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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required)
For the fiscal year ended December 30, 1996
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from _______________ to _______________
Commission file number: 33-48183
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AMERICAN RESTAURANT GROUP, INC.
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Exact Name of Registrant as Specified in Its Charter
Delaware 33-0193602
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
450 Newport Center Drive
Newport Beach, California 92660
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(Address of Principal Executive Offices) (Zip Code)
(714) 721-8000
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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None None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by a 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
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Indicate by a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definite proxy or information
statements incorporated by reference in Part II of this Form 10-K or any
amendments to this Form 10-K. [X]
The number of outstanding shares of the Registrant's Common Stock (one cent par
value) as of March 3, 1997 was 93,150.
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AMERICAN RESTAURANT GROUP, INC.
INDEX
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PAGE
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PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 3 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . 6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . 12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . 13
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES,
AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . 17
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PART I
ITEM 1. BUSINESS
INTRODUCTION
American Restaurant Group, Inc., a Delaware corporation (the "Company"),
through its subsidiaries, competes predominately in the midscale segment of the
United States restaurant industry. The Company was formed on August 13, 1986
by Anwar S. Soliman, Chairman of the Board and Chief Executive Officer of the
Company and other members of current senior management, to acquire certain
operations of Saga Corporation, a wholly owned subsidiary of Marriott
Corporation (the "Acquisition"). The Acquisition was completed in February
1987. (Prior to the completion of the Acquisition, the Company had no
significant operations.) The Company is a wholly owned subsidiary of American
Restaurant Group Holdings, Inc., a Delaware corporation ("Holdings").
As of December 30, 1996, the Company operated 247 restaurants located in 17
states, principally California and Texas. The Company operates five restaurant
divisions: Black Angus (western-style steak houses specializing in steak and
prime rib), Grandy's (family-oriented, quick-service restaurants specializing
in fried and grilled chicken, country-fried steak and country breakfasts),
Spoons (casual-style restaurants featuring fajitas, salads and hamburgers),
Spectrum (upscale Northern Italian, American and Mexican specialty restaurants)
and National Sports Grill (sports-theme restaurants featuring generous portions
and microbrewery beers). In addition, as of December 30, 1996, Grandy's
franchised 56 restaurants in the southern United States.
DIVISION OVERVIEW
BLACK ANGUS
As of December 30, 1996, Black Angus operated 101 Stuart Anderson's Black Angus
and Stuart Anderson's Cattle Company steak houses located primarily in
California, the Pacific Northwest and Arizona. During the year, the Company
expanded the Black Angus restaurants into two new markets, Las Vegas, Nevada
and Salt Lake City, Utah. The chain was founded in Seattle in 1964 and is the
Company's largest restaurant concept. Black Angus restaurants are typically
located in highly visible and heavily traveled areas in or near retail and
commercial businesses. The restaurants are generally freestanding and
generally range in size from 6,600 to 12,000 square feet, seating 300 to 435
customers. Black Angus restaurants are distinctly Western in their design and
feature booth seating for dining, attractive lounge areas with audio and video
entertainment, parking facilities and, in some cases, dance floors. They are
generally open for lunch from 11:30 a.m. to 4:00 p.m. and for dinner from 4:00
p.m. to 10:00 p.m.
GRANDY'S
As of December 30, 1996, Grandy's operated 103 family-oriented quick-service
restaurants located primarily in Texas, Oklahoma and Florida and franchised an
additional 56 restaurants in the southern United States. The chain was founded
in Lewisville, Texas in 1973. Grandy's restaurants are generally freestanding
and are located near shopping malls or highly visible, heavily traveled areas.
The restaurants range in size from 3,800 to 5,200 square feet and have dining
areas, which generally seat 130 to 220 customers. All restaurants offer
self-service and free-refill drinks, and all but two restaurants have
drive-through service. Grandy's restaurants are generally open from 6:00 a.m.
to 10:00 p.m. and serve breakfast, lunch and dinner. Grandy's differentiates
itself from its competitors by offering complete home-style meals with limited
service. Approximately 48% of Grandy's 1996 revenues were for consumption in
the dining room as opposed to take out.
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Grandy's domestic franchise agreements presently require initial fees of
$15,000 to $25,000 per restaurant, ongoing royalties of 4% of sales (3% for
some older franchises) and advertising expenditures of approximately 4% of
sales. Grandy's provides certain support functions for franchisees, including
initial training and ongoing monitoring and consultations. The Company does
not provide financing for franchisees.
SPOONS
Spoons, founded in 1978, operated 20 casual-style restaurants as of December
30, 1996, all of which are located in California. Spoons restaurants are
generally freestanding restaurants located in heavily traveled areas, ranging
in size from 5,500 to 7,800 square feet and seating approximately 200
customers. These full-service restaurants average a 40-minute table turnover
and offer booth and table seating in a casual, highly energetic atmosphere. In
addition, each restaurant has a lounge area which also serves food. Spoons
restaurants are generally open from 11:00 a.m. to 12:00 midnight and feature
the same menu all day.
SPECTRUM
As of December 30, 1996, Spectrum, founded in 1970, operated 16 upscale,
specialty restaurants located in California which serve either Northern
Italian, contemporary American or Mexican cuisine. The division includes four
"Prego" restaurants, three "Tutto Mare" restaurants, two "MacArthur Park"
restaurants and seven other restaurants which, although operated under
different names, generally concentrate on Northern Italian food. Spectrum
restaurants vary in size and physical type but are primarily located in
proximity to concentrations of young professionals and other upper-income
customers. The restaurants are generally open from 11:00 a.m. to 12:00
midnight.
NATIONAL SPORTS GRILL
National Sports Grill, founded in 1993, operated six sports-theme restaurants
as of December 30, 1996. This concept offers a menu featuring generous
portions and microbrewery beers and provides multiple video telecasts of
national and regional sporting events as well as interactive video games and
other sporting related games.
National Sports Grill restaurants are freestanding and generally range in size
from 10,000 to 17,000 square feet, seating approximately 200 to 300 customers.
The restaurants feature a bar, a dining area, a billiards area and multiple
video screens throughout. National Sports Grill restaurants are typically open
from 11:00 a.m. to 12:00 midnight.
VELVET TURTLE
The Company operated one Velvet Turtle restaurant as of December 30, 1996.
Velvet Turtle was a full-service, white-tablecloth restaurant chain catering to
the special occasion diner and a more affluent, older customer. The Company
closed the last Velvet Turtle restaurant in February 1997.
RESTAURANT OPERATIONS
The Company is operated as five separate divisions. The Black Angus and
Grandy's divisions are each organized functionally with separate operations,
marketing, finance,
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real estate and human resources departments. The three smaller divisions share
among them certain support functions such as marketing, finance, administration
and human resources. The Company provides strategic direction and approves
major capital expenditures, annual budgets, and all salaries above a specific
level. In addition, the Company provides purchasing, cash management,
insurance and other treasury functions, and accounting and legal expertise, all
on a centralized basis.
The Company's cash management system is highly sophisticated with controls down
to the server level. The Company uses a centralized cash concentration system
which sweeps all of its cash accounts on a daily basis. There is a central
accounts payable and check writing system with approximately 9,000 vendors
profiled on the system.
The Company uses a combination of in-house and outside contracted services for
its management information system needs. In-house systems include a
point-of-sale system for each restaurant and stand-alone computing at the
restaurant, division and corporate levels. The Company currently contracts for
payroll services and for mainframe-based data processing.
Each restaurant is staffed with a General Manager who is directly responsible
for the operation of the restaurant, including product quality, cleanliness,
service, inventory, cash control and the appearance and conduct of store
employees. Except for Grandy's, most restaurants also have one or two
Assistant Managers and a Chef. Managers and supervisory personnel train other
restaurant employees in accordance with detailed procedures and guidelines
prescribed by each division. General Managers are supervised by District
Managers, each of whom is responsible for approximately seven restaurants.
District Managers, General Managers, Assistant Managers and Chefs are eligible
for bonuses under each division's extra compensation program, for which goals
and objectives are established based on profitability, sales and other factors
relating to the restaurants.
PURCHASING AND DISTRIBUTION
To ensure standards of quality and to maximize pricing efficiencies, a central
Purchasing Department coordinates the supply of almost all restaurant items.
The Company purchases products throughout the United States and abroad through
agreements with various food-service vendors. The Company routinely uses
public cold storage facilities and makes forward commitments in order to
establish the availability and price of key food items such as beef and
seafood. In order to achieve more favorable terms, during recent months the
Company has chosen to concentrate its distribution among certain of its vendors
but believes that it could replace any of these distributors on a timely basis.
