date.
"Request for Purchase" shall have the meaning specified
in paragraph 3D.
"Required Holder(s)" shall mean, (i) the holder or
holders of at least 66-2/3% of the aggregate principal amount of
all Notes outstanding at the time of determination, or (ii) with
respect to the decision to accelerate a Series of Notes under
paragraph 9A the holder or holders of at least 66-2/3% of the
aggregate principal amount of the Notes of such Series
outstanding at such time.
"Required Prepayment" shall have the meaning specified
in paragraph 6A.
"Rescheduled Closing Day" shall have the meaning
specified in paragraph 3H.
"Responsible Officer" shall mean the chief executive
officer, chief operating officer, chief financial officer or
chief accounting officer of the Company, general counsel of the
Company or any other officer of the Company involved principally
in its financial administration or its controllership function.
"Restructuring" shall have the meaning specified in the
recitals hereto.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Series" shall have the meaning specified in paragraph
1C.
"Settlement Date" shall mean, with respect to the
Called Principal of any Note, the date on which such Called
Principal is to be prepaid pursuant to paragraph 6B or is
declared to be immediately due and payable pursuant to paragraph
9A, as the context requires.
"Sharing Agreement" shall mean that certain Sharing
Agreement executed and delivered as of the date hereof,
substantially in the form of Exhibit F attached hereto, as
amended from time to time.
"Shelf Notes" shall have the meaning specified in
paragraph 1C.
"Skipper's Sale" shall mean NPC International's sale of
the common stock of Skipper's, Inc. in accordance with all of the
terms and conditions of the Acquisition Agreement.
"Significant Holder" shall mean (i) Prudential, so long
as Prudential or any Prudential Affiliate shall hold (or be
committed under this agreement to purchase) any Note, or (ii) any
other holder of at least 10% of the aggregate principal amount of
the Notes from time to time outstanding.
"Subsidiary" shall mean any corporation, limited
liability company, general partnership or limited partnership
organized under the laws of any state of the United States of
America, Canada, or any province of Canada, which conducts the
major portion of its business in and makes the major portion of
its sales to Persons located in the United States of America or
Canada, and all of the stock (or other ownership interests) of
every class of which, except directors' qualifying shares shall,
at the time as of which any determination is being made, be owned
by the Company or NPC International either directly or through
Subsidiaries.
"Substantial Stockholder" shall mean (i) any Person
owning, directly or indirectly, either individually or together
with all other Persons to whom such Person is related by blood,
adoption or marriage, 5% or more of the outstanding voting stock
of NPC International, or (ii) any Person related by blood,
adoption or marriage to any Person coming within the provisions
of clause (i) of this definition.
"Termination Event" shall mean (i) a Reportable Event
described in Section 4043 of ERISA and the regulations issued
thereunder (other than a Reportable Event not subject to the
provision for 30-day notice to the Pension Benefit Guaranty
Corporation under such regulations), or (ii) the withdrawal of
the Company or NPC International or any of its ERISA Affiliates
from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the
filing of a notice of intent to terminate a Plan or the treatment
of a Plan amendment as a termination under Section 4041 of ERISA,
or (iv) the institution of proceedings to terminate a Plan by the
Pension Benefit Guaranty Corporation, or (v) any other event or
condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
"Transferee" shall mean any direct or indirect
transferee of all or any part of any Note purchased by a
Purchaser under this Agreement.
"Yield-Maintenance Amount" shall mean, with respect to
any Note, an amount equal to the excess, if any, of the
Discounted Value of the Called Principal of such Note over the
sum of (i) such Called Principal plus (ii) interest accrued
thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance
Amount shall in no event be less than zero.
12B. Accounting Principles, Terms and
Determinations12B. Accounting Principles, Terms and
Determinations12B. Accounting Principles, Terms and
Determinations. All unaudited financial statements required to
be furnished hereunder shall be prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with the most recent audited consolidated financial
statements of NPC International and its Subsidiaries delivered
pursuant to clause (ii) of paragraph 7A or, if no such statements
have been so delivered, the most recent audited financial
statements referred to in clause (i) of paragraph 10B. Except as
provided above, all references in this Agreement to "generally
accepted accounting principles" shall be deemed to refer to
generally accepted accounting principles in effect in the United
States as of the date hereof and applied on a basis consistent
with NPC International's audited financial statements for the
fiscal year ended March 26, 1996. All certificates and reports
as to financial matters required to be furnished hereunder shall
be prepared so as to illustrate in reasonably detail all
adjustments between the generally accepted accounting principles
used in NPC International's financial statements provided
pursuant to paragraph 7A and the generally accepted accounting
principles used herein.
13. MISCELLANEOUS.. MISCELLANEOUS..
MISCELLANEOUS.
13A. Note Payments.. Note Payments.. Note
Payments. So long as any Purchaser shall hold any Note, the
Company will make payments of principal thereof and Yield-
Maintenance Amount, if any, and interest thereon, which comply
with the terms of this Agreement, not later than 12:00 noon (New
York City time) on the day when due by wire transfer of
immediately available funds for credit to such Purchaser's
account or accounts as specified in the Information Schedule
attached hereto, or such other account or accounts in the United
States as such Purchaser may designate in writing, notwith
standing any contrary provision herein or in any Note with
respect to the place of payment. Each Purchaser agrees that,
before disposing of any Note, it will make a notation thereon (or
on a schedule attached thereto) of all principal payments
previously made thereon and of the date to which interest thereon
has been paid. The Company agrees to afford the benefits of this
paragraph 13A to any Transferee which shall have made the same
agreement as the Purchasers have made in this paragraph 13A.
13B. Expenses.. Expenses.. Expenses. The
Company agrees, whether or not the transactions contemplated
hereby shall be consummated, to pay, and save Prudential, any
Prudential Affiliate and any Transferee harmless against
liability for the payment of, all out-of-pocket expenses arising
in connection with such transactions (other than such costs and
expenses associated with or resulting from the resale of the
Notes), including (i) all document production and duplication
charges and the fees and expenses of any special counsel engaged
by Prudential in connection with this Agreement and the
transactions contemplated hereby, and all document production and
duplication charges and the fees and expenses of any counsel or
special counsel engaged by Prudential or any Transferee in
connection with any subsequent proposed modification of, or
proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or proposed consent
granted, and (ii) to the extent permitted by applicable law, the
costs and expenses, including reasonable attorneys' fees,
incurred by Prudential or any Transferee in enforcing any rights
against the Company under this Agreement or the Notes (whether in
the contest of civil action, adversary proceeding workout or
otherwise) or in responding to any subpoena or other legal
process issued in connection with this Agreement or the
transactions contemplated hereby or by reason of Prudential, any
Prudential Affiliate or any Transferee's having acquired any
Note, including without limitation costs and expenses incurred in
any bankruptcy case. The obligations of the Company under this
paragraph 13B shall survive the transfer of any Note or portion
thereof or interest therein by Prudential, any Prudential
Affiliate or any Transferee and the payment of any Note.
13C. Consent to Amendments.. Consent to Amendments..
Consent to Amendments. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, if the Company
shall obtain the written consent to such amendment, action or
omission to act, of the Required Holder(s) except that, without
the written consent of the holder or holders of all Notes at the
time outstanding, no amendment to this Agreement shall change the
maturity of any Note, or change the principal of, or the rate or
time of payment of interest or any premium payable with respect
to any Note, or affect the time, amount or allocation of any
required prepayments, or reduce the proportion of the principal
amount of the Notes required with respect to any consent. Each
holder of any Note at the time or thereafter outstanding shall be
bound by any consent authorized by this paragraph 13C, whether or
not such Note shall have been marked to indicate such consent,
but any Notes issued thereafter may bear a notation referring to
any such consent. No course of dealing between the Company and
the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any
rights of any holder of such Note. As used herein and in the
Notes, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or
supplemented.
13D. Form, Registration, Transfer and Exchange of
Notes; Lost Notes.. Form, Registration, Transfer and Exchange of
Notes; Lost Notes.. Form, Registration, Transfer and Exchange of
Notes; Lost Notes. The Notes are issuable as registered notes
without coupons in denominations of at least $1,000,000, except
as may be necessary to reflect any principal amount not evenly
divisible by $1,000,000. The Company shall keep at its principal
office a register in which the Company shall provide for the
registration of Notes and of transfers of Notes. Upon surrender
for registration of transfer of any Note at the principal office
of the Company, the Company shall, at its expense, execute and
deliver one or more new Notes of like tenor and of a like
aggregate principal amount, registered in the name of such
transferee or transferees. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor
and of any authorized denominations, of a like aggregate
principal amount, upon surrender of the Note to be exchanged at
the principal office of the Company. Whenever any Notes are so
surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the ex
change is entitled to receive. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder's attorney duly
authorized in writing. Any Note or Notes issued in exchange for
any Note or upon transfer thereof shall carry the rights to
unpaid interest and interest to accrue which were carried by the
Note so exchanged or transferred, so that neither gain nor loss
of interest shall result from any such transfer or exchange.
Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the
case of any such loss, theft or destruction, upon receipt of such
holder's unsecured indemnity agreement, or in the case of any
such mutilation upon surrender and cancellation of such Note, the
Company will make and deliver a new Note, of like tenor, in lieu
of the lost, stolen, destroyed or mutilated Note.
13E. Persons Deemed Owners; Participations.. Persons
Deemed Owners; Participations.. Persons Deemed Owners;
Participations. Prior to due presentment for registration of
transfer, the Company may treat the Person in whose name any Note
is registered as the owner and holder of such Note for the
purpose of receiving payment of principal of and premium, if any,
and interest on such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall
not be affected by notice to the contrary. Subject to the
preceding sentence, the holder of any Note may from time to time
grant participations in all or any part of such Note to any
Person on such terms and conditions as may be determined by such
holder in its sole and absolute discretion.
13F. Survival of Representations and Warranties; Entire
Agreement.. Survival of Representations and Warranties; Entire
Agreement.. Survival of Representations and Warranties; Entire
Agreement. All representations and warranties contained herein or
made in writing by or on behalf of the Company in connection
herewith shall survive the execution and delivery of this
Agreement and the Notes, the transfer by any Purchaser of any
Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any Transferee, regardless of
any investigation made at any time by or on behalf of such
Purchaser or any Transferee until such time as all principal of,
interest and Yield-Maintenance Amount (if any) on, the Notes have
been paid in full. Subject to the preceding sentence, this
Agreement and the Notes embody the entire agreement and
understanding between Prudential and the Company and supersede
all prior agreements and understandings relating to the subject
matter hereof.
13G. Successors and Assigns.. Successors and Assigns..
Successors and Assigns. All covenants and other agreements in
this Agreement contained by or on behalf of either of the parties
hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto (including, without
limitation, any Transferee) whether so expressed or not.
13H. Disclosure to Other Persons; Confidentiality..
Disclosure to Other Persons; Confidentiality.. Disclosure to
Other Persons; Confidentiality. The Company acknowledges that
the holder of any Note may deliver copies of any financial
statements and other documents delivered to such holder, and
disclose any other information disclosed to such holder, by or on
behalf of the Company or any Guarantor in connection with or
pursuant to this Agreement to (i) such holder's directors,
officers, employees, agents and professional consultants, (ii)
any other holder of any Note, (iii) any Person to which such
holder offers to sell such Note or any part thereof, (iv) any
Person to which such holder sells or offers to sell a
participation in all or any part of such Note, (v) any federal or
state regulatory authority having jurisdiction over such holder,
(vi) the National Association of Insurance Commissioners or any
similar organization or (vii) any other Person to which such
delivery or disclosure may be necessary or appropriate (a) in
compliance with any law, rule, regulation or order applicable to
such holder, (b) in response to any subpoena or other legal
process, (c) in connection with any litigation to which such
holder is a party, (d) in order to protect such holder's
investment in such Note or (e) to correct any false or misleading
information which may become public concerning the relationship
with such holder to the Company or any Guarantor.
