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EXHIBIT (b)(2)
LEHMAN COMMERCIAL PAPER INC. FLEET NATIONAL BANK
3 WORLD FINANCIAL CENTER 100 FEDERAL STREET
NEW YORK, NEW YORK 10285 BOSTON, MASSACHUSETTS 02110
LEHMAN BROTHERS INC. FLEETBOSTON ROBERTSON STEPHENS INC.
3 WORLD FINANCIAL CENTER 100 FEDERAL STREET
NEW YORK, NEW YORK 10285 BOSTON, MASSACHUSETTS 02110
June 2, 2000
COMMITMENT LETTER
Caxton-Iseman Capital, Inc.
667 Madison Avenue, 5th Floor
New York, NY 10021
Attention: Fred Iseman
Big Boy Merger Corporation
667 Madison Avenue, 5th Floor
New York, NY 10021
Attention: Fred Iseman
Ladies and Gentlemen:
This commitment letter agreement (together with all exhibits and schedules
hereto, the "COMMITMENT LETTER") will confirm the understanding and agreement
among Lehman Commercial Paper Inc., ("LCPI"), Fleet National Bank ("FLEET", and
together with LCPI, the "INITIAL LENDERS"), Lehman Brothers Inc., as sole
advisor, joint book-running manager and co-lead arranger ("LEHMAN BROTHERS"),
FleetBoston Robertson Stephens Inc., as joint book-running manager and co-lead
arranger ("FRS" and, together with Lehman Brothers, the "ARRANGERS"), Big Boy
Merger Corporation, (the "COMPANY"), and Caxton-Iseman Capital Inc. (the
"SPONSOR"), in connection with the proposed financing for the acquisition of all
of the issued and outstanding common stock of Buffets, Inc. ("BUFFETS", and
together with each of its subsidiaries, the "ACQUIRED BUSINESS"). We understand
that the Company proposes to sign an agreement (the "ACQUISITION AGREEMENT") to
acquire all of the issued and outstanding common stock of the Acquired Business
(the "ACQUISITION") on or before September 30, 2000 (the "CLOSING DATE").
You have advised us that the total funds needed to finance the Acquisition,
including fees and expenses (which will not exceed $25.0 million) will be
approximately $555.0 million (net of cash on-hand of approximately $110.2
million) and that such funds will be provided from the following sources: (i)
$310.0 million of borrowings by the Company under a $310.0 Senior Term Loan
Facility and a $20.0 million Revolving Credit Facility (collectively, the
"CREDIT FACILITIES") among the Company, LCPI, Fleet and the financial
institutions party thereto, (ii) at least a $130.0 million equity investment by
the Sponsor, other investors selected by it (to the reasonable satisfaction of
the Arrangers), and management in the Company (the "EQUITY INVESTMENT"), (iii)
$20.0 million of net proceeds of a sale/leaseback transaction (the
"SALE/LEASEBACK"), (iv) $35.0 million in mezzanine financing (the "MEZZANINE
DEBT-PARENT") to be issued by the direct holding company of the Company (the
"PARENT"), which will, itself, be formed by the
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Sponsor and to be placed by Credit Suisse First Boston Corporation, (v) $60.0
million in mezzanine financing (the "MEZZANINE DEBT-NEWCO", and together with
the Mezzanine Debt-Parent, the "MEZZANINE DEBT") to be issued by Newco and to be
placed by Credit Suisse First Boston Corporation. Following the Acquisition,
neither the Parent nor the Company nor any of their respective subsidiaries will
have any material debt or equity outstanding except as described in this
paragraph, and the Parent will have no material assets other than its equity
interest in the Company. As used below, the defined term "Company" shall mean
both the Company prior to the Acquisition and the Company together with the
Acquired Business, after giving effect to the Acquisition.
1. The Commitments.
(a) You have requested (i) that the Initial Lenders (collectively with
each other financial institution that becomes a lender under the Credit
Facilities, the "SENIOR LENDERS") commit to provide the entire amount of the
Credit Facilities upon the terms and subject to the conditions set forth or
referred to in this Commitment Letter, in the Summary of Terms of Credit
Facilities attached hereto as Exhibit A (the "TERM SHEET") and in the Funding
Conditions attached hereto as Exhibit B (the "FUNDING CONDITIONS").
(b) Based on the foregoing, each of the Initial Lenders is pleased to
confirm by this Commitment Letter its several (but not joint) commitment to you
(the "COMMITMENT"), to provide or cause one of its affiliates to provide an
amount of the Credit Facilities up to such Initial Lender's Specified
Percentage, as defined below.
For the purposes hereof, the term "SPECIFIED PERCENTAGE" shall mean
(i) 50.0% for LCPI and (ii) 50.0% for Fleet.
(c) It is agreed that (i) Lehman Brothers will act as the sole advisor,
joint book-running manager and co-lead arranger and that FRS will act as joint
book-running manager and co-lead arranger for the Credit Facilities and (ii)
LCPI will act as the sole and exclusive Administrative Agent and Fleet will act
as the sole and exclusive Syndication Agent for the Credit Facilities (the
Administrative Agent and the Syndication Agent collectively, the "AGENTS"). Each
of the Arrangers and the Agents will perform the duties and exercise the
authority customarily performed and exercised by it in its respective role. You
agree that no other agents, co-agents, arrangers or book managers will be
appointed, no other titles will be awarded and no compensation (other than that
expressly contemplated by the Term Sheet or the Fee Letter referred to below)
will be paid in connection with the Credit Facilities unless you and we shall so
agree.