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COMPETITION AND MARKETS
All aspects of the restaurant business are highly competitive. Price,
restaurant location, food quality, service and attractiveness of facilities are
important aspects of competition and the competitive environment is often
affected by factors beyond a particular restaurant management's control,
including changes in the public's taste and eating habits, population and
traffic patterns and economic conditions. The Company's restaurants compete
with a wide variety of restaurants, ranging from national and regional
restaurant chains to locally owned restaurants. The Company believes that its
principal competitive strengths lie in the distinctive atmosphere and food
presentation offered; the value, variety and quality of food products served;
the quality and training of its employees; the experience and ability of its
management; and the economies of scale enjoyed by the Company because of its
size and geographic concentration. The Company continually monitors consumer
tastes and adjusts and updates its menus accordingly. The Company operates a
research facility near its headquarters which develops new menu items for each
of the Company's concepts.
EMPLOYEES
At December 30, 1996, the Company employed approximately 14,800 persons, of
whom approximately 13,800 were hourly employees in restaurants, approximately
800 were salaried employees in restaurants (managers and chefs) and
approximately 200 were hourly and salaried employees in divisional and
corporate management and administration. Approximately 70% of the hourly
restaurant employees work on a part-time basis (25 hours or less per week).
None of the Company's facilities are unionized. The Company believes it
provides competitive compensation and benefits to its employees and that its
employee relations are good.
REGULATIONS
Each restaurant is subject to regulation by federal agencies and to licensing
and regulation by state and local health, sanitation, safety, fire and other
departments. In addition, each restaurant (except for Grandy's) is subject to
licensing with respect to the sale of alcoholic beverages. The loss of
licenses or permits by the Company's restaurants to sell alcohol would
interrupt or terminate the Company's ability to serve alcoholic beverages at
those restaurants and, if a significant number of restaurants were affected,
could have a material adverse effect on the Company. The Company believes it
has good relations with the various alcoholic beverage authorities.
The Company is subject to the Fair Labor Standards Act and various state laws
governing such matters as minimum wages, overtime and other working conditions.
Substantially all of the Company's restaurant employees are paid at rates
related to the federal and state minimum wage, and accordingly increases in the
minimum wage increase the Company's labor costs.
SERVICE MARKS
The Company regards its service marks and trademarks as important to the
identification of its restaurants and believes they have significant value in
the conduct of its business. The Company has registered various service marks
and trademarks with the United States Patent and Trademark Office. In
addition, certain marks have been registered in the State of California, in
various other states and in certain foreign countries.
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SEASONALITY
Except with respect to Grandy's, the Company's restaurant revenues and
profitability are not subject to significant seasonal fluctuations. Grandy's
revenues and profits are traditionally higher during the spring and summer
months because of factors such as increased travel and improved weather
conditions affecting the public's dining habits.
ITEM 2. PROPERTIES
Of the 247 restaurants operated by the Company on December 30, 1996, the
Company owns the land and building for 8, owns the building and leases the land
for 97, and leases both land and building for the remaining 142 restaurants.
Most of the Company's restaurants are freestanding and range from approximately
4,000 square feet for a Grandy's restaurant to as much as 17,000 square feet
for a National Sports Grill restaurant. Most of the Company's leases provide
for the payment of the greater of a set base rental or a percentage rental of
up to 6% of gross revenues, plus real estate taxes, insurance and other
expenses.
In addition, the Company owns the land and building for the Grandy's
headquarters in Lewisville, Texas, and leases office space for its other
divisions and corporate headquarters in Los Altos, San Francisco, and Newport
Beach, California. The Company also leases a facility in Newport Beach,
California, which it uses for centralized research and development.
The following table sets forth, as of December 30, 1996, the number of
Company-operated restaurants by division and state of operation:
<TABLE>
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DIVISION
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NATIONAL
BLACK SPORTS VELVET NUMBER OF
STATE ANGUS GRANDY'S SPOONS SPECTRUM GRILL TURTLE RESTAURANTS
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California 56 2 20 16 6 1 101
Texas - 70 - - - - 70
Oklahoma - 16 - - - - 16
Washington 11 - - - - - 11
Arizona 9 - - - - - 9
Florida - 9 - - - - 9
Colorado 5 - - - - - 5
Kansas - 5 - - - - 5
Oregon 5 - - - - - 5
Minnesota 4 - - - - - 4
Indiana 3 - - - - - 3
Hawaii 2 - - - - - 2
Nevada 2 - - - - - 2
New Mexico 1 1 - - - - 2
Alaska 1 - - - - - 1
Idaho 1 - - - - - 1
Utah 1 - - - - - 1
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Total 101 103 20 16 6 1 247
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various litigation incidental to its business,
including claims arising out of personal injuries, contract lawsuits,
employment practices and worker's compensation cases, the claims for which
sometimes involve substantial damages. Based on information presently
available, management does not believe that the outcome of such litigation will
have a material adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholder of the Company in the
fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK
American Restaurant Group Holdings, Inc., a Delaware corporation, was formed in
1993 and owns 100% of the Company's outstanding common stock. There is
currently no market for the Company's common stock, nor is such anticipated in
the near future. The Company has never paid dividends to its common
stockholders and currently has no plans to do so.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected historical consolidated financial data for each of the
five periods ended December 30, 1996 has been derived from the consolidated
financial statements of the Company which have been audited by Arthur Andersen
LLP, independent accountants, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the consolidated financial statements and notes thereto
included elsewhere in this Form 10-K.
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Year ended (1)
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Dec. 28, Dec. 27, Dec. 26, Dec. 25, Dec. 30,
1992 1993 1994 1995 1996(2)
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(dollars in thousands)
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INCOME STATEMENT DATA:
REVENUES:
Black Angus . . . . . . . . . . . . . . . . $225,796 $235,345 $253,634 $243,624 $254,946
Grandy's . . . . . . . . . . . . . . . . . 106,701 111,166 109,301 101,839 90,962
Other concepts . . . . . . . . . . . . . . 92,520 91,398 97,471 100,503 99,516
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Total revenues . . . . . . . . . . . 425,017 437,909 460,406 445,966 445,424
RESTAURANT COSTS:
Food and beverage . . . . . . . . . . . . . 132,767 136,255 142,828 138,270 141,032
Payroll . . . . . . . . . . . . . . . . . . 131,016 132,292 136,151 134,532 137,104
Direct operating . . . . . . . . . . . . . 95,419 109,462 108,382 110,399 114,589
Depreciation and amortization . . . . . . . 26,330 25,682 26,400 22,819 20,386
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Total restaurant costs. . . . . . . . . 385,532 403,691 413,761 406,020 413,111
General and administrative expenses . . . . . 28,429 29,895 31,027 31,360 28,086
Non-cash charge for impairment
of long-lived assets . . . . . . . . . . . - - - 20,178 13,205
Operating profit (loss) . . . . . . . . . . . 11,056 4,323 15,618 (11,592) (8,978)
Interest expense, net . . . . . . . . . . . . 23,185 23,741 27,691 28,004 27,714
Net loss before extraordinary loss . . . . . (12,228) (19,216) (12,130) (39,662) (36,773)
Extraordinary loss on
extinguishment of debt . . . . . . . . . . (17,775) (10,790) - - (1,688)
Net loss . . . . . . . . . . . . . . . . . . $(30,003) $(30,006) $(12,130) $(39,662) $(38,461)
Ratio of earnings to fixed
charges -- (deficiency) (3) . . . . . . . . (12,129) (19,418) (12,073) (39,596) (36,692)
BALANCE SHEET DATA:
Plant and equipment, net . . . . . . . . . . $190,017 $181,889 $181,496 $171,030 $101,169
Total assets. . . . . . . . . . . . . . . . . 298,494 291,989 282,438 249,053 172,129
Long-term obligations,
including current portion . . . . . . . . . 215,627 228,612 226,394 233,011 182,137
Redeemable cumulative preferred stock . . . . 73,291 - - - -
Common stockholder's equity (deficit) . . . . (60,735) (8,307) (20,437) (60,099) (91,446)
</TABLE>
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(1) The Company's obligations under its 13% Senior Secured Notes due 1998
and 13% Senior Secured Notes due 1998, Series B (collectively the
"Senior Secured Notes") are guaranteed by each of its subsidiaries
(the "Subsidiary Guarantors"). Separate financial statements of the
Subsidiary Guarantors are not included in this Form 10-K because the
Subsidiary Guarantors are unconditionally jointly and severally liable
for the obligations of the Company under the Senior Secured Notes
pursuant to such guarantees and the aggregate net assets, earnings and
equity of such Subsidiary Guarantors are substantially equivalent to
the net assets, earnings and equity of the Company on a consolidated
basis.