Except as provided in the previous sentence, each holder agrees
that it will use its best efforts to hold in confidence and not
to disclose the Confidential Information. As used herein
"Confidential Information" means copies of any financial
statements and other documents delivered to such holder, and any
other information disclosed to such holder, by or on behalf of
the Company or any Guarantor in connection with or pursuant to
this Agreement, but does not include information (i) which was
publicly known or otherwise known to such holder, at the time of
disclosure, (ii) which subsequently becomes publicly known
through no act or omission of such holder, or (iii) which
otherwise becomes known to such holder, other than through
disclosure by the Company or any Guarantor.
13I. Notices.. Notices.. Notices. All notices or other
communications provided for hereunder (except for the telephonic
notice required by paragraph 6D) shall be in writing and sent by
first class mail or nationwide overnight delivery service (with
charges prepaid) or telecopy (with receipt confirmed by the
recipient) and, (i) if to Prudential, addressed to it at the
address specified for such communications in the Information
Schedule attached hereto, or at such other address as it shall
have specified to the Company in writing, (ii) if to any other
holder of any Note, addressed to such other holder at such
address as such other holder shall have specified to the Company
in writing or, if any such other holder shall not have so
specified an address to the Company, then addressed to such other
holder in care of the last holder of such Note which shall have
so specified an address to the Company, and (iii) if to the
Company, addressed to it at 720 W. 20th Street, Pittsburg, Kansas
66762, Attention: Chief Financial Officer (telecopy number (316)
231-1188), or at such other address as the Company shall have
specified to the holder of each Note in writing; provided,
however, that any such communication to the Company may also, at
the option of the holder of any Note, be delivered by any other
reasonable means either to the Company at its address specified
above or to any officer of the Company.
13J. Descriptive Headings.. Descriptive Headings..
Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
13K. Satisfaction Requirement.. Satisfaction
Requirement.. Satisfaction Requirement. If any agreement,
certificate or other writing, or any action taken or to be taken,
is by the terms of this Agreement required to be satisfactory to
any Purchaser or to the Required Holders, the determination of
such satisfaction shall be made by such Purchaser or the Required
Holders, as the case may be, in the sole and exclusive judgment
(exercised in good faith) of such Purchaser or the Required
Holders, as the case may be, making such determination.
13L. Governing Law.. Governing Law.. Governing
Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF KANSAS.
13M. Integration.. Integration.. Integration. This
Agreement may not be changed orally, but (subject to the
provisions of paragraph 13C) only by an agreement in writing
signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought. THIS WRITTEN LOAN
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS AGREEMENT,
TOGETHER WITH ALL OTHER WRITTEN AGREEMENTS BETWEEN PRUDENTIAL AND
THE COMPANY, IS THE FINAL EXPRESSION OF THE NOTE AGREEMENT
BETWEEN PRUDENTIAL AND THE COMPANY, AND SUCH WRITTEN NOTE
AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL
AGREEMENT OR OF A CONTEMPORANEOUS ORAL AGREEMENT BETWEEN
PRUDENTIAL AND THE COMPANY. ANY ADDITIONAL NON-STANDARD TERMS OF
THIS AGREEMENT BETWEEN PRUDENTIAL AND THE COMPANY INCLUDING THE
REDUCTION TO WRITING OF A PREVIOUS ORAL AGREEMENT BETWEEN
PRUDENTIAL AND THE COMPANY ARE SET FORTH IN THE SPACE BELOW:
None
NO UNWRITTEN ORAL AGREEMENT BETWEEN PRUDENTIAL AND THE
COMPANY EXISTS.
13N. Maximum Interest Payable.. Maximum Interest
Payable.. Maximum Interest Payable. The Company, any Purchaser
and any other holders of the Notes specifically intend and agree
to limit contractually the amount of interest payable under this
Agreement, the Notes and all other instruments and agreements
related hereto and thereto to the maximum amount of interest
lawfully permitted to be charged under applicable law.
Therefore, none of the terms of this Agreement, the Notes or any
instrument pertaining to or relating to this Agreement or the
Notes shall ever be construed to create a contract to pay
interest at a rate in excess of the maximum rate permitted to be
charged under applicable law, and neither the Company, any
Guarantor nor any other party liable or to become liable
hereunder, under the Notes, any guaranties or under any other
instruments and agreements related hereto and thereto shall ever
be liable for interest in excess of the amount determined at such
maximum rate, and the provisions of this paragraph shall control
over all other provisions of this Agreement, the Notes, any
guaranties or any other instrument pertaining to or relating to
the transactions herein contemplated. If any amount of interest
taken or received by any Purchaser or any holder of a Note shall
be in excess of said maximum amount of interest which, under
applicable law, could lawfully have been collected by any
Purchaser or such holder incident to such transactions, then such
excess shall be deemed to have been the result of a mathematical
error by all parties hereto and shall be refunded promptly by the
Person receiving such amount to the party paying such amount, or,
at the option of the recipient, credited ratably against the
unpaid principal amount of the Note or Notes held by such
Purchaser or such holder, respectively. All amounts paid or
agreed to be paid in connection with such transactions which
would under applicable law be deemed "interest" shall, to the
extent permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the stated term of this
Agreement. "Applicable law" as used in this paragraph means that
law governing this Agreement in effect from time to time which
permits the charging and collection of the highest permissible
lawful, nonusurious rate of interest on the transactions herein
contemplated and"maximum rate" as used in this paragraph means,
with respect to each of the Notes, the maximum lawful,
nonusurious rates of interest (if any) which under applicable law
may be charged to the Company from time to time with respect to
such Notes.
13O. Counterparts; Fax.. Counterparts; Fax..
Counterparts; Fax. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such
counterpart. This Agreement may be executed and delivered by fax
or other electronic transmission.
13P. Payments Due on Non-Business Days13P. Payments
Due on Non-Business Days13P. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or interest on, or
Yield-Maintenance Amount payable with respect to, any Note that
is due on a date other than a Business day shall be made on the
next succeeding Business Day. If the date for any payment is
extended to the next succeeding Business Day by reason of the
preceding sentence, the period of such extension shall be
included in the computation of the interest payable on such
Business Day.
13Q. Agreement of NPC International and its
Subsidiaries.. Agreement of NPC International and its
Subsidiaries.. Agreement of NPC International and its
Subsidiaries. By its execution and delivery hereof, NPC
International agrees to perform, and cause each Subsidiary to
perform, each obligation hereunder which the Company has agreed
to cause NPC International and such Subsidiaries to perform, and
further agrees to not take any action which the Company has
agreed to not permit NPC International or any such Subsidiary to
take.
[Signatures follow]
IN WITNESS WHEREOF, the parties have executed this Agreement in
multiple copies, each of which shall constitute on original copy, to be
effective as of the date first written above.
Very truly yours,
NPC Management, Inc.
By______________________________
Title:
NPC International, Inc.
By______________________________
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
The Prudential Insurance Company
of America
By______________________________
Vice President
Exhibit 11
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
Fiscal Year Ended
March 25, March 26, March 28,
1997 1996 1995
PRIMARY
Shares outstanding at 24,522,432 24,505,324 25,013,373
beginning of period
Weighted average number of
shares
issued and reacquired 123,571 7,636 (267,323)
during period
Assuming exercise of options
and
warrants reduced by the
number
of shares which could have
been
purchased with the proceeds 375,017 151,011 17,665
from exercise
Shares outstanding for
computation of per share 25,021,020 24,663,971 24,763,715
earnings
Net income (loss) $17,811,000 $ 2,143,000 $(15,614,000)
Earnings (loss) per share $0.71 $ 0.09 $ (0.63)
FULLY DILUTED
Shares outstanding at 24,522,432 24,505,324 25,013,373
beginning of period
Weighted average number of
shares
issued and reacquired 123,571 7,636 (267,323)
during period
Assuming exercise of options
and warrants
reduced by the number of
shares which
could have been purchased
with the
proceeds from exercise 392,635 205,218 18,730
Shares outstanding for
computation of per share 25,038,638 24,718,178 24,764,780
earnings
Net income (loss) $17,811,000 $ 2,143,000 $(15,614,000)
Earnings (loss) per share $0.71 $ 0.09 $ (0.63)
TABLE OF CONTENTS
Financial Highlights 1
Letter to Stockholders 2
Pizza Hut Employees 4
Tony Roma Employees 6
Communications are Key 8
Five Year Summary 10
Management's Discussion and Analysis
Results of Operations 11
Consolidated Balance Sheets 16
Consolidated Statements of Operations 17
Consolidated Statements of Stockholders' Equity 18
Consolidated Statements of Cash Flows 19
Notes to Consolidated Financial Statements 20
Report of Management 27
Report of Independent Auditors 27
Stockholder Data 28
STATEMENT OF DIFFERENTIATION
NPC International, Inc., began operations in 1962, has been publically
owned since 1984, and is the largest Pizza Hut franchisee in the world,
currently operating over 600 restaurants and delivery kitchens in twenty
states. Additionally, through its subsidiary Romacorp, Inc., the Company is
the owner/franchisor of the fast-growing casual restaurant chain, "Tony
Roma's - Famous for Ribs". Romacorp, Inc., operates 40 Tony Roma's units
and, through its affiliates, franchises another 140 restaurants including
49 international facilities.
Shares of NPC International, Inc. are traded on the NASDAQ Stock Market
under the symbol "NPCI".
OUR MISSION
Pizza Hut - Be the best at making and serving the best pizza in America
whether at home or at the Hut.
Tony Roma's - Operating great restaurants to serve America's favorite ribs
and to win our guests for life.
FINANCIAL HIGHLIGHTS
Fiscal Year Ended
March 25, March 26, March 28,
(Dollars in thousands,
except per share data) 1997 1996 1995
For the Year:
Revenue $295,285 $324,986 $317,467
Operating income before
impairmentand loss provision 34,227 33,704 23,940
Impairment and loss provision
for underperforming assets -- 23,500 35,000
Operating income (loss) 34,227 10,204 (11,060)
Income (loss) before income taxes 29,083 3,546 (17,452)
Net income (loss) 17,811 2,143 (15,614)
Earnings (loss) per share 0.71 0.09 (0.63)
Performance Measures:
Operating income before
impairment and loss provision as
a percent of revenue 11.6% 10.4% 7.5%
Operating income (loss) as a
percent of revenue 11.6% 3.1% (3.5)%
Income (loss) before income taxes
as a percent of revenue 9.8% 1.1% (5.5)%
Net income (loss) as a percent
of revenue 6.0% 0.7% (4.9)%
Return on average stockholders'
equity 20.6% 2.7% (17.4)%
Return on average assets 7.8% 1.0% (7.1)%
Fiscal Year Ended
March 25, March 26, March 28,
(Dollars in thousands) 1997 1996 1995
At Year-End:
Total assets $259,907 $197,829 $211,712
Long-term debt 116,777 73,328 82,850
Stockholders' equity 95,793 77,320 80,287
Numbers of Company owned units 513 405 481
Number of franchised units 140 142 157
TO OUR STOCKHOLDERS,
Fiscal 1997 was a challenging experience for every member of the NPC
family. We all were challenged by the unprecedented growth of our concepts
not to mention the day-to-day challenges encountered in the highly
competitive restaurant industry. This annual report is dedicated to our
employees; the people who truly make this Company successful. We hope that
you will enjoy the rare opportunity presented by this year's annual report:
a real look at some of the people who make it happen every day for our
customers and our stockholders.
We are very excited about the future of your company and
the opportunities that lie before it. However, before addressing the future
we will address last year's performance:
A look at Fiscal 1997
For the year, revenue declined 9.1% to $295 million due largely to the sale
of Skipper's, Inc. effective the last day of fiscal 1996. We were pleased
that income from restaurant operations increased by 1.1%, as a percent of
sales, despite increased commodity and labor costs and the expected
increase in the royalty rate paid to our franchisor Pizza Hut, Inc. Income
before taxes and special charges recorded in 1996 increased by more than $2
million or 7.5% over last year's results, despite the challenges mentioned
above.
Fiscal 1997 Highlights:
Sales in our Pizza Hut division declined by 1.4% due largely to a
comparable store sales decline of 8.3% after reaching comparable sales
growth of 5.2% during fiscal 1996 driven primarily by the success of
Stuffed Crust and TripleDecker pizzas.
We continued to grow our Pizza Hut division through acquisition during
fiscal 1997 by investing $84 million in the acquisition of 157 stores.