(d) The commitments and agreements of the Initial Lenders and the
Arrangers described herein are subject to the negotiation, execution and
delivery on or before September 30, 2000 of definitive documentation with
respect to the Credit Facilities, reasonably satisfactory to the Initial Lenders
and the Arrangers and their counsel and to the other conditions set forth or
referred to in the Term Sheet and the Funding Conditions. The terms and
conditions of such commitments hereunder and of the Credit Facilities are not
limited to those set forth herein and in the Term Sheet; those matters that are
not covered by the provisions hereof or of the Term Sheet shall be consistent
with the Term Sheet and shall be subject to the approval and agreement of the
applicable Initial Lenders and the Company.
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2. Fees and Expenses. In consideration of the execution and delivery of
this Commitment Letter by the Initial Lenders and the Arrangers, you agree
jointly and severally to pay or cause the Company to pay the fees and expenses
set forth in Annex A-I to the Term Sheet and in the Fee Letter related to the
Credit Facilities among the Initial Lenders and the Arrangers, the Sponsor and
the Company dated the date hereof (the "FEE LETTER").
3. Indemnification.
(a) The Sponsor and the Company hereby jointly and severally agree to
indemnify and hold harmless each of the Initial Lenders, the Arrangers, the
Agents, the other Senior Lenders and each of their respective affiliates and
each of their respective officers, directors, partners, trustees, employees,
affiliates, shareholders, advisors, agents, attorneys-in-fact and controlling
persons (each, an "INDEMNIFIED PERSON") from and against any and all losses,
claims, damages and liabilities to which any such indemnified person may become
subject arising out of or in connection with this Commitment Letter, the Fee
Letter, the Credit Facilities, the use of the proceeds therefrom, the
Acquisition, any of the other transactions contemplated by this Commitment
Letter, any other transaction related thereto or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any indemnified person is a party thereto, and to reimburse each
indemnified person upon demand for all legal and other expenses reasonably
incurred by it in connection with investigating, preparing to defend or
defending, or providing evidence in or preparing to serve or serving as a
witness with respect to, any lawsuit, investigation, claim or other proceeding
relating to any of the foregoing (including, without limitation, in connection
with the enforcement of the indemnification obligations set forth herein);
provided, however, that no indemnified person shall be entitled to indemnity
hereunder in respect of any loss, claim, damage, liability or expense to the
extent that it is found by a final, non-appealable judgment of a court of
competent jurisdiction that such loss, claim, damage, liability or expense
resulted directly from the gross negligence or willful misconduct of such
indemnified person. In no event will any indemnified person be liable for
consequential damages as a result of any failure to fund any of the Credit
Facilities contemplated hereby or otherwise in connection with the Credit
Facilities. No indemnified person shall be liable for any damages arising from
the use by unauthorized persons of Information or other materials sent through
electronic, telecommunications or other information transmission systems that
are intercepted by such persons.
(b) The Sponsor and the Company further agree that, without the prior
written consent of the Initial Lenders, which consent will not be unreasonably
withheld, none of them will enter into any settlement of a lawsuit, claim or
other proceeding arising out of this Commitment Letter or the transactions
contemplated by this Commitment Letter unless such settlement includes an
explicit and unconditional release from the party bringing such lawsuit, claim
or other proceeding of all indemnified persons.
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4. Expiration of Commitment. The Commitment shall expire at 5:00 p.m.,
New York City time, on June 4, 2000 unless at or prior to such time you shall
previously have executed and returned to the Initial Lenders a copy of this
Commitment Letter and the Fee Letter. If you do execute and deliver to the
Initial Lenders this Commitment Letter and the Fee Letter, the Initial Lenders
agree to hold their respective Commitments available for you until the earlier
of (i) the termination of the Acquisition Agreement, (ii) the consummation of
the Acquisition without the funding of the Credit Facilities and (iii) 5:00
p.m., New York City time, on September 30, 2000. The date and time of expiration
of the Commitment is sometimes referred to herein as the "COMMITMENT EXPIRATION
DATE."
5. Confidentiality.
(a) This Commitment Letter and the terms and conditions contained
herein and therein shall not be disclosed by the Sponsor or the Company to any
person or entity (other than the Acquired Business or such of your and their
agents and advisers as need to know and agree to be bound by the provisions of
this paragraph and as required by law) without the prior written consent of the
Initial Lenders. The Fee Letter and the terms and conditions contained therein
shall not be disclosed by the Sponsor or the Company to any person or entity
(other than such of your agents and advisers as need to know and agree to be
bound by the provisions of this paragraph and as required by law) without the
prior written consent of the Initial Lenders.
(b) You acknowledge that the Arrangers and their respective affiliates
(the term "Arrangers" being understood to refer hereinafter in this paragraph to
include such affiliates, including the Initial Lenders) may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise; provided
however that the Arrangers shall not provide such financing or advisory services
to any person or entity for the purpose of acquiring the Acquired Business
during the term of this Commitment Letter. The Arrangers shall not use
confidential information obtained from you by virtue of the transactions
contemplated by this Commitment Letter or their other relationships with you in
connection with the performance by such Arranger of services for other
companies, and the Arrangers will not furnish any such information to other
companies. You also acknowledge that no Arranger has any obligation to use in
connection with the transactions contemplated by this Commitment Letter, or to
furnish to you, confidential information obtained from other companies.