(2) The year ended December 30, 1996 included 53 weeks.
(3) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of earnings before extraordinary loss, income taxes
and fixed charges. Fixed charges consist of interest on indebtedness,
the amortization of debt issue costs and that portion of operating
rental expense representative of the interest factor.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Years Ended December 26, 1994, December 25, 1995 and December 30, 1996:
Revenues. Total revenues decreased 3.1% from $460.4 million in 1994 to $446.0
million in 1995 followed by a slight decrease to $445.4 million in 1996. The
year ended December 30, 1996 includes a 53rd week which added $6.9 million to
total revenues. Comparable restaurant revenues excluding the 53rd week
decreased 2.9% from 1995. Six new restaurants were opened during 1996 offset
by the closure of seven restaurants. There were 246, 248 and 247 restaurants
operating at the end of 1994, 1995 and 1996, respectively.
Black Angus revenues decreased 3.9% from $253.6 million in 1994 to $243.6
million in 1995 then increased 4.6% to $254.9 million in 1996. The increase in
1996 revenues was the result of the 53rd week which added $4.2 million in
revenues and the addition of six new restaurants. Total comparable restaurant
revenues increased 0.2% in 1996. Comparable restaurant food sales increased
1.5% compared to 1995 while beverage sales decreased 3.9% as a result of
de-emphasizing the late-night lounge business. There were six new restaurants
opened in 1996, two in Arizona, two in Nevada, one in Washington and one in
Utah.
Grandy's revenues decreased 6.8% from $109.3 million in 1994 to $101.8 million
in 1995 followed by a 10.7% decrease to $91.0 million in 1996. The decrease in
1996 was the net result of the 53rd week which added $1.3 million in revenues,
an 11.3% decrease in comparable restaurant revenues and the closure of seven
poor performing restaurants. Franchise revenues were $2.5 million, $2.2
million and $2.0 million in 1994, 1995 and 1996, respectively.
Other revenues increased 3.1% from $97.5 million in 1994 to $100.5 million in
1995 then decreased 1.0% to $99.5 million in 1996. The decrease in 1996 was
the net result of the 53rd week which added $1.4 million in revenues and a 1.9%
decrease in comparable restaurant revenues in 1996.
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Food and Beverage Costs. As a percentage of revenues, food and beverage costs
increased from 31.0% in 1994 and 1995 to 31.7% in 1996. The increase in 1996
was primarily a result of higher grocery expenses.
Payroll Costs. As a percentage of revenues, labor costs increased from 29.6%
in 1994 to 30.2% in 1995 and then increased to 30.8% in 1996. The increase in
1996 was primarily a result of higher restaurant management costs.
Direct Operating Costs. Direct operating costs consist of occupancy,
advertising and other expenses incurred by individual restaurants. As a
percentage of revenues, these costs increased from 23.5% in 1994 to 24.8% in
1995 and then increased to 25.7% in 1996. The increase was a result of
increased advertising expenses and higher occupancy costs.
Depreciation and Amortization. Depreciation and amortization consists of
depreciation of fixed assets used by individual restaurants, division and
corporate offices, as well as amortization of intangible assets. As a
percentage of revenues, depreciation and amortization decreased from 5.7% in
1994 to 5.1% in 1995 and then decreased to 4.6% in 1996. The decrease was
primarily due to the non-cash reduction of the historical costs of certain
long-lived assets in December 1995.
General and Administrative Expenses. General and administrative expenses as a
percentage of revenues were 6.7% in 1994, 7.0% in 1995 and 6.3% in 1996. The
decrease in 1996 was due primarily to decreased division overhead payroll
expenses.
Non-Cash Charge for Impairment of Long-Lived Assets. In December 1996 certain
assets, including fixed assets and certain related intangible assets, were
valued at less than their historic costs and resulted in a non-cash charge of
$13.2 million. This non-cash charge was 3.0% of revenues. A similar non-cash
charge of $20.2 million was recorded in 1995. There were no charges for
impairment of long-lived assets in 1994.
Operating Profit. As a result of the items discussed above, operating profit
decreased from $15.6 million in 1994 to an operating loss of $11.6 million in
1995 and then improved to an operating loss of $9.0 million in 1996 (an
operating profit of $8.6 million in 1995 and $4.2 million in 1996 before the
non-cash charge for impairment of long-lived assets). As noted in the
discussion of revenues, the Company's divisions are not uniform in size or
profitability. For example, for the fiscal year ended 1996, Black Angus had an
operating profit of $19.1 million while Grandy's had an operating loss of $1.0
million.
Interest Expense - Net. Interest expense increased from $27.7 million in 1994
to $28.0 million in 1995 and then decreased to $27.7 million in 1996. The
average interest rate on Company borrowings was 11.5%, 11.5% and 11.7% for
1994, 1995 and 1996, respectively. Average borrowings (excluding capitalized
lease obligations) increased from $215.0 million in 1994 to $217.7 million in
1995 and then decreased to $208.2 million in 1996. Average borrowings declined
in 1996 due to the payment of $43.9 million in principal on the Senior Secured
Notes.
Income Taxes. Income taxes increased from a provision of $57,000 in 1994 to
$66,000 in 1995 and then increased to $81,000 in 1996. The provisions
represent amounts provided for certain minimum state income taxes.
Extraordinary Loss. An extraordinary loss of $1.7 million occurred in 1996 with
the extinguishment of debt. This extraordinary loss resulted from a non-cash
charge to expense for capitalized debt costs associated with the debt repaid.
There were no extraordinary losses in 1994 or 1995.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from operations and
borrowings under its credit facilities. The Company requires capital
principally for the acquisition and construction of new restaurants, the
remodeling of existing restaurants and the purchase of new equipment and
leasehold improvements. As of December 30, 1996, the Company had cash of
approximately $7.5 million and has essentially no debt amortization until
September 1997. The Company also had $12.4 million outstanding under its
letters of credit facility.
In general, restaurant businesses do not have significant accounts receivable
because sales are made for cash or by credit card vouchers which are ordinarily
paid within a few days, and do not maintain substantial inventory as a result
of the relatively brief shelf life and frequent turnover of food products.
Additionally, restaurants generally are able to obtain trade credit in
purchasing food and restaurant supplies. As a result, restaurants are
frequently able to operate with working capital deficits, i.e., current
liabilities exceed current assets. At December 30, 1996, the Company had a
working capital deficit of $91.8 million which included $41.5 million in
current portion of long-term debt.
The Company estimates that capital expenditures of $6.0 million to $10.0
million are required annually to maintain and refurbish its existing
restaurants. In addition, the Company spends approximately $10.0 million to
$13.0 million annually for repairs and maintenance which are expensed as
incurred. Other capital expenditures, which are generally discretionary, are
primarily for the construction of new restaurants and for expanding,
reformatting and extending the capabilities of existing restaurants and for
general corporate purposes. The Company spent approximately $5.8 million on
new restaurants in 1996. The Company expects to spend approximately $5.0
million for new restaurants in 1997. Total capital expenditures were $22.2
million in 1994, $16.3 million in 1995, and $13.3 million in 1996. Higher
capital expenditures in 1994 resulted from the addition of five National Sports
Grill restaurants, three Black Angus restaurants, two Grandy's restaurants, one
Spoons restaurant and one Spectrum restaurant. The Company's credit agreement
contains limitations on the amount of capital expenditures that the Company may
incur.
On March 13, 1996, Holdings completed a private placement of its 14% senior
discount debentures due 2005 with a face value of $17.0 million producing
aggregate proceeds of approximately $7.1 million. Substantially all of the net
proceeds of the offering were contributed by Holdings to the Company. The net
proceeds were used by the Company for general corporate purposes.
On August 28, 1996, the Company's Senior Secured Note holders consented to an
amendment which increased the interest rate on substantially all of the Senior
Secured Notes from 12% to 13% and changed interest payment dates from
semi-annual to quarterly beginning December 15, 1996. The amendment also
replaced a net worth covenant with an EBITDA (earnings before interest, taxes,
depreciation and amortization) covenant and required the Company to consummate
asset sales or sale/leaseback transactions prior to December 31, 1996.