Specifically, during the third quarter, we acquired 31 stores in North
Carolina from a franchisee, with annual sales of around $24 million. We
also acquired another 126 locations in nine states with annual sales of
approximately $74 million from Pizza Hut, Inc. We closed on 60 of the 126
stores on March 6, 1997, and the remainder of the acquisition on March 27,
1997, just after the close of our fiscal year.
Tony Roma's restaurant sales increased by 33.6% due to achieving its
target of opening 12 new stores during the year and positive comparable
sales results for the second consecutive year. Tony Roma's posted
comparable sales growth of 2.2% for the year for stores open 18 months or
longer.
Looking Ahead - Pizza Hut
The Pizza Hut brand is undergoing significant changes under the guidance of
David Novak not to mention the impending spin-off of Pepsico, Inc.'s
restaurant division, which includes Taco Bell and KFC. The new leadership
at Pizza Hut is focused upon growing the concept by "making and serving the
best Pizza in America". Pizza Hut will no longer rely upon new product news
to drive sales as it has done in the past few years with Bigfoot, Stuffed
Crust, and TripleDecker Pizzas. Instead, Pizza Hut is focusing upon it's
core products and ways to make the best pizza in the business even better.
We look forward to fiscal 1998 with great optimism because we are very
excited to share these improvements and the new spirit of the Pizza Hut
brand with everyone who loves great pizza.
Based on communications to date, we believe that the spin-off of the
restaurant division by Pepsico, Inc. will accrue to the benefit of the
brand, its customers and, of course, its franchisees. Further, we believe
that this action will promote more continuity of management, which should
allow for long-term brand-based decision making while not significantly
minimizing the financial wherewithal and marketing power of our franchisor.
We also believe that this action will allow for increased focus upon
restaurant operations which will enhance the value of the brand.
During fiscal 1998 we are targeting the aggressive growth of our Pizza Hut
division through acquisition by remaining active in the Pizza Hut
refranchising process and the pursuit of franchisees. We are off to an
exciting start on our Pizza Hut acquisition strategy with the execution of
two letters of intent during the first month of our new fiscal year.
Specifically, on April 15, 1997 we entered into a letter of intent with
Pizza Hut, Inc. to acquire 52 stores with annual sales in excess of $34
million in North Dakota, South Dakota, and Minnesota for $32.25 million in
cash. This transaction is expected to close in early June of 1997 subject
to certain contingencies. on April 23, 1997 we announced that we had
entered into a letter of intent with Jamie B. Coulter, a long-time Pizza
Hut franchisee, to acquire his Pizza Hut operations for $57 million
consisting of 100 locations in 11 states and annual revenue of almost $60
million. This transaction closed on May 15, 1997 except for 18 North
Carolina units, representing $10 million in purchase price, which we will
manage until acquired, subject to the resolution of certain contingencies.
Both of these operations have produced strong historical operating results
reducing the assimilation risk relative to underperforming units.
This level of acquisition activity will be a challenge to all of us at NPC;
specifically, our restaurant operations personnel upon whom we have focused
in this report. These are the people who comprise the culture which has
made NPC successful in the past and will continue to do so in the future.
They will not only be given additional opportunity for advancement but will
also train employees of the acquired operations regarding NPC's technology
systems, staffing philosophy and rigid compliance with product
specifications. Furthermore, the employees of the newly acquired
territories will add increasing depth to our management ranks, thereby
increasing our future assimilation capabilities.
We ended 1997 with a bang by acquiring 157 units during the last two
quarters of our fiscal year and we have carried the momentum over to fiscal
1998 seizing additional acquisition opportunities as discussed. It is an
exciting time for all of us at NPC and we look forward to the challenge of
assimilating the units that comprise this unprecedented growth.
Looking Ahead - Tony Roma's
We remain very excited about the future of the Tony Roma's brand. We
continue to believe that Tony Roma's is uniquely positioned as the only
national restaurant chain specializing in ribs; however, we remain active
in the pursuit of the optimal menu. The menu overhaul that was rolled out
in October of 1995 was successful in contributing to comparable sales
growth in fiscal 1996 and 1997. We are continuing to evaluate various
enhancements to our menu including new soups, salads, and breads, as well
as menu combinations such as steak and ribs combos, among others. We expect
to further leverage our outstanding menu development staff and produce new
and exciting additions in fiscal 1998.
After again meeting our unit growth target of 12 new company locations and
14 new franchised locations we are targeting the addition of 12 new company
stores and 15 to 20 new franchisee locations in 1998. As a result we are
targeting Company sales growth of around 30% in fiscal 1998. We are looking
for average annual sales volume in excess of $2 million from our new
prototype restaurants to be built in fiscal 1998 as we grow this unique
concept. The increase in Company-owned units operated could not have been
achieved without the outstanding efforts of our development team and our
operations personnel who again displayed their flexibility and commitment.
We believe that Tony Roma's great food, great service, and, of course,
great people are a recipe for success. We at NPC look forward to the
continued growth and prosperity of this unique brand.
In closing...
We would like to thank each of the dedicated employees of NPC who have
given the Company and its customers such great service during this and
years past. We would also like to welcome the new employees who joined our
family by virtue of acquisition, growth, or otherwise. This annual report
is dedicated to each of you as a display of gratitude for your prior and
continuing service. Thank you.
We would also like to thank our stockholders for their
continued confidence in and support of NPC. We appreciate
your support and look to reward it with continuing growth and
profitability.
O. Gene Bicknell
Chairman of the Board & Chief Executive Officer
James K. Schwartz
President & Chief Operating Officer
HIGH ENERGY EMPLOYEES
As the largest Pizza Hut franchisee in the world, the Company is committed
to maintaining the excellence of its "Mega Brand" products. Recognized
quality combined with the Company's energetic personnel will continue to
benefit us significantly in the marketplace.
Majdi Khalaf, Area general manager in Gadsden, Alabama, has been with NPC
for over 20 years because he "believes in the success of the Company and
they have always treated me fair." When Majdi began his career NPC owned 68
restaurants. Today the Company owns over 600 Pizza Huts. Majdi's philosophy
toward employees has helped the Company grow. "You must start with good
quality, even if you have to search to find it. Similar to a fruit tree
that must be watered and fertilized, employees need to be trained and
rewarded with lots of follow-up." Majdi has been Area General Manager of
the Year on two occasions and attributes his success to his co-workers.
Majdi's success can also be attributed to his MBA degree and use of
technological advances which allow him to be "more efficient and
productive." Majdi is married and enjoys watching auto racing in his free
time.
Savannah Atterberry is a server and a "smiler"
in our North Frontage Road unit in Meridian, Mississippi. She has been
cheerfully serving NPC's customers for more than 17 years. Savannah has a
wonderful personality and it shows during her shifts. One regular customer
always ordered her "usual" for 15 years, and in 1990 when Savannah
transferred
to her current restaurant, so did the customer. According
to Bruce Sharp, Vice President-Southern Division, Savannah's attitude and
personality are unbeatable, "the first thing that any customer will see
when they walk through the door is Savannah's warm, friendly smile."
Dorthia Springfield is a cook in our Austin Peay unit in Memphis,
Tennessee. During her 18 years of preparing and serving Pizza Hut pizzas
she has seen a lot of changes. However, one thing remains the same, "having
the satisfied customers thank me and say that they will be back." She loves
serving customers and especially children. "I like for them to have a good
time at Pizza Hut." Dorthia is excited about the "totally new " pizza being
served now. "We have always made a quality pizza, but our new product is
clearly the best pizza we have ever made."
Randy Jefferson, recently promoted Area General manager in Hazelhurst,
Mississippi, values the Company's growth because he is a stockholder and
participant in the Employee Stock Purchase Program. During his 19 years
with NPC, many of his days started at 3:00 a.m. preparing Pizza Hut pizzas
for surrounding school lunch programs. It's rewarding for Randy that
schools have 97% participation at lunch on pizza day. Randy's wife is also
a tenured Pizza Hut manager; together they enjoy raising their three
children.
Yvonne Marsala is a Pizza Hut manager
in Fayetteville, North Carolina. She has been involved in the pizza
business for approximately 18 years and recently became an NPC employee as
part of a 31 store acquisition in October 1996. Yvonne says that she is a
person that "used to resist change, but, I have now learned to accept it. I
am glad that I decided to stick it out through the acquisition and stay
with NPC." She likes the new technology that NPC has brought into her
restaurant. "The systems allow me to have more information at my
fingertips." What Yvonne likes best, is that every day is different. "I
like people and working with young employees. I think it helps me better
relate to my own kids." Yvonne is married with two teenaged children.
It is a great time to be associated with Pizza Hut. The Company is excited
about the future of the innovative Pizza Hut brand. We believe our
dedicated employees, coupled with the strength of the Pizza Hut brand,
provide a strong foundation for increasing stockholder value.
ENTHUSIASM IS CONTAGIOUS
Tony Roma's is a great employer, say its more than 2,500 employees. Tony
Roma's cares about the quality of its product and providing customers with
a comfortable dining experience through great food, outstanding service,
and a guest-friendly environment. Employees appreciate the challenges and
opportunities that Tony Roma's provides, and the flexibility and autonomy
offered by upper management.
Sue Ellisa Caplan, regional training manager
for southern Florida, is committed to her career at Tony Roma's-she enjoys
both the variety and many challenges that the Company's tremendous growth
has afforded her. Originally from Dallas, Sue has been with Tony Roma's
since 1988. She considers her job "fun and interesting." In addition to
training, Sue recruits and interviews managers. Due to our growth, she
coordinated the hiring of a significant number of managers during the past
year. "It's easy to hire managers when you have great things to say about
the Company. I never have to sit across the table from a management
candidate and feel I'm selling them something I don't believe in myself."
Sue and her husband became parents of a baby girl in April.
Bobbie Bryant is kitchen manager of the West Colonial store in Orlando,
Florida. Working with Tony Roma's since 1986, Bobbie was thrilled when the
Company's growth afforded him the opportunity to transfer to the Orlando
area. His commitment to Tony Roma's stems from its "family atmosphere that
management creates. I can talk with upper management about any problem and
I know my employees feel the same way about me." Bobbie is an avid and
award-winning CB enthusiast with more than 50 trophies earned in nationwide
competition. As Bobbie proudly states, "I run 10,000 watts of power out of
my truck." He is married with three children.
Phil Heckathorne, district manager
for five stores in the Dallas, Texas area, loves the food industry. with
Tony Roma's since 1989, he likes the Company's management style, which
allows him to make his own decisions and to work autonomously. Company
growth and improvements have also proved helpful. "The Company has made
improvements in technology that "have made it easy for me to access
information on a daily basis through my laptop. I can monitor sales and
results and communicate with all of my units no matter where I'm located on
that day." Phil is an avid skier and the father of a 5-year-old daughter.
Cynthia (Thia) LeRiche is a bartender and trainer in the Redondo Beach,
California unit, where she has worked since it opened in 1984. Thia has
participated as a trainer in a number of new store openings and also is a
certified trainer for managers. This experience provided a stepping-stone
to the teaching career she has chosen-she has three semesters to complete
before graduation with a dual degree in music. Originally from Maine, Thia
has been happily employed at Tony Roma's for the past 13 years. She
appreciates the "flexibility of management in always working around my
school schedule and the time I took off for the birth of my baby." Thia's
son is now 6 years old.
Jose Perez is a dedicated line cook in Dallas, Texas at the Northwest
Highway restaurant. A native of Mexico, he has lived in the United States
for 15 years. He started as a dishwasher at Tony Roma's ten years ago and
has worked all kitchen positions. He's dedicated to working for his kitchen
manager, Roger Ayala, whom he has followed from store to store. "I like
everything about the Company," he says, "especially working with all the
different employees and managers over the years." He is married with three
children, and spending quality time with his family is
a top priority for him. Going out to dinner is one of the activities they
enjoy together most.
Now is the time to grow with Tony Roma's.
We believe that our combination of great food and service, coupled with the
enduring strength of the brand provide a strong base for future growth.
