<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of
The Securities Exchange Act of 1934
For Quarter Ended: Commission File Number
April 24, 1996 0-14370
BUFFETS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1462294
(State of incorporation) (I.R.S. Employer Identification No.)
10260 Viking Drive, Suite 100, Eden Prairie, MN 55344
(Address of principal executive offices)
(612) 942-9760
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of May 22, 1996
----- ------------------------------
Common Stock, $.01 par value 31,328,834 shares
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets-
January 3, 1996 and April 24, 1996. . . . . . . . . . . . . 3
Consolidated Statements of Earnings-
Sixteen Weeks ended April 19, 1995
and April 24, 1996. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows-
Sixteen Weeks ended April 19, 1995 and
April 24, 1996. . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements. . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 11
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 3, APRIL 24,
ASSETS 1996 1996
-------- --------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . $ 13,375 $ 13,286
Receivable from landlords. . . . . . . . . . . . . . 2,028 1,634
Inventory. . . . . . . . . . . . . . . . . . . . . . 3,044 2,839
Prepaid rents. . . . . . . . . . . . . . . . . . . . 1,950 582
Other current assets . . . . . . . . . . . . . . . . 1,446 1,135
Refundable income taxes. . . . . . . . . . . . . . . 1,829
Deferred income taxes. . . . . . . . . . . . . . . . 5,723 6,210
-------- --------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . 29,395 25,686
PROPERTY AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . 8,135 8,155
Building . . . . . . . . . . . . . . . . . . . . . . 13,221 14,709
Equipment. . . . . . . . . . . . . . . . . . . . . . 164,371 168,921
Leasehold improvements . . . . . . . . . . . . . . . 122,125 126,417
-------- --------
307,852 318,202
Less accumulated depreciation and amortization . . . 87,225 94,971
-------- --------
220,627 223,231
GOODWILL, net of accumulated amortization of $1,274 and
$1,363, respectively. . . . . . . . . . . . . . . . . 5,365 5,276
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . 520 491
-------- --------
$255,907 $254,684
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . $ 24,375 $ 23,004
Accrued payroll and related benefits . . . . . . . . 12,602 10,830
Accrued rents. . . . . . . . . . . . . . . . . . . . 9,306 8,814
Accrued sales taxes. . . . . . . . . . . . . . . . . 2,463 1,730
Other accrued expenses . . . . . . . . . . . . . . . 8,656 8,394
Income taxes . . . . . . . . . . . . . . . . . . . . 1,151
-------- --------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . 57,402 53,923
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . 14,000 10,000
DEFERRED INCOME. . . . . . . . . . . . . . . . . . . . 598 477
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 11,979 12,501
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 5,000 shares;
none issued and outstanding
Common stock, $.01 par value; authorized 60,000 shares;
issued and outstanding 31,282 and
31,316 shares, respectively. . . . . . . . . . . . 313 313
Additional paid-in capital . . . . . . . . . . . . . 52,728 53,034
Retained earnings. . . . . . . . . . . . . . . . . . 118,887 124,436
-------- --------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . 171,928 177,783
-------- --------
$255,907 $254,684
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
-----------------------
APRIL 19, APRIL 24,
1995 1996
-------- --------
(in thousands, except per share amounts)
<S> <C> <C>
RESTAURANT SALES . . . . . . . . . . . . . . . . . $142,090 $155,935
RESTAURANT COSTS:
Food costs . . . . . . . . . . . . . . . . . . . 49,832 54,573
Labor costs. . . . . . . . . . . . . . . . . . . 40,505 46,033
Direct and occupancy costs . . . . . . . . . . . 32,623 38,307
-------- --------
Total restaurant costs . . . . . . . . . . . . . 122,960 138,913
-------- --------
RESTAURANT PROFITS . . . . . . . . . . . . . . . . 19,130 17,022
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES . . . . . . . . . . . . . 8,214 8,206
-------- --------
10,916 8,816
OTHER INCOME . . . . . . . . . . . . . . . . . . . 66 134
-------- --------
EARNINGS BEFORE INCOME TAXES . . . . . . . . . . . 10,982 8,950
INCOME TAXES . . . . . . . . . . . . . . . . . . . 4,173 3,401
-------- --------
NET EARNINGS . . . . . . . . . . . . . . . . . . . $ 6,809 $ 5,549
-------- --------
-------- --------
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE . . . . . . . . . . . . . $.22 $.18
-------- --------
-------- --------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . . . 31,156 31,556
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED
----------------------
APRIL 19, APRIL 24,
1995 1996
------- -------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $ 6,809 $ 5,549
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 7,173 8,231
Tax benefit from early disposition of common stock . . . 37 32
Deferred income. . . . . . . . . . . . . . . . . . . . . (121)
Deferred income taxes. . . . . . . . . . . . . . . . . . (300) 35
Changes in assets and liabilities:
Inventory. . . . . . . . . . . . . . . . . . . . . . . . (482) 205
Other current assets . . . . . . . . . . . . . . . . . . (440) 1,679
Refundable income taxes. . . . . . . . . . . . . . . . . 1,829
Other assets . . . . . . . . . . . . . . . . . . . . . . 44 (1)
Accounts payable . . . . . . . . . . . . . . . . . . . . (1,440) (1,371)
Accrued payroll and related benefits . . . . . . . . . . 832 (1,772)
Other accrued expenses . . . . . . . . . . . . . . . . . 1,662 (1,487)
Income taxes currently payable . . . . . . . . . . . . . 1,095 1,151
------- -------
Total adjustments. . . . . . . . . . . . . . . . . . . 8,181 8,410
------- -------
Net cash provided by operating activities. . . . . . . 14,990 13,959
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . (21,797) (11,538)
Cash received from landlords . . . . . . . . . . . . . . . 3,535 1,216
------- -------
Net cash used in investing activities. . . . . . . . . (18,262) (10,322)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of employees' stock options . . . . 523 274
Payments of long-term debt . . . . . . . . . . . . . . . . (4,000)
Borrowing under long-term debt . . . . . . . . . . . . . . 5,000
------- -------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . . 5,523 (3,726)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . 2,251 (89)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . 6,822 13,375
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . $ 9,073 $13,286
------- -------
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of capitalized interest of $175 and
$134 in 1995 and 1996, respectively) . . . . . . . . . . . $ 0 $ 21
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 3,341 354
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
the financial position of Buffets, Inc. and subsidiaries as of April 24,
1996 and the results of operations and cash flows for the sixteen weeks
ended April 19, 1995 and April 24, 1996.
2. These statements should be read in conjunction with the Notes to Financial
Statements contained in the Company's Annual Report on Form 10-K for the
fiscal year ended January 3, 1996 and with Management's Discussion and
Analysis of Financial Condition and Results of Operations appearing on
pages 7 through 9 of this quarterly report.
3. On April 30, 1996 the Company increased its unsecured revolving line of
credit to $50 million. The Company is required to pay a quarterly
commitment fee equal to 1/4 of 1% per annum of the unused balance. On
July 1, 1999, providing no default or event of default has occurred and is
continuing, the line of credit is convertible, at the Company's option, to
a three-year term loan, maturing on July 1, 2002.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company operates on a fifty-two or fifty-three week fiscal year, which
ends on the Wednesday nearest December 31. The Company's first quarter consists
of sixteen weeks; all other quarters are comprised of twelve weeks. When a
fifty-three week year occurs, the Company's fourth quarter consists of thirteen
weeks.
RESULTS OF OPERATIONS
SIXTEEN WEEKS ENDED APRIL 24, 1996
RESTAURANT SALES. Restaurant sales of $155.9 million during the first sixteen
weeks of 1996 represented a 9.7% increase over sales of $142.1 million for the
comparable period of 1995, due to sales generated by new restaurants. Sales for
the quarter were negatively impacted largely as the result of the severe winter
weather experienced by much of the nation during the first sixteen weeks of
1996. Eight new restaurants opened and one restaurant (previously reserved for)
closed in the first quarter of 1996, bringing the total number of Company-owned
restaurants to 250 at the end of the quarter, compared to 225 restaurants open
at the end of the comparable 1995 period. Average weekly sales per restaurant
for the first sixteen weeks of 1996 decreased 3.5% to $39,391 from $40,812 in
the comparable period of 1995. The eight new restaurants opened during the
quarter generated average weekly sales of $53,683, well above the Company
average. Comparable sales per restaurant were down 3.4% for the comparable
periods. The Company's price increases have been nominal.
RESTAURANT COSTS. As a percentage of restaurant sales, total restaurant costs
increased to 89.1% for the first sixteen weeks of 1996 from 86.5% for the first
sixteen weeks of 1995. Food costs as a percentage of restaurant sales decreased
slightly to 35.0% from 35.1%. Labor costs increased to 29.5% in 1996 from 28.5%
in 1995 due to increased staffing of hourly employees and increased hourly
rates. The Company anticipates that food and labor costs in the second quarter
of 1996 will be less as a percentage of sales than last year's comparable
quarter. Direct and occupancy costs increased as a percentage of sales to 24.6%
in 1996 from 22.9% in 1995, due to increases in utilities, repair and
maintenance, and various other restaurant costs. Also, comparable sales per
restaurant were down, which increases restaurant fixed costs as a percentage of
sales.
7
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of restaurant sales decreased to 5.2% in
the first sixteen weeks of 1996 from 5.8% in the first sixteen weeks of 1995.
Such expenses in absolute terms were substantially unchanged at $8.2 million
for the first sixteen weeks of 1996 from the comparable period of 1995,
primarily as a result of decreases in training and opening costs due to the
opening of eight new restaurants during the first quarter of 1996 compared to 17
during the first quarter of 1995, offset by an increase in advertising expense.
Advertising costs as a percentage of restaurant sales for the period increased
to .6% in 1996 from .3% in 1995. The Company expects to hold advertising
expenditures to less than 1% of restaurant sales through the remainder of the
current year.
INCOME TAXES. Income taxes were 38% of earnings before taxes for each of the
comparable quarters of 1995 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
On April 30, 1996 the Company increased its unsecured revolving line of
credit to $50 million. The Company is required to pay a quarterly commitment
fee equal to 1/4 of 1% per annum of the unused balance. On July 1, 1999,
providing no default or event of default has occurred and is continuing, the
line of credit is convertible, at the Company's option, to a three-year term
loan, maturing on July 1, 2002. As of April 24, 1996, the Company had
borrowings of $10 million outstanding under this credit line.
The Company continues to require substantial amounts of capital to fund its
growth. The Company currently expects to open approximately 35 to 40 new
restaurants during 1996, with 9 already opened at May 24, 1996. The Company
expects to spend an aggregate of approximately $28 to $40 million during the
remainder of 1996 on its restaurants being opened in 1996, depending on the
level of contributions obtained from landlords for leasehold improvements and
the amount of land purchased for freestanding buildings. The Company
anticipates that, as it further pursues the development of freestanding
locations, the cost per location and related cash requirements will increase
substantially over prior years and these costs will not be offset by landlord
contributions that typically have been associated with strip mall locations.
The capital expenditure required for a freestanding location can be over 100%
greater than for a mall location. The Company estimates that less than 10% of
1996 new locations will be purchased freestanding units built and owned by the
Company. The Company estimates that another 25% of 1996 locations will be
freestanding leased units. Sources of capital for restaurant development
projects are anticipated to
8
<PAGE>
be funds provided by operations, credit received from trade suppliers, landlord
contributions to leasehold improvements and current bank financing. The Company
believes that these sources will be adequate to finance operations and the
additional restaurants included in the Company's restaurant development plans
for at least the remainder of 1996. However, in order to remain prepared for
further significant growth in future years, the Company will continue to
evaluate its financing needs and seek additional funding if appropriate.
ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of," which will be
effective for financial statements for fiscal years beginning after December 15,
1995. The statement requires that such long-lived assets used by the entity be
reviewed for impairment whenever the carrying amount of an asset may not be
recoverable. Adoption of this new standard did not impact the Company's
earnings for the sixteen weeks ended April 24, 1996.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of specified disclosure provisions no
later than fiscal years beginning after December 15, 1995 and adoption of
certain recognition and measurement provisions for nonemployee stock-based
transactions no later than after December 15, 1995. The new standard defines a
fair value method of accounting for stock options and other equity instruments.
Under the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service period,
which is usually the vesting period.
Pursuant to the new standard, companies are also encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-based
transactions. Companies also are permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," but would be required to disclose in a note to
financial statements pro forma net income and earnings per share as if the
company had applied the new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption. The
Company has determined that it will elect not to change to the fair value method
for employee stock based transactions. Adoption of the new standard would have
no effect on the Company's cash flows.
9
<PAGE>
This quarterly report contains forward-looking statements, including
statements regarding future food and labor costs and the number of restaurants
expected to be opened during the remainder of 1996. In addition to the factors
discussed herein, other factors that could cause actual results to differ
materially include adverse weather conditions, the success of the Company's
advertising program, changes in food supply costs and general economic
conditions. In addition, the ability of the Company to open new restaurants
depends on a number of factors, including its ability to find suitable locations
and negotiate acceptable leases and land purchases, its ability to attract and
retain qualified restaurant managers and the availability of capital.
10
<PAGE>
Part II.
Other Information
Item 1. Legal Proceedings
IN RE BUFFETS, INC. SECURITIES LITIGATION, United States District Court for
the District of Minnesota, Master No. 3-94-1447. This action is a consolidation
of four separate lawsuits. The first lawsuit was commenced by ZSA Asset
Allocation Fund and ZSA Equity Fund on or about November 7, 1994. Three other
substantially similar actions were filed shortly thereafter by alleged
shareholders Marc Kushner, Trustee for Service Lamp Corp. Profit Sharing Plan,
Jerrine Fernandes, and John J. Nuttall. By Pretrial Order No. 1, entered in
early January 1995, the District Court ordered that the four lawsuits be
consolidated into the single pending action and that plaintiffs serve and file a
Consolidated Amended Class Action Complaint (the "Complaint"), which was served
on or about January 31, 1995. The Court ordered the dismissal of the Complaint
upon motion by the defendants, but granted plaintiffs leave to replead.
Plaintiffs filed their Second Amended, Consolidated Class Action Complaint (the
"Second Complaint") on December 11, 1995. Defendants moved to dismiss the
Second Complaint. On May 3, 1996, Magistrate Judge John Mason issued his Report
and Recommendation, recommending to the district judge that the Second Complaint
be dismissed, with leave to plaintiffs to replead within 60 days only upon
payment of all defendants' attorneys' fees to date. Plaintiffs have filed
objections to this Report and Recommendation and the matter currently is before
the District Court, Judge Michael J. Davis, for decision.
The Second Complaint is against the Company and several of its officers and
directors. In the Second Complaint, plaintiffs seek to represent a putative
class consisting of all persons and entities (excluding defendants and certain
others) who purchased shares of the Company's Common Stock during the period
commencing October 26, 1993 and ending October 25, 1994 (the "Class Period").
The Second Complaint alleges that the defendants made misrepresentations and
omissions of material fact during the Class Period with respect to the Company's
operations and restaurant development activities, as a result of which the price
of the Company's stock allegedly was artificially inflated during the Class
Period. The Second Complaint further alleges that certain defendants made sales
of Common Stock of the Company during the Class Period while in possession of
material undisclosed information about the Company's operations and restaurant
development activities. The Second Complaint alleges that the defendants'
conduct violated the Securities Exchange Act of 1934 and seeks compensatory
damages in an unspecified amount, prejudgment interest, and an award of
attorneys' fees, costs and expenses.
11
<PAGE>
Management of the Company believes that the action is without merit and intends
to defend it vigorously. Although the outcome of this proceeding cannot be
predicted with certainty, the Company's management believes that while the
outcome may have a material effect on earnings in a particular period, the
outcome should not have a material effect on the financial condition of the
Company.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8-K
10(l) Second Amended and Restated Credit Agreement dated April 30,
1996 between the Company and First Bank National Association
(certain exhibits and schedules omitted, but will be filed
at request of the Commission)
27 Financial Data Schedule
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUFFETS, INC.
(Registrant)
Date: May 31, 1996
/s/ Roe H. Hatlen
---------------------------
Roe H. Hatlen
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
/s/ Clark C. Grant
---------------------------
Clark C. Grant
Executive Vice President of
Finance and Administration
and Treasurer
(Principal Financial
Officer)
13
<PAGE>
EXHIBIT INDEX
Exhibits Page
-------- ----
10(l) Second Amended and Restated Credit Agreement
dated April 30, 1996 between the Company and
First Bank National Association . . . . . . . . . . Filed Electronically
27 Financial Data Schedule . . . . . . . . . . . . . . Filed Electronically
- -------------------
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
BY AND BETWEEN
FIRST BANK NATIONAL ASSOCIATION
AND
BUFFETS, INC.