On September 13, 1996, the Company completed a sale/leaseback transaction under
which it sold the real property relating to 24 Stuart Anderson's Black Angus
and Stuart Anderson's Cattle Company restaurants for an aggregate sales price
of $48.1 million and simultaneously executed long-term leases under which it
will continue to operate the
10
<PAGE> 13
restaurants. The proceeds of the transaction have been applied in accordance
with the requirements of the Company's debt instruments, as follows: to redeem
at par principal and interest thereon of its Senior Secured Notes in the amount
of $34.3 million; to repay bank debt and to partially cash collateralize
outstanding letters of credit in a combined amount of $4.8 million; for fees
and expenses of this transaction as well as the Company's above noted consent
solicitation relating to the Senior Secured Notes in a total amount of $4.6
million; and $4.4 million retained by the Company to be invested in productive
assets within six months. The Company recorded an extraordinary loss on
extinguishment of debt relating to the write-off of capitalized debt costs in
the amount of $1.1 million. In addition, a $5.9 million gain related to this
sale/leaseback was deferred and will be amortized over the life of the
underlying leases.
On December 13 ,1996, the Company completed a sale/leaseback transaction under
which it sold the real property relating to 30 Grandy's restaurants for an
aggregate sales price of $12.5 million and simultaneously executed a long-term
lease under which it will continue to operate the restaurants. The proceeds of
this transaction were applied in accordance with the requirements of the
Company's debt instruments as follows: to redeem at par principal and interest
thereon of its Senior Secured Notes in the amount of $9.9 million; to partially
cash collateralize outstanding letters of credit in the amount of $1.1 million;
for fees and expenses of this transaction in the amount of $0.9 million; and
$0.6 million retained by the Company to be invested in productive assets within
six months. The Company recorded a loss of $1.5 million on the sale of this
property and an extraordinary loss of $0.6 million on extinguishment of debt
relating to the write-off of capitalized debt costs.
During 1996, the Company also completed the sale of three additional Grandy's
restaurants and the sale/leaseback of two Spoons restaurants, the proceeds of
which were applied in accordance with the requirements of the Company's debt
instruments. The combined aggregate sales price of these transactions was $3.9
million.
The Company was two weeks late in paying the quarterly interest of $1.2 million
on its Subordinated Debt which was due December 15, 1996 and expects to be four
weeks late in the quarterly payment which was due March 15, 1997. The
Subordinated Debt provides for a 30-day grace period for interest payments.
In 1997, the Company was in default under a covenant that required certain sales
or sale/leaseback transactions by December 31, 1996. On March 13,1997, the
Company's Senior Secured Note holders consented to an amendment which replaced
the EBITDA covenants for the year ended December 30, 1996 and for the four
quarters ended March 31, 1997 with an EBITDA covenant for the twelve months
ended May 31, 1997 (tested at the same level as would have been required for
the four quarters ended March 31, 1997), reduced the amount of net cash
proceeds from asset sales or sale/leaseback transactions required by December
31, 1996 to $15.0 million (which was accomplished) and waived any related
existing defaults or events of default. The amendment provided for an increase
of $10 in the stated principal amount for each $1,000 in stated principal
amount of consenting noteholders. This resulted in an increase of
approximately $1.6 million in the stated principal amount of the Senior Secured
Notes and $1.2 million in the actual outstanding principal amount of the Senior
Secured Notes.
Substantially all assets of the Company are pledged to its senior lenders. In
addition, the subsidiaries have guaranteed the indebtedness owed by the Company
and such guarantee is secured by substantially all of the assets of the
subsidiaries. In connection with such indebtedness, contingent and mandatory
prepayments may be required
11
<PAGE> 14
under certain specified conditions and events. There are no compensating
balance requirements. A quarterly commitment fee of 0.5% per annum is payable
on the letter of credit facility and a quarterly fee of 3.75% per annum is
payable on outstanding letters of credit.
At year end 1995 and 1996, the Company had outstanding letters of credit
primarily related to its self-insurance programs of approximately $14.4 million
and $12.4 million, respectively.
The Company's senior credit facilities provide for a letter of credit facility
of $11.0 million until July 31, 1997. This letter of credit facility was fully
utilized as of March 3, 1997. Having repaid the outstanding bank loan in
September 1996, the Company does not have a working capital facility.
The Company is highly leveraged and is pursuing additional asset sales which
must be consummated in order to enable the Company to repay the required
sinking fund payment of $41.5 million due September 15, 1997 on the Senior
Secured Notes. Any additional asset sale proceeds in excess of the amount
required to repay the Senior Secured Notes in full, together with any proceeds
from additional refinancing, will be used to repay the Subordinated Debt. In
the absense of such a sale, the Company believes it could otherwise restructure
its debt. In addition, the Company expects to obtain a replacement letter of
credit facility. However, there can be no assurance that any such asset sales
or refinancing will be completed on acceptable terms.
The Company's net operating loss carryforwards may be subject to significant
limitations on use or elimination under applicable provisions of the Internal
Revenue Code of 1986, as amended, as a result of changes in ownership of the
Company.
IMPACT OF INFLATION
Although inflationary increases in food, labor or operating costs could
adversely affect operations, the Company has generally been able to offset
increases in cost through price increases, labor scheduling and other
management actions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Consolidated Financial Statements on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
12
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about the Company's current
directors and each of its executive officers and key management personnel:
NAME AGE POSITION WITH COMPANY
- ------------------------ --- ------------------------------------
[S] [C] [C]
Anwar S. Soliman 59 Chairman, Chief Executive Officer,
Director
Ralph S. Roberts 54 President, Chief Operating Officer,
Director
William J. McCaffrey, Jr. 50 Chief Financial Officer, Vice
President, Treasurer, Assistant
Secretary, Director
Wilfred H. Partridge 67 Vice President - Purchasing
Patrick J. Kelvie 45 Secretary and General Counsel
Officers are elected by the Board of Directors and serve at the discretion of
the board.
Anwar S. Soliman. Mr. Soliman has served as Chairman, Chief Executive Officer
and a Director of the Company since its organization in 1986. Prior to joining
the Company, Mr. Soliman was Executive Vice President of W. R. Grace & Co.
("Grace") and Group Executive of the Grace Restaurant Group, which he started
in 1977. Mr. Soliman spent 22 years with Grace in various executive positions.
He is also a trustee of the Orange County Museum of Art and a member of the
Board Council of Boys Hope of California. Mr. Soliman received both a B.
Commerce and an M.B.A. from Alexandria University and a Ph.D. from New York
University.
Ralph S. Roberts. Mr. Roberts has served as a Director of the Company since
1991 and has served as the President and Chief Operating Officer of the Company
since 1986. Mr. Roberts has over 25 years of experience in the restaurant
industry and before joining the Company was Deputy Group Executive of
Operations of the Grace Restaurant Group and Vice President of Grace. Prior to
joining Grace in 1980, he was Vice President of the Stouffer Restaurant
Division and President and co-founder of the Rusty Scupper restaurants. Mr.
Roberts received a B.A. from Princeton University.
William J. McCaffrey, Jr. Mr. McCaffrey has served as a Director of the
Company since 1991 and has served as the Chief Financial Officer, Vice
President, Treasurer and Assistant Secretary of the Company since 1986. Prior
thereto he was Chief Financial Officer of the Grace Restaurant Group, having
spent 12 years with Grace. For eight years, Mr. McCaffrey was assistant to the
Chief Executive Officer of Grace. He received a B.S. M.E. from the University
of Notre Dame and an M.B.A. from Harvard University.
Wilfred H. Partridge. Mr. Partridge has served as Vice President responsible
for purchasing and distribution for the Company since 1986. Mr. Partridge has
over 30 years experience in the restaurant industry encompassing purchasing,
production and distribution, as well as restaurant operations, and was
President of Grace Restaurant Services before joining the Company. Mr.
Partridge served as Vice President of Purchasing, Production and Distribution
with Marriott Corporation (Bob's Big Boy Division) for 19 years. He served as
Director of Manufacturing and Distribution for Foodmaker Company
(Jack-in-the-Box) and also operated his own restaurants in the San Diego area.
He received a B.A. in Commercial Science from Benjamin Franklin University.
13
<PAGE> 16
Patrick J. Kelvie. Mr. Kelvie has served as General Counsel of the Company
since 1987 and Secretary of the Company since 1989. From 1987 to 1989, Mr.
Kelvie was an Assistant Secretary of the Company. Between 1978 and 1987, Mr.