COMMUNICATIONS NETWORK
At NPC technology plays a key role in our business. It provides us with a
competitive edge and it allows our operators to focus more of their time on
servicing their customers. It allows us to conduct business in a cost
efficient manner, reducing our support and overhead cost while providing a
higher level of service. At the store level our front of the house Point-of-
Sale (POS) system provides effective communication between the server and
the kitchen, allowing our employees to serve our customers in a quick and
consistent manner while still maintaining a high level of control. It feeds
data to our back office system that provides support for inventory,
payroll, accounts payable and cash management. The back office system also
provides management reporting and a communications interface to our
corporate systems. Thanks to technology and the efforts of our operations
group we can implement our POS and back office systems in a true "cookie-
cutter" fashion. Our corporate systems include a wide area network with
more than 800 nodes that feeds data to a state of the art AS400. On a daily
basis we provide store level sales, key operating statistics and trend data
to each location less than ten hours after the close of business. Over the
past year we have focused our attention on improving our systems
infrastructure. We upgraded our AS400, increased the reliability of our
network and implemented a company wide Electronic Mail system. We have also
worked hard to eliminate paper by consolidating various bills and moving
them to electronic billing. We have implemented systems for inventory and
accounts payable to collect data electronically allowing us to reduce our
financial processing cycle while increasing the level
of control.To improve access to this information we have provided Laptop
PC's to our field management. Quick access to operating data allows us to
deal with situations while the details are still fresh and ensures that
weekly operations reviews by our President, Chief Financial Officer and
Senior operations personnel are more fruitful. As we closed the year our
systems were more reliable, our tool set more robust and most important we
were prepared to take on new business.In the coming year we will continue
efforts to consolidate bills, eliminate paper and insure that quality data
is provided to our operators in a timely fashion. We will also focus our
attention on developing new tools that will help our operators analyze
their business. We will convert the data we gather into information that is
useful and easy to interpret. We will provide this information in "real
time" at the store level. Further in the future we will set our sights on
capturing our organization's knowledge assets, to offer our operators
expert advice and analysis based on established best practices.
FIVE YEAR FINANCIAL SUMMARY
Fiscal Year Ended
March 25,March 26,March 28,March 29,March 30,
(Dollars in thousands
except per share data) 1997 1996 1995 1994 1993
Income Statement Data:
Revenue 295,285 $324,986 $317,467$337,003 $285,433
Cost of sales 80,618 93,977 92,332 98,692 82,552
Direct labor 81,086 87,293 89,964 97,103 79,829
Other operating expenses 75,523 83,280 84,659 88,619 80,475
Income from restaurant
operations 58,058 60,436 50,512 52,589 42,577
General and administrative
expenses 17,710 21,084 21,066 19,970 16,855
Depreciation and amortization 6,121 5,648 5,506 7,337 4,379
Operating income before
impairment and loss provision34,227 33,704 23,940 25,282 21,343
Impairment and loss
provision for
underperforming assets (1) -- 23,500 35,000 -- --
Operating income (loss) 34,227 10,204 (11,060) 25,282 21,343
Interest expense (5,455) (6,317) (6,252) (6,720) (6,460)
Other income (expense) 311 (341) (140) (56) (215)
Income (loss) before
income taxes 29,083 3,546 (17,452) 18,506 14,668
Provision (benefit) for
income taxes 11,272 1,403 (1,838) 7,211 5,544
Net income (loss) 17,811 2,143 (15,614) 11,295 9,124
Earnings (loss) per share:
Primary 0.71 0.09 (0.63) 0.45 0.35
Fully diluted 0.71 0.09 (0.63) 0.45 0.35
Cash dividend per share (2) -- .421875 -- -- --
Fiscal Year Ended
March 25,March 26,March 28, March 29, March 30,
(Dollars in thousands) 1997 1996 1995 1994 1993
Year-End Data:
Working capital deficit $ (15,405)$ (1,782)$ (7,061)$ (19,620)$ (16,361)
Total assets 259,907 197,829 211,712 229,112 205,310
Long-term debt 116,777 73,328 82,850 86,734 79,078
Stockholders' equity 95,793 77,320 80,287 98,987 89,436
Number of Company-owned units 513 405 481 577 546
Number of franchised units 140 142 157 155 18
Number of employees 12,000 9,800 10,300 12,500 11,200
(1) See notes to the Consolidated Financial Statements for a discussion of
the sale of Skipper's, Inc. effective March 25, 1996.
(2) Declared August 8, 1995 related to Class A shares concurrent with the
approval of a stock recapitalization plan.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is the largest Pizza Hut franchisee in the world. Based on
unit count at year-end, the Company's Pizza Hut operations account for
approximately 14% of all Pizza Hut franchised units and 6% of the entire
Pizza Hut system. The Company operated its Pizza Hut units in 12 states
during fiscal 1997.
The Company, through its wholly owned subsidiary, Romacorp, Inc. is also
the owner/franchisor of the Tony Roma's concept which was acquired in June
1993. Through expansion of Company owned restaurants, Tony Roma's revenue
grew 33.6% during the year and comprised 26.2% of consolidated revenue for
the fiscal year ended March 25, 1997. Tony Roma's has targeted 12
additional restaurants for development in fiscal 1998. The Tony Roma's
system operates in 25 states and 17 foreign countries.
Skipper's, Inc., a quick service seafood chain, located predominately in
the Pacific Northwest, was sold by the Company effective March 25, 1996.
Accordingly, the current year financial statements do not reflect any
operating results related to Skipper's. The sale occurred in fiscal 1996
after the Company closed 44% of the chain in fiscal 1995 in an effort to
return the concept to its core geographic operating areas.
Products - Pizza Hut's main product is high quality, innovative and
moderately priced pizza. Additionally, the menu contains pasta, sandwiches,
salad bar and a luncheon buffet.
Tony Roma's is a casual theme restaurant that is "Famous For Ribs." The
restaurant's signature products are baby back ribs with a mild tangy sauce
and deep fried onion loaves. The menu also includes spare ribs with three
sauce varieties, chicken, seafood, soups, salads, appetizers, a children's
menu and dessert.
All of the Company's concepts serve beer and/or other alcoholic beverages.
These products are not a significant portion of the sales mix at Pizza Hut,
and they comprise approximately 12% of sales for Tony Roma's.
Service - Pizza Hut provides a buffet with table service for beverages
during lunch and full table service for dinner, with delivery and carry-out
available throughout the day. Tony Roma's offers a fully staffed dining
experience throughout the day and evening.
Period of Operation - The Company operates on a 52 or 53 week fiscal year
ending the last Tuesday in March. The three most recent fiscal years ended
March 25, 1997, March 26, 1996, and March 28, 1995 each comprised 52 weeks.
DEVELOPMENT
Activity with respect to unit count during the year is set forth in the
table below. Consistent with the strategy initiated last year, the Company
aggressively pursued the acquisition of Pizza Hut units from Pizza Hut,
Inc. (PHI) and other franchisees. During the year the Company acquired 60
units from PHI and subsequent to year-end the acquisition of 62 units and
the operations of four others were completed in a related transaction.
Additionally, the Company completed a 31 unit acquisition from a franchisee
in North Carolina during the year.
Following year-end, the Company acquired 74 units and the operations of 8
others from franchisee Jamie B. Coulter. The Company will manage another 18
units in North Carolina and expects to acquire them from Mr. Coulter
subject to the resolution of certain contingencies. During the term of the
management agreement, the Company will record the results of these
operations as if owned, net of a management fee to be paid to the seller.
Four additional units have been acquired from a franchisee in Illinois. The
Company has also announced that it has entered into a letter of intent with
PHI to purchase 52 units in North Dakota, South Dakota, and Minnesota. See
footnote 10 to the consolidated financial statements.
Subsequent to the completion of the above transactions, the Company's Pizza
Hut operations will be in 23 states and will account for approximately 21%
of all Pizza Hut franchised units and 9% of the entire Pizza Hut system.
The Company's Pizza Hut unit count will have increased nearly 87% from
March 26, 1996.
Along with stores acquired during the year, 15 Pizza Hut units were opened,
net of relocations, including five delivery and six "small town"
facilities. Five units were closed and eight units were relocated, as a
result of the Company's continual evaluation of store operations. Units
that don't provide the necessary economic performance are closed or
relocated.
Tony Roma's achieved their aggressive growth plan and developed twelve new
units and one replacement during the year. Six stores targeted for closure
in the fourth quarter last year were closed. This initiative will be
completed in the first quarter of fiscal 1998 as one unit will be
relocated.
The development goals for fiscal 1998 consist of nine Pizza Hut units with
continued emphasis on the "small town" strategy, and twelve new Tony Roma's
facilities.
SYSTEM UNIT ACTIVITY
Beginning Developed (2) Acquired Closed(2)Ending
Company Owned
Pizza Hut
Restaurant 280 13 68 (3) 358
Delivery 92 2 23 (2) 115
Total Pizza Hut 372 15 91 (5) 473
Tony Roma's (1) 33 12 - (5) 40
Total Company Owned 405 27 91 (10) 513
Franchised
Tony Roma's (1) 142 14 - (16) 140
Total System 547 41 91 (26) 653
(1) Does not include two units operated as joint ventures by the Company.
(2) Does not include 5 Pizza Hut restaurants, 3 Pizza Hut delivery units
and 1 Tony Roma's restaurant that were relocated.
RESULTS OF OPERATIONS
The "operations summaries" set forth an overview of revenue, and operating
expenses as a percent of revenue for the last three fiscal years (dollars
in thousands) for each concept operated by the Company. Cost of sales
includes the cost of food and beverage products sold. Direct labor
represents the salary and related fringe benefit costs associated with
restaurant based personnel. Other operating expenses include rent,
depreciation, advertising, utilities, supplies, and insurance among other
costs directly associated with operating a restaurant facility.
PIZZA HUT RESULTS OF OPERATIONS
Revenue - Revenue totaled $218 million during fiscal 1997 which was $3
million or 1.4% below fiscal 1996 results. This decrease was due to an 8.3%
decline in comparable sales from the prior year which was offset in large
part by unit development and acquisition. The decrease in comparable sales
was primarily the result of the initial success of Stuffed Crust and
TripleDecker pizzas in fiscal 1996, which caused comparable sales to
increase by 5.2% during fiscal 1996. These new product introductions
contributed to the increase in revenue of $22.4 million or 11.3% over
fiscal 1995 to $221 million.
Cost and Expenses - Cost of sales as a percent of revenue increased
slightly for the year at 26.5% compared to 26.3% for the prior year. The
increase is attributable to cheese costs, which averaged 8.6% higher than
the prior year. The impact of this higher ingredient cost was significantly
offset by last year's higher than normal cheese content and promotional
pricing related to both the Stuffed Crust and TripleDecker products which
also contributed to the increase in the cost of sales percentage from 26.1%
in fiscal 1995 to 26.3% in fiscal 1996.
Direct labor as a percent of revenue increased to 27.3% during fiscal 1997
from 26.5% in fiscal 1996 due to the increased minimum wage and the de-
leveraging of store labor costs associated with fiscal 1997 comparable
revenue results. Direct labor decreased as a percent of revenue in fiscal
1996 from fiscal 1995 due primarily to increased leverage of store labor
costs resulting from increased comparable sales during the year.
In fiscal 1997 other operating expenses increased to 27% of revenue
primarily due to the July 1996 increase in the Company's franchise fee paid
to PHI, from an effective rate of 2.25% to 4%. Also contributing to the
increase in these costs as a percent of revenue was the effect of the lower
per unit sales volumes on these largely fixed costs. The increase in fiscal
1996 from 25.0% to 25.4% was due to higher advertising cost, an increase in
franchise fees related to acquired units and increased equipment rent due
to improvements in restaurant based technology.
The Company expects that its Pizza Hut Restaurant based income percentage
will decline in fiscal 1998 relative to fiscal 1997 due to the assimilation
of historically lower margin operations recently acquired, and the increase
in average royalty rate paid to PHI, from 2.25% to 4%, which was effective
in July 1996.