6. Assignment and Syndication.
(a) The parties hereto agree that the Initial Lenders and the Arrangers
shall have the right to syndicate the Credit Facilities and/or the Commitment
(the "COMMITMENT") to a group of financial institutions or other investors,
identified by us in consultation with you. The Initial Lenders and the Arrangers
shall manage all aspects of any such syndication, including decisions as to the
selection of institutions to be approached and when they will be approached, the
acceptance of commitments, the amounts offered, the amounts allocated and the
compensation provided, and the Sponsor and the Company agree to use all
commercially reasonable efforts to assist the Initial Lenders and the Arrangers
in such syndication process, including, without limitation, (i) ensuring that
the syndication efforts benefit materially from the existing lending
relationships of the Sponsor and the Company, (ii) arranging for direct contact
between senior management and advisors of the Sponsor, the Company, and the
Acquired Business, and the proposed Senior Lenders, (iii) assisting in the
preparation of Confidential Information Memoranda and other marketing materials
to be used in connection with any syndication, including causing such
Confidential Information Memoranda to conform to market standards as reasonably
determined by the Initial Lenders and the Arrangers and (iv) hosting with the
Arrangers at least 45 days in advance of closing, one or more meetings of
prospective Senior Lenders and, in connection with any such Senior Lender
meeting, consulting with the Initial Lenders and the Arrangers with respect to
the
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presentations to be made at such meeting, and making available appropriate
officers and representatives to rehearse such presentations prior to such
meetings, as reasonably requested by the Initial Lenders and the Arrangers. You
also agree that, at your expense, you will work with the Initial Lenders and the
Arrangers to procure a rating for the Credit Facilities by Moody's Investors
Service, Inc. and Standard & Poor's Ratings Group.
(b) To assist the Initial Lenders and the Arrangers in their
syndication efforts, you agree promptly to prepare and provide to the Initial
Lenders and the Arrangers all information with respect to the Company, the
Parent, the Sponsor, the Acquired Business, the Acquisition and the other
transactions contemplated hereby, including all financial information and
projections (the "PROJECTIONS"), as they may reasonably request. You hereby
represent and covenant that to the best of your knowledge (i) all information
other than the Projections (the "INFORMATION") taken as a whole that has been or
will be made available to the Initial Lenders and the Arrangers by you or any of
your representatives is or will be, when furnished, complete and correct in all
material respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which such statements are made and (ii) the Projections
that have been or will be made available to the Initial Lenders and the
Arrangers by you or any of your representatives have been or will be prepared in
good faith based upon reasonable assumptions at the time made. You understand
that in arranging and syndicating the Credit Facilities we may use and rely on
the Information and Projections without independent verification thereof and
that you will promptly notify us of any changes in circumstances that could be
expected to call into question the continued reasonableness of any assumption
underlying the Projections.
(c) To ensure an orderly and effective syndication of the Credit
Facilities, you agree that, from the date hereof until the earlier of (i) the
termination of the syndication as determined by the Arrangers and (ii) 90 days
following the date of initial funding under the Credit Facilities, you will not,
and will not permit any of your affiliates to, syndicate or issue, attempt to
syndicate or issue, announce or authorize the announcement of the syndication or
issuance of, or engage in discussions concerning the syndication or issuance of,
any debt facility, or debt or preferred equity security of the Parent, the
Company or any of their subsidiaries (other than the indebtedness contemplated
hereby, including any renewals or refinancings of any existing debt facility)
without the prior written consent of the Arrangers in each case, if such actions
could, in the reasonable judgment of the Arrangers, be expected to interfere
with the syndication of the Credit Facilities.
7. Survival. The provisions of this Commitment Letter relating to the
payment of fees and expenses, indemnification and contribution and
confidentiality and the provisions of Section 8 below will survive the
expiration or termination of any commitment hereunder or this Commitment Letter
(including any extensions) and the execution and delivery of definitive
financing documentation; provided that upon closing of the definitive
documentation Sponsor will be released from its indemnification, contribution,
expense reimbursement and fee obligations hereunder.
8. Choice of Law; Jurisdiction; Waivers.
(a) This Commitment Letter shall be governed by and construed in
accordance with the laws of the State of New York. To the fullest extent
permitted by applicable law, the Sponsor and the Company hereby irrevocably
submit to the non-exclusive jurisdiction of any New York State court or Federal
court sitting in the County of New York in respect of any suit, action or
proceeding arising out of or relating to the provisions of this Commitment
Letter or the Fee Letter and irrevocably agree that all claims in respect of any
such suit, action or proceeding may be heard and determined in any such court.
The parties hereto hereby waive, to the fullest extent permitted by applicable
law, any objection that they may now or hereafter have to the laying of venue of
any such suit, action or proceeding brought in any
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such court, and any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. The parties hereto
hereby waive, to the fullest extent permitted by applicable law, any right to
trial by jury with respect to any action or proceeding arising out of or
relating to this Commitment Letter or the Fee Letter.
(b) No Senior Lender shall be liable in any respect for any of the
obligations or liabilities of any other Senior Lender under this letter or
arising from or relating to the transactions contemplated hereby.
9. Miscellaneous.
(a) This Commitment Letter may be executed in one or more counterparts,
each of which will be deemed an original, but all of which taken together will
constitute one and the same instrument. Delivery of an executed signature page
of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
(b) Neither the Company nor the Sponsor may assign any of their
respective rights, or be relieved of any of their respective obligations,
without the prior written consent of each of the Initial Lenders. In connection
with any syndication of all or a portion of the Senior Loan Commitments, the
rights and obligations of each of the Initial Lenders hereunder may be assigned,
in whole or in part, as provided above (if prior to closing, such lender is
reasonably satisfactory to you), and upon such assignment, such Initial Lender
shall be relieved and novated hereunder from the obligations of such Initial
Lender with respect to any portion of its Senior Loan Commitment that has been
assigned as provided above.
(c) This Commitment Letter and the attached Exhibits and Schedules set
forth the entire understanding of the parties hereto as to the scope of the
Commitment and the obligations of the Senior Lenders hereunder. This Commitment
Letter shall supersede all prior understandings and proposals, whether written
or oral, between any of the Senior Lenders and you relating to the Credit
Facilities or the transactions contemplated hereby. This Commitment Letter shall
be in addition to the agreements of the parties dated as of the date hereof.
(d) This Commitment Letter has been and is made solely for the benefit
of the parties hereto, the indemnified persons, and their respective successors
and assigns, and nothing in this Commitment Letter, expressed or implied, is
intended to confer or does confer on any other person or entity any rights or
remedies under or by reason of this Commitment Letter or the agreements of the
parties contained herein.