DATED AS OF APRIL 30, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Accounting Terms and Calculations . . . . . . . . . . . . 14
Section 1.3 Computation of Time Periods. . . . . . . . . . . . . . . . 14
Section 1.4 Other Definitional Terms . . . . . . . . . . . . . . . . . 14
ARTICLE II
TERMS OF THE CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.1 Lending Commitments . . . . . . . . . . . . . . . . . . . 15
Section 2.2 Procedure for Loans . . . . . . . . . . . . . . . . . . . 15
Section 2.3 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.4 Applicable Interest Rates . . . . . . . . . . . . . . . . 18
Section 2.5 Interest Rates, Interest Payments and Default Interest. . 19
Section 2.6 Repayment . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.7 Optional Prepayments . . . . . . . . . . . . . . . . . . 21
Section 2.8 Letters of Credit . . . . . . . . . . . . . . . . . . . . 21
Section 2.9 Procedures for Letters of Credit . . . . . . . . . . . . 21
Section 2.10 Terms of Letters of Credit . . . . . . . . . . . . . . . 22
Section 2.11 Agreement to Repay Letter of Credit Drawings . . . . . . 22
Section 2.12 Obligations Absolute . . . . . . . . . . . . . . . . . . 22
Section 2.13 Increased Cost for Letters of Credit . . . . . . . . . . 24
Section 2.14 Optional Reduction of Commitment Amounts or Termination
of Commitments . . . . . . . . . . . . . . . . . . . . . 24
Section 2.15 Loans to Cover Unpaid Drawings . . . . . . . . . . . . . 24
Section 2.16 Commitment Fee . . . . . . . . . . . . . . . . . . . . . 25
Section 2.17 Letter of Credit Fees . . . . . . . . . . . . . . . . . 25
Section 2.18 Computation . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.19 Payments . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.20 Use of Loan Proceeds . . . . . . . . . . . . . . . . . . 26
Section 2.21 Interest Rate Not Ascertainable, Etc. . . . . . . . . . 26
Section 2.22 Increased Cost . . . . . . . . . . . . . . . . . . . . . 27
Section 2.23 Illegality . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.24 Capital Adequacy . . . . . . . . . . . . . . . . . . . . 28
Section 2.25 Funding Losses; Fixed Rate Advances . . . . . . . . . . 29
Section 2.26 Discretion of Banks as to Manner of Funding . . . . . . 29
Section 2.27 Withholding Taxes . . . . . . . . . . . . . . . . . . . . 29
-i-
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.1 Conditions of Initial Transaction . . . . . . . . . . . . 31
Section 3.2 Conditions Precedent to all Loans and Letters of Credit . 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.1 Organization, Standing, Etc. . . . . . . . . . . . . . . 34
Section 4.2 Authorization and Validity . . . . . . . . . . . . . . . 34
Section 4.3 No Conflict; No Default . . . . . . . . . . . . . . . . . 34
Section 4.4 Government Consent . . . . . . . . . . . . . . . . . . . 35
Section 4.5 Financial Statements and Condition . . . . . . . . . . . 35
Section 4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.7 Environmental, Health and Safety Laws . . . . . . . . . . 36
Section 4.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.9 Federal Reserve Regulations . . . . . . . . . . . . . . . 36
Section 4.10 Title to Property; Leases; Liens; Subordination . . . . . 36
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.12 Trademarks, Patents . . . . . . . . . . . . . . . . . . . 37
Section 4.13 Burdensome Restrictions . . . . . . . . . . . . . . . . . 37
Section 4.14 Force Majeure . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.15 Investment Company Act . . . . . . . . . . . . . . . . . 37
Section 4.16 Public Utility Holding Company Act . . . . . . . . . . . 38
Section 4.17 Retirement Benefits . . . . . . . . . . . . . . . . . . . 38
Section 4.18 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.19 Full Disclosure . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE V
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.1 Financial Statements and Reports . . . . . . . . . . . . 38
Section 5.2 Corporate Existence . . . . . . . . . . . . . . . . . . . 40
Section 5.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.4 Payment of Taxes and Claims . . . . . . . . . . . . . . . 41
Section 5.5 Inspection. Upon reasonable notice, . . . . . . . . . . 41
Section 5.6 Maintenance of Properties . . . . . . . . . . . . . . . . 41
Section 5.7 Books and Records . . . . . . . . . . . . . . . . . . . . 41
Section 5.8 Compliance . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.9 Notice of Litigation . . . . . . . . . . . . . . . . . . 42
Section 5.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-ii-
<PAGE>
Section 5.11 Environmental Matters; Reporting . . . . . . . . . . . . 42
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.2 Disposition of Assets . . . . . . . . . . . . . . . . . . 43
Section 6.3 Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.4 Change in Nature of Business . . . . . . . . . . . . . . 44
Section 6.5 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.6 Negative Pledges; Subsidiary Restrictions . . . . . . . . 44
Section 6.7 Restricted Payments . . . . . . . . . . . . . . . . . . . 44
Section 6.8 Transactions with Affiliates . . . . . . . . . . . . . . 45
Section 6.9 Accounting Changes . . . . . . . . . . . . . . . . . . . 45
Section 6.10 Capital Expenditures . . . . . . . . . . . . . . . . . . 45
Section 6.11 Subordinated Debt . . . . . . . . . . . . . . . . . . . . 45
Section 6.12 Investments . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.13 Indebtedness . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.14 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.15 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . 47
Section 6.16 Minimum Tangible Net Worth . . . . . . . . . . . . . . . 48
Section 6.17 Minimum Fixed Charge Coverage Ratio . . . . . . . . . . . 48
Section 6.18 Loss Limitation . . . . . . . . . . . . . . . . . . . . . 48
Section 6.19 Subsidiary Indebtedness, Liens and Operating Leases . . . 48
Section 6.20 Notification Regarding C.E.O . . . . . . . . . . . . . . 48
Section 6.21 Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . . 49
Section 7.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.3 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VIII
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.1 Appointment and Authorization . . . . . . . . . . . . . . 52
Section 8.2 Note Holders . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.3 Consultation With Counsel . . . . . . . . . . . . . . . . 52
Section 8.4 Loan Documents . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.5 First Bank and Affiliates . . . . . . . . . . . . . . . . 52
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<PAGE>
Section 8.6 Action by Agent . . . . . . . . . . . . . . . . . . . . . 52
Section 8.7 Credit Analysis . . . . . . . . . . . . . . . . . . . . . 53
Section 8.8 Notices of Event of Default, Etc. . . . . . . . . . . . . 53
Section 8.9 Indemnification . . . . . . . . . . . . . . . . . . . . . 53
Section 8.10 Payments and Collections . . . . . . . . . . . . . . . . 53
Section 8.11 Sharing of Payments . . . . . . . . . . . . . . . . . . . 54
Section 8.12 Advice to Banks . . . . . . . . . . . . . . . . . . . . . 54
Section 8.13 Resignation . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.1 Modifications . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.3 Waivers, etc. . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.6 Successors and Assigns; Disposition of Loans;
Transferees . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.7 Confidentiality of Information . . . . . . . . . . . . . 57
Section 9.8 Governing Law and Construction . . . . . . . . . . . . . 58
Section 9.9 Consent to Jurisdiction . . . . . . . . . . . . . . . . . 58
Section 9.10 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . 58
Section 9.11 Survival of Agreement . . . . . . . . . . . . . . . . . . 59
Section 9.12 Indemnification . . . . . . . . . . . . . . . . . . . . . 59
Section 9.13 Captions . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . 60
Section 9.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.16 Borrower Acknowledgements . . . . . . . . . . . . . . . . 60
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<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April
30, 1996, is by and between BUFFETS, INC., a Minnesota corporation (the
"Borrower"), the banks from time to time party hereto (individually, a "Bank"
and, collectively, the "Banks") and FIRST BANK NATIONAL ASSOCIATION, a national
banking association, one of the Banks, as agent for the Banks (in such capacity,
the "Agent").
WHEREAS, the Borrower and First Bank National Association (in its
individual capacity, "First Bank") are the parties to that certain Amended and
Restated Credit Agreement dated as of April 16, 1993, as amended by that certain
Amendment No. 1 to Amended and Restated Credit Agreement dated as of June 29,
1993, that certain Amendment No. 2 to Amended and Restated Credit Agreement
dated as of March 24, 1994, that certain Amendment No. 3 to Amended and Restated
Credit Agreement dated April 8, 1994, that certain Consent and Amendment No. 4
to Amended and Restated Credit Agreement dated as of June 30, 1994 and that
certain Amendment No. 5 to Amended and Restated Credit Agreement dated as of
August 4, 1995 (as so amended, the "Existing Credit Agreement"); and
WHEREAS, the Borrower and First Bank desire to further amend and
restate the Existing Credit Agreement in its entirety, and to provide for
additional Banks to become party hereto.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 DEFINED TERMS. As used in this Agreement the following
terms shall have the following respective meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined, as
the context may require):
"ADJUSTED CD RATE": With respect to each Interest Period applicable
to a CD Rate Advance, the sum (rounded upward, if necessary, to the next one
hundredth of one percent) of (a) the rate per annum obtained by dividing (i) the
CD Rate as of the first day of the Interest Period, by (ii) 1.00 minus the
Domestic Reserve Percentage, plus (b) the annual rate most recently estimated by
the Agent as the then current net annual assessment rate payable by the Agent to
the Federal Deposit Insurance Corporation (or any successor) for insuring time
deposits made in Dollars at the Agent's domestic
<PAGE>
offices, plus (c) the cost (converted to an equivalent rate per annum) of
customary brokerage fees incurred by the Agent in obtaining funds by the sale of
its negotiable certificates of deposit.
"ADJUSTED EURODOLLAR RATE": With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the rate (rounded upward, if necessary,
to the next one hundredth of one percent) determined by dividing the Eurodollar
Rate for such Interest Period by 1.00 minus the Eurodollar Reserve Percentage.
"ADVANCE": Any portion of the outstanding Revolving Loans or Term
Loan by a Bank as to which the Borrower elected one of the available interest
rate options and, if applicable, an Interest Period. An Advance may be a CD
Rate Advance, a Eurodollar Rate Advance, a Reference Rate Advance or, with
respect to the Term Loans if elected as provided in Section 2.2(b), a Fixed Rate
Term Loan.
"AFFILIATE": When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent or more of any class of voting stock
of the Person referred to (or if the Person referred to is not a corporation,
five percent or more of the equity interest), (c) each Person, five percent of
more of the voting stock (or if such Person is not a corporation, five percent
or more of the equity interest) of which is beneficially owned or held, directly
or indirectly, by the Person referred to, and (d) each of such Person's
officers, directors, joint venturers and partners. The term control (including
the terms "controlled by" and "under common control with") means the possession,
directly, of the power to direct or cause the direction of the management and
policies of the Person in question.
"AGGREGATE COMMITMENT AMOUNTS": As of any date, the sum of the
Commitment Amounts of all the Banks.
"APPLICABLE LENDING OFFICE": For each Bank and for each type of
Advance, the office of such Bank identified pursuant to Section 9.4 or such
other domestic or foreign office of such Bank (or of an Affiliate of such Bank)
as such Bank may specify from time to time to the Agent and the Borrower as the
office by which its Advances of such type are to be made and maintained.
"APPLICABLE MARGIN": With respect to each Reference Rate Advance, the
Applicable Margin set forth in the table below as in effect from time to time,
and with respect to each CD Rate Advance or Eurodollar Rate Advance, the
Applicable Margin set forth in the table below as in effect on the first day of
each Interest Period for such CD Rate Advance or Eurodollar Rate Advance for
such Interest Period, in each case
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<PAGE>
determined based on the Cash Flow Leverag-e Ratio calculated as of the end of
the most recent Quarterly Period of the Borrower for which the Borrower has
furnished the financial statements and reports required under Sections 5.1(c)
(adjustments to the Applicable Margin to become effective on the first day of
the first month after the date the Borrower is required to deliver its
financial statements for such quarterly period under Section 5.1(c)).
<TABLE>
<CAPTION>
Revolving Loans Term Loan
--------------- ---------
Cash Flow Reference
Leverage Ratio Rate Reference
Eurodollar CD Rate Eurodollar Rate CD Rate
(in each case, to 1.00) Loans Loans Rate Loans Loans Loans Rate Loans
- ----------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Greater than 3.99 0.125% 1.75% 2.00% 0.625% 2.25% 2.50%
3.00 to 3.99 0% 1.50% 1.75% 0.50% 2.00% 2.25%
2.00 to 2.99 0% 1.25% 1.50% 0.50% 1.75% 2.00%
Less than 2.00 0% 1.00% 1.25% 0.50% 1.50% 1.75%
</TABLE>
Notwithstanding the foregoing, if the Borrower has not furnished the financial
statements and reports required under Section 5.1(c) for any Quarterly Period by
the first day of the first month after such financial statements and reports
were required to be delivered, the Applicable Margin shall be calculated as if
the Leverage Ratio as of the end of such Quarterly Period was greater than 3.99
to 1.00 for the period from the first day of the first month after such
financial statements and reports were required to be delivered until the first
day of the month following the month in which such financial statements and
reports are delivered.
"ASSUMED INTEREST PERIOD": As defined in Section 2.4(b).
"ASSUMED INTEREST RATE": As defined in Section 2.4(b).
"BOARD": The Board of Governors of the Federal Reserve System or any
successor thereto.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of Minnesota) on which national banks are permitted to be
open in Minneapolis, Minnesota.
"CAPITAL EXPENDITURES": For any period, the sum of all amounts that
would, in accordance with GAAP, be included as additions to property, plant and
equipment on a consolidated statement of cash flows for the Borrower during such
period, in respect of (a) the acquisition, construction, improvement,
replacement or betterment of land, buildings, machinery, equipment or of any
other fixed assets or leaseholds, (b) to the extent related to and not included
in (a) above, materials, contract labor (excluding expenditures properly
chargeable to repairs or maintenance in
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<PAGE>
accordance with GAAP), and (c) other capital expenditures and other uses
recorded as capital expenditures or similar terms having substantially the same
effect (including expenditures for nonrecurrent tangible assets such as
software).
"CAPITALIZED LEASE": A lease of (or other agreement conveying the
right to use) real or personal property with respect to which at least a portion
of the rent or other amounts thereon constitute Capitalized Lease Obligations.
"CAPITALIZED LEASE OBLIGATIONS": As to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board), and, for purposes
of this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP (including such Statement No.
13).
"CAPITALIZED RESTAURANT LEASE OBLIGATIONS": Capitalized Lease
Obligations of the Borrower or of a Subsidiary of the Borrower arising out of
leases of restaurant facilities.
"CASH FLOW LEVERAGE RATIO": As of the end of any Quarterly Period,
the ratio of (a) the sum of (i) Total Interest-bearing Indebtedness on such date
and (ii) eight times lease payments for restaurant and office facilities
pursuant to leases that are not Capitalized Leases made or required to be made
by the Borrower and its Consolidated Subsidiaries during the four Quarterly
Periods ended on such date, to (b) the sum of (i) EBITDA and (ii) lease payments
for restaurant and office facilities pursuant to leases that are not Capitalized
Leases, in each case for the four Quarterly Periods ended on such date.
"CD RATE": With respect to any CD Rate Advance for any Interest
Period applicable thereto, the rate of interest determined by the Agent for the
relevant Interest Period to be the average (rounded upward, if necessary, to the
nearest 1/100th of 1%) of the rates quoted to the Agent at approximately 8:00
a.m., Minneapolis time (or as soon thereafter as practicable), or at the option
of the Bank at approximately the time of the request for a CD Rate Advance if
such request is made later than 8:00 a.m., Minneapolis time, in each case on the
first day of the applicable Interest Period by certificate of deposit dealers
selected by the Agent, in its sole discretion, for the purchase from the Agent,
at face value, of certificates of deposit issued by the Agent in an amount and
maturity comparable to the amount and maturity of the requested CD Rate Advance,
or at the option of the Agent determined for such amount and maturity based on
published composite quotations of certificate of deposit rates selected by the
Agent.
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<PAGE>
"CD RATE ADVANCE": An Advance with respect to which the interest rate
is determined by reference to the Adjusted CD Rate.
"CLOSING DATE": The Business Day on which all the conditions
precedent to effectiveness of this Agreement, as set forth in Article III, have
been, or, on such Closing Date, will be, satisfied.
"CODE": The Internal Revenue Code of 1986, as amended.
"COMMITMENT": With respect to a Bank, the agreement of such Bank to
make Revolving Loans to the Borrower in an aggregate principal amount
outstanding at any time not to exceed such Bank's Commitment Amount, and on the
Transformation Date to Convert the outstanding principal balance thereof to a
Term Loan, upon the terms and subject to the conditions and limitations of this
Agreement.
"COMMITMENT AMOUNT": With respect to a Bank, initially the amount set
opposite such Bank's name on Schedule 1.1(a) as its Commitment Amount, as the
same may be reduced from time to time pursuant to Section 2.14.
"COMMITMENT FEES": As defined in Section 2.16.
"CONTINGENT OBLIGATION": With respect to any Person at the time of
any determination, without duplication, any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or otherwise; provided, that the term "Contingent Obligation" shall not
include endorsements for collection or deposit, in each case in the ordinary
course of business.
"DAMAGES CLAIM": Any suit, proceeding or action by a non-governmental
Person against the Borrower, any Subsidiary of the Borrower or any of their
property in which the only relief requested is damages.
"DEFAULT": Any event which, with the giving of notice (whether such
notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.
"DOMESTIC RESERVE PERCENTAGE": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board for determining the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves) for a member bank of
the Federal Reserve System, with deposits comparable in amount to those held by
the Agent, in respect of new non-personal time deposits in dollars having a
maturity comparable to the related
-5-
<PAGE>
Interest Period and in an amount of $100,000 or more. The rate of interest
applicable to any outstanding CD Rate Advance shall be adjusted automatically on
and as of the effective date of any change in the Domestic Reserve Percentage.
"EBITDA": For any period of determination, the consolidated net
income of the Borrower and its Subsidiaries before deductions for income taxes,
interest expense, depreciation and amortization, all as determined in accordance
with GAAP.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"EURODOLLAR BUSINESS DAY": A Business Day which is also a day for
trading by and between banks in United States dollar deposits in the interbank
Eurodollar market and a day on which banks are open for business in New York
City.
"EURODOLLAR RATE": With respect to each Interest Period applicable to
a Eurodollar Rate Advance, the interest rate per annum (rounded upward, if
necessary, to the next one-sixteenth of one percent) at which United States
dollar deposits are offered to the Agent in the interbank Eurodollar market two
Eurodollar Business Days prior to the first day of such Interest Period for
delivery in Immediately Available Funds on the first day of such Interest Period
and in an amount approximately equal to the Advance by the Agent to which such
Interest Period is to apply as determined by the Agent and for a maturity
comparable to the Interest Period; provided, that in lieu of determining the
rate in the foregoing manner, the Agent may substitute the per annum Eurodollar
interest rate (LIBOR) for United States dollars displayed on the Reuters Screen
LIBO page two Eurodollar Business Days prior to the first day of such Interest
Period. "Reuters Screen LIBO page" means the display designated as page "LIBO"
on the Reuters Monitor Money Rate Screen (or such other page as may replace the
LIBO page on such service) for the purpose of displaying Reuters interbank
offered rates of major banks for United States dollar deposits.
"EURODOLLAR RATE ADVANCE": An Advance with respect to which the
interest rate is determined by reference to the Adjusted Eurodollar Rate.
"EURODOLLAR RESERVE PERCENTAGE": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board for determining the maximum reserve requirement (including any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System, with deposits
-6-
<PAGE>
comparable in amount to those held by the Agent, in respect of "Eurocurrency
Liabilities" as such term is defined in Regulation D of the Board. The rate of
interest applicable to any outstanding Eurodollar Rate Advances shall be
adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"EVENT OF DEFAULT": Any event described in Section 7.1.
"FIXED CHARGE COVERAGE RATIO": For any period of determination, the
ratio that (a) the sum of EBITDA for such period, PLUS lease payments for
restaurant and office facilities pursuant to leases that are not Capitalized
Leases made or required to be made during such period, MINUS the income taxes
actually paid during such period, MINUS the aggregate amount of Restricted
Payments made by the Borrower during such period, MINUS twenty-five percent
(25%) of depreciation expense deducted in determining the consolidated net
income for such period, bears to (b) the sum of interest expense during such
period, PLUS lease payments for restaurant and office facilities pursuant to
leases that are not Capitalized Leases made or required to be made during such
period, PLUS scheduled payments and mandatory prepayments on Indebtedness, in
all cases determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP, PLUS twenty percent (20%) of the
outstanding principal balance of the Note on the last day of such period.