PIZZA HUT OPERATIONS SUMMARY
Fiscal Year Ended March
1997 1996 1995
Revenue
Restaurant Sales $168,688 $168,353 $149,754
Delivery Sales 49,293 52,654 48,829
Total Revenue $217,981 $221,007 $198,583
Restaurant Operating Expenses
as a Percentage of Revenue:
Total Expenses (1)
Cost of Sales 26.5% 26.3% 26.1%
Direct Labor 27.3% 26.5% 27.3%
Other 27.0% 25.4% 25.0%
Total Operating Expenses 80.8% 78.2% 78.4%
Restaurant Based Income 19.2% 21.8% 21.6%
Restaurant Expenses (2)
Cost of Sales 26.7% 26.6% 26.5%
Direct Labor 26.0% 25.1% 25.7%
Other 27.4% 25.6% 25.0%
Total Operating Expenses 80.1% 77.3% 77.2%
Restaurant Based Income 19.9% 22.7% 22.8%
Delivery Expenses (3)
Cost of Sales 25.6% 25.5% 24.8%
Direct Labor 32.0% 30.9% 32.0%
Other 25.6% 24.7% 24.8%
Total Operating Expenses 83.2% 81.1% 81.6%
Restaurant Based Income 16.8% 18.9% 18.4%
(1) As a percent of total revenue
(2) As a percent of restaurant sales
(3) As a percent of delivery sales
TONY ROMA'S RESULTS OF OPERATIONS
Revenue - Restaurant sales increased 33.6% from $51.5 million to $68.8
million during fiscal 1997. The increase was attributable to the
development of 12 restaurants and a comparable sales increase of 2.2% for
stores open more than 18 months. From fiscal 1995 to fiscal 1996,
restaurant sales increased 22.2% or $9.4 million due to the addition of
nine restaurants and comparable sales growth of 2.6%, measured for stores
open more than 12 months. Other factors impacting the change in sales from
year-to-year include price increases of approximately 2% and 5% implemented
in October of fiscal 1997 and November of fiscal 1996, respectively. the
revenue growth in fiscal 1997 was net of the effect of closing six units
throughout the year and one unit during the last week of fiscal 1996. This
closure strategy was implemented in the fourth quarter of fiscal 1996 and
targeted low volume stores with poor economic performance. The new
prototype units constructed in fiscal 1997 and 1996 produce higher volumes
resulting in better leverage on fixed costs.
Net franchise revenue grew 12.6% in fiscal 1997 to $8.5 million over the
$7.6 million recorded in fiscal 1996. The increase was due to the opening
of 14 franchised locations in 1997 compared to 12 openings in 1996, the
sale of certain international franchise rights, and a lower provision for
bad debts as a result of reduced delinquency rates, and the closure of
delinquent franchise operations.
Costs and Expenses - Cost of sales as a percent of restaurant sales fell to
33.3% in fiscal 1997 from 34.1% in fiscal 1996 despite an 8% increase in
the average cost of baby back ribs. This occurred primarily due to menu
enhancements, and the price increases implemented in October 1996 and
November 1995.
Direct labor increased to 31.2% of restaurant sales during the year from
30.6% in fiscal 1996 primarily due to normal inefficiencies associated with
the opening of thirteen restaurants during the year, for an 86% increase in
new store openings over fiscal 1996 development. The federal minimum wage
increase, effective in October 1996 also impacted the labor percentage, but
was substantially offset by the October 1996 price increase.
In fiscal 1996 the labor percentage fell to 30.6% from 31.4% in fiscal 1995
due largely to the November 1995 price increase and favorable comparable
sales results.
Other operating expenses continued a favorable trend falling to 24.2% in
fiscal 1997 from 25.9% in fiscal 1996 and 27.9% in fiscal 1995. This
improvement is largely due to the opening of higher volume proto-type
facilities and the closure of seven older poor performing units over the
last two years.
TONY ROMA'S OPERATIONS SUMMARY
Fiscal Year Ended March
1997 1996(1) 1995(1)
Revenue
Restaurant Sales $68,778 $51,499 $42,137
Net Franchise Revenue 8,526 7,570 7,291
Total Revenue $77,304 $59,069 $49,428
Restaurant Operating Expenses
as a Percentage of Sales
Cost of Sales 33.3% 34.1% 33.3%
Direct Labor 31.2% 30.6% 31.4%
Other 24.2% 25.9% 27.9%
Total Operating Expenses 88.7% 90.6% 92.6%
Restaurant Based Income 11.3% 9.4% 7.4%
Income From System Operations(2) 21.0% 21.0% 20.6%
(1) Contains reclassifications to conform to current year presentation
(2) Net franchise revenue and restaurant based income as a percent of total
revenue
CONSOLIDATED RESULTS OF OPERATIONS
As reported in last year's annual report, Skipper's, Inc., a formerly
wholly-owned subsidiary was sold on May 14, 1996, effective March 25, 1996
and therefore, no results of Skipper's operations are reflected in the
Company's financial statements for the year ended March 25, 1997. For the
years ended March 26, 1996 and March 28, 1995 Skipper's, Inc. recorded
revenues of $44.9 million and $69.5 million, operating expenses of $45.1
million and $72.2 million, and the loss from restaurant operations
exclusive of impairment and loss provision charges of $.2 million and $2.8
million respectively. The change between years was due to the closure of
44% of the chain in February 1995 with a strategy of focusing on key market
areas and improving product quality. The Company recorded a related $35
million impairment and loss provision, and despite significant improvement
during fiscal 1996, the Company concluded that the best long term strategy
was to sell the Skipper's operations. In fiscal 1996 a $20 million
impairment charge was recorded in conjunction with the disposition of
Skipper's, Inc.
Consolidated revenue for fiscal 1997 was $295.3 million, a decrease of
$29.7 million or 9.1% below last year. The decrease is due to the sale of
Skipper's, Inc., offset by expansion at Tony Roma's, with Pizza Hut
Division revenue relatively flat.
In fiscal 1996 revenue grew $7.5 million or 2.4% due to successful product
introductions at Pizza Hut and expansion at Tony Roma's offset by declining
revenue at Skipper's resulting largely from store closures.
Consolidated income from restaurant operations was $58.1 million or 19.7%
of revenue for the current year compared to $60.4 million or 18.6% of
revenue in fiscal 1996 and $50.5 million or 15.9% of revenue in fiscal
1995. The improvement from year-to-year is largely due to the reduction and
elimination of Skipper's losses. In fiscal 1997 this benefit is net of
increased franchise fees paid to Pizza Hut, Inc. and commodity pressures at
both Pizza Hut and Tony Roma's.
General and administrative expenses were reduced in the current year to
$17.7 million or 6% of revenue compared to $21.1 million or 6.5% of revenue
in fiscal 1996, due to the sale of Skipper's which had a higher ratio of
general and administrative expenses to revenue than the consolidated
operation. For fiscal 1996 general and administrative expenses were flat in
nominal dollars, and as a percent of revenue, compared to fiscal 1995.
Depreciation and amortization includes depreciation of field and corporate
equipment and facilities as well as the amortization of goodwill, franchise
rights and pre-opening costs. In fiscal 1997 these costs increased to $6.1
million from $5.6 million primarily due to increased pre-opening costs
related to the development at Tony Roma's, as well as increased franchise
rights amortization at Pizza Hut. Depreciation and amortization was
relatively flat from fiscal 1996 to fiscal 1995.
Interest expense decreased in fiscal 1997 due to debt reduction early in
the year from the Skipper's sale proceeds and favorable interest rates on
the Company's revolving credit facility. In fiscal 1998 interest expense
will increase due to increased borrowings related to acquisitions, and
likely higher interest rates. Interest expense was flat between fiscal 1996
and fiscal 1995.
NPC's income tax provisions for the fiscal years 1997, 1996 and 1995
resulted in effective tax rates of 38.8%, 39.6% and 10.5% respectively. The
fiscal 1995 rate is impacted by the write-off of Skipper's goodwill, which
is not deductible for tax purposes. Without this write-off, the Company's
fiscal 1995 tax rate would have been approximately 39.6%. The Company
anticipates that its fiscal 1998 tax rate will decrease from fiscal 1997
levels due to the realization of tax benefits associated with the
implementation of a corporate reorganization and the realization of various
tax credits.
LIQUIDITY AND CAPITAL RESOURCES
On March 25, 1997 the Company had a working capital deficit of $15.4
million compared to a $1.8 million deficit at March 26, 1996. The increase
in the deficit is due to the receipt of sales proceeds, used to reduce
debt, and the realization of deferred tax assets associated with the
disposition of Skipper's. The Skipper's transaction was effective March 25,
1996 but closed on May 14, 1996. Like most restaurant companies, the
Company is able to operate with a working capital deficit because
substantially all of its sales are for cash, while it generally receives
credit from trade suppliers. Further, receivables are not a significant
asset in the restaurant business and inventory turnover is rapid.
Therefore, the Company uses all available liquid assets to reduce
borrowings under its revolving line of credit.
At March 25, 1997, the Company had a $15 million and a $160 million
unsecured revolving credit facility, of which $64 million was borrowed.
Availability under the revolvers is reduced by outstanding letters of
credit which can be as much as $12 million, of which $7.3 million was
issued at year-end. The Company also has $30 million available under a
"shelf" facility with a major insurance company. Borrowing under this
facility is available at the lender's discretion through June 29, 1997.
The Company anticipates cash flow from operations and additional borrowings
will be sufficient to fund continuing expansion and improvements and to
service debt obligations. The Company's ability to make additional
acquisitions is subject to certain financial covenants or, if necessary and
warranted, the Company's ability to obtain additional equity capital.
Subsequent to year-end, the Company borrowed $50 million in senior
unsecured debt from institutional lenders, and increased the limit of the
revolving credit facilities to a combined aggregate of $200 million in
order to complete certain acquisitions. See discussion under Development
and footnotes 3 and 10 to the Consolidated Financial Statements.
CASH FLOWS
Net cash provided by operating activities was $45 million in fiscal 1997
compared to $32.7 million in fiscal 1996. The 37% increase was largely due
to improved operating results and the realization of deferred tax assets
related to the sale of Skipper's. Cash flows from operations increased $5
million in fiscal 1996 from fiscal 1995, due to improved operating
results.
Investing activities include normal maintenance capital expenditures and in
fiscal 1997 include the development of 23 Pizza Hut units and 13 Tony
Roma's compared to fiscal 1996 which included the development of 8 Pizza
Hut units and 7 Tony Roma's. Acquisitions consist of 91 Pizza Hut units in
fiscal 1997, and 23 Pizza Huts and two Tony Roma's in fiscal 1996. Proceeds
from the sale of Skipper's, and fee simple properties associated with the
Skipper's closure and disposition strategy have resulted in cash received
of $8.8 million in fiscal 1997 and $4.7 million in fiscal 1996.
Acquisitions during the year were funded through the Company's revolving
credit facility. Financing activities in fiscal 1996 include the borrowing
of $20 million under its shelf facility and the payment of a $5.2 million
one time special dividend related to the recapitalization of the Company's
stock. At March 25, 1997, 346,500 shares remain approved for repurchase
under the Company's stock repurchase program.
SEASONALITY
As a result of the diversification in restaurant concepts, the Company has
historically not experienced significant seasonal sales fluctuations on a
consolidated basis. However, each concept is impacted by individual sales
trends. Tony Roma's sales are traditionally higher from January to March
due to an increase in vacation and part time residence activity in the
desert and beach areas where a significant number of the Company's
facilities are located. Pizza Hut sales are largely driven through
advertising and promotion and are adversely impacted in economic times that
generally require high cash flow from consumers such as back-to-school and
holiday seasons.
EFFECTS OF INFLATION AND FUTURE OUTLOOK
Inflationary factors such as increases in food and labor costs directly
affect the Company's operations. Because most of the Company's employees
are paid on an hourly basis, changes in rates related to federal and state
minimum wage and tip credit laws will effect the Company's labor costs. The
Company cannot always effect immediate price increases to offset higher
costs and no assurance can be given that the Company will be able to do so
in the future.
Federal wage laws will increase the minimum wage to $5.15 per hour in
September 1997. Not withstanding potential menu price increases and
operational strategies, this increase is expected to raise labor costs one
half of one percentage point over current levels for both concepts.
Cheese represents approximately 40% of the cost of a pizza. The price of
this commodity changes throughout the year due to changes in demand and
supply resulting from school lunch programs, weather and other factors.
Baby back ribs represent approximately 28% of the menu mix at Tony Roma's.