(e) You acknowledge that the Senior Lenders and the Arrangers, may be
(or may be affiliated with) full service financial firms and as such from time
to time may effect transactions for their own account or the account of
customers, and hold long or short positions in debt or equity securities or
loans of companies that may be the subject of the transactions contemplated by
this Commitment Letter. You hereby waive and release, to the fullest extent
permitted by law, any claims you have with respect to any conflict of interest
arising from such transactions, activities, investments or holdings, or arising
from the failure of the Initial Lenders, the Arrangers or one or more Senior
Lenders or any of their respective affiliates to bring such transactions,
activities, investments or holdings to your attention.
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If you are in agreement with the foregoing, kindly sign and return to us
the enclosed copy of this Commitment Letter.
Very truly yours,
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Mark Rice
Name:
Title: Authorized Signatory
FLEET NATIONAL BANK
By: /s/ J. Nicholas Cole
Name: J. Nicholas Cole
Title: Director
Lehman Brothers Inc.
By: /s/ Mark Rice
Name:
Title: Authorized Signatory
FLEETBOSTON ROBERTSON STEPHENS INC.
By: /s/ David W. Power
Name: David W. Power
Title: Managing Director
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Accepted and agreed to as of the date first above written:
BIG BOY MERGER CORPORATION
By: /s/ Frederick Iseman
Name:
Title:
CAXTON-ISEMAN CAPITAL, INC.
By: /s/ Frederick Iseman
Name:
Title:
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EXHIBIT A TO COMMITMENT LETTER
SUMMARY OF TERMS OF CREDIT FACILITIES
Set forth below is a summary of certain of the terms of the Credit
Facilities and the documentation related thereto. Capitalized terms used and not
otherwise defined herein have the meanings set forth in the Commitment Letter to
which this Summary of Terms is attached and of which it forms a part.
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I. PARTIES
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BORROWER........................... The Company or another entity acceptable to the Initial
Lenders.
GUARANTORS ........................ The Parent and each of its direct and indirect domestic
subsidiaries (other than the Borrower) (the "GUARANTORS",
the Company and the Guarantors, collectively, the "CREDIT
PARTIES").
SOLE ADVISOR ...................... Lehman Brothers Inc. ("LEHMAN BROTHERS")
CO-LEAD ARRANGERS AND JOINT Lehman Brothers and FleetBoston Robertson Stephens Inc.
BOOK-RUNNING MANAGERS ............. ("FRS", each of Lehman Brothers and FRS in such capacity,
an "ARRANGER" and collectively, the "ARRANGERS").
ADMINISTRATIVE AGENT............... Lehman Commercial Paper Inc. (in such capacity, the
"ADMINISTRATIVE AGENT").
SYNDICATION AGENT.................. Fleet National Bank (in such capacity, the "SYNDICATION
AGENT" and collectively with the Administrative Agent,
THE "AGENTS").
SENIOR LENDERS..................... A syndicate of banks, financial institutions and other
entities arranged by the Arrangers, including the Initial
Lenders (collectively, the "SENIOR LENDERS").
II. TYPES AND AMOUNTS OF CREDIT FACILITIES
SENIOR TERM LOAN FACILITIES........ Senior Term Loan Facilities (the "SENIOR TERM LOAN
FACILITIES") in an aggregate amount equal to $310.0
million (the loans thereunder, the "SENIOR TERM LOANS")
as follows:
Tranche A Term Loan Facility.. A 5-year term loan facility (the "TRANCHE A TERM LOAN
FACILITY") in an aggregate principal amount equal to
$160.0 million (the loans thereunder, the "TRANCHE A
TERM LOANS"). The Tranche A Term
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Loans shall be repayable in quarterly installments
beginning on March 31, 2001 in an aggregate principal
amount for each year following the Closing Date equal
to the amount set forth opposite such year below (with
the installments in each such year being equal in amount):
Period Principal Amount
------ ----------------
Year 1 $12 million
Year 2 $24 million
Year 3 $32 million
Year 4 $40 million
Year 5 $52 million
------ -----------
TOTAL $160 million
Tranche B Term Loan Facility.. A 6.5-year term loan facility (the "TRANCHE B TERM LOAN
FACILITY") in an aggregate principal amount equal to
$150.0 million (the loans thereunder, the "TRANCHE B
TERM LOANS"). The Tranche B Term Loans shall be
repayable in quarterly installments beginning on March
31, 2001 in an aggregate principal amount for each year
following the Closing Date equal to the amount set forth
opposite such year below:
Period Principal Amount
------ ----------------
Year 1 $1.5 million
Year 2 $1.5 million
Year 3 $1.5 million
Year 4 $1.5 million
Year 5 $1.5 million
Year 6 $90.0 million
Year 7 $52.5 million
------ -------------
TOTAL $150 million
REVOLVING CREDIT FACILITY.......... A 5-year revolving credit facility (the "REVOLVING
CREDIT FACILITY"); together with the Senior Term Loan
Facilities, (the "CREDIT FACILITIES") in an aggregate
principal amount equal to $20.0 (the loans thereunder,
the "REVOLVING CREDIT LOANS"), which will be unfunded at
closing.
Availability.................. The Revolving Credit Facility shall be available on a
revolving basis during the period commencing on the
Closing Date and ending on the 5th anniversary thereof
(the "REVOLVING CREDIT TERMINATION DATE").