Kelvie held various legal counsel positions for Saga Corporation. Mr. Kelvie
received a B.A. from the University of California at Berkeley and a J.D. from
Harvard Law School.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation for services rendered in
all capacities which the Company paid to or accrued for the Chief Executive
Officer and each of the other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ------------------------------------------------------------------------- --------------------- -------
OTHER NUMBER ALL
ANNUAL RESTRICTED OF OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(b) AWARD(S) SARS PAYOUTS SATION(c)
- ------------------------------------------------------------------------ ----------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anwar S. Soliman 1996 $1,233,640 $ 0 $ 96,125 - - - $24,303
(Chairman and CEO) 1995 1,233,640 0 62,660 - - - 18,002
1994 1,189,580 0 92,635 - - - 17,552
Ralph S. Roberts 1996 704,935 0 48,295 - - - 8,351
(President and COO) 1995 704,935 0 28,230 - - - 8,351
1994 659,907 0 43,400 - - - 5,759
William J. McCaffrey, Jr. 1996 325,000 0 (a) 5,680 - - - 14,846
(Chief Financial Officer) 1995 311,539 30,000 0 - - - 9,571
1994 287,115 35,000 5,425 - - - 9,093
Wilfred H. Partridge 1996 290,000 0 (a) 7,610 - - - 5,754
(Vice President - 1995 279,231 30,000 0 - - - 5,884
Purchasing) 1994 259,692 35,000 7,325 - - - 26,982
Patrick J. Kelvie 1996 175,000 0 (a) 0 - - - 1,312
(Secretary and 1995 175,000 0 0 - - - 1,262
General Counsel) 1994 167,731 0 0 - - - 1,849
</TABLE>
- ---------------------
(a) Discretionary bonus amounts for Messrs. McCaffrey, Partridge and
Kelvie were not determined as of March 3, 1997.
(b) Amounts shown are for reimbursement during the fiscal year for the
payment of premiums and income taxes thereon relating to executive
life and disability plans.
(c) Amounts shown in this column for the last fiscal year include the
following: group term life insurance premiums of $24,303, $8,351,
$12,471 and $3,510 for Messrs. Soliman, Roberts, McCaffrey and
Partridge, respectively; and company matching contributions to a
401(k) plan of $2,375, $2,244 and $1,312 for Messrs. McCaffrey,
Partridge and Kelvie, respectively.
14
<PAGE> 17
EMPLOYMENT AGREEMENTS
The following table sets forth, with respect to each executive officer who has
entered into an employment agreement with the Company, the base salary for such
officer provided for therein together with the termination date of such
agreement:
<TABLE>
<CAPTION>
BASE TERMINATION
NAME OF INDIVIDUAL CAPACITY IN WHICH SERVED SALARY DATE
- ------------------ ------------------------------------ ---------- -----------
<S> <C> <C> <C>
Anwar S. Soliman Chairman and Chief Executive Officer $1,233,640 12/31/97
Ralph S. Roberts President and Chief Operating Officer 704,935 12/31/97
Wilfred H. Partridge Vice President - Purchasing 290,000 12/31/97
</TABLE>
Each of the agreements provides, among other things, for adjustments to the
base salaries and automatic extensions of the termination date. The agreements
also provide for certain other benefits, including, in the case of Mr. Soliman,
one year's severance pay equal to his then salary in the event of disability or
death; in the case of Mr. Roberts, one year's severance pay in the event of
death and salary for the remainder of the calendar year in the event of
disability; in the case of Mr. Partridge, six months severance pay in the event
of death and salary for the remainder of the calendar year in the event of
disability. The employment agreements of Mr. Soliman and Mr. Roberts each
provide six months severance pay if either executive terminates his employment
for cause. None of the Company's employment agreements provides for any salary
obligations in the event of termination by the Company for cause.
SAVINGS PLAN
The Company currently has the American Restaurant Group Savings and Investment
Plan (the "Savings Plan"), which is a 401(k) plan established for the benefit
of employees who have satisfied certain requirements. These requirements
include completion of one year of service with a minimum of 1,000 hours worked.
Subject to applicable limits imposed on tax qualified plans, eligible employees
may elect pre-tax contributions up to 18.5% of a participant's total earnings
for a calendar year (but not in excess of $9,500 for 1996). The Company makes
matching contributions to the Savings Plan equal to 25% of the participant's
contributions up to 6% of the participant's earnings. A participant is
entitled to a distribution from the Savings Plan upon termination of employment
and any such distribution will be in a lump sum form. Distributable benefits
are based on the value of the participant's individual account balance which is
invested at the direction of the participant in one or a combination of six
investment funds, none of which include investments in the Company. Under
certain circumstances, a participant may borrow amounts held in his account
under the Savings Plan. Based upon the Savings Plan vesting schedule, as of
1996, 100% of the Company matching contributions were vested for Messrs.
McCaffrey, Partridge and Kelvie.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Holdings owns 100% of the Company's outstanding common stock. All of the
Holdings' management stockholders have entered into a voting trust agreement in
accordance with which Anwar S. Soliman, Chairman and Chief Executive Officer of
the Company and of Holdings, exercises, as voting trustee, all voting and
substantially all other rights to which such shareholders would otherwise be
entitled until the earlier of December 31, 2001 or the earlier termination of
the Voting Trust Agreement. As a result, Mr. Soliman is considered the
beneficial owner of approximately 82.4% of the outstanding shares of Holdings'
common stock (approximately 61% on a fully diluted basis).
15
<PAGE> 18
As of March 3, 1997, certain holders of the senior discount debentures held
approximately 18% of the shares of Holdings' common stock (approximately 13% on
a fully diluted basis). Also certain holders of the Subordinated Debt held
warrants of common stock of approximately 26% on a fully diluted basis.
The following table sets forth certain information regarding the beneficial
ownership of Holdings common stock, as of March 3, 1997, by (i) each of the
Company's directors, (ii) the Chief Executive Officer and certain other highly
compensated executive officers of the Company, (iii) all executive officers and
directors as a group and (iv) each person believed by the Company to own
beneficially more than 5% of Holdings' outstanding common stock. As of March
3, 1997, Holdings owned all of the issued and outstanding capital stock of the
Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS(1) OF BENEFICIAL OWNERSHIP OF CLASS
- ------------------- ----------------------- --------
<S> <C> <C>
Anwar S. Soliman 228,577 (1) 33.5%
Roberts Family Limited Partnership 114,266 16.8
William J. McCaffrey, Jr. 28,567 4.2
Wilfred H. Partridge 28,567 4.2
Patrick J. Kelvie 4,563 0.7
Nomura Holding America Inc. 39,358 (2) 5.8
Swiss Bank Corporation 39,355 (2) 5.8
Cerberus Partners, L.P. 35,430 (2) 5.2
Dean Witter, Discover & Co. and
Dean Witter InterCapital Inc. 78,557 (3) 11.5
All directors and officers of the
Company as a group (5 persons) 404,540 59.4
</TABLE>
- ---------------------
(1) Does not include 187,371 shares of Holdings common stock which Mr.
Soliman is deemed to be the owner of pursuant to the Voting Trust
Agreement.
(2) Represents warrants which are immediately exercisable at a nominal
price per share. None of such warrants are exercisable after July 31,
2001.
(3) Pursuant to a Schedule 13G dated February 13, 1996, Dean Witter,
Discover & Co. and Dean Witter InterCapital Inc. reported holding
78,557 shares the beneficial ownership of which they disclaimed.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
16
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Consolidated Financial Statements. See the Index to Consolidated
Financial Statements on page F-1.