"FIXED RATE ADVANCE": A CD Rate Advance, a Eurodollar Rate Advance or
a Fixed Rate Term Loan.
"FIXED RATE TERM LOAN": An Advance consisting of an entire Term Loan
with respect to which the interest rate is the Fixed Term Loan Interest Rate.
"FIXED TERM LOAN INTEREST RATE": As defined in Section 2.4(b).
"GAAP": Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of 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 approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
"GUARANTORS": OCB Purchasing Co., OCB Restaurant Co., OCB Property
Co., OCB Realty Co., Evergreen Buffets, Inc. and any other Subsidiary of the
Borrower that hereafter executes and delivers a guaranty to the Banks.
"GUARANTY": A Guaranty in the form of Exhibit A hereto.
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<PAGE>
"HOLDING ACCOUNT": A deposit account belonging to the Agent for the
benefit of the Banks into which the Borrower may be required to make deposits
pursuant to the provisions of this Agreement, such account to be under the sole
dominion and control of the Agent and not subject to withdrawal by the Borrower,
with any amounts therein to be held for application toward payment of any
outstanding Letters of Credit when drawn upon.
"IMMEDIATELY AVAILABLE FUNDS": Funds with good value on the day and
in the city in which payment is received.
"INDEBTEDNESS": With respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise, of
such Person which in accordance with GAAP should be classified upon the balance
sheet of such Person as liabilities, but in any event including: (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services, (f) all obligations of others secured by any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Capitalized Lease Obligations of such
Person, (h) all obligations of such Person in respect of interest rate
protection agreements, (i) all obligations of such Person, actual or contingent,
as an account party in respect of letters of credit or bankers' acceptances, (j)
all obligations of any partnership or joint venture as to which such Person is
or may become personally liable, and (k) all Contingent Obligations of such
Person.
"INTEREST PERIOD": (a) With respect to each Eurodollar Rate Advance,
the period commencing on the date of such Advance or on the last day of the
immediately preceding Interest Period, if any, applicable to an outstanding
Advance and ending seven days or one, two, three, six or, if available from all
of the Banks, four months thereafter, as the Borrower may elect in the
applicable notice of borrowing, continuation or conversion; PROVIDED THAT:
(1) Any Interest Period that would otherwise end on a day which
is not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Eurodollar Business Day;
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<PAGE>
(2) Any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(3) No Interest Period in respect of a Eurodollar Rate Advance
outstanding during the Revolving Loan Period shall end after the date set
forth in clause (a) of the definition of Termination Date, and no Interest
Period in respect of a Eurodollar Rate Advance outstanding during the Term
Loan Period shall end after the date set forth in clause (a) of the
definition of Maturity Date; and
(4) Interest Periods shall be selected so that the installment
payments on the Term Loan can be paid without having to pay a Eurodollar
Rate Advance prior to the last day of the Interest Period applicable
thereto.
(b) With respect to each CD Rate Advance, the period commencing on the
date of such Advance or on the last day of the immediately preceding Interest
Period, if any, applicable to an outstanding Advance and ending 7, 30, 60, 90,
180 or, if available from all of the Banks, 120 or 150 days thereafter, as the
Borrower may elect in the applicable notice of borrowing, continuation or
conversion; PROVIDED THAT:
(1) Any Interest Period that would otherwise end on a day which
is not a Business Day shall be extended to the next succeeding Business
Day; and
(2) No Interest Period in respect of a CD Rate Advance
outstanding during the Revolving Loan Period shall end after the date set
forth in clause (a) of the definition of Termination Date, and no Interest
Period in respect of a CD Rate Advance outstanding during the Term Loan
Period shall end after the date set forth in clause (a) of the definition
of Maturity Date; and
(3) Interest Periods shall be selected so that the installment
payments on the Term Loan can be paid without having to pay a CD Rate
Advance prior to the last day of the Interest Period applicable thereto.
"INVESTMENT": The acquisition, purchase, making or holding of any
stock or other security, any loan, advance, contribution to capital, extension
of credit (except for trade and customer accounts receivable for inventory sold
or services rendered in the ordinary course of business and payable in
accordance with customary trade terms), any acquisitions of real or personal
property (other than real and personal property acquired in the ordinary course
of business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of or any interest in
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another Person or any integral part of any business or the assets comprising
such business or part thereof. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto, without
any adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment.
"LETTER OF CREDIT": An irrevocable letter of credit issued by the
Agent pursuant to this Agreement for the account of the Borrower.
"LETTER OF CREDIT FEE": As defined in Section 2.17.
"LETTER OF CREDIT USAGE": As of any date, the sum of (a) the amount
of all Unpaid Drawings PLUS (b) the amount available to be drawn under all
outstanding Letters of Credit.
"LEVERAGE RATIO": On any date of determination for any Person, the
ratio of (a) the sum of (i) such Person's liabilities PLUS (ii) eight times
lease payments required to be made by such Person pursuant to non-cancelable
leases that are not Capitalized Leases in effect on such date during the first
full fiscal year beginning more than one day after the date of determination,
MINUS (iii) Subordinated Debt, to (b) the sum of (i) such Person's Tangible Net
Worth plus (ii) Subordinated Debt.
"LIEN": With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
Capitalized Lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"LOAN": A Revolving Loan or a Term Loan.
"LOAN DOCUMENTS": This Agreement and the Notes.
"MAJORITY BANKS": (a) At any time at which there are two or fewer
Banks, all of the Banks, and (b) at any time at which there are three or more
Banks, Banks whose Pro Rata Shares (determined under clause (c) of the
definition thereof) aggregate at least sixty-six and two-thirds percent (66
2/3%).
"MATURITY DATE": The earlier of (a) July 1, 2002 and (b) the date on
which the Obligations become due and payable pursuant to Section 7.2 hereof.
"MONTHLY PAYMENT DATE": The first day of each month.
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"MULTIEMPLOYER PLAN": A multiemployer plan, as such term is defined
in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing Date,
within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Borrower or any ERISA Affiliate.
"NOTE": A promissory note of the Borrower in the form of Exhibit B.
"OBLIGATIONS": The Borrower's obligations in respect of the due and
punctual payment of principal and interest on the Notes and Unpaid Drawings when
and as due, whether by acceleration or otherwise and all fees (including
Commitment Fees), expenses, indemnities, reimbursements and other obligations of
the Borrower under this Agreement or any other Loan Document, in all cases
whether now existing or hereafter arising or incurred.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
"PERSON": Any natural person, corporation, partnership, limited
partnership, limited liability company, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or political
subdivision or any other entity, whether acting in an individual, fiduciary or
other capacity.
"PLAN": Each employee benefit plan (whether in existence on the
Closing Date or thereafter instituted), as such term is defined in Section 3 of
ERISA, maintained for the benefit of employees, officers or directors of the
Borrower or of any ERISA Affiliate, other than a Multiemployer Plan.
"PRO RATA SHARE": With respect to each Bank, in each case expressed
as a percentage:
(a) as such term pertains to such Bank's obligation to make
Revolving Loans and to receive Commitment Fees on its Commitment, the
fraction which the amount of its Commitment Amount is to the Aggregate
Commitment Amounts.
(b) as such term pertains to such Bank's right to receive
payment of principal of and interest on its outstanding Loans, the fraction
which the aggregate unpaid principal balance of its Loans is to the
aggregate unpaid principal balance of all of the Loans.
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(c) as such term pertains to such Bank's obligations under
Section 8.9, and for all other purposes, the fraction which such Bank's
Commitment Amount or, if its Commitment has terminated, the unpaid
principal balance of its Loans, is to the Aggregate Commitment Amounts of
all of the Banks or, if the Commitments have terminated, the unpaid
principal balance of all of the Loans.
"PROHIBITED TRANSACTION": The respective meanings assigned to such
term in Section 4975 of the Code and Section 406 of ERISA.
"QUARTERLY PAYMENT DATE": The first Business Day of each February,
May, August and November.
"QUARTERLY PERIOD": The first sixteen weeks, the second and third
twelve weeks and the last twelve or thirteen weeks, as the case may be, of each
fiscal year of the Borrower.
"REAL ESTATE SUBSIDIARY": Any Subsidiary of the Borrower the only
assets of which are ownership or leasehold interests in real property held for
lease or sublease to the Borrower or other Subsidiaries and rights under the
related leases or subleases.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Agent as its "reference rate." The Agent may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate hereunder or under any other Loan Document
which is based on the Reference Rate, such interest rate shall change as and
when the Reference Rate shall change.
"REFERENCE RATE ADVANCE": An Advance with respect to which the
interest rate is determined by reference to the Reference Rate.
"REGULATORY CHANGE": Any change after the Closing Date in federal,
state or foreign laws or regulations or the adoption or making after such date
of any interpretations, directives or requests applying to a class of banks
including any Bank under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"REPORTABLE EVENT": a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such
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event, PROVIDED that a failure to meet the minimum funding standard of Section
412 of the Code and of Section 302 of ERISA shall be a Reportable Event
regardless of the issuance of any waiver in accordance with Section 412(d) of
the Code.
"RESTRICTED PAYMENTS": With respect to the Borrower, collectively,
all dividends or other distributions of any nature (securities other than common
stock of the Borrower, cash, assets or otherwise), and all payments on any class
of equity securities (including warrants, options or rights therefor) issued by
the Borrower, whether such securities are authorized or outstanding on the
Closing Date or at any time thereafter and any redemption or purchase of, or
distribution in respect of, any of the foregoing, whether directly or
indirectly.
"REVOLVING LOAN": As defined in Section 2.1(a).
"REVOLVING LOAN DATE": The date of the making of any Revolving Loans
hereunder.
"REVOLVING LOAN PERIOD" The period from the Closing Date to and
including the day preceding the Transformation Date, and if there is no
Transformation Date, from the Closing Date to and including the date on which
the Note is paid in full and the Commitments have expired or been terminated.
"SUBORDINATED DEBT": Any Indebtedness of the Borrower, now existing
or hereafter created, incurred or arising, which is subordinated in right of
payment to the payment of the Obligations in a manner and to an extent (a) that
Majority Banks have approved in writing prior to the creation of such
Indebtedness, or (b) as to any Indebtedness of the Borrower existing on the date
of this Agreement, that Majority Banks have approved as Subordinated Debt in a
writing delivered by Majority Banks to the Borrower on or prior to the Closing
Date.
"SUBSIDIARY": Any corporation or other entity of which securities or
other ownership interests having ordinary voting power for the election of a
majority of the board of directors or other Persons performing similar functions
are owned by the Borrower either directly or through one or more Subsidiaries.
"TANGIBLE NET WORTH": As of any date of determination for any Person,
the sum of the amounts set forth on the balance sheet of such Person as the sum
of the common stock, preferred stock, additional paid-in capital and retained
earnings (excluding treasury stock), less the book value of all assets that
would be treated as intangibles under GAAP, including all such items as
goodwill, trademarks, trade names, service marks, copyrights, patents, licenses,
unamortized debt discount and
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expenses and the excess of the purchase price of the assets of any business
acquired by such Person over the book value of such assets.
"TERMINATION DATE": The earliest of (a) June 30, 1999, (b) the date
on which the Commitments are terminated pursuant to Section 7.2 hereof or (c)
the date on which the Commitment Amounts are reduced to zero pursuant to Section
2.14 hereof.
"TERM LOAN": As defined in Section 2.2.
"TERM LOAN PERIOD": The period from the Transformation Date to and
including the Maturity Date.
"TOTAL INTEREST-BEARING INDEBTEDNESS": On any date of determination
for any Person, the outstanding amount of all Indebtedness of such Person other
than liabilities not consisting of Indebtedness for borrowed money or the
deferred purchase price of property incurred in the ordinary course of business,
as determined in accordance with GAAP.
"TOTAL OUTSTANDINGS": As of any date of determination, the sum of (a)
the aggregate unpaid principal balance of Loans outstanding on such date, (b)
the Letter of Credit Usage on such date.
"TRANSFORMATION DATE": July 1, 1999.
"UNPAID DRAWING": As defined in Section 2.11.
"UNUSED COMMITMENT": With respect to any Bank as of any date of
determination, the amount by which such Bank's Commitment Amount exceeds such
Bank's Pro Rata Share of the Total Outstandings on such date.
Section 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Agreement,
such computation or determination shall be made as if such change in GAAP had
not occurred unless the Borrower and Majority Banks agree in writing on an
adjustment to such computation or determination to account for such change in
GAAP.
Section 1.3 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless
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otherwise stated the word "from" means "from and including" and the word "to" or
"until" each means "to but excluding".
Section 1.4 OTHER DEFINITIONAL TERMS. The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly
requires, "or" has the inclusive meaning represented by the phrase "and/or".
ARTICLE II
TERMS OF THE CREDIT FACILITIES
PART A -- TERMS OF LENDING
Section 2.1 LENDING COMMITMENTS.
2.1(a) REVOLVING CREDIT. On the Closing Date, each "Loan"
outstanding under the Existing Credit Agreement shall become a Revolving
Loan hereunder, and each "Reference Rate Loan," "Eurodollar Rate Loan" and
"CD Rate Loan" outstanding under the Existing Credit Agreement shall become
a Reference Rate Advance, a Eurodollar Rate Advance or a CD Rate Advance,
respectively, hereunder (and, with respect to Eurodollar Rate Advances and
CD Rate Advances, the "Interest Periods" in effect under the Existing
Credit Agreement shall remain in effect). On the terms and subject to the
conditions hereof, each Bank severally agrees to make a revolving credit
facility available as loans (each, a "Revolving Loan" and, collectively,
the "Revolving Loans") to the Borrower on a revolving basis at any time and
from time to time from the Closing Date to the Termination Date, during
which period the Borrower may borrow, repay and reborrow in accordance with
the provisions hereof, provided, that no Revolving Loan will be made in any
amount which, after giving effect thereto, would cause the Total
Outstandings to exceed the Aggregate Commitment Amounts. Revolving Loans
hereunder shall be made by the several Banks ratably in accordance with
their respective Pro Rata Shares. Revolving Loans may be obtained and
maintained, at the election of the Borrower but subject to the limitations
hereof, as Reference Rate Advances, Eurodollar Rate Advances or CD Rate
Advances.
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2.1(b) CONVERSION TO TERM LOANS. On the Transformation Date,
provided that no Default or Event of Default has occurred and is
continuing, the outstanding principal balance on such date of the Revolving
Loans made by each Bank shall be converted into a Term Loan on the terms
and conditions set forth herein. The Term Loan may be maintained, at the
election of the Borrower but subject to the limitations hereof, as
Reference Rate Advances, Eurodollar Rate Advances or CD Rate Advances.
Section 2.2 PROCEDURE FOR LOANS.
2.2(a) PROCEDURE FOR REVOLVING LOANS. Any request by the
Borrower for Revolving Loans hereunder shall be in writing or by
telephone and must be given so as to be received by the Agent not
later than 11:00 a.m. (Minneapolis time) two Eurodollar Business Days
prior to the requested Revolving Loan Date if the Revolving Loans are
requested as Eurodollar Rate Advances and not later than 11:00 a.m.
(Minneapolis time) on the requested Revolving Loan Date if the
Revolving Loans are requested as CD Rate Advances or Reference Rate
Advances. Each request for Revolving Loans hereunder shall be
irrevocable and shall be deemed a representation by the Borrower that
on the requested Revolving Loan Date and after giving effect to the
requested Revolving Loans, the applicable conditions specified in
Article III have been and will be satisfied. Each request for
Revolving Loans hereunder shall specify (i) the requested Revolving
Loan Date, (ii) the aggregate amount of Revolving Loans to be made on
such date, which shall be (A) in the case of CD Rate Advances or
Eurodollar Rate Advances, in a minimum amount of $1,000,000 or, if
more, an integral multiple of $500,000 in excess thereof, and (B) in
the case of Reference Rate Advances, in a minimum amount of $500,000
or, if more, an integral multiple of $100,000 in excess thereof, (iii)
whether such Revolving Loans are to be funded as Reference Rate
Advances, Eurodollar Rate Advances or CD Rate Advances and (iv) in the
case of CD Rate Advances or Eurodollar Rate Advances, the duration of
the initial Interest Period applicable thereto. The Agent may rely on
any telephone request for Revolving Loans hereunder which it believes
in good faith to be genuine; and the Borrower hereby waives the right
to dispute the Agent's record of the terms of such telephone request.
The Agent shall promptly notify each other Bank of the receipt of such
request, the matters specified therein, and of such Bank's Pro Rata
Share of the requested Revolving Loans. On the date of the requested
Revolving Loans, each Bank shall provide its Pro Rata Share of the
requested Revolving Loans to the Agent in Immediately Available Funds
not later than 3:00 p.m., Minneapolis time. Unless the Agent
determines that any
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applicable condition specified in Article III has not been satisfied, the
Agent will make available to the Borrower at the Agent's principal office
in Minneapolis, Minnesota in Immediately Available Funds not later than
4:00 p.m. (Minneapolis time) on the requested Revolving Loan Date the
amount of the requested Revolving Loans. If the Agent has made a Revolving
Loan to the Borrower on behalf of a Bank but has not received the amount of
such Revolving Loan from such Bank by the time herein required, such Bank
shall pay interest to the Agent on the amount so advanced at the overnight
Federal Funds rate from the date of such Revolving Loan to the date funds
are received by the Agent from such Bank, such interest to be payable with
such remittance from such Bank of the principal amount of such Revolving
Loan (provided, however, that the Agent shall not make any Revolving Loan
on behalf of a Bank if the Agent has received prior notice from such Bank
that it will not make such Revolving Loan). If the Agent does not receive
payment from such Bank by the next Business Day after the date of any
Revolving Loan, the Agent shall be entitled to recover such Revolving Loan,
with interest thereon at the rate then applicable to the such Revolving
Loan, on demand, from the Borrower, without prejudice to the Agent's and
the Borrower's rights against such Bank. If such Bank pays the Agent the
amount herein required with interest at the overnight Federal Funds rate
before the Agent has recovered from the Borrower, such Bank shall be
entitled to the interest payable by the Borrower with respect to the
Revolving Loan in question accruing from the date the Agent made such
Revolving Loan.
2.2(b) PROCEDURE FOR CONVERSION TO TERM LOANS. Not later than
11:00 a.m. (Minneapolis time) two Business Days prior to the Transformation
Date if the Borrower elects to maintain all (but not less than all) of the
Term Loans as Fixed Rate Term Loans, 11:00 a.m. (Minneapolis time) two
Eurodollar Business Days prior to the Transformation Date if the Borrower
elects to maintain all or any portion of the Term Loans as Eurodollar Rate
Advances and not later than 11:00 a.m. (Minneapolis time) one Business Day
prior to the Transformation Date if the Borrower elects to maintain all of
the Term Loans as CD Rate Advances or Reference Rate Advances, the Borrower
shall deliver to the Agent a written notice electing the type of Advances
into which the Term Loans will be converted on the Transformation Date.