Letters of Credit ............ A portion of the Revolving Credit Facility in an amount
to be determined shall be available for the issuance of
letters of credit (the "LETTERS OF CREDIT") by one or
more Senior Lenders to be selected in the
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syndication process (each such Senior Lender in such
capacity, an "ISSUING LENDER"). The face amount of any
outstanding Letters of Credit will reduce availability
under the Revolving Credit Facility on a dollar-for-dollar
basis. No Letter of Credit shall have an expiration date after
the earlier of (i) one year after the date of issuance
and (ii) five business days prior to the Revolving
Credit Termination Date; provided that any Letter of
Credit with a one-year tenor may provide for the renewal
thereof for additional periods of up to one year (which
shall in no event extend beyond the date referred to in
clause (ii) above).
Drawings under any Letter of Credit shall be reimbursed
by the Company (whether with its own funds or with the
proceeds of Revolving Credit Loans) on the same business
day. To the extent that the Company does not so reimburse
the Issuing Lender, the Senior Lenders under the Revolving
Credit Facility shall be irrevocably and unconditionally
obligated to reimburse the Issuing Lender on a pro rata basis.
Swing Line Loans.............. A portion of the Revolving Credit Facility not in excess
of $2.5 million shall be available for swing line loans (the "SWING LINE
LOANS") from the Administrative Agent (in such capacity, the "SWING LINE
LENDER") on same-day notice. Any such Swing Line Loans will reduce
availability under the Revolving Credit Facility on a dollar-for-dollar
basis. Each Senior Lender under the Revolving Credit Facility shall
acquire, under certain circumstances, an irrevocable and unconditional pro
rata participation in each Swing Line Loan.
Maturity...................... The Revolving Credit Termination Date.
Purpose....................... The proceeds of the Revolving Credit Loans shall be used
for general corporate purposes of the Company and its
subsidiaries in the ordinary course of business or as
otherwise permitted under the Credit Documentation.
III. CERTAIN PAYMENT PROVISIONS
FEES AND INTEREST RATES............ As set forth on Annex A-I.
OPTIONAL PREPAYMENTS AND Loans may be prepaid in minimum amounts to be
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COMMITMENT REDUCTIONS.............. agreed upon. Optional prepayments of the Senior Term Loans
shall be applied to the Tranche A Term Loans and the Tranche
B Term Loans ratably and to the installments thereof
ratably in accordance with the then outstanding amounts
thereof and may not be reborrowed.
MANDATORY PREPAYMENTS AND
COMMITMENT REDUCTIONS.............. The following amounts shall be applied to prepay the Senior Term
Loans:
100% of the net proceeds of any sale or issuance of equity
(other than additional sponsor equity) or incurrence of certain
indebtedness, after the Closing Date by the Parent or by the
Company or any of their respective subsidiaries;
100% of the net proceeds of any sale or other disposition
(including as a result of casualty or condemnation) by the
Company or any of its subsidiaries of any assets, subject to
reinvestment provisions to be determined (except for
the sale of inventory in the ordinary course of business and
certain other dispositions to be agreed upon); and
75% of excess cash flow (commencing with the fiscal year
following the fiscal year in which the Closing Date occurs),
with a step-down to 50% when operating company funded
debt/EBITDA is < 2.0x for each fiscal year of the Company.
All such amounts shall be applied to the prepayment of the
Senior Term Loans. Each such prepayment of the Senior Term
Loans shall be applied to the Tranche A Term Loans and the Tranche
B Term Loans ratably and to the installments thereof
ratably in accordance with the then outstanding amounts
thereof and may not be reborrowed. Notwithstanding the
foregoing, so long as any Tranche A Term Loans are outstanding,
each holder of Tranche B Term Loans shall have the right to
refuse all or any portion of such prepayment allocable
to its Tranche B Term Loans and (i) 50% of the amount so refused
will be applied to prepay the Tranche A Term Loans, and (ii)
the remaining 50% of such prepayments shall be retained by the
Borrower. The Revolving Credit Loans shall be prepaid and
the Letters of Credit shall be cash collateralized or
replaced to the extent such extensions of credit exceed the
amount of the Revolving Credit Facility.
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IV. COLLATERAL The obligations of each Credit Party in respect of the Credit Facilities
shall be secured by a perfected first priority security interest in all of
its tangible and intangible assets (including, without limitation,
intellectual property, real property (including, without limitation,
mortgages on leases), licenses, permits and all of the capital stock of the
Company and each of its direct and indirect domestic subsidiaries and 2/3
of the capital stock of certain of its first tier foreign subsidiaries),
except for those assets as to which the Administrative Agent shall
determine in its sole discretion that the costs of obtaining such a
security interest are excessive in relation to the value of the security to
be afforded thereby.
V. CERTAIN CONDITIONS
INITIAL CONDITIONS................. The availability of the Credit Facilities is subject to
the conditions set forth on Exhibit B to the Commitment Letter.
ON-GOING CONDITIONS................ The making of each extension of credit shall be
conditioned upon (i) the accuracy in all material respects
of all representations and warranties in the definitive
financing documentation with respect to the Credit
Facilities (the "CREDIT DOCUMENTATION") (including, without
limitation, the material adverse change and litigation
representations) and (ii) there being no default or event of
default in existence at the time of, or after giving effect
to the making of, such extension of credit.
VI. CERTAIN DOCUMENTATION MATTERS...... The Credit Documentation shall contain representations,
warranties, covenants and events of default customary for
financings of this type and other terms deemed appropriate
by the Initial Lenders, including, without limitation:
REPRESENTATIONS AND WARRANTIES..... Financial statements (including pro forma financial
statements); absence of undisclosed liabilities; no material
adverse change; corporate existence; compliance with law;
corporate power and authority; enforceability of Credit
Documentation; no conflict with law or contractual obligations;
no material litigation; no default; ownership of property;
indebtedness; liens; intellectual property; taxes; Federal
Reserve regulations; ERISA; Investment Company Act; licenses;
permits;
</TABLE>
A-5
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C>
franchises and regulatory approvals; subsidiaries;
environmental matters; solvency; labor matters; accuracy
of disclosure; creation and perfection of security interests;
and status of the Credit Facilities as senior debt.