(c) List of Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Purchase Agreement dated as of September 11, 1996 by and between ARG Property Management
Corporation and ARG Enterprises, Inc. and ARG Properties I, LLC.****
2.2 Master lease dated September 11, 1996 between ARG Properties I, LLC, as Landlord and ARG
Enterprises, Inc. as Tenant.****
2.3 Lease #06152 dated September 11, 1996 between Captec Net Lease Realty, Inc. and ARG
Enterprises, Inc. as Tenant for Bloomington, Minnesota.****
2.4 Lease #06153 dated September 11, 1996 between Captec Net Lease Realty, Inc. and ARG
Enterprises, Inc. as Tenant for Fridley, Minnesota.****
2.5 Lease #06154 dated September 11, 1996 between Captec Net Lease Realty, Inc. and ARG
Enterprises, Inc. as Tenant for Minnetonka, Minnesota.****
2.6 Lease #06155 dated September 11, 1996 between Captec Net Lease Realty, Inc. and ARG
Enterprises, Inc. as Tenant for Roseville, Minnesota.****
2.7 Lease dated September 11, 1996 between Safeway Inc., as Landlord and ARG Enterprises,
Inc., as Tenant.****
2.8 Guaranty of Lease dated September 11, 1996 by ARG Enterprises, Inc. as Tenant to ARG
Properties I, LLC as Landlord.****
2.9 A Guaranty of Lease dated September 11, 1996 by ARG Enterprises, Inc. as Tenant to Captec
Net Lease Realty, Inc. as Landlord for each of four Minnesota restaurants.****
2.10 Guaranty of Lease dated September 11, 1996 by ARG Enterprises, Inc. as Tenant and Safeway
Inc. as Landlord.****
3.1 Amended and Restated Certificate of Incorporation of the Company, filed with the Secretary
of State of Delaware on July 23, 1991.*
3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of the
Company, filed with the Secretary of State of Delaware on March 21, 1992.*
3.3 By-Laws of the Company.*
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.1 Indenture, dated as of December 1, 1993, between the Company and U.S. Trust Company of
California, N.A., as Trustee (including specimen certificate of 12% Senior Secured Note
due 1998, Series B).**
4.2 Amended and Restated Credit Agreement, dated as of December 13, 1993, among the Company,
the subsidiaries of the Company parties hereto, Bankers Trust Company, as Agent, and the
several banks named thereto.**
4.3 Second Amended and Restated Subordinated Loan Agreement, dated as of December 14, 1993,
between the Company and Merrill Lynch Interfunding Inc.**
4.4 Registration Rights Agreement, dated as of December 14, 1993, between the Company and
Merrill Lynch Interfunding Inc.**
4.5 Stockholders and Registration Rights Agreement, dated as of December 14, 1993, among
American Restaurant Group Holdings, Inc. ("Holdings"), the Company, the stockholders
parties thereto and Merrill Lynch Interfunding Inc.**
4.6 Indenture, dated as of September 15, 1992, between the Company and U.S. Trust Company of
California, N.A., as Trustee (including the form of note).*
4.7 Intercreditor Agreement, dated March 20, 1992, among Bankers Trust Company, as Collateral
Agent and as Agent, U.S. Trust Company of California, N.A., as Trustee, Merrill Lynch
Interfunding Inc., the Company and the Subsidiary Guarantors.*
4.8 Acknowledgment to Intercreditor Agreement, dated as of December 13, 1993, between the
Lenders named therein and U.S. Trust Company of California, N.A., as Trustee.**
4.9 First Supplemental Indenture, dated as of December 9, 1993, between the Company and U.S.
Trust Company of California, N.A., as Trustee under the Indenture dated as of September
15, 1992.**
4.10 Limited Waiver and Fourth Amendment to Amended and Restated Credit Agreement, dated
November 1, 1995, among the Company, the subsidiaries of the Company parties hereto,
Bankers Trust Company, as Agent, and the several banks named thereto.*****
4.11 Limited Waiver and Fifth Amendment to Amended and Restated Credit Agreement, dated
February 27, 1996, among the Company, the subsidiaries of the Company parties hereto,
Bankers Trust Company, as Agent, and the several banks named thereto.*****
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.12 Limited Waiver and Sixth Amendment to Amended and Restated Credit Agreement, dated August
26, 1996, among the Company, the subsidiaries of the Company parties hereto, Bankers Trust
Company, as Agent, and the several banks named thereto.
4.13 Limited Waiver and Seventh Amendment to Amended and Restated Credit Agreement, dated
September 10, 1996, among the Company, the subsidiaries of the Company parties hereto,
Bankers Trust Company, as Agent, and the several banks named thereto.
4.14 Limited Waiver and Eighth Amendment to Amended and Restated Credit Agreement, dated
February 25, 1997, among the Company, the subsidiaries of the Company parties hereto,
Bankers Trust Company, as Agent, and the several banks named thereto.
4.15 Limited Waiver and Ninth Amendment to Amended and Restated Credit Agreement, dated
February 27, 1997, among the Company, the subsidiaries of the Company parties hereto,
Bankers Trust Company, as Agent, and the several banks named thereto.
4.16 Second Supplemental Indenture, dated as of August 28, 1996, between the Company and U.S.
Trust Company of California, N.A., as Trustee under the Indenture dated as of September
15, 1992.
4.17 Third Supplemental Indenture, dated as of January 15, 1997, between the Company and U.S.
Trust Company of California, N.A., as Trustee under the Indenture dated as of September
15, 1992.
4.18 Fourth Supplemental Indenture, dated as of March 13, 1997, between the Company and U.S.
Trust Company of California, N.A., as Trustee under the Indenture dated as of September
15, 1992.
4.19 First Supplemental Indenture, dated as of August 28, 1996, between the Company and U.S.
Trust Company of California, N.A., as Trustee under the Indenture dated as of December 1,
1993.
4.20 Second Supplemental Indenture, dated as of March 13, 1997, between the Company and U.S.
Trust Company of California, N.A., as Trustee under the Indenture dated as of December 1,
1993.
10.1 Amended and Restated Employment Agreement, dated as of December 14, 1993, between the
Company and Anwar S. Soliman.***
10.2 Amended and Restated Employment Agreement, dated as of December 14, 1993, between the
Company and Ralph S. Roberts.***
10.3 Amended and Restated Employment Agreement, dated as of December 14, 1993, between the
Company and Wilfred H. Partridge.***
21.1 Subsidiaries of the Company.***
27.1 Financial Data Schedule, which is submitted electronically to the Securities and
Exchange Commission for information only.
</TABLE>
19
<PAGE> 22
- ---------------------------
* Incorporated by reference to the Registrant's Registration Statement
No. 33-48183 on Form S-4 filed with the Securities and Exchange
Commission on May 28, 1992, as amended with Amendment No. 1 filed on
September 11, 1992.
** Incorporated by reference to the Registrant's Current Report on Form
8-K dated December 14, 1993 filed with the Securities and Exchange
Commission on December 30, 1993.
*** Incorporated by reference to the Registrant's Registration Statement
No. 33-74010 on Form S-4 filed with the Securities and Exchange
Commission on January 12, 1994.
**** Incorporated by reference to the Registrant's Current Report on Form
8-K dated September 13, 1996 filed with the Securities and Exchange
Commission on September 30, 1996.
***** Incorporated by reference to the Registrant's Annual Report on Form
10-K dated December 25, 1995 filed with the Securities and Exchange
Commission on March 25, 1996.
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ ANWAR S. SOLIMAN
---------------------------------
Anwar S. Soliman
Chairman, Chief Executive Officer
and Director
April 11, 1997
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ANWAR S. SOLIMAN Chairman, Chief Executive April 11, 1997
- --------------------------------- Officer and Director
Anwar S. Soliman (Principal Executive Officer)
/s/ WILLIAM J. MCCAFFREY, JR. Chief Financial Officer, April 11, 1997
- --------------------------------- Vice President, Treasurer,
William J. McCaffrey, Jr. Assistant Secretary and
Director (Principal Financial
and Accounting Officer)
/s/ RALPH S. ROBERTS President, Chief Operating April 11, 1997
- --------------------------------- Officer and Director
Ralph S. Roberts
</TABLE>
21
<PAGE> 24
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 25, 1995
and December 30, 1996 . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the Years Ended
December 26, 1994, December 25, 1995
and December 30, 1996 . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Common Stockholder's
Equity for Years Ended December 26, 1994,
December 25, 1995 and December 30, 1996 . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for Years
Ended December 26, 1994, December 25, 1995
and December 30, 1996 . . . . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . F-8
F-1
<PAGE> 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
American Restaurant Group, Inc.:
We have audited the accompanying consolidated balance sheets of AMERICAN
RESTAURANT GROUP, INC. (a Delaware corporation) AND SUBSIDIARIES as of December
25, 1995 and December 30, 1996, and the related consolidated statements of
operations, common stockholder's equity (deficit) and cash flows for the years
ended December 26, 1994, December 25, 1995 and December 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Restaurant Group,
Inc. and subsidiaries as of December 25, 1995 and December 30, 1996, and the
results of their operations and their cash flows for the years ended December
26, 1994, December 25, 1995 and December 30, 1996, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1.b. and other
notes to the financial statements, the Company has suffered recurring losses
from operations, has a net capital deficit, has a sinking fund payment of $41.5
million due September 15, 1997, and may be required to renegotiate its senior
debt if it cannot meet amended covenants, that raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 1.b. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
As explained in Note 2. of the financial statements, as required by FAS 121,
effective December 25, 1995, the Company changed its method of accounting for
the impairment of long-lived assets.
