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EXHIBIT (b)(3)
[LETTERHEAD OF CORPORATE PROPERTY ASSOCIATES 14
INCORPORATED AND CAREY PROPERTY ADVISORS]
June 3, 2000
Mr. Steven Lefkowitz
Caxton-Iseman Capital, Inc.
667 Madison Avenue, 5th Floor
New York, NY 10021
Re: Commitment to purchase and leaseback the Buffets, Inc. headquarters
facility located in Eagan, Minnesota.
Dear Steve:
We are pleased to advise Caxton-Iseman Capital, Inc. (together with
each of its subsidiaries, "Sponsor") and Big Boy Merger Corporation (together
with each of its subsidiaries, the "Company") that Corporate Property Associates
14 Incorporated and/or one of its affiliates or assigns ("CPA:14" or "Lessor")
is making a commitment (the "Commitment") to purchase the above-referenced
facility (the "Facility") and lease it back to Buffets, Inc. ("Buffets" or
"Lessee") subject to and in accordance with the terms of this Commitment.
Transaction: CPA:14 will purchase the Facility and lease it back
to Buffets. The Facility is generally described
below:
Location Square Footage
Eagan, MN +/- 100,000
Purchase Price: $20,000,000. In addition to the above amount, W. P.
Carey & Co., Inc. ("W.P. Carey") will be paid an
acquisition fee by CPA:14 in connection with this
Transaction which will be added to the above amount
to constitute the Purchase Price.
Purchaser/Lessor: CPA:14 Incorporated and/or one of its subsidiaries,
affiliates or assigns.
Lessee: Buffets, Inc.
Lease Guarantor: A newly formed holding company which shall own all of
the issued and outstanding stock in Lessee.
Lease Terms: The Facility will be leased to Lessee based upon an
absolutely net and bondable lease (the "Lease").
Lessee will pay maintenance, insurance, taxes and all
other
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Mr. Steven Lefkowitz
June 3, 2000
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property-related expenses of whatever description.
The Lease will contain typical bond lease provisions,
which Lessee and Lessor will negotiate in good faith.
The initial term shall be twenty (20) years and shall
be followed by two, ten-year renewal options. The
Lease will be automatically renewed for each renewal
period unless Lessee, at least eighteen months before
the end of the then current term, provides Lessor
with notice that it does not intend to renew the
lease at the end of the term.
Rent: The initial annual rent shall be $1,850,000 payable
quarterly in advance. At the beginning of the second
year, the rent will increase to $2,250,000. At the
beginning of the third lease year and every year
thereafter, the rent will increase in accordance with
the increase in the Consumer Price Index during the
prior year.
Mortgage Financing: CPA:14 contemplates that mortgage financing for the
Transaction is available from one or more
institutional lenders in an amount equal to
$12,500,000. For the purposes of this letter, it is
assumed that the mortgage will have a ten-year
maturity, a 9.00% interest rate. If there is an
increase in the assumed interest rate, the initial
Basic Rent shall be increased to reflect any such
change in such interest rate or amortization
schedule. All such debt shall be non-recourse to
CPA:14, and all loan documents shall be subject to
CPA:14's approval. Any such mortgage financing shall
provide for a Subordination, Non-Disturbance and
Attornment Agreement in favor of Lessee. The
obligation of CPA:14 to fund the Transaction is not
subject to its receipt of mortgage financing.
Commitment Fee: Upon the acceptance of this Commitment W. P. Carey
shall have earned a non-refundable commitment fee of
$100,000 payable upon the earlier of (i) closing of
the Transaction, or (ii) the Commitment Expiration
Date.
Financing Requirements: As a condition to the obligation of CPA:14 to fund
the Transaction, the Company shall have acquired all
of the issued and outstanding stock of Lessee (the
"Acquisition") and shall have available approximately
$535.0 million in loans and equity (plus $20.0
million to be provided by Lessor), which you have
advised us are the total funds
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Mr. Steven Lefkowitz
June 3, 2000
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needed to finance the Acquisition (the "Financing
Sources"), including fees and expenses (which will
not exceed $25.0 million), and that such funds are
available from the following sources: (i) $310.0
million of borrowings by the Company under a $310.0
Senior Term Loan Facility and $20.0 million Revolving
Credit Facility (collectively, the "Credit
Facilities") among the Company, Lehman Commercial
Paper Inc. ("LCPI"), Fleet National Bank ("Fleet"),
and the financial institutions party thereto, (ii) at
least $130.0 million equity investment by the
Sponsor, other investors selected by it, and
management in the Company (the "Equity Investment"),
(iii) $15.0 million in mezzanine financing (the
"Mezzanine Debt Payment") to be issued by the direct
holding company of the Company (the "Parent"), which
will, itself, be formed by the Sponsor and to be
placed by Credit Suisse First Boston Corporation,
(iv) $80.0 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.