Because ribs are a by-product of pork processing, their price is influenced
largely by the demand for boneless pork. Significant changes in the prices
of these commodities would have an impact on the Company's food cost as a
percent of revenue.
Cheese costs are expected by the Company to be at or below last year's
levels for the first quarter and, provided favorable weather and supply and
demand conditions continue, costs should remain below last year's unusually
high levels into the third quarter. Based upon existing inventories, rib
prices are expected to be approximately 10% to 12% higher during the first
and second quarters of fiscal 1998 than during the same period of fiscal
1997. For the third and fourth quarters, prices are expected to be below
the same period last year.
Increases in interest rates would directly affect the Company's financial
results. Under the Company's revolving credit agreements alternative
interest rate options are available which can be used to limit the
Company's exposure to fluctuating rates.
FORWARD LOOKING COMMENTS
The statements under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other statements which are not
historical facts contained herein are forward looking statements that
involve risks and uncertainties, including but not limited to: consumer
demand and market acceptance risk; the effectiveness of franchisor
advertising programs, and the overall success of the Company's franchisor;
the integration and assimilation of acquired restaurants; training and
retention of skilled management and other restaurant personnel; the
Company's ability to locate and secure acceptable restaurant sites; the
effect of economic conditions, including interest rate fluctuations, the
impact of competing restaurants and concepts, the cost of commodities and
other food products, labor shortages and costs and other risks detailed in
the Company's Securities and Exchange Commission filings.
OTHER
Impact of Recently issued Accounting Pronouncements - In October 1995,
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," was issued. This statement is effective for fiscal
years beginning after December 15, 1995. The statement permits companies to
elect to record compensation expense measured at the grant date based on
the fair value of the award recognized over a service period.
Alternatively, companies may continue to apply current accounting
requirements, which generally result in no recognition of compensation
expense for most fixed stock option plans. However companies that choose to
continue using the current method are required to disclose the impact the
alternative fair value accounting method would have on their statements if
implemented. The Company has elected to continue applying the current
accounting requirements.
In February 1997 Statement of Financial Accounting Standards No. 128
"Earnings per Share" was issued. This statement simplifies the computation
of earnings per share. The Company does not anticipate this statement will
significantly impact the earnings per share as historically computed.
CONSOLIDATED BALANCE SHEETS
NPC International, Inc. and Subsidiaries
March 25, March 26,
(Dollars in thousands, except share data) 1997 1996
Assets
Current assets:
Cash and cash equivalents $ -- $ 1,584
Accounts receivable, net of $260
and $915 reserves, respectively 2,151 10,104
Notes receivable, net of $20
and $311 reserves, respectively 575 831
Inventories of food and supplies 2,577 3,730
Income tax receivable 1,737 285
Deferred income tax asset 3,546 12,186
Prepaid expenses and other current assets 3,165 2,367
Total current assets 13,751 31,087
Facilities and equipment, net 126,461 93,541
Assets held for sale 4,248 5,904
Franchise rights, less accumulated amortization
of $11,366 and $9,325, respectively 92,318 43,512
Goodwill, less accumulated amortization of
$4,910 and $4,046, respectively 18,228 19,092
Other assets 4,901 4,693
$259,907 $197,829
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $11,624 $10,410
Payroll taxes 1,815 1,647
Accrued interest 1,997 2,159
Accrued payroll 4,412 4,385
Current portion of closure reserve 400 3,500
Insurance reserves 3,724 4,151
Other accrued liabilities 5,184 6,617
Total current liabilities 29,156 32,869
Long-term debt 116,777 73,328
Deferred income tax liability 5,619 3,981
Closure reserve 4,734 4,000
Other deferred items 181 168
Health and workers' compensation reserves 7,647 6,163
Stockholders' Equity
Common stock, $.01 par value
100,000,000 shares authorized, 27,592,510 issued 276 276
Paid-in capital 20,978 21,829
Retained earnings 94,827 77,016
116,081 99,121
Less treasury stock at cost, representing
2,957,307 and 3,070,078 shares, respectively (20,288) (21,801)
Total stockholders' equity 95,793 77,320
$259,907 $197,829
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
NPC International, Inc. and Subsidiaries Fiscal Year Ended
March 25, March 26, March 28,
(Dollars in thousands,
except share data) 1997 1996 1995
Net sales $286,759 $317,294 $309,829
Net franchise revenue 8,526 7,692 7,638
Total revenue 295,285 324,986 317,467
Cost of sales 80,618 93,977 92,332
Direct labor 81,086 87,293 89,964
Other 75,523 83,280
84,659
Total operating expenses 237,227 264,550 266,955
Income from restaurant operations 58,058 60,436 50,512
General and administrative expenses 17,710 21,084 21,066
Depreciation and amortization 6,121 5,648 5,506
Operating income before impairment and
loss provision for
underperforming assets 34,227 33,704 23,940
Impairment and loss provision for
underperforming assets - 23,500 35,000
Operating income (loss) 34,227 10,204 (11,060)
Other income (expense):
Interest expense (5,455) (6,317) (6,252)
Miscellaneous 311 (341) (140)
Income (loss) before income taxes 29,083 3,546 (17,452)
Provision (benefit) for income taxes:
Current 994 7,500 5,169
Deferred 10,278 (6,097) (7,007)
11,272 1,403 (1,838)
Net income (loss) $17,811 $2,143 $ (15,614)
Earnings (loss) per share $.71 $.09 $ (.63)
Weighted average shares outstanding 25,021,020 24,663,971 24,763,715
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NPC International, Inc. and Subsidiaries
Total
Common Paid-in Retained Treasury Stockholders'
(Dollars in Stock Capital Earnings Stock Equity
thousands)
Balance, March 29,
1994 $276 $22,322 $95,700 $(19,311) $98,987
Net loss - - (15,614) - (15,614)
Acquisition of
treasury stock - - - (3,256) (3,256)
Exercise of stock
options - (302) - 472 170
Balance, March 28,
1995 276 22,020 80,086 (22,095) 80,287
Dividend - - (5,213) - (5,213)
Net income - - 2,143 - 2,143
Exercise of stock
options - (191) - 294 103
Balance, March 26,
1996 276 21,829 77,016 (21,801) 77,320
Net income - - 17,811 - 17,811
Acquisition of
treasury stock - - - (904) (904)
Exercise of stock
options - (851) - 2,417 1,566
Balance, March 25,
1997 $276 $20,978 $94,827 $(20,288) $95,793
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NPC International, Inc. and Subsidiaries Fiscal Year Ended
March 25, March 26, March 28,
(Dollars in thousands) 1997 1996
1995
Operating Activities
Net income (loss) $17,811 $2,143 $(15,614)
Non-cash items included in net income (loss):
Depreciation and amortization 16,531 18,326 20,990
Amortization of start-up costs 1,875 1,110 396
Deferred income taxes and other 10,278 (6,097) (8,334)
Non-cash portion of impairment
and loss provision - 23,379 34,414
Change in assets and liabilities,
net of acquisitions:
Accounts receivable, net 353 (488) 748
Notes receivable, net 256 (312) (226)
Inventories of food and supplies 1,153 (1,100) (162)
Income tax receivable (1,452) 2,245 -
Prepaid expenses and other current assets (2,673) (614) (748)
Accounts payable 1,214 (1,327) 150
Payroll taxes 168 294 49
Accrued interest (162) 202 204
Accrued payroll 27 327 (1,019)
Health and workers' compensation reserves 1,057 2,046 1,260
Other accrued liabilities (1,420) (7,392) (4,407)
Net cash flows provided by operating
activities 45,016 32,742 27,701
Investing Activities
Capital expenditures (41,379) (17,825) (11,067)
Acquisition of business assets, net of cash (55,595) (15,150) (7,803)
Changes in other assets, net (2,098) 289 (1,870)
Proceeds from sale of capital assets 8,808 4,708 1,943
Net cash flows used in investing activities (90,264) (27,978) (18,797)
Financing Activities
Purchase of treasury stock (904) - (3,256)
Dividends - (5,213) -
Net change in revolving credit agreements 52,713 (16,480) 3,480
Proceeds from issuance of long-term debt - 20,000 10,000
Payment of long-term debt (9,711) (11,561) (17,446)
Exercise of stock options 1,566 103 170
Net cash flows provided by (used in)
financing activities 43,664 (13,151) (7,052)
Net Change In Cash And Cash Equivalents (1,584) (8,387) 1,852
Cash And Cash Equivalents At Beginning Of Year 1,584 9,971 8,119
Cash And Cash Equivalents At End Of Year $ - $1,584 $9,971
See notes to consolidated financial statements.
Notes to Consolidated
Financial Statements
Note 1 Summary of Significant Accounting Policies
Consolidation - The financial statements include the accounts of NPC
International, Inc. and its wholly owned subsidiaries (the Company). All
significant intercompany transactions are eliminated.
Fiscal Year - The Company operates on a 52 or 53 week fiscal year ending on
the last Tuesday in March. The fiscal years ended March 25, 1997, March 26,
1996, and March 28, 1995, each contained 52 weeks.
Cash Equivalents - For purposes of the Consolidated Statements of Cash
Flows, the Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents. At March
26, 1996, substantially all cash was in the form of depository accounts.
Inventories - Inventories of food and supplies are valued at the lower of
cost (first-in, first-out method) or market.
Pre-opening Costs - The Company amortizes pre-opening costs, which
principally represent the cost of hiring and training new personnel, over a
period of one year commencing with the restaurant's opening. Amortization
of these costs are presented below income from restaurant operations.
Facilities and Equipment - Facilities and equipment are recorded at cost.
Depreciation is charged on the straight-line basis for buildings, furniture
and equipment. Leasehold improvements are amortized on the straight-line
method over the economic life of the lease or the life of the improvements,
whichever is shorter.
Effective in fiscal 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of." The majority of
the Company's long-lived assets held for continuing use are evaluated for
potential impairment on a store-by-store basis. Assets held for sale are
stated at estimated fair value.
Franchise Rights - The Company's Pizza Hut franchise agreements generally
provide franchise rights for a period of 15 to 20 years and are renewable
at the option of the Company for an additional 15 years. Initial franchise
fees are capitalized for accounting purposes and are amortized over their
estimated economic life (original term plus option renewal period) on a
straight-line basis. Purchased franchise rights are recorded at estimated
value and amortized ratably over the remaining life of the franchise
agreement, including the renewal period, if any. Periodic franchise fees,
generally provided for in the agreements as a percent of gross sales, are
recorded as operating expenses as incurred.
Net Franchise Revenue - The franchise agreements for Tony Roma's
restaurants provide for an initial fee and continuing royalty payments
based upon gross sales, in return for operational support, product
development, marketing programs and various administrative services.
Royalty revenue is recognized when earned and initial fees are recognized
when the franchisee's restaurant is opened. Fees for granting exclusive
development rights to specific geographic areas are recognized when the
right has been granted and cash received is non-refundable. Net franchise
revenue is presented net of direct expenses which include labor, travel,
and related costs of Franchise Business Managers, who operate as liasons
between the franchise community and the franchisor. Direct costs also
include bad debt expense, and opening costs consisting primarily of
training expenses. Franchisees also participate in national and local
marketing programs which are managed by the Company but are not included in
the accompanying financial statements.
Goodwill - Goodwill represents the excess of cost over the identifiable net
assets of companies acquired and is amortized on the straight-line method
over periods ranging from 25 to 40 years.
Income Taxes - The provision for income taxes includes federal and state
taxes currently payable and those deferred because of temporary differences
between the financial statements and tax bases of assets and liabilities.
Deferred taxes arise principally from accelerated amortization of franchise
rights for tax purposes, the use of accelerated depreciation for tax
purposes, and the deferral of tax deductions for insurance costs and
impairment provisions that have been accrued for financial statement
purposes.
Earnings Per Share - Earnings per share is computed using the weighted
average number
of common and common equivalent shares outstanding during the period.
Common equivalent shares represent the number of shares which would be
issued assuming the exercise of dilutive common stock options, reduced by
the number of shares which could be purchased with proceeds from the
exercise of such options. Per share amounts are not materially different on
a fully diluted basis.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Advertising Costs - Advertising costs are expensed as incurred. The Company
incurred $14,341,000 of such costs in fiscal 1997 and $17,229,000 and
$17,940,000 in fiscal 1996 and
fiscal 1995 respectively.