AFFIRMATIVE COVENANTS.............. Delivery of financial statements, reports, accountants'
letters, projections, officers' certificates and other
information requested by the Senior Lenders; payment of
other obligations; continuation of business and maintenance
of existence and material rights and privileges; compliance
with laws and material contractual obligations; maintenance
of property and insurance; maintenance of books and records;
right of the Senior Lenders to inspect property and books
and records; notices of defaults, litigation and other
material events; compliance with environmental laws; further
assurances (including, without limitation, with respect to
security interests in after-acquired property); and
satisfactory interest rate protection taking into account,
among other things, the Company's fixed rate debt.
FINANCIAL COVENANTS................ Financial covenants (including, without limitation, the
following):
(i)......Maximum total operating company funded debt/EBITDA,
with an initial level of 3.25x, with step-downs to be
agreed.
(ii).....Minimum EBITDA/operating company interest
expense, with an initial level to be determined and with
step-ups to be agreed.
(iii)....Minimum operating company fixed charge coverage
ratio, with an initial level to be determined
and with step-ups to be agreed.
(iv).....Maximum annual capital expenditures
(including a limitation on new restaurant openings by
concept).
NEGATIVE COVENANTS.............. Limitations on: indebtedness (including preferred stock);
liens; guarantee obligations; mergers, consolidations,
liquidations and dissolutions; sales of assets; leases;
dividends and other payments in respect of capital stock;
investments, loans and advances; optional payments and
modifications of subordinated and other debt instruments;
transactions with affiliates; sale and leasebacks;
</TABLE>
A-6
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C>
changes in fiscal year; negative pledge clauses; changes
in lines of business; and changes in passive holding
company status of Parent.
EVENTS OF DEFAULT.................. Nonpayment of principal when due; nonpayment of interest,
fees or other amounts after a grace period to be agreed
upon; material inaccuracy of representations and warranties;
violation of covenants (subject, in the case of certain
affirmative covenants, to a grace period to be agreed upon);
cross-default subject to thresholds to be agreed; bankruptcy
events; certain ERISA events; material judgments; actual or
asserted by Company invalidity of any guarantee or security
document, or security interest; and a change of control (the
definition of which is to be agreed).
VOTING............................. Amendments and waivers with respect to the Credit
Documentation shall require the approval of Senior Lenders
holding not less than a majority of the aggregate amount of
the Senior Term Loans, Revolving Credit Loans and unused
commitments under the Credit Facilities, except that (i) the
consent of each Senior Lender affected thereby shall be
required with respect to (a) reductions in the amount or
extensions of the scheduled date of amortization or final
maturity of any Loan, (b) reductions in the rate of interest
or any fee or extensions of any due date thereof, (c)
increases in the amount or extensions of the expiry date of
any Senior Lender's commitment and (ii) the consent of 100%
of the Senior Lenders shall be required with respect to (a)
modifications to any of the voting percentages and (b)
releases of all or substantially all of the Guarantors or
all or substantially all of the collateral. In addition, the
consent of Senior Lenders holding a majority of the
aggregate amount of the Tranche A Term Loans or the Tranche
B Term Loans , as the case may be, shall be required with
respect to certain modifications affecting the relevant
Senior Term Loan Facility.
ASSIGNMENTS AND PARTICIPATIONS..... The Senior Lenders shall be permitted to assign and sell
participations in their Loans and commitments, subject, in
the case of assignments (other than assignments to another
Senior Lender or to an affiliate of a Senior Lender) to the
consent of the Administrative Agent, the Issuing Lender and
the Swing Line Lender and so long as no Default or Event of
Default has occurred and is continuing, the Company (which
consent in each case shall not be
</TABLE>
A-7
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C>
unreasonably withheld). Non-pro rata assignments
shall be permitted. In the case of partial assignments
(other than to another Senior Lender or to an affiliate of a
Senior Lender), the minimum assignment amount shall be $5.0
million for Tranche A and Revolver Loans and $1.0 million
for Tranche B Loans, unless otherwise agreed by the Company
and the Administrative Agent. Participants shall have the
same benefits as the Senior Lenders with respect to yield
protection and increased cost provisions. Voting rights of
participants shall be limited to those matters with respect
to which the affirmative vote of the Senior Lender from
which it purchased its participation would be required as
described under "Voting" above. Pledges of Loans in
accordance with applicable law shall be permitted without
restriction; provided that assignments of such pledged
Loans, after any foreclosure by the applicable pledgee, must
comply with the assignment provisions of the Credit
Documentation. Promissory notes shall be issued under the
Credit Facilities only upon request.
YIELD PROTECTION................... The Credit Documentation shall contain customary
provisions (i) protecting the Senior Lenders against
increased costs or loss of yield resulting from changes in
reserve, tax, capital adequacy and other requirements of law
and from the imposition of or changes in withholding or
other taxes and (ii) indemnifying the Senior Lenders for
"breakage costs" incurred in connection with, among other
things, any prepayment of a Eurodollar Loan (as defined in
Annex A-I) on a day other than the last day of an interest
period with respect thereto.
EXPENSES AND INDEMNIFICATION ...... The Company shall pay (i) all reasonable out-of-pocket
expenses of the Administrative Agent, the Syndication Agent
and the Arrangers associated with the syndication of the
Credit Facilities and the preparation, execution, delivery
and administration of the Credit Documentation and any
amendment or waiver with respect thereto (including the
reasonable fees, disbursements and other charges of counsel)
and (ii) all out-of-pocket expenses of the Agents and the
Senior Lenders (including the fees, disbursements and other
charges of counsel) in connection with the enforcement of
the Credit Documentation.