Closing Date: Both parties will use their best efforts to
consummate this transaction by the date on which
Sponsor or its assignee acquires all of the issued
and outstanding capital stock of the Lessee.
Third-Party Reports: It is understood that Lessor will receive an
appraisal acceptable to Lessor which will contain a
"leased fee" value of not less than the Purchase
Price.
Fees, Expenses, etc.: Lessee will be responsible for all reasonable fees
and expenses related to the Transaction including,
but not limited to, environmental and appraisal
costs; transfer and recording fees and taxes; title
insurance; mortgage legal fees and points, if any,
and Lessor's reasonable legal fees and expenses.
Indemnification: (a) The Sponsor and the Company hereby jointly and
severally agree to indemnify and hold harmless W.P.
Carey, CPA:14 and 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
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Mr. Steven Lefkowitz
June 3, 2000
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"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, the use
of the proceeds from the Transaction, 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
close the Transaction. 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 Company further agree that,
without the prior written consent of CPA 14, which
consent will not be unreasonably withheld, neither of
them will enter into any settlement of a lawsuit,
claim or other proceeding arising out of this
Commitment or the transactions contemplated by this
Commitment unless such settlement includes an
explicit and unconditional release from the party
bringing such lawsuit, claim or other proceeding of
all indemnified persons.
Expiration of Commitment: The Commitment shall expire at 5:00 pm, Eastern
Standard Time, on June 4, 2000 unless at or prior to
such time you
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Mr. Steven Lefkowitz
June 3, 2000
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shall previously have executed and returned to CPA 14
a copy of this Commitment. If you do execute and
deliver to CPA 14 this Commitment, CPA 14 agrees to
hold its Commitment available for you until the
earlier of (i) the termination of either the
Commitment Letter dated June 2, 2000 from LCPI, et
al, to the Company and the Sponsor or the agreement
to acquire all of the issued and outstanding stock of
Lessee, (ii) the consummation of the Acquisition
either without the funding of the total funds needed
to finance the Acquisition or upon terms any of which
differ in any material respect from the terms of the
Financing Sources presented to CPA:14 and W. P. Carey
& Co., Inc. by the Sponsor, and (iii) 5:00 pm Eastern
Standard Time on September 30, 2000. The date and
time of expiration of the Commitment is sometimes
referred to herein as the "Commitment Expiration
Date."
Confidentiality: This Commitment 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 Lessee 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
CPA 14.
Survival: The provisions of this Commitment relating to the
payment of fees and expenses, indemnification and
contribution and confidentiality and the Choice of
Law; Jurisdiction; Waivers provision as set forth
below will survive the expiration or termination of
this Commitment (including any extensions) and the
execution and delivery of definitive lease
documentation; provided that upon closing of the
definitive documentation Sponsor will be released
from its indemnification, contribution, expense
reimbursement and fee obligations hereunder.
Choice of Law;
Jurisdiction; Waivers This Commitment 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
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Mr. Steven Lefkowitz
June 3, 2000
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of any suit, action or proceeding arising out of or
relating to the provisions of this Commitment 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 such court,
and any claim that any such suit, action proceeding
brought in any 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.
Miscellaneous: (a) This Commitment 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 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 CPA:14.
(c) This Commitment 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, 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 or the agreements of the
parties contained herein.
Consummation of the Transaction is conditional upon (i) the execution
and delivery of definitive agreements and receipt of real estate documentation,
including, title, survey, and zoning, satisfactory to all parties and their
respective counsel, (ii) the appraisal referred to above, and (iii) evidence of
the consummation of the financing transactions described in the provision titled
Financing Requirements in this
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Mr. Steven Lefkowitz
June 3, 2000
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Commitment. Sponsor and Lessee agree and shall cause their respective officers,
employees, agents, trustees, etc., not to solicit or encourage, directly or
indirectly, in any manner other offers for the Transaction, or negotiate for or
otherwise pursue, any transaction similar to the Transaction other than with
CPA:14 and/or one of its affiliates, subsidiaries and or assigns.
We are delighted to be of service in connection with the Transaction
and look forward to working together with you to complete the Transaction. This
letter shall expire unless executed by all parties no later than June 3, 2000.
Sincerely,
CORPORATE PROPERTY
ASSOCIATES 14 INCORPORATED
By: /s/ Gordon J. Whiting
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Gordon J. Whiting
Executive Vice President
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Mr. Steven Lefkowitz
June 3, 2000
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Accepted this 3rd day of June, 2000
CAXTON-ISEMAN CAPITAL, INC.
By: /s/ Steven M. Lefkowitz
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Title: Principal
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BIG BOY MERGER CORPORATION
By: /s/ Steven M. Lefkowitz
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Title: Vice President
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