Stock Based Compensation - In October 1995 the Financial Accounting
Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement established a fair value based method of
accounting for employee stock options or similar equity instruments,
but allows companies to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." Companies electing to continue to apply the
accounting requirements in APB Opinion No. 25 must, however, make pro forma
disclosures of net income and net income per share as if the fair value
based method of accounting defined in SFAS No. 123 had been applied. The
Company has adopted SFAS No. 123 on a disclosure basis only in this current
fiscal year. See Note 4.
Reclassifications - Certain amounts have been reclassified to conform the
prior year financial statements with the current year presentation.
Note 2 Facilities and Equipment
Facilities and equipment consists of the following:
Estimated March 25, March 26,
(Dollars in thousands) Useful Life 1997 1996
Land $27,978 $21,192
Buildings 15-20 years 54,257 38,582
Leasehold improvements 5-20 years 38,513 36,086
Furniture and equipment 3-10 years 73,741 66,670
Construction in progress 9,009 4,245
203,498 166,775
Less accumulated depreciation
and amortization (77,037) (73,234)
Net facilities and equipment $126,461 $93,541
Note 3 Bank Debt and Senior Notes
The Company has a $15 million unsecured revolving credit facility that
provides the option to pay interest at the prime rate, the London Interbank
Offering Rate (LIBOR) or a money market rate (6.9375% at March 25, 1997).
Additionally, the Company has a $160 million unsecured revolving credit
facility which provides the option to pay interest at the prime rate or the
LIBOR (6.4375% at March 25, 1997). Availability under this agreement is
reduced by issued letters of credit which can be as much as $12,000,000,
of which $7,300,000 has been issued at March 25, 1997 (Note 7). Commitment
fees of .25% per annum are paid on the unused balance of both facilities
and are included in interest expense. These agreements are in effect until
March 3, 2000.
In order to fund acquisitions (Note 10), subsequent to March 25, 1997, the
Company increased its $160 million unsecured revolving credit facility to
$185 million and borrowed $50 million from institutional lenders. The $50
million senior note bears interest at 7.94%. Annual principal payments of
$10 million begin May 1, 2002 and end May 1, 2006.
Each senior note requires annual principal payments equal to 20% of the
original principal amount. Proceeds from these notes were used to repay
amounts borrowed under the Company's revolving credit agreement. The
Company has the ability and intent to refinance the principal payments due
under its senior notes through its revolving credit agreement. Accordingly,
such amounts are classified as long-term debt.
On June 9, 1994, the Company signed a $20,000,000 shelf placement facility
with a major insurance company, $10,000,000 of which was borrowed on
December 20, 1994, bearing interest at 9.09%, and the remaining $10,000,000
borrowed on April 25, 1995, bearing interest at 8.02%. This facility was
increased to $60,000,000 on June 29, 1995 and an additional $10,000,000 was
borrowed under the facility on July 18, 1995 at an interest rate of 6.96%.
The Company can borrow an additional $30,000,000 under this agreement, as
of March 25, 1997, until June 29, 1997.
The aggregate maturities of long-term debt, excluding the revolving credit
agreement, are as follows: fiscal 1998 - $11,444,000; fiscal 1999 -
$10,444,000; fiscal 2000 - $10,444,000; fiscal
2001 - $10,445,000; fiscal 2002-$6,000,000, and fiscal 2003 - $4,000,000.
The average amount outstanding on all bank borrowings and senior notes for
the year ended March 25, 1997, was $78,351,000 and the maximum borrowings
were approximately $121,500,000. Interest expense from bank borrowings and
senior notes for fiscal years 1997, 1996 and 1995, was $5,501,000,
$5,703,000, and $5,331,000 respectively. Weighted average interest rates
during the same periods were 7.02%, 7.34%, and 7.36% respectively.
Cash paid for interest in fiscal years 1997, 1996 and 1995 was $6,030,000,
$6,043,000, and $5,957,000 respectively.
The Company is subject to a number of covenants under its various credit
agreements including limits on additional borrowing, restrictions on
dividend payments and requirements to maintain various financial ratios and
a minimum net worth. The Company was in compliance with all such debt
covenants, as amended, at March 25, 1997.
Statement of Financial Accounting Standards No. 107, "Disclosures about the
Fair Market Value of Financial Instruments," requires companies to disclose
the estimated fair value of financial instruments. The Company's debt
consists of non-trading long-term notes with fixed rates maturing over the
next six years and long-term revolving loans with variable rates.
Management has computed the fair market values of the fixed-rate notes
based upon estimated incremental borrowing rates of 7.8% in fiscal 1997 and
7.7% in fiscal 1996. This rate is not substantially different from the rate
spread from similar government bonds with similar maturities to that of the
Company's debt portfolio. Management believes the fair market value of the
revolving credit agreement is equal to its carrying value, due to its daily
rate fluctuation.
March 25, 1997 March
26, 1996
(Dollars in Principal Pmt. Carrying Est. Carrying Est.
thousands) Begin End Value FairValue Value Fair Value
Revolving credit $64,000 $64,000 $10,840 $10,840
9.09% senior notes 10/97 10/01 10,000 10,451 10,000 10,478
8.02% senior notes 4/98 4/02 10,000 10,072 10,000 10,105
7.58% senior notes 5/93 5/97 5,000 4,990 10,000 9,994
6.96% senior notes 4/98 4/02 10,000 9,725 10,000 9,757
6.35% senior notes 4/96 4/00 16,000 15,500 20,000 19,533
Other 1,777 1,777 2,488 2,646
Total long-term debt $116,777 $116,515 $73,328 $73,353
Note 4 Stock Options
At March 25, 1997, the Company has a 1994 Non-Qualified Stock Option Plan
pursuant to which an aggregate of 2,791,450 shares of common stock are
reserved for issuance to employees (including officers) of the Company. The
options have an exercise price equal to the fair market value of the common
stock on the date of grant, and generally become exercisable over a four-
year period in equal annual amounts.
Under APB No. 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date
of the grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123. The fair value for these options was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1996 and 1997; risk-free
interest rate of 5.38% to 6.78%; volatility factor of the expected market
price of the Company's common stock of .298 and an average expected life of
the option of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands except for earnings
per share information):
1997 1996
As Reported Pro-forma As Reported Pro-forma
Net income $17,811 $17,661 $2,143 $2,094
Earnings per share $0.71 $0.71 $0.09
$0.08
A summary of the Company's stock option activity, and related information
is presented below:
March 25, 1997 March 26, 1996 March 28, 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
Outstanding-beginning
of year 1,839,769 $7.07 1,593,206 $7.24 1,564,626 $7.49
Granted 228,850 $8.22 396,350 $6.41 364,500 $5.44
Canceled (108,847) $6.06 (130,759) $7.24 (294,058) $6.83
Exercised (197,257) $6.40 (19,028) $5.49 (41,862) $4.00
Outstanding-end
of year 1,762,515 $7.36 1,839,769 $7.07 1,593,206 $7.24
Exercisable at end
of year 1,191,730 1,122,081 1,027,423
Weighted-Average fair
value of options granted
during the year $3.12 $2.40 $--
Exercise prices for options outstanding as of March 25, 1997 ranged from
$4.75 to $11.50. The weighted-average remaining contractual life of those
options is 6.4 years.
Note 5 Income Taxes
The provision (benefit) for income taxes consisted of the following:
March 25, March 26, March 28,
(Dollars in thousands) 1997 1996 1995
Current:
Federal $604 $5,730 $3,731
State 38 1,428 1,246
Foreign 352 342 192
Total 994 7,500 15,169
Deferred:
Federal 8,596 (3,956) (5,753)
State 1,243 (1,079) (1,240)
Foreign 439 (1,062) (14)
Total 10,278 (6,097) (7,007)
Provision (benefit) for
income taxes $11,272 $1,403 $(1,838)
The significant components of the deferred tax asset and liability at March
25, 1997, and March 26, 1996, consisted of the following:
March 25, 1997 March 26, 1996
Deferred Deferred Deferred Deferred
(Dollars in thousands) Tax Assets Tax Liab. Tax Assets Tax Liab.
Disposition of Skipper's $ - $ - $7,910 $ -
Depreciation and
amortization - 9,121 - 11,548
Closure reserve 2,013 5,656 -
Capitalized leases - - 561 -
Tax credit carryforwards 1,145 - 1,145 -
Insurance reserves 4,041 - 4,126 -
Other 1,710 716 2,223 723
Subtotal 8,909 9,837 21,621 12,271
Valuation allowances (1,145) - (1,145) -
Total deferred tax assets
and liabilities $7,764 $9,837 $20,476 $12,271
The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to earnings
before income taxes are as follows:
March 25, March 26, March 28,
(Dollars in thousands) 1997 1996 1995
Tax computed at
statutory rate $10,179 $1,241 $(6,108)
Write-off of Skipper's
goodwill - - 4,665
Goodwill
amortization 271 360 314
Tax credits (579) (468) (857)
State taxes, net
of federal effect,
and other 1,401 270 148
Provision
(benefit) for
income taxes $11,272 $1,403 $(1,838)
Cash paid for income taxes in fiscal 1997, 1996, and 1995 was $2,430,000,
$4,868,000, and $8,542,000, respectively.
Note 6 Profit Sharing Plan
The Company instituted the NPC International, Inc. Profit Sharing Plan on
July 1, 1992. To qualify, employees must generally have two years of
service, attain the age of 21 and be employed on the last day of the plan
year. The Company's contribution to the plan is discretionary, based upon
the earnings of each operating division. The Company contributed $610,594,
$540,334, and $517,000, for calendar years 1996, 1995, and 1994
respectively.
Note 7 Commitments
The Company leases certain restaurant equipment and buildings under
operating leases. Rent expense for fiscal 1997, 1996, and 1995 was
$11,008,000, $11,849,000, and $11,410,000, respectively, including
additional rentals of approximately $1,308,000 in 1997, $1,453,000 in 1996,
and $1,030,000 in 1995. The additional rentals are based upon a percentage
of sales in excess of a base amount as specified in the lease. The majority
of the Company's leases contain renewal options for 5 to 10 years. The
remaining leases may be renewed upon negotiations.
Minimum lease payments for the next five years at March 25, 1997, consisted
of:
(Dollars in thousands)
Fiscal Year
1998 $9,533
1999 8,205
2000 7,010
2001 6,032
2002 4,928
Thereafter 24,635
Total minimum lease commitments $60,343
The Company leased two properties from affiliates during fiscal 1997 and
three properties during fiscal 1996 and 1995 at rental rates believed to be
comparable to terms the Company could obtain from unrelated lessors. Rental
expense under these leases for fiscal years 1997, 1996, and 1995 was
$42,000, $69,000, and $106,000, respectively. The Company purchased real
estate from an officer of the Company or his affiliate in the amount of
$800,000 in both fiscal 1996 and fiscal 1995. The value of the purchased
real estate was determined by an independent certified appraiser or Company
personnel using recognized valuation techniques. All such related party
transactions were approved by the Company's Board of Directors.
Additionally, the Company leased a corporate aircraft from an officer
during fiscal 1995. Management believes the lease was at least as favorable
as could be obtained from unrelated parties. Rental expense incurred under
this lease amounted to $194,000 in fiscal 1995.
For purposes of administering its self-insurance program, the Company has
issued three standby letters of credit. One letter of credit for
$7,100,000, expiring July 1, 1997, benefits the insurance company which
administers the Company's primary workers compensation program. Two
additional letters of credit for $100,000 each, benefit another insurance
company and state workers compensation programs and expire October 2, 1997
and June 23, 1997. All claims are routinely paid in the normal course of
business and the Company does not anticipate that such instruments will be
funded.