ARTHUR ANDERSEN LLP
Orange County, California
February 28, 1997, except certain matters
in Note 4. which date is March 13, 1997
F-2
<PAGE> 26
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 25, 1995 AND DECEMBER 30, 1996
ASSETS
<TABLE>
<CAPTION>
December 25, December 30,
1995 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 10,385,000 $ 7,493,000
Accounts receivable, net of
reserve of $777,000 and
$1,041,000 at December 25, 1995
and December 30, 1996, respectively 7,734,000 7,465,000
Inventories 6,597,000 6,818,000
Prepaid expenses 4,607,000 4,485,000
------------ ------------
Total current assets 29,323,000 26,261,000
------------ ------------
PROPERTY AND EQUIPMENT:
Land and land improvements 52,991,000 6,158,000
Buildings and leasehold improvements 141,382,000 110,071,000
Fixtures and equipment 90,520,000 84,162,000
Property held under capital leases 13,067,000 12,375,000
Construction in progress 3,749,000 6,487,000
------------ ------------
301,709,000 219,253,000
Less -- Accumulated depreciation 130,679,000 118,084,000
------------ ------------
171,030,000 101,169,000
------------ ------------
OTHER ASSETS:
Intangible assets 14,137,000 13,039,000
Deferred debt costs 20,439,000 20,168,000
Leasehold interests 10,176,000 9,946,000
Franchise rights 8,798,000 6,876,000
Liquor licenses and other 3,899,000 6,259,000
Cost in excess of net assets acquired 14,671,000 13,305,000
------------ ------------
72,120,000 69,593,000
Less -- Accumulated amortization 23,420,000 24,894,000
------------ ------------
48,700,000 44,699,000
------------- ------------
Total assets $249,053,000 $172,129,000
============ ============
</TABLE>
(consolidated balance sheets continued on following page)
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 27
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
December 25, December 30,
1995 1996
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 29,239,000 $ 33,394,000
Accrued liabilities 14,112,000 14,315,000
Accrued insurance 16,694,000 15,848,000
Accrued interest 5,925,000 1,016,000
Accrued payroll costs 10,171,000 11,059,000
Current portion of obligations
under capital leases 858,000 902,000
Current portion of long-term debt 8,131,000 41,532,000
------------- -------------
Total current liabilities 85,130,000 118,066,000
------------- -------------
LONG-TERM LIABILITIES, net of
current portion:
Obligations under capital leases 9,344,000 8,443,000
Long-term debt 214,678,000 131,260,000
------------- -------------
Total long-term liabilities 224,022,000 139,703,000
------------- -------------
DEFERRED GAIN - 5,806,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE CUMULATIVE PREFERRED STOCK:
Redeemable cumulative senior preferred
stock, $0.01 par value; 1,400,000
shares authorized, no shares issued
or outstanding at December 25, 1995
or December 30, 1996 - -
Redeemable cumulative junior preferred
stock, $0.01 par value; 100,000
shares authorized, no shares issued
or outstanding at December 25, 1995
or December 30, 1996 - -
COMMON STOCKHOLDER'S EQUITY:
Common stock 1,000 1,000
Paid-in capital 56,132,000 63,246,000
Accumulated deficit (116,232,000) (154,693,000)
------------- -------------
Total common stockholder's
deficit (60,099,000) (91,446,000)
------------- -------------
Total liabilities and common
stockholder's equity $ 249,053,000 $ 172,129,000
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 28
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 26, 1994, DECEMBER 25, 1995
AND DECEMBER 30, 1996
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------
December 26, December 25, December 30,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $460,406,000 $445,966,000 $445,424,000
------------ ------------ ------------
RESTAURANT COSTS:
Food and beverage 142,828,000 138,270,000 141,032,000
Payroll 136,151,000 134,532,000 137,104,000
Direct operating 108,382,000 110,399,000 114,589,000
Depreciation and amortization 26,400,000 22,819,000 20,386,000
GENERAL AND ADMINISTRATIVE EXPENSES 31,027,000 31,360,000 28,086,000
NON-CASH CHARGE FOR IMPAIRMENT
OF LONG-LIVED ASSETS - 20,178,000 13,205,000
------------ ------------ ------------
Operating profit (loss) 15,618,000 (11,592,000) (8,978,000)
INTEREST EXPENSE, net 27,691,000 28,004,000 27,714,000
------------ ------------ ------------
Loss before provision
for income taxes and
extraordinary loss (12,073,000) (39,596,000) (36,692,000)
PROVISION FOR INCOME TAXES 57,000 66,000 81,000
------------ ------------ ------------
Loss before extraordinary loss (12,130,000) (39,662,000) (36,773,000)
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT - - (1,688,000)
------------ ------------ ------------
Net loss $(12,130,000) $(39,662,000) $(38,461,000)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 29
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 26, 1994, DECEMBER 25, 1995
AND DECEMBER 30, 1996
<TABLE>
<CAPTION>
Common Paid-in Accumulated
Stock Capital Deficit Total
------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
BALANCE, December 27, 1993 $1,000 $56,132,000 $ (64,440,000) $ (8,307,000)
Net loss - - (12,130,000) (12,130,000)
------ ----------- ------------- ------------
BALANCE, December 26, 1994 1,000 56,132,000 (76,570,000) (20,437,000)
Net loss - - (39,662,000) (39,662,000)
------ ----------- ------------- -------------
BALANCE, December 25, 1995 1,000 56,132,000 (116,232,000) (60,099,000)
Net loss - - (38,461,000) (38,461,000)
Cash contribution from parent - 7,114,000 - 7,114,000
------ ----------- ------------- ------------
BALANCE, December 30, 1996 $1,000 $63,246,000 $(154,693,000) $(91,446,000)
====== =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 30
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 26, 1994, DECEMBER 25, 1995
AND DECEMBER 30, 1996
<TABLE>
<CAPTION>
Year ended
--------------------------------------------------------
December 26, December 25, December 30,
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 460,024,000 $ 446,355,000 $ 445,678,000
Cash paid to suppliers and employees (414,409,000) (413,206,000) (415,662,000)
Interest paid, net (27,800,000) (27,912,000) (32,524,000)
Income taxes paid (55,000) (86,000) (74,000)
------------- ------------- -------------
Net cash provided by (used in)
operating activities 17,760,000 5,151,000 (2,582,000)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (22,178,000) (16,277,000) (13,279,000)
Net (increase) decrease in other assets 209,000 181,000 (2,455,000)
Proceeds from disposition of assets 508,000 29,000 64,560,000
Sale/leaseback costs included in
deferred gain - - (1,112,000)
------------- ------------- -------------
Net cash provided by (used in)
investing activities (21,461,000) (16,067,000) 47,714,000
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on indebtedness (779,000) (3,949,000) (51,907,000)
Borrowings on indebtedness - 11,000,000 1,791,000
Net increase in deferred debt costs (510,000) (5,000) (4,165,000)
Payments on capital lease obligations (970,000) (777,000) (857,000)
Contribution from parent - - 7,114,000
------------- ------------- -------------
Net cash provided by (used in)
financing activities (2,259,000) 6,269,000 (48,024,000)
------------- ------------- -------------
NET DECREASE IN CASH (5,960,000) (4,647,000) (2,892,000)
CASH, at beginning of period 20,992,000 15,032,000 10,385,000
------------- ------------- -------------
CASH, at end of period $ 15,032,000 $ 10,385,000 $ 7,493,000
============= ============= =============
RECONCILIATION OF NET LOSS TO NET
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net loss $ (12,130,000) $ (39,662,000) $ (38,461,000)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Extraordinary loss on
extinguishment of debt - - 1,688,000
Loss on impairment of long-lived assets - 20,178,000 13,205,000
Depreciation and amortization 26,400,000 22,819,000 20,386,000
Loss on disposition of assets 2,183,000 684,000 1,610,000
Amortization of deferred gain - - (123,000)
Accretion on indebtedness 81,000 87,000 99,000
(Gain) loss in value of
interest rate swap (661,000) 98,000 -
Gain on extinguishment of debt (550,000) - -
(Increase) decrease in current assets:
Accounts receivable, net (382,000) 389,000 254,000
Inventories (769,000) 1,483,000 (221,000)
Prepaid expenses (1,817,000) (1,288,000) (467,000)
Increase (decrease) in current liabilities:
Accounts payable 5,453,000 (1,706,000) 4,155,000
Accrued liabilities (1,566,000) 856,000 160,000
Accrued insurance (794,000) 2,167,000 (846,000)
Accrued interest (9,000) (93,000) (4,909,000)
Accrued payroll costs 2,321,000 (861,000) 888,000
------------- ------------- -------------
Net cash provided by (used in)
operating activities $ 17,760,000 $ 5,151,000 $ (2,582,000)
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE> 31
AMERICAN RESTAURANT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 26, 1994, DECEMBER 25, 1995 AND DECEMBER 30, 1996
1. Summary of Significant Accounting Policies
a. Company
American Restaurant Group, Inc., (the "Company") a Delaware
corporation, through its subsidiaries, operates middle and upper price
dinner houses, casual dining restaurants and fast food restaurants
primarily in California and Texas. The Company is a wholly owned
subsidiary of American Restaurant Group Holdings, Inc. ("Holdings"), a
Delaware corporation. At year end 1994, 1995 and 1996, the Company
and its subsidiaries, collectively referred to herein as the Company,
operated 246, 248 and 247 restaurants, respectively.
b. Significant Risks and Operations
The Company's operations are affected by local and regional economic
conditions, including competition in the restaurant industry, and the
effect that such conditions have on the markets it serves. Due to a
decline in restaurant revenues in 1996, the Company was two weeks
late, but within the grace period, in paying the quarterly interest on
its subordinated debt which was due on December 15, 1996 and expects
to be four weeks late, but within the grace period, in the quarterly
payment due on March 15, 1997. The Company also renegotiated its
senior debt covenants in March 1997 (see Note 4.) and may be required
to renegotiate if it is not in compliance with the amended covenants.