The Agents, the Arrangers and the Senior Lenders (and
their affiliates and their respective officers,
</TABLE>
A-8
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C>
directors, employees, advisors and agents) will have no liability
for, and will be indemnified and held harmless against, any loss,
liability, cost or expense incurred in respect of the
financing contemplated hereby or the use or the proposed use of
proceeds thereof (except to the extent resulting from the
gross negligence or willful misconduct of the indemnified
party).
GOVERNING LAW AND FORUM............ State of New York.
COUNSEL TO THE AGENTS AND THE
ARRANGERS.......................... Latham & Watkins.
</TABLE>
A-9
<PAGE> 18
ANNEX A-I
INTEREST AND CERTAIN FEES
<TABLE>
<CAPTION>
<S> <C>
INTEREST RATE OPTIONS................... The Company may elect that the Loans comprising each borrowing
bear interest at a rate per annum equal to:
(i) the Base Rate plus the Applicable Margin; or
(ii) the Eurodollar Rate plus the Applicable Margin.
provided that all Swing Line Loans shall bear interest based
upon the Base Rate.
As used herein:
"BASE RATE" means the highest of (i) the rate of interest publicly
announced by Deutsche Bank New York (or any successor) as its prime
rate in effect at its principal office in New York City (the "PRIME
RATE") and (ii) the federal funds effective rate from time to time
plus 0.5%.
"APPLICABLE MARGIN" means a percentage determined in accordance
with the pricing grid attached hereto as Annex A-II.
"EURODOLLAR RATE" means the rate (adjusted for statutory reserve
requirements for eurocurrency liabilities) at which eurodollar
deposits for one, two, three or six months (as selected by the Company)
are offered in the interbank eurodollar market.
INTEREST PAYMENT DATES.................. In the case of Loans bearing interest based upon the Base Rate
("BASE RATE LOANS"), quarterly in arrears.
In the case of Loans bearing interest based upon the
Eurodollar Rate ("EURODOLLAR LOANS"), on the last day of each
relevant interest period and, in the case of any interest
period longer than three months, on each successive date three
months after the first day of such interest period.
COMMITMENT FEES......................... The Company shall pay a commitment fee determined in
accordance with the pricing grid attached hereto as Annex
A-II, on the average daily unused portion of the Revolving
Credit Facility, payable quarterly in arrears. Swing Line
Loans shall, for purposes of the commitment fee calculations
only, not be deemed to be a utilization of the Revolving
Credit Facility.
LETTER OF CREDIT FEES........................The Company shall pay a commission on all outstanding
</TABLE>
A-I-1
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C>
Letters of Credit at a per annum rate equal to the Applicable Margin
then in effect with respect to Eurodollar Loans under the
Revolving Credit Facility on the face amount of each such
Letter of Credit. Such commission shall be shared ratably
among the Senior Lenders participating in the Revolving Credit
Facility and shall be payable quarterly in arrears.
In addition to letter of credit commissions, a fronting fee to
be agreed on the face amount of each Letter of Credit shall be
payable quarterly in arrears to the Issuing Lender for its own
account. In addition, customary administrative, issuance,
amendment, payment and negotiation charges shall be payable to
the Issuing Lender for its own account.
DEFAULT RATE.................................At any time when the Company is in default in the payment of
any amount of principal due under the Credit Facilities, such
amount shall bear interest at 2% above the rate otherwise
applicable thereto. Overdue interest, fees and other amounts
shall bear interest at 2% above the rate applicable to Base
Rate Loans.
RATE AND FEE BASIS...........................All per annum rates shall be calculated on the basis of a year
of 360 days (or 365 days, in the case of Base Rate Loans the
interest rate payable on which is then based on the Prime
Rate) and the actual number of days elapsed.
</TABLE>
A-I-2
<PAGE> 20
ANNEX A-II
PRICING GRID -TRANCHE A TERM LOANS AND REVOLVING CREDIT LOANS
<TABLE>
<CAPTION>
Ratio of Total Applicable Margin- Applicable Margin-
Debt to Eurodollar Loans Commitment Base Rate Loans
EBITDA Fee
Tranche A & Tranche B Tranche A & Tranche B
Revolver Revolver
<S> <C> <C> <C> <C> <C>
Greater than 2.50x 3.25% 3.75% 0.50% 2.25% 2.75%
Less than or equal to 2.50x
and Greater than or equal to 2.00x 3.00% 3.75% 0.50% 2.00% 2.75%
Less than or equal to 2.00x
and Greater than or equal to 1.50x 2.75% 3.75% 0.50% 1.75% 2.75%
Less than 1.50x 2.25% 3.75% 0.375% 1.25% 2.75%
</TABLE>
Notwithstanding the foregoing grid:
(a) the Applicable Margin and Commitment Fee Rate for the first six months
following from the Closing Date until the date of delivery to the Administrative
Agent of the Company's financial statements for the first two full fiscal
quarters following the Closing Date will be 3.25% for Revolver and Tranche A
borrowings and 3.75% for Tranche B borrowings (Eurodollar Rate Loans), 2.25%
(Base Rate Loans) and 0.50% (Commitment Fee Rate) respectively; and
(b) the Applicable Margin shall be increased by 25 pbs at all times when
the Credit Facilities have a rating equal to or less than B1 from Moody's
Investor Services or B+ from Standard & Poor's Corporation.
A-II-1
<PAGE> 21
EXHIBIT B TO COMMITMENT LETTER
FUNDING CONDITIONS
Capitalized terms used but not defined herein have the meanings assigned to
them in the Commitment Letter to which this Exhibit B is attached and of which
it forms a part. The availability of the Credit Facilities is conditioned upon
satisfaction of, among other things, the conditions precedent summarized below.
The date upon which all such conditions precedent shall be satisfied and the
Credit Facilities will be funded shall be the Closing Date.
(a) Each Credit Party shall have executed and delivered satisfactory definitive
financing documentation with respect to the Credit Facilities.