Note 8 Asset Exchange Agreement
On August 3, 1994, the Company completed an asset exchange agreement with
Pizza Hut, Inc. (PHI), which extended the Company's Pizza Hut franchise
rights through the year 2010. The agreement involved the concurrent
acquisition of 19 Pizza Hut restaurants from another franchisee, and the
exchange of 95 of the Company's Pizza Hut restaurants and delivery
kitchens, including 11 obtained in the concurrent acquisition, for 62 Pizza
Huts operated by PHI. Book basis in the exchange properties and additional
net cash payments made by the Company of $6,630,000 to consummate the
transaction have been allocated to the new franchise rights and stores
acquired in the exchange. Part of this agreement included the exchange of
$6,878,000 in fixed assets, $2,395,000 in unamortized franchised rights and
$675,000 in other intangible assets, in return for franchise rights valued
at $9,948,000. No gain or loss was recorded on the transaction. Under the
terms of the new franchise agreements, the Company's royalty payments for
all units owned at that time increased to four percent of gross sales, as
defined, in July 1996.
Note 9 Impairment and Loss Provision for Underperforming Assets
In February 1995 the Company recorded a pre-tax charge of $35,000,000
associated with the closure of 77 Skipper's units. Significant components
of the charge included the impairment of $13,336,000 of goodwill,
$9,910,000 related to the loss on disposition of real-estate, $8,659,000
estimated present value of obligations related to leased property, and
$3,095,000 in other miscellaneous costs. In fiscal 1995, $14,203,000 had
been charged against the accrual, and in fiscal 1996, $8,659,000 was
charged against the liability, the balance of which was considered in
determining the loss on the disposition of Skipper's, Inc.
Effective March 25, 1996 the Company sold Skipper's Inc. and recorded a pre-
tax charge of $20,000,000 related to the transaction. The asset sale
agreement was signed April 24, 1996 and closed May 14, 1996. In conjunction
with the sale, the Company retained certain assets and liabilities,
primarily related to the 77 units closed in February 1995. The retained
assets were recorded at fair value in accordance with SFAS No. 121 and are
reflected in assets held for sale. The retained liabilities are reflected
as historically presented, primarily in the closure reserve. Proceeds from
the sale were reflected in accounts receivable at March 26, 1996, and were
received at closing.
In fiscal 1996, Skipper's generated $44,910,000 of revenue and a loss from
restaurant operations, exclusive of the $20,000,000 impairment and loss
provision, of $196,000. Revenue for fiscal 1995 was $69,456,000, and the
loss from restaurant operations, exclusive of the $35,000,000 impairment
and loss provision, was $2,771,000. Results for fiscal 1995 include the
operations of the 77 stores closed in February 1995, which were revenue of
$19,647,000 and a loss from restaurant operations of $3,845,000.
Additionally, the Company recorded a pre-tax provision of $3,500,000 in
fiscal 1996 related to the disposition of six underperforming Tony Roma's
units and the relocation of two others. The assets to be disposed of
consist of buildings, leasehold improvements, and furniture and equipment,
which had a carrying value of approximately $2,800,000. The six units to be
disposed of generated sales of approximately $7,600,000 and losses from
restaurant operations of approximately $340,000 in fiscal 1996.
Note 10 Acquisitions
During fiscal 1997 the Company completed two significant Asset Purchase
Agreements. The first acquisition consisted of 31 units acquired from R&W
Pizza Huts of North Carolina, Inc., and was completed on October 31, 1996.
The purchase price, funded through the Company's revolving credit facility
was $27.5 million, which has been allocated between facilities and
equipment and franchise rights.
Additionally, the Company entered into an Asset Purchase Agreement with
Pizza Hut, Inc. (PHI). The transaction closed in two distinct phases. Phase
I consisted of 60 units with a purchase price of $27.3 million and closed
on March 6, 1997. Phase II consisted of 62 units and the operation of four
others, with a purchase price of $28.1 million and closed on March 27,
1997, subsequent to the Company's fiscal year-end. Both phases of this
acquisition were funded through the Company's revolving credit facility,
and the purchase price was allocated between facilities and equipment and
franchise rights. The results of operations of all acquired units are
included in the Company's financial statements from the closing date of
each transaction forward.
Under the agreement with PHI, as amended, the Company may acquire for $1.1
million the assets of four units, upon final resolution of certain
litigation to the satisfaction of the Company. The Company will record the
related assets at the time any payment is made.
Pro Forma Results (unaudited)
(Dollars in thousands except March 25, March 26,
per share data) 1997 1996
As reported:
Total revenues $295,285 $324,986
Net income 17,881 2,143
Net income per share .71 .09
Pro forma results for:
Fiscal 1997 transactions (1)
Total revenues 343,104 384,266
Pro forma net income 17,200 2,322
Pro forma net income per share .69 .09
(1) Includes R&W and Phase I of PHI transaction.
Subsequent to year-end the Company acquired 74 Pizza Hut units and the
operations of eight others from franchisee Jamie B. Coulter for $47
million. The Company will manage another 18 units and expects to acquire
them for $10 million, subject to the resolution of certain contingencies.
During the term of the management agreement, the Company will record the
results of these operations, as if owned, net of a management fee to be
paid to seller.
Additionally, the Company has signed a letter of intent with PHI to acquire
52 units in a transaction scheduled to close in June 1997 for a purchase
price of $32.25 million. These transactions will be funded through the
issuance of long-term debt and additional borrowings through the revolving
credit facility. See Note 3 for further information on the related funding.
The table at left presents unaudited pro forma results for fiscal 1997 and
fiscal 1996 assuming all units had been acquired as of the beginning of the
periods presented. For both years presented, the unaudited, pro forma
results reflect certain adjustments, including interest expense,
depreciation of facilities and equipment, and amortization of franchise
rights.
The unaudited pro forma results shown at left are not necessarily
indicative of the consolidated results that would have occurred had the
acquisitions taken place at the beginning of the respective periods, nor
are they necessarily indicative of results that may occur in the future.
Note 11 Fu11 Quarterly Results (unaudited)
(Dollars in First Second Third Fourth Annual
thousands except Fiscal Fiscal Fiscal Fiscal Fiscal
per share data) Quarter Quarter Quarter Quarter Total
Year Ended
March 25, 1997
Revenue $ 72,926 $ 69,070 $74,223 $ 79,066 $295,285
Income from
restaurant
operations 16,265 13,044 13,375 15,374 58,058
Net Income 5,522 3,946 3,678 4,665 17,811
Earnings per share .22 .16 .15 .19 .71
Year Ended
March 26, 1996
Revenue $ 84,019 $ 79,598 $77,815 $ 83,554 $324,986
Income from
restaurant
operations 15,325 13,721 14,706 16,684 60,436
Net Income (loss) 4,125 3,637 3,912 (9,531) 2,143
Earnings (loss)
per share .17 .15 .16 (.38) .09
Report of Management
The management of NPC International, Inc. has prepared the consolidated
financial statements and related financial information included in this
Annual Report. Management has the primary responsibility for the integrity
of the consolidated financial statements and other financial information.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied in all
material respects and reflect estimates and judgments by management where
necessary. Financial information included throughout this Annual Report is
consistent with the consolidated financial statements.
Management of the Company has established a system of internal accounting
controls that provides reasonable assurance that assets are properly
safeguarded and accounted for and that transactions are executed in
accordance with management's authorization.
The consolidated financial statements have been audited by our independent
auditors, Ernst & Young LLP, whose unqualified report is presented herein.
Their opinion is based upon procedures performed in accordance with
generally accepted auditing standards, including tests of the accounting
records, obtaining an understanding of the system of internal accounting
controls and such other tests as deemed necessary in the circumstances to
provide them reasonable assurance that the consolidated financial
statements are fairly presented. The Audit Committee of the Board of
Directors, consisting solely of outside directors, meets with the
independent auditors at least twice per year to discuss the scope and major
findings of the audit. The independent auditors have access to the Audit
Committee at any time.
O. Gene Bicknell
Chairman of the Board and
Chief Executive Officer
James K. Schwartz
President and
Chief Operating Officer
Troy D. Cook
Vice President Finance and
Chief Financial Officer
Report of Independent
Auditors
The Board of Directors and Stockholders
NPC International, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of NPC
International, Inc. and Subsidiaries (the Company) as of March 25, 1997 and
March 26, 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three fiscal years in
the period ended March 25, 1997. 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 consolidated financial position of NPC
International, Inc. and Subsidiaries at March 25, 1997, and March 26, 1996,
and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended March 25, 1997, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in the fiscal year
ended March 26, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of."
Ernst & Young LLP
Kansas City, Missouri
April 29, 1997
STOCKHOLDER DATA
Registrar and Transfer Agent
American Stock Transfer & Trust Company
40 Wall Street, New York, New York 10005
Inquiries regarding stock transfers, lost certificates or address changes
should be directed to the Stock Transfer Department of American Stock
Transfer at the above address.
Stock Information - NPC International, Inc.'s common shares are traded on
the NASDAQ Stock Market under the symbol "NPCI". Effective August 8, 1995,
the Company combined its Class A common stock and Class B common stock into
a new, single class of common stock.
For the calendar periods indicated, the following table sets forth the
range of high and low closing sale prices.
Class A Class B
Calendar Period Common Stock Common Stock
High Low High Low
1995
First Quarter 61/2 5 55/8 43/4
Second Quarter 67/8 5 61/2 43/4
Common Stock
Third Quarter 73/8 61/8 - -
Fourth Quarter 81/4 63/16 - -
1996
First Quarter 9 67/8 - -
Second Quarter 97/8 81/2 - -
Third Quarter 101/2 81/4 - -
Fourth Quarter 83/4 77/8 - -
1997
First Quarter 107/8 81/4 - -
NPC International, Inc.'s policy is to retain earnings to fund development
and grow the business. On August 8, 1995, the stockholders approved a
special cash dividend of $0.421875 per Class A share (to stockholders of
record on August 8, 1995) in connection with the concurrent approval of a
stock recapitalization plan. The Company does not contemplate payment of
cash dividends in future periods.
As of May 20, 1997, the approximate number of stockholders was 5,424,
including an estimated number of individual participants in security
position listings.
NPC International, Inc.'s 1997 Form 10-K Annual Report to the Securities
and Exchange Commission is available without charge to stockholders and
beneficial owners of stock upon written request to the Chief Financial
Officer, NPC International, Inc., 720 West 20th Street, Pittsburg, Kansas
66762.
Directors, Corporate Officers and Key Personnel
O. Gene Bicknell
Chairman of the Board
Chief Executive Officer, and Director
James K. Schwartz
President and Chief Operating Officer, and Director
Marty D. Couk
Senior Vice President, Pizza Hut Operations
D. Blayne Vaughn
Vice President, Pizza Hut Operations
L. Bruce Sharp
Vice President, Pizza Hut Operations
Robert B. Page
President, Romacorp, Inc.
Troy D. Cook
Vice President Finance, Chief Financial Officer
Treasurer and Assistant Secretary
David G. Short
Vice President, Legal and Secretary
Frank S. Covvey
Vice President, Information and Communication Systems
James K. Villamaria
Risk and Regulatory Counsel
Alan L. Salts
Corporate Controller and Chief Accounting Officer
Fran D. Jabara
Director, President of Jabara Ventures Group
Robert E. Cressler
Director, Partner in FRAC Enterprises
Mary M. Polfer
Director
William A. Freeman
Director
Auditors
Ernst & Young LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
NPC International, Inc.
720 West 20th Street
Pittsburg, Kansas 66762
Exhibit 21
NPC International, Inc.
List of Subsidiaries
NPC Management, Inc.
NPC Restaurants LP
Seattle Restaurant Equipment Company, Inc.
Roma Dining LP
Romacorp, Inc.
Roma Fort Worth, Inc.
Roma Franchise Corporation
Roma Holdings, Inc.
Roma Huntington Beach, Inc.
Roma Systems, Inc.
NPC International, Inc.
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of NPC International, Inc. of our report dated April 29,
1997 included in the 1997 Annual Report to Stockholders of NPC
International, Inc.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-2233 and Form S-8 No. 33-37354) pertaining
to the NPC International, Inc. 1984 Non-Qualified Stock Option Plan,
As Amended, and the Registration Statement (Form S-8 No. 33-56399)
pertaining to the NPC International, Inc. 1994 Non-Qualified Stock
Option Plan of our report dated April 29, 1997, with respect to the
consolidated financial statements, incorporated herein by reference in
the Annual Report (Form 10-K) of NPC International, Inc.
ERNST & YOUNG LLP
Kansas City, Missouri
June 2, 1997
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