Such notice shall specify (i) whether the Term Loans are to be funded as
Fixed Rate Term Loans, Eurodollar Rate Advances, CD Rate Advances or
Reference Rate Advances, and (ii) in the case of CD Rate Advances or
Eurodollar Rate Advances, the duration of the initial Interest Period
applicable thereto. The Agent shall promptly notify each Bank of the
receipt of such notice and the matters specified therein.
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Section 2.3 NOTES. The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank in a principal amount equal to
such Bank's Commitment Amount originally in effect. Upon receipt of each Bank's
Note from the Borrower, the Agent shall mail such Note to such Bank. Each Bank
shall enter in its ledgers and records the amount of its Loans, the various
Advances made, converted or continued and the payments made thereon, and each
Bank is authorized by the Borrower to enter on a schedule attached to its Note a
record of such Loans, Advances and payments; provided, however that the failure
by any Bank to make any such entry or any error in making such entry shall not
limit or otherwise affect the obligation of the Borrower hereunder and on the
Notes, and, in all events, the principal amounts owing by the Borrower in
respect of the Notes shall be the aggregate amount of all Loans made by the
Banks less all payments of principal thereof made by the Borrower.
Section 2.4 APPLICABLE INTEREST RATES.
2.4(a) CONVERSIONS AND CONTINUATIONS. On the terms and subject
to the limitations hereof, the Borrower shall have the option at any time
and from time to time to convert all or any portion of the Loans into
Reference Rate Advances, Eurodollar Rate Advances or CD Rate Advances, or
to continue a Eurodollar Rate Advance or a CD Rate Advance as such;
provided, however that a Eurodollar Rate Advance or a CD Rate Advance may
be converted or continued only on the last day of the Interest Period
applicable thereto and no Advance may be converted or continued as a
Eurodollar Rate Advance or a CD Rate Advance if a Default or Event of
Default has occurred and is continuing on the proposed date of continuation
or conversion. Advances may be converted to, or continued as, Eurodollar
Rate Advances or CD Rate Advances only in integral multiples, as to the
aggregate amount of the Advances of all Banks so converted or continued, of
$1,000,000 or, if more, an integral multiple of $500,000 in excess thereof.
The Borrower shall give the Agent written notice of any continuation or
conversion of any Advances and such notice must be given so as to be
received by the Agent not later than 11:00 a.m. (Minneapolis time) two
Eurodollar Business Days prior to requested date of conversion or
continuation in the case of the continuation of, or conversion to,
Eurodollar Rate Advances and not later than 11:00 a.m. (Minneapolis time)
on the date of the requested continuation of CD Rate Advances or conversion
to CD Rate Advances or Reference Rate Advances. Each such notice shall
specify (a) the amount to be continued or converted, (b) the date for the
continuation or conversion (which must be (i) the last day of the preceding
Interest Period for any continuation or conversion of CD Rate Advances or
Eurodollar Rate Advances, (ii) a Eurodollar Business Day in the case of
conversions to or continuations as Eurodollar Advances, and (iii) a
Business Day in the case of continuations as CD Rate Advances or
conversions to CD Rate Advances or Reference Rate Advances), and (c) in the
case of
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conversions to or continuations as CD Rate Advances or Eurodollar
Rate Advances, the Interest Period applicable thereto. Any notice given by
the Borrower under this Section shall be irrevocable. If the Borrower
shall fail to notify the Agent of the continuation of any CD Rate Advances
or Eurodollar Rate Advances or of the conversion of Eurodollar Rate
Advances to CD Rate Advances or vice versa within the time required by this
Section, such Advances shall, on the last day of the Interest Period
applicable thereto, automatically be converted into Reference Rate Advances
of the same principal amount. All conversions and continuation of Advances
must be made uniformly and ratably among the Banks. The number of CD Rate
Advances and Eurodollar Rate Advances of each Bank that may be outstanding
at any one time shall not exceed eight.
2.4(b) FIXED TERM LOAN INTEREST RATE. If, in accordance with
Section 2.2(b), the Borrower gives the Bank notice that the Borrower
desires, from and after the Transformation Date, to maintain the Term Loans
as Fixed Rate Term Loans, the interest rate applicable to the Fixed Rate
Term Loans shall be determined as follows:
(i) On the Transformation Date, the Agent shall determine
the interest rate (the "Assumed Interest Rate") that would be
applicable to each principal installment of each Term Loan on the
assumption that, until its due date, such installment would bear
interest at a rate equal to the sum of (x) the Adjusted CD Rate for an
interest period (hereinafter, for each such principal installment,
referred to as the "Assumed Interest Period") beginning on the
Transformation Date and ending on the due date of such principal
installment, plus (y) the Applicable Margin for CD Rate Advances,
determined as of the Transformation Date.
(ii) The amount of each principal installment shall be
multiplied times the number of days during the Assumed Interest Period
of such principal installment; the product of such multiplication is
hereinafter referred to as the "Weighted Dollar Life" of such
principal installment;
(iii) The Assumed Interest Rate for each principal
installment shall be multiplied times the Weighted Dollar Life of such
principal installment; the product of such multiplication is
hereinafter referred to as the "Weighted Interest Amount" of such
principal installment;
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(iv) The Weighted Interest Amount of all principal
installments shall be added together and the sum shall be divided by
the sum of the Weighted Dollar Life of all principal installments and
rounded to the nearest 1/100 of 1%; the result of such division
expressed as a percent per annum shall be the "Fixed Term Loan
Interest Rate". In the absence of manifest error, the rate so
determined by the Agent shall be conclusively presumed to be correct.
Section 2.5 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST.
Interest shall accrue and be payable on the Loans as follows:
(a) Subject to subsection (e) below, each Eurodollar Rate Advance
shall bear interest on the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per annum equal to the sum of
(A) the Adjusted Eurodollar Rate for such Interest Period, plus (B) the
Applicable Margin.
(b) Subject to subsection (e) below, each CD Rate Advance shall bear
interest on the unpaid principal amount thereof during the Interest Period
applicable thereto at a rate per annum equal to the sum of (A) the Adjusted
CD Rate for such Interest Period, plus (B) the Applicable Margin.
(c) Subject to subsection (e) below, each Reference Rate Advance
shall bear interest on the unpaid principal amount thereof at a floating
rate per annum equal to the sum of (A) the Reference Rate, plus (B) the
Applicable Margin.
(d) Subject to subsection (e) below, during the Term Loan Period, if,
in accordance with Section 2.2(b), the Borrower exercises its options to
maintain the Term Loans as Fixed Rate Term Loans, at a rate per annum equal
to the Fixed Term Loan Interest Rate.
(e) Upon the occurrence and during the continuation of an Event of
Default, each Advance shall bear interest until paid in full (A) during the
balance of any Interest Period applicable to a CD Rate Advance or a
Eurodollar Advance, at a rate per annum equal to the sum of the rate
applicable to such Advance during such Interest Period plus 2.0%, and (B)
otherwise, at a rate per annum equal to the sum of (1) the Reference Rate,
plus (2) the Applicable Margin for Reference Rate Advances, plus (3) 2.0%.
(f) Interest shall be payable as follows:
(i) On that portion of the outstanding principal amount thereof
maintained as a Reference Rate Loan or the Fixed Rate Term Loan,
interest
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accrued through the last day of each month shall be payable on the
next Monthly Payment Date; and
(ii) On that portion of the outstanding principal amount thereof
maintained as a CD Rate Loan or a Eurodollar Rate Loan, accrued
interest shall be payable on the last day of each applicable Interest
Period and, in the case of Interest Periods of more than three months
or 90 days, at the end of each three month or 90 day period during
such Interest Periods.
(g) Interest accrued under the Existing Credit Agreement through the
Closing Date shall be payable on the date provided for herein for each type
of Advance outstanding thereunder.
Section 2.6 REPAYMENT. The unpaid principal balance of the Notes,
together with all accrued and unpaid interest thereon, shall be due and payable
on the Maturity Date. In addition, the outstanding principal balance of the
Term Loan of each Bank on the Transformation Date shall be payable in twelve
quarterly installments, each in an amount equal to one-twelfth of such
outstanding principal balance, on each subsequent Quarterly Payment Date,
beginning with the first Quarterly Payment Date after the Transformation Date.
Section 2.7 OPTIONAL PREPAYMENTS. The Borrower may prepay Reference
Rate Advances, in whole or in part, at any time, without premium or penalty.
Any such prepayment must be accompanied by accrued and unpaid interest on the
amount prepaid. Each partial prepayment shall be in an aggregate amount for all
the Banks of $500,000 or an integral multiple of $100,000 in excess thereof.
Except upon an acceleration following an Event of Default or upon termination of
the Commitments in whole, the Borrower may pay Fixed Rate Advances only on the
last day of the Interest Period applicable thereto. Amounts paid or prepaid on
the Advances under this Section 2.7 shall be for the account of each Bank in
proportion to its share of outstanding Loans. Amounts paid (unless following an
acceleration or upon termination of the Commitments in whole) or prepaid under
this Section 2.7 during the Revolving Period may be reborrowed upon the terms
and subject to the conditions and limitations of this Agreement. Amounts paid
or prepaid on the Term Loans under this Section 2.7 shall be applied to the
installments due on the Term Loans in the inverse order of their maturities.
PART B -- TERMS OF THE LETTER OF CREDIT FACILITY
Section 2.8 LETTERS OF CREDIT. On the Closing Date, each "Letter of
Credit" outstanding under the Existing Credit Agreement shall become a Letter of
Credit hereunder. Upon the terms and subject to the conditions of this
Agreement, the Agent
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agrees to issue Letters of Credit for the account of the Borrower from time to
time between the Closing Date and the Termination Date in such amounts as the
Borrower shall request; provided that no Letter of Credit will be issued in any
amount which, after giving effect to such issuance, would cause (a) Total
Outstandings to exceed the Aggregate Commitment Amounts, or (b) the Letter of
Credit Usage to exceed $10,000,000.
Section 2.9 PROCEDURES FOR LETTERS OF CREDIT. Each request for a
Letter of Credit shall be made by the Borrower in writing, by telex, facsimile
transmission or electronic conveyance received by the Agent by 2:00 p.m.,
Minneapolis time, on a Business Day which is not less than one Business Day
preceding the requested date of issuance (which shall also be a Business Day).
Each request for a Letter of Credit shall be deemed a representation by the
Borrower that on the date of issuance of such Letter of Credit and after giving
effect thereto the applicable conditions specified in Article III have been and
will be satisfied. The Agent may require that such request be made on such
letter of credit application and reimbursement agreement form as the Agent may
from time to time specify, along with satisfactory evidence of the authority and
incumbency of the officials of the Borrower making such request. The Agent
shall promptly notify the other Banks of the receipt of the request and the
matters specified therein. On the date of each issuance of a Letter of Credit
the Agent shall send notice to the other Banks of such issuance, accompanied by
a copy of the Letter or Letters of Credit so issued.
Section 2.10 TERMS OF LETTERS OF CREDIT. Letters of Credit shall be
issued in support of obligations of the Borrower, other than obligations
relating to the borrowing of money or obtaining other financing, incurred in the
ordinary course of business. All Letters of Credit must expire not later than
the Business Day preceding the date set forth in clause (a) of the definition of
Termination Date. No Letter of Credit may have a term longer than twelve
months.
Section 2.11 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. If the
Agent has received documents purporting to draw under a Letter of Credit that
the Agent believes conform to the requirements of the Letter of Credit, or if
the Agent has decided that it will comply with the Borrower's written or oral
request or authorization to pay a drawing on any Letter of Credit that the Agent
does not believe conforms to the requirements of the Letter of Credit, it will
notify the Borrower of that fact. The Borrower shall reimburse the Agent by
9:30 a.m. (Minneapolis time) on the day on which such drawing is to be paid in
Immediately Available Funds in an amount equal to the amount of such drawing.
Any amount by which the Borrower has failed to reimburse the Agent for the full
amount of such drawing by 10:00 a.m. on the date on which the Agent in its
notice indicated that it would pay such drawing, until
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reimbursed from the proceeds of Loans pursuant to Section 2.15 or out of funds
available in the Holding Account, is an "Unpaid Drawing."
Section 2.12 OBLIGATIONS ABSOLUTE. The obligation of the Borrower
under Section 2.11 to repay the Agent for any amount drawn on any Letter of
Credit and to repay the Banks for any Revolving Loans made under Section 2.15 to
cover Unpaid Drawings shall be absolute, unconditional and irrevocable, shall
continue for so long as any Letter of Credit is outstanding notwithstanding any
termination of this Agreement, and shall be paid strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, setoff, defense or other right which
the Borrower may have or claim at any time against any beneficiary,
transferee or holder of any Letter of Credit (or any Person for whom any
such beneficiary, transferee or holder may be acting), the Agent or any
Bank or any other Person, whether in connection with a Letter of Credit,
this Agreement, the transactions contemplated hereby, or any unrelated
transaction; or
(c) Any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever.
Neither the Agent nor any Bank nor officers, directors or employees of any
thereof shall be liable or responsible for, and the obligations of the Borrower
to the Agent and the Banks shall not be impaired by:
(i) The use which may be made of any Letter of Credit or for any
acts or omissions of any beneficiary, transferee or holder
thereof in connection therewith;
(ii) The validity, sufficiency or genuineness of documents, or of
any endorsements thereon, even if such documents or
endorsements should, in fact, prove to be in any or all
respects invalid, insufficient, fraudulent or forged;
(iii) The acceptance by the Agent of documents that appear on
their face to be in order, without responsibility for
further investigation, regardless of any notice or
information to the contrary; or
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(iv) Any other action of the Agent in making or failing to make
payment under any Letter of Credit if in good faith and in
conformity with U.S. or foreign laws, regulations or customs
applicable thereto.
Notwithstanding the foregoing, the Borrower shall have a claim against the
Agent, and the Agent shall be liable to the Borrower, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by the Agent's willful misconduct
or gross negligence in determining whether documents presented under any Letter
of Credit comply with the terms thereof.
Section 2.13 INCREASED COST FOR LETTERS OF CREDIT. If any Regulatory
Change shall either (a) impose, modify or make applicable any reserve, deposit,
capital adequacy or similar requirement against Letters of Credit issued by the
Agent or any Bank's obligations to make Loans to cover Letters of Credit, or (b)
shall impose on any Bank any other conditions affecting this Agreement or any
Letter of Credit; and the result of any of the foregoing is to increase the cost
to the Agent or any Bank of issuing or maintaining any Letter of Credit or such
Bank's obligations to make Advances to cover Unpaid Drawings, or reduce the
amount of any sum received or receivable by the Agent or any Bank hereunder,
then, upon demand (which demand shall be given by a Bank affected by such
increased cost or reduction promptly after it determines such increased cost or
reduction) to the Borrower by such Bank, the Borrower shall pay to such Bank the
additional amount or amounts as will compensate such Bank for such increased
cost or reduction. A certificate submitted to the Borrower by such Bank setting
forth the basis for the determination of such additional amount or amounts
necessary to compensate such Bank as aforesaid shall be conclusive and binding
on the Borrower absent error.
PART C -- GENERAL
Section 2.14 OPTIONAL REDUCTION OF COMMITMENT AMOUNTS OR TERMINATION
OF COMMITMENTS. The Borrower may, at any time during the Revolving Period, upon
not less than three Business Days prior written notice to the Agent, reduce the
Commitment Amounts, ratably, with any such reduction in a minimum aggregate
amount for all the Banks of $1,000,000, or, if more, in an integral multiple of
$1,000,000; PROVIDED, HOWEVER, that the Borrower may not at any time reduce the
Aggregate Commitment Amounts below the Total Outstandings. The Borrower may, at
any time when there are no Letters of Credit outstanding, upon not less than
three Business Days prior written notice to the Agent, terminate the Commitments
in their entirety. Upon termination of the Commitments pursuant to this
Section, the Borrower shall pay to the Agent for the account of the Banks the
full amount of all outstanding Loans, all
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accrued and unpaid interest thereon, all unpaid Commitment Fees accrued to the
date of such termination, any indemnities payable with respect to Advances
pursuant to Section 2.25 and all other unpaid obligations of the Borrower to the
Agent and the Banks hereunder.
Section 2.15 LOANS TO COVER UNPAID DRAWINGS. Whenever any Unpaid
Drawing exists for which there are not then funds in the Holding Account to
cover the same, the Agent shall give the other Banks notice to that effect,
specifying the amount thereof, in which event each Bank is authorized (and the
Borrower does here so authorize each Bank) to, and shall, make a Revolving Loan
(as a Reference Rate Advance) to the Borrower in an amount equal to such Bank's
Pro Rata Share of the amount of the Unpaid Drawing. The Agent shall notify each
Bank by 11:00 a.m. (Minneapolis time) on the date such Unpaid Drawing occurs of
the amount of the Revolving Loan to be made by such Bank. Notices received
after such time shall be deemed to have been received on the next Business Day.
Each Bank shall then make such Revolving Loan (regardless of noncompliance with
the applicable conditions precedent specified in Article III hereof and
regardless of whether an Event of Default then exists) and each Bank shall
provide the Agent with the proceeds of such Revolving Loan in Immediately
Available Funds, at the office of the Agent, not later than 2:00 p.m.
(Minneapolis time) on the day on which such Bank received such notice (or, in
the case of notices received after 11:00 a.m., Minneapolis time, is deemed to
have received such notice). The Agent shall apply the proceeds of such
Revolving Loans directly to reimburse itself for such Unpaid Drawing. If any
portion of any such amount paid to the Agent should be recovered by or on behalf
of the Borrower from the Agent in bankruptcy, by assignment for the benefit of
creditors or otherwise, the loss of the amount so recovered shall be ratably
shared between and among the Banks in the manner contemplated by Section 8.11
hereof. If at the time the Banks make funds available to the Agent pursuant to
the provisions of this Section, the applicable conditions precedent specified in
Article III shall not have been satisfied, the Borrower shall pay to the Agent
for the account of the Banks interest on the funds so advanced at a floating
rate per annum equal to the sum of the Reference Rate plus the Applicable Margin
for Reference Rate Advances plus two percent (2.00%). Except as provided in the
preceding sentence, any Revolving Loans made under this Section 2.15 shall be
made as Reference Rate Advances, and shall bear interest, subject to the terms
and conditions hereof, at the rate applicable to Reference Rate Advances
pursuant to Section 2.5(c). If for any reason any Bank is unable to make a
Revolving Loan to the Borrower to reimburse the Agent for an Unpaid Drawing,
then such Bank shall immediately purchase from the Agent a risk participation in
such Unpaid Drawing, at par, in an amount equal to such Bank's Pro Rata Share of
the Unpaid Drawing.