(b) The Arrangers and their respective representatives are satisfied as of the
Closing Date with the status (including contingency plans with respect
thereto) of all contingent liabilities affecting the Parent, the Company
and the Acquired Business.
(c) The ratio of the Company's funded senior debt (pro forma for the
Acquisition) shall not exceed 2.5x pro forma EBITDA for the 12 month period
preceding the Closing Date.
(d) There not having occurred any material adverse change in the financial
condition, results of operations, business or prospects of the Acquired
Business since December 29, 1999.
(e) The completion of all documentation relating to the Credit Facilities,
including, without limitation, preparation of confidential information
memorandums for the Credit Facilities containing the required audited
and unaudited historical and pro forma financial statements of the
Company, a credit agreement for the Credit Facilities in form and
substance reasonably satisfactory to the Initial Lenders.
(f) Satisfaction by the Initial Lenders with the terms of the Acquisition
Agreement and satisfaction by the Senior Lenders with the terms of the
Mezzanine Debt, the Equity Investment, and the management roll-over
equity investment.
(g) There shall not have occurred any disruption or adverse change, as
determined by each of the Agents in their sole discretion, in the
financial or capital markets generally, or in the markets for bank loan
syndication in particular or affecting the syndication or funding of
bank loans that could reasonably be expected to have a material adverse
impact on the ability to syndicate the Credit Facilities.
(h) There shall not exist (pro forma for the Acquisition and the financing
contemplated hereby) any default or event of default under the Credit
Facilities, or under any other material indebtedness or agreement of
the Parent, the Company or the Acquired Business (other than the
convertible notes which shall have been called for redemption and the
proceeds necessary therefor placed in an escrow account subject to an
escrow agreement reasonably satisfactory to the Agents).
(i) The Company shall have received (i) at least $130.0 million from the
issuance of its equity to the Sponsor and other investors selected by it
(to the reasonable satisfaction of the Arrangers) and rollover management
equity which will be no less than $7.5 million, (ii) $60.0 million from the
issuance of Mezzanine Debt-Newco and (iii) $35.0 million from the issuance
of Mezzanine Debt-Parent (which shall be raised by the Parent and
contributed to the Company) each on terms
B-1
<PAGE> 22
reasonably satisfactory to the Arrangers, and the Company shall have
received at least $20.0 million from the Sale/Leaseback. The capital
structure of each Credit Party after the Acquisition (including the amounts
available under the Revolving Credit Facility) shall be reasonably
satisfactory to the Initial Lenders. Notwithstanding the foregoing, if the
Credit Facilities have a rating of at least Ba3 from Moody's Investor
Services and at least BB- from Standard & Poor's Corporation, the proceeds
of the Mezzanine Debt-Newco may be $80.0 million and the proceeds of the
Mezzanine Debt-Parent may be $15.0 million.
(j) The Acquisition shall have been consummated for an aggregate purchase price
not exceeding $665.2 million (including fees and expenses not exceeding
$25.0 million in the aggregate) pursuant to documentation reasonably
satisfactory to the Administrative Agent, and no provision thereof shall
have been waived, amended, supplemented or otherwise modified.
(k) The Parent, the Sponsor and the Company shall have complied in all material
respects with all of their obligations under and agreements in the
Commitment Letter and the Fee Letter.
(l) The Senior Lenders shall not have become aware after the date hereof of any
information or other matter affecting the Parent, the Company, the Acquired
Business or the transactions contemplated hereby that is inconsistent in a
material and adverse manner with any such information or other matter
disclosed to the Senior Lenders prior to the date hereof.
(m) All material governmental and third party approvals (including landlords'
and other consents) and consents including regulatory approvals necessary
or, in the reasonable discretion of the Administrative Agent, advisable in
connection with the Acquisition, the financing contemplated hereby and the
continuing operations of the Company and its subsidiaries shall have been
obtained and be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened by
any competent authority that would restrain, prevent or otherwise impose
adverse conditions on the Acquisition or the financing contemplated hereby.
(n) The Senior Lenders shall have received audited and unaudited (which have
been reviewed by the independent accountants for the Company as provided in
Statement on Auditing Standards No. 71) financial statements of the
Guarantors and the Acquired Business and all other completed or probable
acquisitions (including pro forma financial statements) reasonably
satisfactory to the Initial Lenders.
(o) The Administrative Agent shall have received the results of a recent lien,
tax lien, judgment and litigation search in each relevant jurisdiction with
respect to the Parent, the Company and its subsidiaries and the Acquired
Business, and such search shall reveal no liens on any of the assets of the
Parent, the Company or its subsidiaries or the Acquired Business except for
liens permitted by the Credit Documentation or liens to be discharged on or
prior to the Closing Date pursuant to documentation satisfactory to the
Administrative Agent.
(p) The Senior Lenders shall have received a solvency certificate from the
chief financial officer of the Company which shall document the solvency of
the Company and its subsidiaries after giving pro forma effect to the
Acquisition and the other transactions contemplated hereby, all in form and
substance satisfactory to the Senior Lenders.
(q) The Senior Lenders shall have received such legal opinions (including
opinions (i) from counsel to the Company and its subsidiaries, (ii)
delivered to the Company by counsel to the Acquired
B-2
<PAGE> 23
Business, accompanied by reliance letters in favor of the Senior Lenders
and (iii) from such special and local counsel as may be reasonably required
by the Administrative Agent), documents and other instruments as are
customary for transactions of this type or as they may reasonably request.
(r) The Senior Lenders shall be reasonably satisfied with all documentation
concerning the collateral for the Credit Facilities, including, without
limitation, security agreements, pledge agreements, mortgages, financing
statements, title insurance, landlord consents, and other customary
documentation. It is understood that in connection with any mortgages
securing the Credit Facilities that the Senior Lenders may require the
completion and delivery of Phase I environmental reports with respect
thereto.
B-3