Section 2.16 COMMITMENT FEE. The Borrower shall pay to the Agent for
the account of each Bank fees (the "Commitment Fees") in an amount determined by
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applying a rate of one-quarter of one percent (0.25%) per annum to the average
daily Unused Commitment of such Bank for the period from the Closing Date to the
Termination Date. Such Commitment Fees are payable in arrears on each Quarterly
Payment Date and on the Termination Date.
Section 2.17 LETTER OF CREDIT FEES. For each Letter of Credit
issued, the Borrower shall pay to the Agent for the account of the Banks, in
advance payable on the date of issuance, a fee (a "Letter of Credit Fee") in an
amount determined by applying a per annum rate of (a) in the case of each Letter
of Credit with an expiration date less than six months after its issuance date,
three-quarters of one percent (0.75%), and in the case of any other Letter of
Credit, one and one-half percent (1.50%), to the original face amount of the
Letter of Credit for the period from the date of issuance to the scheduled
expiration date of such Letter of Credit. In addition to the Letter of Credit
Fee, the Borrower shall pay to the Agent, on demand, all issuance, amendment,
drawing and other fees regularly charged by the Agent to its letter of credit
customers and all out-of-pocket expenses incurred by the Agent in connection
with the issuance, amendment, administration or payment of any Letter of Credit.
Section 2.18 COMPUTATION. Commitment Fees and Letter of Credit Fees
and interest on Loans shall be computed on the basis of actual days elapsed (or,
in the case of Letter of Credit Fees, actual days to elapse) and a year of 360
days.
Section 2.19 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other obligations under this
Agreement payable to the Agent or the Banks shall be made without setoff or
counterclaim in Immediately Available Funds not later than 11:00 a.m.
(Minneapolis time) on the dates called for under this Agreement and the Notes to
the Agent at its main office in Minneapolis, Minnesota. Funds received after
such time shall be deemed to have been received on the next Business Day. The
Agent will promptly distribute in like funds to each Bank its Pro Rata Share of
each such payment of principal, interest, Commitment Fees and Letter of Credit
Fees received, by the Agent for the account of the Banks. Whenever any payment
to be made hereunder or on the Notes shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the next succeeding Business
Day and such extension of time, in the case of a payment of principal, shall be
included in the computation of any interest on such principal payment.
Section 2.20 USE OF LOAN PROCEEDS. The proceeds of the Revolving
Loans shall be used for the Borrower's general business purposes in a manner not
in conflict with any of the Borrower's covenants in this Agreement.
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Section 2.21 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior
to the date for determining the Adjusted CD Rate or the Adjusted Eurodollar Rate
in respect of the Interest Period for any CD Rate Advance or Eurodollar Rate
Advance, any Bank determines (which determination shall be conclusive and
binding, absent error) that:
(a) deposits in dollars (in the applicable amount) are not being made
available to such Bank in the relevant market for such Interest Period, or
(b) the Adjusted CD Rate or the Adjusted Eurodollar Rate, as the case
may be, will not adequately and fairly reflect the cost to such Bank of
funding or maintaining CD Rate Advances or Eurodollar Rate Advances for
such Interest Period,
such Bank shall forthwith give notice to the Borrower and the other Banks of
such determination, whereupon the obligation of such Bank to make or continue,
or to convert any Advances to, CD Rate Advances or Eurodollar Rate Advances, as
the case may be, shall be suspended until such Bank notifies the Borrower and
the Agent that the circumstances giving rise to such suspension no longer exist.
While any such suspension continues, all further Advances by such Bank shall be
made with an interest rate option to which such suspension does not apply. No
such suspension shall affect the interest rate then in effect during the
applicable Interest Period for any CD Rate Advance or Eurodollar Rate Advance
outstanding at the time such suspension is imposed.
Section 2.22 INCREASED COST. If any Regulatory Change:
(a) shall subject any Bank (or its Applicable Lending Office) to
any tax, duty or other charge with respect to its Fixed Rate Advances, its
Note or its obligation to make Fixed Rate Advances or shall change the
basis of taxation of payment to any Bank (or its Applicable Lending Office)
of the principal of or interest on its Fixed Rate Advances or any other
amounts due under this Agreement in respect of its Fixed Rate Advances or
its obligation to make Fixed Rate Advances (except for changes in the rate
of tax on the overall net income of such Bank or its Applicable Lending
Office imposed by the jurisdiction in which such Bank's principal office or
Applicable Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve, special
deposit, capital requirement or similar requirement (including, without
limitation, any such requirement imposed by the Board, but excluding (i)
with respect to any CD Rate Advance any such requirement to the extent
included in
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calculating the applicable Adjusted CD Rate and (ii) with respect to any
Eurodollar Rate Advance any such requirement to the extent included in
calculating the applicable Adjusted Eurodollar Rate) against assets of,
deposits with or for the account of, or credit extended by, any Bank's
Applicable Lending Office or shall impose on any Bank (or its Applicable
Lending Office) or on the United States market for certificates of deposit
or the interbank Eurodollar market any other condition affecting its Fixed
Rate Advances, its Note or its obligation to make Fixed Rate Advances;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Advance,
or to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Notes, then,
within 30 days after demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. Each Bank will
promptly notify the Borrower and the Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If any Bank fails to give such notice within 45
days after it obtains knowledge of such an event, such Bank shall, with respect
to compensation payable pursuant to this Section, only be entitled to payment
under this Section for costs incurred from and after the date 45 days prior to
the date that such Bank does give such notice. A certificate of any Bank
claiming compensation under this Section, setting forth the additional amount or
amounts to be paid to it hereunder and stating in reasonable detail the basis
for the charge and the method of computation, shall be conclusive in the absence
of error. In determining such amount, any Bank may use any reasonable averaging
and attribution methods. Failure on the part of any Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable with respect to any Interest Period shall not constitute a waiver of
such Bank's rights to demand compensation for any increased costs or reduction
in amounts received or receivable in any subsequent Interest Period.
Section 2.23 ILLEGALITY. If any Regulatory Change shall make it
unlawful or impossible for any Bank to make, maintain or fund any Fixed Rate
Advances, such Bank shall notify the Borrower and the Agent, whereupon the
obligation of such Bank to make or continue, or to convert any Advances to, CD
Rate Advances, Eurodollar Rate Advances or the Fixed Rate Term Loan, as the case
may be, shall be suspended until such Bank notifies the Borrower and the Agent
that the circumstances giving rise to such suspension no longer exist. Before
giving any such notice, such Bank shall designate a different Applicable Lending
Office if such designation will avoid the need for giving such notice and will
not, in the judgment of such Bank, be otherwise disadvantageous to such Bank.
If such Bank determines that it may not lawfully
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continue to maintain any CD Rate Advances, Eurodollar Rate Advances or the Fixed
Rate Term Loan, as the case may be, to the end of the applicable Interest
Periods on the Maturity Date, all of the affected Advances shall be
automatically converted to Reference Rate Advances as of the date of such Bank's
notice, and upon such conversion the Borrower shall indemnify such Bank in
accordance with Section 2.25.
Section 2.24 CAPITAL ADEQUACY. In the event that any Regulatory
Change reduces or shall have the effect of reducing the rate of return on any
Bank's capital or the capital of its parent corporation (by an amount such Bank
deems material) as a consequence of its Commitments and/or its Loans to a level
below that which such Bank or its parent corporation could have achieved but for
such Regulatory Change (taking into account such Bank's policies and the
policies of its parent corporation with respect to capital adequacy), then the
Borrower shall, within five days after written notice and demand from such Bank
(with a copy to the Agent), pay to such Bank additional amounts sufficient to
compensate such Bank or its parent corporation for such reduction. Any
determination by such Bank under this Section and any certificate as to the
amount of such reduction given to the Borrower by such Bank shall be final,
conclusive and binding for all purposes, absent error. The Bank shall promptly
give the Borrower written notice of any Regulatory Change or other circumstances
which may result in increased costs under this Section; PROVIDED, HOWEVER, that
the Borrower's liability for additional amounts computed in accordance with this
Section shall be neither changed nor waived by any failure to give such notice.
Section 2.25 FUNDING LOSSES; FIXED RATE ADVANCES. The Borrower shall
compensate each Bank, upon its written request, for all losses, expenses and
liabilities (including any interest paid by such Bank to lenders of funds
borrowed by it to make or carry Fixed Rate Advances to the extent not recovered
by such Bank in connection with the re-employment of such funds and including
loss of anticipated profits) which such Bank may sustain: (i) if for any
reason, other than a default by such Bank, a funding of a Fixed Rate Advance
does not occur on the date specified therefor in the Borrower's request or
notice as to such Advance under Section 2.2 or 2.4, or (ii) if, for whatever
reason (including, but not limited to, acceleration of the maturity of Advances
following an Event of Default), any repayment of a Fixed Rate Advance, or a
conversion pursuant to Section 2.23, occurs on any day other than the last day
of the Interest Period applicable thereto (in the case of CD Rate Advances or
Eurodollar Advances) or a scheduled payment date (in the case of Fixed Rate Term
Loans). A Bank's request for compensation shall set forth the basis for the
amount requested and shall be final, conclusive and binding, absent error.
Section 2.26 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Each Bank
shall be entitled to fund and maintain its funding of Fixed Rate Advances in any
manner it may elect, it being understood, however, that for the purposes of this
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Agreement all determinations hereunder (including, but not limited to,
determinations under Section 2.25) shall be made as if such Bank had actually
funded and maintained each Fixed Rate Advance during the Interest Period for
such Advance or the Term Loan Period, as the case may be, through the issuance
of its certificates of deposit or the purchase of deposits having a maturity
corresponding to the last day of the Interest Period or each payment date
thereon, as the case may be, and bearing an interest rate equal to the CD Rate
or the Eurodollar Rate, as the case may be, for such Interest Period or Assumed
Interest Period. Notwithstanding the manner of funding or maintaining of
funding of any Fixed Rate Advance by any Bank, the obligation of the Banks to
make Eurodollar Rate Advances and the Obligations of the Borrower shall be
governed exclusively by the terms of this Agreement and the other Loan
Documents.
Section 2.27 WITHHOLDING TAXES.
(a) BANKS TO SUBMIT FORMS. Each Bank represents to the Borrower
and the Agent that it is either (i) a corporation organized under the laws of
the United States or any State thereof or (ii) is entitled to complete
exemption from United States withholding tax imposed on or with respect to
any payments, including fees, to be made pursuant to this Agreement (x) under
an applicable provision of a tax convention to which the United States is a
party or (y) because it is acting through a branch, agency or office in the
United States and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States. Each Bank that is
not a United States person (as such term is defined in Section 7701(a)(30) of
the Code) shall submit to the Borrower and the Agent, on or before the
Closing Date or the day on which such Bank becomes such under Section 9.6
duly completed and signed copies of either Form 1001 (relating to such Bank
and entitling it to a complete exemption from withholding on all payments to
be received by such Bank hereunder) or Form 4224 (relating to all payments to
be received by such Bank hereunder) of the United States Internal Revenue
Service. Thereafter and from time to time, each such Bank shall submit to
the Borrower and the Agent such additional duly completed and signed copies
of one or the other of such Forms (or such successor Forms as shall be
adopted from time to time by the relevant United States taxing authorities)
as may be (i) reasonably requested by the Borrower or the Agent and (ii)
required and permitted under then-current United States law or regulations to
avoid United States withholding taxes on payments in respect of all payments
to be received by such Bank hereunder. Upon the request of the Borrower or
the Agent, each Bank that is a United States person (as such term is defined
in Section 7701(a)(30) of the Code) shall submit to the Borrower and the
Agent a certificate in such form as is reasonably satisfactory to the
Borrower and the Agent to the effect that it is such a United States person.
(b) INABILITY OF A BANK. If any Bank that is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) determines
that, as a result of
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any Regulatory Change, the Borrower is required by law or regulation to make any
deduction, withholding or backup withholding of any taxes, levies, imposts,
duties, fees, liabilities or similar charges of the United States of America,
any possession or territory of the United States of America (including the
Commonwealth of Puerto Rico) or any area subject to the jurisdiction of the
United States of America ("U.S. TAXES") from any payments to a Bank pursuant to
any Loan Document in respect of the Obligations payable to such Bank then or
thereafter outstanding, the amount payable will be increased to the amount
which, after deduction from such increased amount of all U.S. Taxes required to
be withheld or deducted therefrom, will yield the amount required under any Loan
Document to be paid with respect thereto; PROVIDED, that the Borrower shall not
be required to pay any additional amount pursuant to this Section 2.27(b) to any
Bank (i) that is not, either on the date this Agreement is executed by such Bank
or on the date such Bank becomes such under Section 9.6, either (x) entitled to
submit Form 1001 (relating to such Bank and entitling it to a complete exemption
from withholding on all payments to be received by such Bank hereunder) or Form
4224 (relating to all payments to be received by such Bank hereunder) or (y) a
United States person (as such term is defined in Section 7701(a)(30) of the
Code), or (ii) that has failed to submit any form or certificate that it was
required to file pursuant to subsection (a) and entitled to file under
applicable law or (iii) arising from such Bank's failure to comply with any
certification, identification or other similar requirement under United States
income tax laws or regulations (including backup withholding) to establish
entitlement to exemption from such U.S. Taxes; and PROVIDED, FURTHER, that if a
Bank, as a result of any amount paid by the Borrower to such Bank pursuant to
this Section 2.27, shall realize a tax credit or refund, which tax credit or
refund would not have been realized but for the Borrower's payment of such
amount, such Bank shall pay to the Borrower an amount equal to such tax credit
or refund. Each Bank may determine the portion, if any, of any tax credit or
refund attributable to the Borrower's payments using such attribution and
accounting methods as such Bank reasonably selects, and such Bank's
determination of the portion of any tax credit or refund attributable to the
Borrower's payments shall be conclusive in the absence of manifest error. The
obligation of the Borrower under this Section 2.27(b) shall survive the payment
in full of the Obligations and the termination of the Commitments of such Bank.
(c) SUBSTITUTION OF BANK. In the event the Borrower is required
pursuant to this Section 2.27 to pay any additional amount to any Bank, such
Bank shall, if no Event of Default or Unmatured Event of Default has occurred
and is continuing, upon the request of the Borrower to such Bank and the Agent,
assign, pursuant to and in accordance with the provisions of Section 9.6, all of
its rights and obligations under this Agreement and under the Loan Documents to
another Bank or a Transferee selected by the Borrower and reasonably
satisfactory to the Agent, in consideration for (i) the payment by such assignee
to the assigning Bank of the principal of, and interest accrued and unpaid to
the date of such assignment on, the Note of such Bank, (ii) the payment
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by the Borrower to the assigning Bank of any and all other amounts owing to such
Bank under any provision of this Agreement accrued and unpaid to the date of
such assignment and (iii) the Borrower's release of the assigning Bank from any
further obligation or liability under this Agreement. Notwithstanding anything
to the contrary in this Section 2.27(c), in no event shall the replacement of
any Bank result in a decrease in the aggregate Commitment Amounts without the
written consent of the Majority Banks.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS OF INITIAL TRANSACTION. The effectiveness of
this Agreement shall be subject to the prior or simultaneous fulfillment of the
following conditions:
3.1(a) DOCUMENTS. The Agent shall have received the following
in sufficient counterparts (except for the Notes) for each Bank:
(i) A Note drawn to the order of each Bank executed by a duly
authorized officer (or officers) of the Borrower and dated the Closing
Date.
(ii) Guaranties executed by a duly authorized officer (or officers)
of each Guarantor.
(iii) A copy of the corporate resolution of the Borrower and each
Guarantor authorizing the execution, delivery and performance of the Loan
Documents to which it is a party, certified as of the Closing Date by its
Secretary or an Assistant Secretary.
(iv) An incumbency certificate showing the names and titles and
bearing the signatures of the officers of the Borrower and each Guarantor
authorized to execute the Loan Documents to which it is a party and, in the
case of the Borrower, to request Loans, Letters of Credit and conversions
and continuations of Advances hereunder, certified as of the Closing Date
by its Secretary or an Assistant Secretary.
(v) A copy of the Articles of Incorporation of the Borrower and each
Guarantor with all amendments thereto, certified by the appropriate
governmental official of the jurisdiction of its incorporation as of a date
not more than ten days prior to the Closing Date.
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(vi) A certificate of good standing for the Borrower and each
Guarantor in the jurisdiction of its incorporation, certified by the
appropriate governmental officials as of a date not more than ten days
prior to the Closing Date.
(vii) A copy of the bylaws of the Borrower, certified as of the
Closing Date by its Secretary or an Assistant Secretary.
(viii) A certificate dated the Closing Date of the chief executive
officer or chief financial officer of the Borrower certifying as to the
matters set forth in Sections 3.2 (a) and 3.2 (b) below.
3.1(b) OPINION. The Borrower shall have requested Faegre &
Benson, its counsel, to prepare a written opinion, addressed to the Banks and
dated the Closing Date, covering the matters set forth in Exhibit C hereto, and
such opinion shall have been delivered to the Agent in sufficient counterparts
for each Bank.
3.1(c) COMPLIANCE. The Borrower shall have performed and
complied with all agreements, terms and conditions contained in this Agreement
required to be performed or complied with by the Borrower prior to or
simultaneously with the Closing Date.
3.1(d) OTHER MATTERS. All corporate and legal proceedings
relating to the Borrower and the Guarantors and all instruments and agreements
in connection with the transactions contemplated by this Agreement shall be
satisfactory in scope, form and substance to the Agent, the Banks and the
Agent's special counsel, and the Agent shall have received all information and
copies of all documents, including records of corporate proceedings, as any Bank
or such special counsel may reasonably have requested in connection therewith,
such documents where appropriate to be certified by proper corporate or
governmental authorities.
3.1(e) FEES AND EXPENSES. The Agent shall have received for
itself and for the account of the Banks all fees and other amounts due and
payable by the Borrower on or prior to the Closing Date, including the
reasonable fees and expenses of counsel to the Agent payable pursuant to Section
9.2.
Section 3.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT.
The obligation of the Banks to make any Loans hereunder and of the Agent to
issue each Letter of Credit shall be subject to the fulfillment of the following
conditions:
3.2(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV shall be true and correct on and as of
the
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Closing Date and on the date of each Revolving Loan or the date of issuance
of each Letter of Credit, with the same force and effect as if made on such
date.
3.2(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on the Closing Date and on the date of each
Revolving Loan or the date of issuance of each Letter of Credit, or will
exist after giving effect to the Loans made or the Letter of Credit issued
on such date.
3.2(c) NOTICES AND REQUESTS. The Agent shall have received the
Borrower's request for such Loans as required under Section 2.2 or its
application for such Letters of Credit specified under Section 2.9.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make Loans
hereunder and to induce the Agent to issue Letters of Credit, the Borrower
represents and warrants to the Banks:
Section 4.1 ORGANIZATION, STANDING, ETC. The Borrower and each
Subsidiary is a corporation duly incorporated and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted, in the case of the Borrower to enter into this Agreement and to issue
the Notes and to perform its obligations under the Loan Documents to which it is
a party, and in the case of each Guarantor to enter into and perform its
obligations under the Guaranty to which it is a party. Each of the Borrower and
the Subsidiaries (a) holds all certificates of authority, licenses and permits
necessary to carry on its business as presently conducted in each jurisdiction
in which it is carrying on such business, except where the failure to hold such
certificates, licenses or permits would not have a material adverse effect on
the business, operations, property, assets or condition, financial or otherwise,
of the Borrower and the Subsidiaries taken as a whole, and (b) is duly qualified
and in good standing as a foreign corporation in each jurisdiction in which the
character of the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary and the failure so to qualify
would permanently preclude the Borrower or such Subsidiary from enforcing its
rights with respect to any assets or expose the Borrower or such Subsidiary to
any liability, which in either case would be material to the Borrower and the
Subsidiaries taken as a whole.
Section 4.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Borrower and each Guarantor of the Loan Documents to which it
is
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a party have been duly authorized by all necessary corporate action, and the
Loan Documents when executed will constitute, the legal, valid and binding
obligations of the Borrower and the Guarantors, as applicable, enforceable in
accordance with their respective terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to
limitations on the availability of equitable remedies.
Section 4.3 NO CONFLICT; NO DEFAULT. The execution, delivery and
performance by the Borrower and the Guarantors of the Loan Documents will not
(a) violate any provision of any law, statute, rule or regulation or any order,
writ, judgment, injunction, decree, determination or award of any court,
governmental agency or arbitrator presently in effect having applicability to
the Borrower or any Guarantor, (b) violate or contravene any provision of the
Articles of Incorporation or bylaws of the Borrower of any Guarantor, or (c)
result in a breach of or constitute a default under any indenture, loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower or any Guarantor is a party or by which any of them or any of their
properties may be bound or result in the creation of any Lien thereunder.
Neither the Borrower nor any Subsidiary is in default under or in violation of
any such law, statute, rule or regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, loan or credit agreement
or other agreement, lease or instrument in any case in which the consequences of
such default or violation could have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole.
Section 4.4 GOVERNMENT CONSENT. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority is required
on the part of the Borrower or any Guarantor to authorize, or is required in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Loan Documents.
Section 4.5 FINANCIAL STATEMENTS AND CONDITION. The Borrower's
audited consolidated financial statements as at December 28, 1994 and its
unaudited financial statements as at October 4, 1995, as heretofore furnished to
the Banks, have been prepared in accordance with GAAP on a consistent basis
(except for year-end audit adjustments as to the interim statements) and fairly
present the financial condition of the Borrower and its Subsidiaries as at such
dates and the results of their operations and changes in financial position for
the respective periods then ended. As of the dates of such financial
statements, neither the Borrower nor any Subsidiary had any material obligation,
contingent liability, liability for taxes or long-term lease obligation which is
not reflected in such financial statements or in the notes thereto. Since
December 28, 1994, there has been no material adverse change in the business,
operations, property,
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assets or condition, financial or otherwise, of the Borrower and its
Subsidiaries taken as a whole.
Section 4.6 LITIGATION. Except as set forth in Schedule 4.6, there
are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or any
of their properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which, if determined
adversely to the Borrower or such Subsidiary, would have a material adverse
effect on the business, operations, property or condition (financial or
otherwise) of the Borrower and the Subsidiaries taken as a whole or on the
ability of the Borrower or any Subsidiary to perform its obligations under the
Loan Documents. For purposes of this Section 4.6 and Section 5.9, an adverse
determination in any Damages Claim shall not be considered material if such a
Damages Claim, together with any other Damages Claim pending or known by an
officer of the Borrower to be contemplated presenting in large degree the same
legal and factual issues, does not involve claims for damages in excess of ten
percent of the consolidated current assets of the Borrower or, if less,
$2,000,000.
Section 4.7 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not
exist any violation by the Borrower or any Subsidiary of any applicable federal,
state or local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to environmental,
pollution, health or safety matters which will or threatens to impose a material
liability on the Borrower or a Subsidiary or which would require a material
expenditure by the Borrower or such Subsidiary to cure. Neither the Borrower
nor any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.
Section 4.8 ERISA. Each Plan is in substantial compliance with all
applicable requirements of ERISA and the Code and with all material applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements. No Reportable Event has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would reasonably be expected to result in the institution of
proceedings to terminate any Plan under Section 4042 of ERISA. With respect to
each Plan subject to Title IV of ERISA, as of the most recent valuation date for
such Plan, the present value (determined on the basis of reasonable
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assumptions employed by the independent actuary for such Plan and previously
furnished in writing to the Banks) of such Plan's projected benefit obligations
did not exceed the fair market value of such Plan's assets.
Section 4.9 FEDERAL RESERVE REGULATIONS. Neither the Borrower nor
any Subsidiary is engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing or carrying
margin stock (as defined in Regulation U of the Board). The value of all margin
stock owned by the Borrower does not constitute more than 25% of the value of
the assets of the Borrower.
Section 4.10 TITLE TO PROPERTY; LEASES; LIENS; SUBORDINATION. Each
of the Borrower and the Subsidiaries has (a) good and marketable title to its
owned real properties and (b) good and sufficient title to, or valid, subsisting
and enforceable leasehold interest in, its other material properties, including
all leased real properties, referred to as owned by the Borrower and its
Subsidiaries in the most recent financial statement referred to in Section 4.5
(other than property disposed of since the date of such financial statements in
the ordinary course of business). None of such properties is subject to a Lien,
except as allowed under Section 6.14. The Borrower has not subordinated any of
its rights under any obligation owing to it to the rights of any other person.
Section 4.11 TAXES. Each of the Borrower and the Subsidiaries has
filed all federal, state and local tax returns required to be filed and has paid
or made provision for the payment of all taxes due and payable pursuant to such
returns and pursuant to any assessments made against it or any of its property
and all other taxes, fees and other charges imposed on it or any of its property
by any governmental authority (other than taxes, fees or charges the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been
provided on the books of the Borrower). No tax Liens have been filed and no
material claims are being asserted with respect to any such taxes, fees or
charges. The charges, accruals and reserves on the books of the Borrower in
respect of taxes and other governmental charges are adequate and the Borrower
knows of no proposed material tax assessment against it or any Subsidiary or any
basis therefor.
Section 4.12 TRADEMARKS, PATENTS. Each of the Borrower and the
Subsidiaries possesses or has the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of others.
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Section 4.13 BURDENSOME RESTRICTIONS. Neither the Borrower nor any
Subsidiary is a party to or otherwise bound by any indenture, loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter, corporate or partnership restriction which would foreseeably have a
material adverse effect on the business, properties, assets, operations or
condition (financial or otherwise) of the Borrower or such Subsidiary or on the
ability of the Borrower or any Subsidiary to carry out its obligations under any
Loan Document.
Section 4.14 FORCE MAJEURE. Since the date of the most recent
financial statement referred to in Section 4.5, the business, properties and
other assets of the Borrower and the Subsidiaries have not been materially and
adversely affected in any way as the result of any fire or other casualty,
strike, lockout, or other labor trouble, embargo, sabotage, confiscation,
condemnation, riot, civil disturbance, activity of armed forces or act of God.
Section 4.15 INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as amended.
Section 4.16 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any Subsidiary 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 within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Section 4.17 RETIREMENT BENEFITS. Except as required under Section
4980B of the Code, Section 601 of ERISA or applicable state law, neither the
Borrower nor any Subsidiary is obligated to provide post-retirement medical or
insurance benefits with respect to employees or former employees.
Section 4.18 SUBSIDIARIES. Schedule 4.18 sets forth as of the date
of this Agreement a list of all Subsidiaries and the number and percentage of
the shares of each class of capital stock owned beneficially or of record by the
Borrower or any Subsidiary therein, and the jurisdiction of incorporation of
each Subsidiary.
Section 4.19 FULL DISCLOSURE. Subject to the following sentence,
neither the financial statements referred to in Section 4.5 nor any other
certificate, written statement, exhibit or report furnished by or on behalf of
the Borrower in connection with or pursuant to this Agreement contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained therein not misleading.
Certificates or statements furnished by or on behalf of the Borrower to the
Banks consisting of projections or forecasts of future results or events
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have been prepared in good faith and based on good faith estimates and
assumptions of the management of the Borrower, and the Borrower has no reason to
believe that such projections or forecasts are not reasonable.
ARTICLE V
AFFIRMATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Loans and of
the Agent to issue Letters of Credit shall have expired or been terminated and
the Notes and all of the other Obligations have been paid in full and all
outstanding Letters of Credit shall have expired or the liability of the Agent
thereon shall have otherwise been discharged, unless the Majority Banks shall
otherwise consent in writing:
Section 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will
furnish to the Banks in hard copy or electronic form:
5.1(a) As soon as available following the date the Borrower is
required to publicly disclose financial results pursuant to the Securities
and Exchange Act of 1934, and in any event within ninety (90) days after
the end of each fiscal year of the Borrower, the consolidated financial
statements of the Borrower and the Subsidiaries consisting of at least
statements of income, cash flow and changes in stockholders' equity, and a
consolidated balance sheet as at the end of such year, setting forth in
each case in comparative form corresponding figures from the previous
annual audit, certified without qualification by Deloitte & Touche or other
independent certified public accountants of recognized national standing
selected by the Borrower and acceptable to the Agent, together with any
management letters, management reports or other supplementary comments or
reports to the Borrower or its board of directors furnished by such
accountants.
5.1(b) Together with the audited financial statements required
under Section 5.1 (a)(i), consolidating financial statements of the
Borrower and the Subsidiaries consisting of at least statements of income,
cash flow and changes in stockholders' equity, and a consolidating balance
sheet as at the end of such year, prepared by the Borrower's certified
public accountants who prepared its audited financial statements, and (b) a
statement by the accounting firm performing such audit to the effect that
it has reviewed this Agreement and that in the course of performing its
examination nothing came to its attention that caused it to believe that
any Default or Event of Default exists, or, if such Default or Event of
Default exists, describing its nature.
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5.1(c) As soon as available following the date the Borrower is
required to publicly disclose financial results pursuant to the Securities
and Exchange Act of 1934, and in any event within forty-five (45) days
after the end of each Quarterly Period, unaudited consolidated and
consolidating statements of income, cash flow and changes in stockholders'
equity for the Borrower and the Subsidiaries for such Quarterly Period and
for the period from the beginning of such fiscal year to the end of such
Quarterly Period, and a consolidated balance sheet of the Borrower as at
the end of such Quarterly Period, setting forth in comparative form figures
for the corresponding period for the preceding fiscal year, accompanied by
a certificate signed by the chief financial officer of the Borrower stating
that such financial statements present fairly the financial condition of
the Borrower and the Subsidiaries and that the same have been prepared in
accordance with GAAP.
5.1(d) As soon as practicable following the date the Borrower is
required to publicly disclose financial results pursuant to the Securities
and Exchange Act of 1934, and in any event within forty-five (45) days
after the end of each Quarterly Period, a Compliance Certificate in the
form attached hereto as Exhibit D signed by the chief financial officer of
the Borrower demonstrating in reasonable detail compliance (or
noncompliance, as the case may be) with Sections 6.10, 6.13(g), 6.14(c),
6.14(g), 6.15, 6.16, 6.17, 6.18 and 6.19 as at the end of such Quarterly
Period and stating that as at the end of such Quarterly Period there did
not exist any Default or Event of Default or, if such Default or Event of
Default existed, specifying the nature and period of existence thereof and
what action the Borrower proposes to take with respect thereto.
5.1(e) As soon as practicable and in any event within forty-five
(45) days after the beginning of each fiscal year of the Borrower,
statements of forecasted consolidated income for the Borrower and the
Subsidiaries for each fiscal month in such fiscal year and a forecasted
consolidated balance sheet of the Borrower and the Subsidiaries, together
with supporting assumptions, as at the end of each Quarterly Period, all in
reasonable detail and reasonably satisfactory in scope to Majority Banks.
5.1(f) Immediately upon any officer of the Borrower becoming
aware of any Default or Event of Default, a notice describing the nature
thereof and what action the Borrower proposes to take with respect thereto.
5.1(g) Immediately upon any officer of the Borrower becoming
aware of the occurrence, with respect to any Plan, of any Reportable Event
or any Prohibited Transaction, a notice specifying the nature thereof and
what action the Borrower proposes to take with respect thereto, and, when
received, copies
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of any notice from PBGC of intention to terminate or have a trustee
appointed for any Plan.
5.1(h) Promptly upon the mailing or filing thereof, copies of
all financial statements, reports and proxy statements mailed to the
Borrower's shareholders, and copies of all registration statements,
periodic reports and other documents filed with the Securities and Exchange
Commission (or any successor thereto) or any national securities exchange.
5.1(i) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the
Subsidiaries as any Bank may reasonably request.
Section 5.2 CORPORATE EXISTENCE. The Borrower will maintain, and
cause each Subsidiary to maintain, its corporate existence in good standing
under the laws of its jurisdiction of incorporation and its qualification to
transact business in each jurisdiction where failure so to qualify would
permanently preclude the Borrower or such Subsidiary from enforcing its rights
with respect to any material asset or would expose the Borrower or such
Subsidiary to any material liability; provided, however, that nothing herein
shall prohibit the merger or liquidation of any Subsidiary allowed under Section
6.1.
Section 5.3 INSURANCE. The Borrower shall maintain, and shall cause
each Subsidiary to maintain, with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in
such amounts and against such hazards as is customary in the case of reputable
firms engaged in the same or similar business and similarly situated.
Section 5.4 PAYMENT OF TAXES AND CLAIMS. The Borrower shall file,
and cause each Subsidiary to file, all tax returns and reports which are
required by law to be filed by it and will pay, and cause each Subsidiary to
pay, before they become delinquent all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands of
any kind (including but not limited to those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result in
the creation of a Lien upon its property; provided that the foregoing items need
not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower's or such Subsidiary's title to its
property is not materially adversely affected, its use of such property in the
ordinary course of its business is not materially interfered with and adequate
reserves with respect thereto have been set aside on the Borrower's or such
Subsidiary's books in accordance with GAAP.
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Section 5.5 INSPECTION. Upon reasonable notice, the Borrower shall
permit any Person designated by the Agent or any Bank to visit and inspect any
of the properties, corporate books and financial records of the Borrower and the
Subsidiaries, to examine and to make copies of the books of accounts and other
financial records of the Borrower and the Subsidiaries, and to discuss the
affairs, finances and accounts of the Borrower and the Subsidiaries with, and to
be advised as to the same by, its officers at such reasonable times and
intervals as the Agent or the Majority Banks may designate. So long as no Event
of Default exists, such visits, inspections and examinations shall be at the
expense of the Agent and the Banks, but any such visits, inspections and
examinations made while any Event of Default is continuing shall be at the
expense of the Borrower.
Section 5.6 MAINTENANCE OF PROPERTIES. The Borrower will maintain,
and cause each Subsidiary to maintain its properties used or useful in the
conduct of its business in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 5.7 BOOKS AND RECORDS. The Borrower will keep, and will
cause each Subsidiary to keep, adequate and proper records and books of account
in which full and correct entries will be made of its dealings, business and
affairs.
Section 5.8 COMPLIANCE. The Borrower will comply, and will cause
each Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject; provided, however, that failure so to comply shall not be a
breach of this covenant if such failure does not have, or is not reasonably
expected to have, a materially adverse effect on the properties, business,
prospects or condition (financial or otherwise) of the Borrower or such
Subsidiary and the Borrower or such Subsidiary is acting in good faith and with
reasonable dispatch to cure such noncompliance.
Section 5.9 NOTICE OF LITIGATION. The Borrower will give prompt
written notice to the Agent of any litigation or governmental proceeding pending
or, to its knowledge, threatened against the Borrower or any of the Subsidiaries
that, if adversely determined, would in the opinion of the Borrower have a
material adverse effect on the business or financial condition of the Borrower
and its Subsidiaries taken as a whole or on the ability of the Borrower or any
Subsidiary to perform its obligations under the Loan Documents.
Section 5.10 ERISA. The Borrower will maintain, and cause each
Subsidiary to maintain, each Plan in compliance with all material applicable
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requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code and will not
and not permit any of the ERISA Affiliates to (a) engage in any transaction in
connection with which the Borrower or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in either case in an amount
exceeding $50,000, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Borrower or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, with respect to any Plan in an
aggregate amount exceeding $50,000 or (c) fail to make any payments in an
aggregate amount exceeding $50,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.11 ENVIRONMENTAL MATTERS; REPORTING. The Borrower will
observe and comply with, and cause each Subsidiary to observe and comply with,
all laws, rules, regulations and orders of any government or government agency
relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent non-compliance could result in a material
liability or otherwise have a material adverse effect on the Borrower and the
Subsidiaries taken as a whole. The Borrower will give the Agent prompt written
notice of any violation as to any environmental matter by the Borrower or any
Subsidiary and of the commencement of any judicial or administrative proceeding
relating to health, safety or environmental matters (a) in which an adverse
determination or result could result in the revocation of or have a material
adverse effect on any operating permits, air emission permits, water discharge
permits, hazardous waste permits or other permits held by the Borrower or any
Subsidiary which are material to the operations of the Borrower or such
Subsidiary, or (b) which will or threatens to impose a material liability on the
Borrower or such Subsidiary to any Person or which will require a material
expenditure by the Borrower or such Subsidiary to cure any alleged problem or
violation.
ARTICLE VI
NEGATIVE COVENANTS
Until any obligation of the Banks hereunder to make Loans and of the
Agent to issue Letters of Credit shall have expired or been terminated and the
Notes and all of the other Obligations have been paid in full and all
outstanding Letters of Credit shall have expired or the liability of the Agent
thereon shall have otherwise been discharged, unless the Majority Banks shall
otherwise consent in writing:
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Section 6.1 MERGER. The Borrower will not merge or consolidate or
enter into any analogous reorganization or transaction with any Person or
liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution)
or permit any Subsidiary to do any of the foregoing; PROVIDED, HOWEVER, that the
foregoing shall not prohibit the following activities: (a) any Subsidiary may be
merged with or liquidated into the Borrower or any wholly-owned Subsidiary (if
the Borrower or such wholly-owned Subsidiary is the surviving corporation and,
after giving effect to any merger in which a Subsidiary is the surviving
corporation, the requirements of Sections 6.14(e), 6.15(b) and 6.18 will be
satisfied); and (b) the Borrower may merge or otherwise combine with any Person
for the purpose of making an Investment permitted by Section 6.12(f), if the
Borrower is the surviving corporation.
Section 6.2 DISPOSITION OF ASSETS. The Borrower will not, and will
not permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one transaction or a series
of transactions), or enter into any commitment to sell, transfer, convey or
lease as lessor, all or a substantial part of its assets (including accounts and
notes receivable, with or without recourse) outside the ordinary course of
business. For purposes of this provision, "substantial part" shall mean ten
percent of the Borrower's consolidated assets. This Section 6.2 shall not
restrict the transfer of assets from the Borrower to any wholly-owned Subsidiary
or among wholly-owned Subsidiaries.
Section 6.3 PLANS. The Borrower will not permit, and will not allow
any Subsidiary to permit, any event to occur or condition to exist which would
permit any Plan to terminate under any circumstances which would cause the Lien
provided for in Section 4068 of ERISA to attach to any assets of the Borrower or
any Subsidiary; and the Borrower will not permit, as of the most recent
valuation date for any Plan subject to Title IV of ERISA, the present value
(determined on the basis of reasonable assumptions employed by the independent
actuary for such Plan and previously furnished in writing to the Banks) of such
Plan's projected benefit obligations to exceed the fair market value of such
Plan's assets.
Section 6.4 CHANGE IN NATURE OF BUSINESS. The Borrower will not, and
will not permit any Subsidiary to, make any material change in the nature of the
business of the Borrower or such Subsidiary, as carried on at the date hereof,
or engage in any line of business materially different from that in which it is
engaged at the date hereof.
Section 6.5 SUBSIDIARIES. After the date of this Agreement, the
Borrower will not, and will not permit any Subsidiary to, form or acquire any
corporation which would thereby become a Subsidiary, unless (a) on or prior to
the date of its formation or acquisition, such Subsidiary executes and delivers
to the Banks a Guaranty, and (b)
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either (i) such Subsidiary is a Real Estate Subsidiary and, after giving effect
to its formation or acquisition, the Borrower and its Subsidiaries are in
compliance with the requirements of Sections 6.14(e) and 6.15(b), or (ii) such
Subsidiary is not a Real Estate Subsidiary and, after giving effect to its
formation or acquisition, the Borrower and its Subsidiaries are in compliance
with the requirements of Section 6.18.
Section 6.6 NEGATIVE PLEDGES; SUBSIDIARY RESTRICTIONS. The Borrower
will not, and will not permit any Subsidiary to, enter into any agreement, bond,
note or other instrument with or for the benefit of any Person other than the
Banks which would (i) prohibit the Borrower or such Subsidiary from granting,
or otherwise limit the ability of the Borrower or such Subsidiary to grant, to
the Banks any Lien on any assets or properties of the Borrower or such
Subsidiary, or (ii) require the Borrower or such Subsidiary to grant a Lien to
any other Person if the Borrower or such Subsidiary grants any Lien to the
Banks; provided, that in connection with any Indebtedness permitted under
Section 6.13 and secured by a Lien permitted under Section 6.14(e), the Borrower
or any Real Estate Subsidiary may enter into an agreement of the type described
in clause (i) above relating solely to the property subject to the Lien
permitted by Section 6.14(e). The Borrower will not permit any Subsidiary to
place or allow any restriction, directly or indirectly, on the ability of such
Subsidiary to (a) pay dividends or any distributions on or with respect to such
Subsidiary's capital stock or (b) make loans or other cash payments to the
Borrower.
Section 6.7 RESTRICTED PAYMENTS. The Borrower will not make any
Restricted Payments, except that (a) the Borrower may issue Series A Junior
Participation Preferred Shares in accordance with the terms of its Rights
Agreement dated as of October 24, 1995, as now in effect or as amended from time
to time, and (b) the Borrower shall be permitted to make Restricted Payments in
an aggregate amount per fiscal year of the Borrower not to exceed $2,000,000 for
the sole purpose of redeeming common stock of the Borrower, provided that no
Default or Event of Default then exists.
Section 6.8 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and
will not permit any Subsidiary to, enter into any transaction with any Affiliate
of the Borrower, except upon fair and reasonable terms no less favorable to the
Borrower or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.
Section 6.9 ACCOUNTING CHANGES. The Borrower will not, and will not
permit any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as permitted by GAAP, or change its fiscal year or
the fiscal year of any Subsidiary.
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Section 6.10 CAPITAL EXPENDITURES. The Borrower will not, and will
not permit any Subsidiary to, (a) make Capital Expenditures (other than
Capitalized Restaurant Lease Obligations), net of any landlord contribution, in
an amount greater than $85,000,000 in its fiscal year ending January 1, 1997,
for each subsequent fiscal year, the amount of permitted Capital Expenditures
shall increase by $5,000,000 per annum, or (b) enter into Capitalized Restaurant
Lease Obligations, except Capitalized Restaurant Lease Obligations of the
Borrower, any Real Estate Subsidiary and, to the extent permitted pursuant to
Section 6.18, other Subsidiaries, in any fiscal year which exceed $15,000,000.
Section 6.11 SUBORDINATED DEBT. The Borrower will not, and will not
permit any Subsidiary to (a) make any scheduled payment of the principal of or
interest on any Subordinated Debt which would be prohibited by the terms of such
Subordinated Debt and any related subordination agreement; (b) directly or
indirectly make any prepayment on or purchase, redeem or defease any
Subordinated Debt or offer to do so (whether such prepayment, purchase or
redemption, or offer with respect thereto, is voluntary or mandatory); (c) amend
or cancel the subordination provisions applicable to any Subordinated Debt; (d)
take or omit to take any action if as a result of such action or omission the
subordination of such Subordinated Debt, or any part thereof, to the Obligations
might be terminated, impaired or adversely affected; or (e) omit to give the
Agent prompt notice of any notice received from any holder of Subordinated Debt,
or any trustee therefor, or of any default under any agreement or instrument
relating to any Subordinated Debt by reason whereof such Subordinated Debt might
become or be declared to be due or payable.
Section 6.12 INVESTMENTS. The Borrower will not, and will not permit
any Subsidiary to, acquire for value, make, have or hold any Investments,
except:
(a) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued by
U.S. corporations rated "A-1" or "A-2" by Standard & Poors Corporation or
"P-1" or "P-2" by Moody's Investors Service or certificates of deposit or
bankers' acceptances having a maturity of one year or less issued by
members of the Federal Reserve System having deposits in excess of
$100,000,000;
(b) loans to officers, employees or directors of the Borrower
not otherwise permitted pursuant to this Section 6.12, in an aggregate
amount at any time outstanding not exceeding at any one time an aggregate
of $250,000;
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(c) travel advances to officers and employees of the Borrower; and
(d) the loans to and investments in the Subsidiaries existing on the
date hereof; PROVIDED FURTHER that nothing in this Section 6.12 shall be
deemed a restriction on loans, investments and transfers in the ordinary
course of business between or among the Borrower and any wholly-owned
Subsidiary that has guaranteed the obligations of the Borrower under this
Agreement and the Notes.
(e) guaranties by the Borrower of leases entered into by its
Subsidiaries; and
(f) loans to and investments in (in addition to those permitted by
clause (d)) entities other than wholly-owned Subsidiaries or Guarantors
that are primarily engaged in the type of business engaged in by the
Borrower, not to exceed at any one time an aggregate of $10,000,000.
Section 6.13 INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, incur, create, issue, assume or suffer to exist any
Indebtedness, except (a) the Indebtedness evidenced by the Note, (b)
Subordinated Debt of the Borrower, (c) Indebtedness created in the ordinary
course of business other than for money borrowed or property leased, (d) the
Indebtedness listed in the attached Schedule 6.13, (e) Indebtedness secured by
liens permitted under Section 6.14(e) hereof, (f) Indebtedness owed to the
Borrower by its Subsidiaries to the extent permitted by Section 6.12, and (g)
Capitalized Restaurant Lease Obligations permitted by Section 6.10(b).
Section 6.14 LIENS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien, or enter into,
or make any commitment to enter into, any arrangement for the acquisition of any
property through conditional sale, lease-purchase or other title retention
agreements, with respect to any property now owned or hereafter acquired by the
Borrower or a Subsidiary, except:
(a) Materialmen's, mechanics', suppliers', tax, assessments,
warehousemen's liens, statutory liens of landlords and other like liens
arising in the ordinary course of business (including the leasing,
building, equipping and operating of restaurants) securing obligations
which are not yet due or which are being contested in good faith by
appropriate proceedings,
(b) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
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and other types of social security or to secure the performance of
statutory obligations,
(c) Encumbrances consisting of zoning regulations, easements,
rights of way, survey exceptions and other similar restrictions on the use
of real property and minor irregularities in titles thereto which do not
materially impair their use in the operation of its business,
(d) Liens and encumbrances reflected in the attached Schedule
6.14,
(e) Purchase money mortgages, liens, or security interests
(which term for purposes of this subsection shall include conditional sale
agreements or other title retention agreements and leases in the nature of
title retention agreement) upon or in property acquired by the Borrower or
a Real Estate Subsidiary after the date hereof, PROVIDED THAT (i) no such
mortgage, lien or security interest extends or shall extend to or cover any
property of the Borrower or such Real Estate Subsidiary, other than the
property then being acquired, (ii) the aggregate principal amount of all
Indebtedness of all Real Estate Subsidiaries secured by all mortgages,
liens or security interests described in this subsection shall not exceed
$30,000,000 at any one time, and (iii) the aggregate principal amount of
all Indebtedness of the Borrower secured by all mortgages, liens or
security interests described in this subsection shall not exceed $3,000,000
at any one time outstanding, and
(f) Capitalized Restaurant Lease Obligations to the extent
permitted by Section 6.10.
Section 6.15 LEVERAGE RATIO. The Borrower will not (a) permit its
consolidated Leverage Ratio at any time to be more than 2.30 to 1.00; or (b)
permit the Leverage Ratio of any Real Estate Subsidiary at any time to be more
than 7.00 to 1.00.
Section 6.16 MINIMUM TANGIBLE NET WORTH. The Borrower will not
permit its consolidated Tangible Net Worth at any time to be less than 95% of
the Borrower's consolidated Tangible Net Worth as of its most recent fiscal year
end or, in the case of any measurement at the end of any fiscal year, as of its
preceding fiscal year end.
Section 6.17 MINIMUM FIXED CHARGE COVERAGE RATIO. The Borrower shall
not permit its Fixed Charge Coverage Ratio for any four consecutive Quarterly
Periods to be less than 1.75 to 1.00.
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Section 6.18 LOSS LIMITATION. The Borrower will not suffer a net
loss for any period of two consecutive fiscal quarters.
Section 6.19 SUBSIDIARY INDEBTEDNESS, LIENS AND OPERATING LEASES.
The Borrower will not permit any Subsidiary other than a Real Estate Subsidiary
to (a) incur any Indebtedness (including, without limitation, Capitalized
Restaurant Lease Obligations) other than (i) liabilities not consisting of
Indebtedness for borrowed money or the deferred purchase price of property
incurred in the ordinary course of business, and (ii) obligations (including, to
the extent permitted, Capitalized Lease Obligations) permitted pursuant to
clause (b) of this Section 4.18, or (b) enter into any lease of real or personal
property with any Person other than the Borrower or a Guarantor if the aggregate
amount of lease payments required to be made under all such leases by all
Subsidiaries other than Real Estate Subsidiaries in any fiscal year of the
Borrower would exceed $1,000,000.
Section 6.20 NOTIFICATION REGARDING C.E.O. The Borrower shall
immediately notify the Bank in the event that Roe H. Hatlen shall resign or die
or for any other reason cease actively participating as chief executive officer
of the Borrower for a period of at least 30 consecutive calendar days.
Section 6.21 LOAN PROCEEDS. The Borrower will not, and will not
permit any Subsidiary to, use any part of the proceeds of any Loans or Letters
of Credit directly or indirectly, and whether immediately, incidentally or
ultimately, (a) to purchase or carry margin stock (as defined in Regulation U of
the Board) or to extend credit to others for the purpose of purchasing or
carrying margin stock or to refund Indebtedness originally incurred for such
purpose or (b) for any purpose which entails a violation of, or which is
inconsistent with, the provisions of Regulations G, U or X of the Board.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an Event of Default:
7.1(a) The Borrower shall fail to (a) pay when due, whether by
acceleration or otherwise, any payment of principal on any Note or any
Unpaid Drawing (provided, that no Event of Default shall occur as a result
of the Borrower's failure to pay any Unpaid Drawing if such Unpaid Drawing
is paid from Revolving Loans made pursuant to Section 2.15 and, at the time
such Revolving Loans are made, the Borrower would otherwise have been
entitled to
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obtain such Revolving Loans pursuant to this Agreement), (b) make any
deposit into the Holding Account when the same becomes due, or (c) pay
within five days after the same becomes due any other Obligation required
to be paid to the Agent or any Bank pursuant to this Agreement.
7.1(b) Any representation or warranty made by or on behalf of
the Borrower or any Subsidiary in this Agreement or any other Loan Document
or by or in any certificate, statement, report or document herewith or
hereafter furnished to any Bank or the Agent pursuant to this Agreement or
any other Loan Document shall prove to have been false or misleading in any
material respect on the date as of which the facts set forth are stated or
certified.
7.1(c) The Borrower shall fail to comply with SECTIONS 5.2 OR 5.3
hereof or any Section of Article VI hereof.
7.1(d) The Borrower shall fail to comply with any other
agreement, covenant, condition, provision or term contained in this
Agreement (other than those hereinabove set forth in this Section 7.1) and
such failure to comply shall continue for thirty (30) calendar days after
whichever of the following dates is the earliest: (i) the date the
Borrower gives notice of such failure to the Banks, (ii) the date the
Borrower should have given notice of such failure to the Banks pursuant to
Section 5.1, or (iii) the date the Agent or any Bank gives notice of such
failure to the Borrower.
7.1(e) The Borrower or any Subsidiary shall become insolvent or
shall generally not pay its debts as they mature or shall apply for, shall
consent to, or shall acquiesce in the appointment of a custodian, trustee
or receiver of the Borrower or such Subsidiary or for a substantial part of
the property thereof or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed for the
Borrower or a Subsidiary or for a substantial part of the property thereof
and shall not be discharged within 60 days, or the Borrower or any
Subsidiary shall make an assignment for the benefit of creditors.
7.1(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower or any Subsidiary, and, if instituted against the
Borrower or any Subsidiary, shall have been consented to or acquiesced in
by the Borrower or such Subsidiary, or shall remain undismissed for 60
days, or an order for relief shall have been entered against the Borrower
or such Subsidiary.
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7.1(g) Any dissolution or liquidation proceeding not permitted
by Section 6.1 shall be instituted by or against the Borrower or a
Subsidiary, and, if instituted against the Borrower or any Subsidiary,
shall be consented to or acquiesced in by the Borrower or such Subsidiary
or shall remain for 60 days undismissed.
7.1(h) A judgment or judgments for the payment of money in
excess of the sum of $2,000,000 in the aggregate shall be rendered against
the Borrower or a Subsidiary and either (i) the judgment creditor executes
on such judgment, unless such execution is enjoined or otherwise declared
invalid or unenforceable before possession of any property of the Borrower
or a Subsidiary is obtained by the judgment creditor, or (ii) such judgment
remains unpaid or undischarged for more than 60 days from the date of entry
thereof or such longer period during which execution of such judgment shall
be stayed during an appeal from such judgment.
7.1(i) The maturity of any material Indebtedness of the Borrower
(other than Indebtedness under this Agreement) or a Subsidiary shall be
accelerated, or the Borrower or a Subsidiary shall fail to pay any such
material Indebtedness when due (after the lapse of any applicable grace
period) or, in the case of such Indebtedness payable on demand, when
demanded (after the lapse of any applicable grace period), or any event
shall occur or condition shall exist and shall continue for more than the
period of grace, if any, applicable thereto and shall have the effect of
causing, or permitting the holder of any such Indebtedness or any trustee
or other Person acting on behalf of such holder to cause, such material
Indebtedness to become due prior to its stated maturity or to realize upon
any collateral given as security therefor. For purposes of this Section,
Indebtedness of the Borrower or a Subsidiary shall be deemed "material" if
it exceeds $2,000,000 as to any item of Indebtedness or in the aggregate
for all items of Indebtedness with respect to which any of the events
described in this Section 7.1(i) has occurred.
7.1(j) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower or any Subsidiary shall be
taken or attempted to be taken and the same shall not have been vacated or
stayed within 60 days after the issuance thereof.
Section 7.2 REMEDIES. If (a) any Event of Default described in
Sections 7.1(e), (f) or (g) shall occur with respect to the Borrower , the
Commitments shall automatically terminate and the Notes and all other
Obligations shall automatically become immediately due and payable, and the
Borrower shall without demand pay into the Holding Account an amount equal to
the aggregate face amount of all
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outstanding Letters of Credit; or (b) any other Event of Default shall occur and
be continuing, then, upon receipt by the Agent of a request in writing from the
Majority Banks, the Agent shall take any of the following actions so requested:
(i) declare the Commitments terminated, whereupon the Commitments shall
terminate, (ii) declare the outstanding unpaid principal balance of the Notes,
the accrued and unpaid interest thereon and all other Obligations to be
forthwith due and payable, whereupon the Notes, all accrued and unpaid interest
thereon and all such Obligations shall immediately become due and payable, in
each case without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, anything in this Agreement or in the Notes
to the contrary notwithstanding, and (iii) demand that the Borrower pay into the
Holding Account an amount equal to the aggregate face amount of all outstanding
Letters of Credit. Upon the occurrence of any of the events described in clause
(a) of the preceding sentence, or upon the occurrence of any of the events
described in clause (b) of the preceding sentence when so requested by the
Majority Banks, the Agent may exercise all rights and remedies under any of the
Loan Documents, and enforce all rights and remedies under any applicable law.
Section 7.3 OFFSET. In addition to the remedies set forth in Section
7.2, upon the occurrence of any Event of Default and thereafter while the same
be continuing, the Borrower hereby irrevocably authorizes each Bank to set off
any Obligations owed to such Bank against all deposits and credits of the
Borrower with, and any and all claims of the Borrower against, such Bank. Such
right shall exist whether or not such Bank shall have made any demand hereunder
or under any other Loan Document, whether or not the Obligations, or any part
thereof, or deposits and credits held for the account of the Borrower is or are
matured or unmatured, and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available to such
Bank or the Banks. Each Bank agrees that, as promptly as is reasonably possible
after the exercise of any such setoff right, it shall notify the Borrower of its
exercise of such setoff right; provided, however, that the failure of such Bank
to provide such notice shall not affect the validity of the exercise of such
setoff rights. Nothing in this Agreement shall be deemed a waiver or
prohibition of or restriction on any Bank to all rights of banker's Lien, setoff
and counterclaim available pursuant to law.
ARTICLE VIII
THE AGENT
The following provisions shall govern the relationship of the Agent
with the Banks.
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Section 8.1 APPOINTMENT AND AUTHORIZATION. Each Bank appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such respective powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto. Neither the Agent nor any of its directors, officers or employees
shall be liable for any action taken or omitted to be taken by it under or in
connection with the Loan Documents, except for its own gross negligence or
willful misconduct. The Agent shall act as an independent contractor in
performing its obligations as Agent hereunder and nothing herein contained shall
be deemed to create any fiduciary relationship among or between the Agent, the
Borrower or the Banks.
Section 8.2 NOTE HOLDERS. The Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have been filed
with it, signed by such payee and in form satisfactory to the Agent.
Section 8.3 CONSULTATION WITH COUNSEL. The Agent may consult with
legal counsel selected by it and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
Section 8.4 LOAN DOCUMENTS. The Agent shall not be under a duty to
examine or pass upon the validity, effectiveness, genuineness or value of any of
the Loan Documents or any other instrument or document furnished pursuant
thereto, and the Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be.
Section 8.5 FIRST BANK AND AFFILIATES. With respect to its
Commitments and the Loans made by it, First Bank shall have the same rights and
powers under the Loan Documents as any other Bank and may exercise the same as
though it were not the Agent consistent with the terms thereof, and First Bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower as if it were not the Agent.
Section 8.6 ACTION BY AGENT. Except as may otherwise be expressly
stated in this Agreement, the Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it by, or with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, the Loan
Documents. The Agent shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Banks, and such instructions shall be binding upon
all holders of Notes; provided, however, that the Agent shall not be required to
take any action which exposes the Agent to personal liability or which is
contrary to the Loan Documents or applicable law. The Agent shall incur no
liability under or in
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respect of any of the Loan Documents by acting upon any notice, consent,
certificate, warranty or other paper or instrument believed by it to be genuine
or authentic or to be signed by the proper party or parties and to be consistent
with the terms of this Agreement.
Section 8.7 CREDIT ANALYSIS. Each Bank has made, and shall continue
to make, its own independent investigation or evaluation of the operations,
business, property and condition, financial and otherwise, of the Borrower in
connection with entering into this Agreement and has made its own appraisal of
the creditworthiness of the Borrower. Except as explicitly provided herein, the
Agent has no duty or responsibility, either initially or on a continuing basis,
to provide any Bank with any credit or other information with respect to such
operations, business, property, condition or creditworthiness, whether such
information comes into its possession on or before the first Event of Default or
at any time thereafter.
Section 8.8 NOTICES OF EVENT OF DEFAULT, ETC. In the event that the
Agent shall have acquired actual knowledge of any Event of Default or Default,
the Agent shall promptly give notice thereof to the Banks.
Section 8.9 INDEMNIFICATION. Each Bank agrees to indemnify the
Agent, as Agent (to the extent not reimbursed by the Borrower), ratably
according to such Bank's Pro Rata Share (determined under clause (c) of the
definition thereof) from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on or
incurred by the Agent in any way relating to or arising out of the Loan
Documents or any action taken or omitted by the Agent under the Loan Documents,
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct. No payment by any Bank under this Section shall relieve the
Borrower of any of its obligations under this Agreement.
Section 8.10 PAYMENTS AND COLLECTIONS. All funds received by the
Agent in respect of any payments made by the Borrower on the Notes shall be
distributed forthwith by the Agent among the Banks, in like currency and funds
as received, ratably according to each Bank's Pro Rata Share. After any Event
of Default has occurred, all funds received by the Agent, whether as payments by
the Borrower or as realization on collateral or on any guaranties, shall (except
as may otherwise be required by law) be distributed by the Agent in the
following order: (a) first to the Agent or any Bank who has incurred
unreimbursed costs of collection with respect to any Obligations hereunder,
ratably to the Agent and each Bank in the proportion that the costs incurred by
the Agent or such Bank bear to the total of all such costs incurred by the Agent
and
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all Banks; (b) next to the Agent for the account of the Banks (in accordance
with their respective Pro Rata Shares) for application on the Notes; (c) next to
the Agent for the account of the Banks (in accordance with their respective Pro
Rata Shares) for any unpaid Commitment Fees or Letter of Credit Fees owing by
the Borrower hereunder; and (d) last to the Agent to be held in the Holding
Account to cover any outstanding Letters of Credit.
Section 8.11 SHARING OF PAYMENTS. If any Bank shall receive and
retain any payment, voluntary or involuntary, whether by setoff, application of
deposit balance or security, or otherwise, in respect of Indebtedness under this
Agreement or the Notes in excess of such Bank's share thereof as determined
under this Agreement, then such Bank shall purchase from the other Banks for
cash and at face value and without recourse, such participation in the Notes
held by such other Banks as shall be necessary to cause such excess payment to
be shared ratably as aforesaid with such other Banks; provided, that if such
excess payment or part thereof is thereafter recovered from such purchasing
Bank, the related purchases from the other Banks shall be rescinded ratably and
the purchase price restored as to the portion of such excess payment so
recovered, but without interest. Subject to the participation purchase
obligation above, each Bank agrees to exercise any and all rights of setoff,
counterclaim or banker's lien first fully against any Notes and participations
therein held by such Bank, next to any other Indebtedness of the Borrower to
such Bank arising under or pursuant to this Agreement and to any participations
held by such Bank in Indebtedness of the Borrower arising under or pursuant to
this Agreement, and only then to any other Indebtedness of the Borrower to such
Bank.
Section 8.12 ADVICE TO BANKS. The Agent shall forward to the Banks
copies of all notices, financial reports and other communications received
hereunder from the Borrower by it as Agent, excluding, however, notices, reports
and communications which by the terms hereof are to be furnished by the Borrower
directly to each Bank.
Section 8.13 RESIGNATION. If at any time First Bank shall deem it
advisable, in its sole discretion, it may submit to each of the Banks and the
Borrower a written notification of its resignation as Agent under this
Agreement, such resignation to be effective upon the appointment of a successor
Agent, but in no event later than 30 days from the date of such notice. Upon
submission of such notice, the Majority Banks may appoint a successor Agent.
ARTICLE IX
MISCELLANEOUS
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Section 9.1 MODIFICATIONS. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure therefrom by the Borrower or other party thereto shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks,
and then such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the purpose for which given. Notwithstanding
the forgoing, no such amendment, modification, waiver or consent shall:
9.1(a) Reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of the principal thereof, or modify any of
the provisions of any Note with respect to the payment or repayment
thereof, without the consent of all of the Banks; or
9.1(b) Increase the amount or extend the time of any Commitment,
without the consent of all of the Banks; or
9.1(c) Reduce the rate or extend the time of payment of any fee,
without the consent of all of the Banks; or
9.1(d) Except as may otherwise be expressly provided in any of
the other Loan Documents, release any Guaranty without the consent of all
the Banks; or
9.1(e) Amend the definition of Majority Banks or otherwise
reduce the percentage of the Banks required to approve or effectuate any
such amendment, modification, waiver, or consent, without the consent of
all the Banks; or
9.1(f) Amend any of the foregoing Sections 9.1 (a) through (e)
or this Section 9.1 (f) without the consent of all the Banks; or
9.1(g) Amend any provision of this Agreement relating to the
Agent in its capacity as Agent without the consent of the Agent; or
9.1(h) Amend any provision of this Agreement relating to the
issuance of Letters of Credit without the consent of the Agent.
Section 9.2 EXPENSES. Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to reimburse the Agent upon demand
for all reasonable out-of-pocket expenses paid or incurred by the Agent
(including filing
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and recording costs and fees and expenses of Dorsey & Whitney P.L.L.P., counsel
to the Agent) in connection with the negotiation, preparation, approval, review,
execution, delivery, administration, amendment, modification and interpretation
of this Agreement and the other Loan Documents and any commitment letters
relating thereto. The Borrower shall also reimburse the Agent and each Bank
upon demand for all reasonable out-of-pocket expenses (including expenses of
legal counsel) paid or incurred by the Agent or any Bank in connection with the
collection and enforcement of this Agreement and any other Loan Document. The
obligations of the Borrower under this Section shall survive any termination of
this Agreement.
Section 9.3 WAIVERS, ETC. No failure on the part of the Agent or the
holder of a Note to exercise and no delay in exercising any power or right
hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
The remedies herein and in the other Loan Documents provided are cumulative and
not exclusive of any remedies provided by law.
Section 9.4 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Agent or any Bank under Article II hereof shall be deemed to
have been given only when received by the Agent or such Bank.
Section 9.5 TAXES. The Borrower agrees to 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 Notes, which obligation of the Borrower shall survive the
termination of this Agreement.
Section 9.6 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS;
TRANSFEREES. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Borrower may not assign its rights or delegate its obligations hereunder or
under any other Loan Document without
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the prior written consent of all the Banks. Each Bank may at any time sell,
assign, transfer, grant participations in, or otherwise dispose of any portion
of its Commitment, the Loans and/or Advances (each such interest so disposed of
being herein called a "Transferred Interest") to banks or other financial
institutions ("Transferees"); PROVIDED, HOWEVER, that a Bank may assign (as
opposed to selling a participation in) any portion of its Commitment, Loans
and/or Advances only with the consent of the Agent (which consent shall not be
unreasonably withheld) and the Borrower, and only upon payment to the Agent by
the parties to such disposition of a processing and recording fee in the amount
of $2,500 for each party. The Borrower agrees that each Transferee shall be
entitled to the benefits of Sections 2.22, 2.23, 2.24, 2.25, 2.27 and 9.2 with
respect to its Transferred Interest and that each Transferee may exercise any
and all rights of banker's Lien, setoff and counterclaim as if such Transferee
were a direct lender to the Borrower. If any Bank makes any assignment to a
Transferee, then upon notice to the Borrower such Transferee, to the extent of
such assignment (unless otherwise provided therein), shall become a "Bank"
hereunder and shall have all the rights and obligations of such Bank hereunder
and such Bank shall be released from its duties and obligations under this
Agreement to the extent of such assignment. Notwithstanding the sale by any
Bank of any participation hereunder, (a) no participant shall be deemed to be or
have the rights and obligations of a Bank hereunder except that any participant
shall have a right of setoff under Section 7.3 as if it were such Bank and the
amount of its participation were owing directly to such participant by the
Borrower and (b) such Bank shall not in connection with selling any such
participation condition such Bank's rights in connection with consenting to
amendments or granting waivers concerning any matter under any Loan Document
upon obtaining the consent of such participant other than on matters relating to
(i) any reduction in the amount of any principal of, or the amount of or rate of
interest on, any Note or Advance in which such participation is sold, (ii) any
postponement of the date fixed for any payment of principal of or interest on
any Note or Advance in which such participation is sold, (iii) the release or
subordination of any material portion of any collateral other than pursuant to
the terms of any Security Document or (iv) the release of any Guaranty.
Section 9.7 CONFIDENTIALITY OF INFORMATION. The Agent and each Bank
shall use reasonable efforts to assure that information about the Borrower and
its operations, affairs and financial condition, not generally disclosed to the
public or to trade and other creditors, which is furnished to the Agent or such
Bank pursuant to the provisions hereof is used only for the purposes of this
Agreement and any other relationship between any Bank and the Borrower and shall
not be divulged to any Person other than the Banks, their Affiliates and their
respective officers, directors, employees and agents, except: (a) to their
attorneys and accountants, (b) in connection with the enforcement of the rights
of the Banks hereunder and under the Notes and the Security Documents or
otherwise in connection with applicable litigation, (c) in connection with
assignments and participations and the solicitation of prospective
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assignees and participants referred to in the immediately preceding Section, and
(d) as may otherwise be required or requested by any regulatory authority
having jurisdiction over any Bank or by any applicable law, rule, regulation or
judicial process, the opinion of such Bank's counsel concerning the making of
such disclosure to be binding on the parties hereto. No Bank shall incur any
liability to the Borrower by reason of any disclosure permitted by this Section
9.7.
Section 9.8 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY,
CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT
TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE
UNITED STATES APPLICABLE TO NATIONAL BANKS. Whenever possible, each provision
of this Agreement and the other Loan Documents and any other statement,
instrument or transaction contemplated hereby or thereby or relating hereto or
thereto shall be interpreted in such manner as to be effective and valid under
such applicable law, but, if any provision of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto shall be held to be prohibited or
invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto.
Section 9.9 CONSENT TO JURISDICTION. AT THE OPTION OF THE AGENT,
THIS AGREEMENT AND THE OTHER BORROWER LOAN DOCUMENTS MAY BE ENFORCED IN ANY
FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA;
AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT
THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE AGENT AT ITS OPTION SHALL BE ENTITLED TO HAVE THE
CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF
SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
Section 9.10 WAIVER OF JURY TRIAL. EACH OF THE BORROWER , THE AGENT
AND THE BANKS IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING
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<PAGE>
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
Section 9.11 SURVIVAL OF AGREEMENT. All representations, warranties,
covenants and agreement made by the Borrower herein or in the other Borrower
Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be deemed to have been relied upon by the Banks and shall survive
the making of the Loans by the Banks and the execution and delivery to the Banks
by the Borrower of the Notes, regardless of any investigation made by or on
behalf of the Banks, and shall continue in full force and effect as long as any
Obligation is outstanding and unpaid and so long as the Commitments have not
been terminated; provided, however, that the obligations of the Borrower under
Section 9.2, 9.5 and 9.12 shall survive payment in full of the Obligations and
the termination of the Commitments.
Section 9.12 INDEMNIFICATION. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Agent and the Banks and their
respective Affiliates and the directors, officers, employees, attorneys and
agents of the Agent and the Banks and their respective Affiliates (each of the
foregoing being an "Indemnitee" and all of the foregoing being collectively the
"Indemnitees") from and against any and all claims, actions, damages,
liabilities, judgments, costs and expenses (including all reasonable fees and
disbursements of counsel which may be incurred in the investigation or defense
of any matter) imposed upon, incurred by or asserted against any Indemnitee,
whether direct, indirect or consequential and whether based on any federal,
state, local or foreign laws or regulations (including securities laws,
environmental laws, commercial laws and regulations), under common law or on
equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with the
execution, delivery, performance or enforcement of any Loan Document, any
commitments relating thereto, or any transaction contemplated by any Loan
Document; or
(b) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by any
Person, or the exercise of any rights or remedies thereunder, including the
acquisition of any collateral by the Banks by way of foreclosure of the
Lien thereon, deed or bill of sale in lieu of such foreclosure or
otherwise;
provided, however, that the Borrower shall not be liable to any Indemnitee for
any portion of such claims, damages, liabilities and expenses resulting from
such Indemnitee's gross negligence or willful misconduct. In the event this
indemnity is
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unenforceable as a matter of law as to a particular matter or consequence
referred to herein, it shall be enforceable to the full extent permitted by law.
This indemnification applies, without limitation, to any act,
omission, event or circumstance existing or occurring on or prior to the later
of the Termination Date or the date of payment in full of the Obligations,
including specifically Obligations arising under clause (b) of this Section.
The indemnification provisions set forth above shall be in addition to any
liability the Borrower may otherwise have. Without prejudice to the survival of
any other obligation of the Borrower hereunder the indemnities and obligations
of the Borrower contained in this Section shall survive the payment in full of
the other Obligations.
Section 9.13 CAPTIONS. The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.
Section 9.14 ENTIRE AGREEMENT. This Agreement and the other Borrower
Loan Documents embody the entire agreement and understanding between the
Borrower, the Agent and the Banks with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. Nothing contained in this Agreement or
in any other Loan Document, expressed or implied, is intended to confer upon any
Persons other than the parties hereto any rights, remedies, obligations or
liabilities hereunder or thereunder.
Section 9.15 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 9.16 BORROWER ACKNOWLEDGEMENTS. The Borrower hereby
acknowledges that (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents, (b)
neither the Agent nor any Bank has any fiduciary relationship to the Borrower,
the relationship being solely that of debtor and creditor, (c) no joint venture
exists between the Borrower and the Agent or any Bank, and (d) neither the Agent
nor any Bank undertakes any responsibility to the Borrower to review or inform
the Borrower of any matter in connection with any phase of the business or
operations of the Borrower and the Borrower shall rely entirely upon its own
judgment with respect to its business, and any review, inspection or supervision
of, or information supplied to, the Borrower by the Agent or any Bank is for the
protection of the Banks and neither the Borrower nor any third party is entitled
to rely thereon.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
BUFFETS, INC.
By /s/ Clark C. Grant
-------------------------------
Its Executive Vice President
-------------------------
Address for Borrower:
10260 Viking Drive
Suite 100
Eden Prairie, Minnesota 55344
Attention: Clark C. Grant
-----------------------
FIRST BANK NATIONAL ASSOCIATION
In its individual corporate
capacity and as Agent
By /s/ Megan Mourning
-------------------------------
Its Vice President
-------------------------
Address:
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Gary Perkins MPFP0601
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<PAGE>
EXHIBITS
A. Form of Guaranty
B. Form of Note
C. Matters to be Covered by Opinion of Counsel to the Borrower and the
Guarantors
D. Form of Compliance Certificate
SCHEDULES
1.1(a) Commitment Amounts
4.6 Pending Litigation
4.18 Subsidiaries
6.13 Existing Indebtedness
6.14 Existing Liens
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<PAGE>
SCHEDULE 1.1(a)
TO CREDIT AGREEMENT
Bank Commitment Amount
- ---- ------------------
First Bank National Association $50,000,000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF APRIL 24, 1996 AND THE CONSOLIDATED STATEMENT
OF EARNINGS FOR THE PERIOD ENDED APRIL 24, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> JAN-01-1997
<PERIOD-START> JAN-04-1996
<PERIOD-END> APR-24-1996
<CASH> 13,286
<SECURITIES> 0
<RECEIVABLES> 1,634
<ALLOWANCES> 0
<INVENTORY> 2,839
<CURRENT-ASSETS> 25,686
<PP&E> 318,202
<DEPRECIATION> 94,971
<TOTAL-ASSETS> 254,684
<CURRENT-LIABILITIES> 53,923
<BONDS> 10,000
0
0
<COMMON> 313
<OTHER-SE> 177,470
<TOTAL-LIABILITY-AND-EQUITY> 254,684
<SALES> 155,935
<TOTAL-REVENUES> 155,935
<CGS> 138,913
<TOTAL-COSTS> 138,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 8,950
<INCOME-TAX> 3,401
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,549
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