The Company has initiated plans and transactions in 1997 to assist it
in meeting its obligations subsequent to December 30, 1996. The
Company expects to pursue additional asset sales, including the sale of
its Black Angus division, in order to repay its senior secured notes
prior to the required sinking fund payment of $41,456,000 due September
15, 1997. Any additional asset sale proceeds in excess of the amount
required to repay the senior secured notes in full, together with any
proceeds from additional refinancing, will be used to repay the
subordinated debt. In the absence of such a sale, the Company believes
it could otherwise restructure its debt. In addition, the Company
expects to obtain a replacement letter of credit facility. However,
there can be no assurance that any such asset sales or refinancing will
be completed on acceptable terms.
The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary
should the Company be unable to accomplish its plans.
c. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
F-8
<PAGE> 32
d. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions which affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities and
the reported amounts of revenues and expenses. Actual results could
differ from those estimates.
e. Related-Party Transactions
In fiscal years 1995 and 1996, the Company had $27,000 and $83,000,
respectively, in net receivables due from certain officers for
advanced expenses.
f. Inventories and Prepaid Expenses
Inventories consist of food, beverages and supplies and are valued at
the lower of cost (first-in, first-out method) or market value. When
a restaurant is opened, the initial purchase of expendable equipment,
such as china, glassware and silverware, is set up as prepaid supplies
and is not depreciated; however, all replacements are expensed.
g. Advertising Costs
Advertising costs are accrued as a percentage of sales and expensed
during the year. Production costs are allocated to the related
advertisements. At year end, production costs for advertisements
which have not been aired are included in prepaid expenses. Prepaid
advertising costs of $1,946,000 and $1,215,000 were included in
prepaid expenses at December 25, 1995 and December 30, 1996,
respectively. Advertising expenses included in net loss were
$17,644,000, $16,768,000 and $20,870,000 in fiscal years 1994, 1995
and 1996, respectively.
h. Preopening Costs
Costs incurred in connection with opening a new restaurant,
principally occupancy and staff training, are accumulated as prepaid
expenses and amortized over the initial year of operations.
i. Property and Equipment
Property and equipment is carried at the lower of cost or, if
impaired, at the estimated fair value of the asset (see Note 2.). The
Company provides for depreciation and amortization based upon the
estimated useful lives of depreciable assets using the straight-line
method. Estimated useful lives are as follows:
Land improvements 20 years
Buildings 30 to 35 years
Leasehold improvements Life of lease
Fixtures and equipment 3 to 10 years
Property held under capital leases Life of lease
Substantially all of the Company's assets, including property and
equipment, are pledged as collateral on the senior debt of the
Company.
j. Interest Costs
Interest costs incurred during the construction period of restaurants
are capitalized. The Company capitalized approximately $184,000,
$130,000 and $168,000 for the years ended 1994, 1995 and 1996,
respectively.
F-9
<PAGE> 33
k. Other Assets
Other assets include intangible assets, leasehold interests, franchise
rights, liquor licenses and cost in excess of net assets acquired.
These costs are amortized using the straight-line method over the
periods estimated to be benefited, not greater than 40 years.
Deferred debt costs are amortized using the effective interest method
over the related debt term.
Estimated useful lives are as follows:
Intangible assets 3 to 40 years
Deferred debt costs Term of debt
Leasehold interests Life of lease
Franchise rights 35 years
Liquor licenses 40 years
Cost in excess of net assets acquired 40 years
l. Intangible Assets
The following table details the components of intangible assets
included in the accompanying consolidated balance sheets (in
thousands):
December 25, December 30
1995 1996
------------ ------------
Assembled workforce $ 5,556 $ 5,109
Goodwill 3,854 3,502
Trademark/service marks 2,963 2,769
Acquisition costs 1,322 1,209
Other 442 450
------- -------
Total $14,137 $13,039
======= =======
m. Insurance
The Company self-insures the first $100,000 of its annual medical and
dental benefits per family. The Company also self-insures the first
$100,000 of property damage and the first $250,000 to $350,000 per
incident for general liability, automotive liability and workers'
compensation risks inherent in its operations. Reserves for losses
are established currently based upon estimated obligations.
F-10
<PAGE> 34
n. Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash,
accounts receivable and payable and debt instruments. The carrying
values of all financial instruments, other than debt instruments, are
representative of their fair value due to their short-term maturity.
The fair value of the Company's long-term debt instruments is
estimated based on the current rates offered to the Company.
o. Franchise Income
The Company franchises fast food restaurants. Franchise fees are
recognized as income as services are rendered. Franchise royalties
based upon a percentage of the franchisees' gross sales are accrued
currently. Revenues include franchise royalties and franchise fees of
$2,483,000, $2,176,000 and $1,995,000, respectively, for the years
ended 1994, 1995 and 1996. There were 59, 55 and 56 franchised
restaurants at year end 1994, 1995 and 1996, respectively.
p. Accounting Period
The Company's fiscal year ends on the last Monday in December. The
years ended 1994 and 1995 included 52 weeks while 1996 included 53
weeks.
q. Reclassifications
Certain prior year accounts have been reclassified to conform to the
current year presentation.
2. Impairment of Long-Lived Assets
Effective December 25, 1995, the Company adopted the provisions of
Financial Accounting Standards Number 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (FAS
121). The new statement changes the method of valuing long-lived assets,
including the Company's intangible assets, whereby long-lived assets are to
be carried at the lower of cost or, if impaired, fair value of the asset,
rather than at original cost less accumulated depreciation. Various
assumptions and estimates are used to determine fair value. The
calculation of the impairment loss is based on estimated future cash flows.
The estimates used to determine the impairment adjustment can change in the
near term as the economy and operations of specific restaurants change.
The adoption of FAS 121, together with the effects of continuing adverse
operations of certain restaurants, resulted in a pre-tax non-cash charge of
$20,178,000 and $13,205,000 for the years ended 1995 and 1996,
respectively.
3. Lease Obligations
The Company leases certain of its operating facilities under terms ranging
up to 40 years. These leases are classified as both operating and capital
leases. Certain of the leases contain provisions calling for additional
rentals based on sales or other provisions obligating the Company to pay
related property taxes and certain other expenses.
F-11
<PAGE> 35
The following is a summary of property held under leases that have been
capitalized and included in the accompanying consolidated balance sheets
(in thousands):
December 25, December 30,
1995 1996
------------ ------------
Property $13,067 $12,375
Less -- Accumulated depreciation 6,650 7,066
------- -------
$ 6,417 $ 5,309
======= =======
The following represents the minimum lease payments remaining under
noncancelable operating leases and capitalized leases as of December 30,
1996 (in thousands):
Operating Capitalized
Fiscal years ending Leases Leases
--------- -----------
1997 $ 28,984 $ 1,966
1998 26,823 1,881
1999 25,542 1,791
2000 24,266 1,694
2001 22,999 1,694
Thereafter 252,707 6,639
-------- -------
Total minimum lease payments $381,321 15,665
========
Less -- Imputed interest
(7.75% to 15.5%) 6,320
-------
Present value of minimum lease payments 9,345
Less -- Current portion 902
-------
Long-term portion $ 8,443
=======
Rental expense (including $1,300,000, $1,019,000 and $895,000,
respectively, for contingent rents under operating leases) was $21,823,000,
$22,863,000 and $24,814,000 during 1994, 1995 and 1996, respectively.
4. Long-Term Debt
In 1991, the Company secured financing of $45,000,000 which was
subordinated to existing debt.
In 1992, the Company issued and sold $120,000,000 of senior secured notes.
These notes are due September 15, 1998. Simultaneously with its issuance
of the notes, the Company entered into a senior credit agreement providing
for a term loan of $40,000,000, a revolving credit facility of $11,000,000
and a letter of credit facility of $15,000,000. The Company used the
proceeds to repay existing debt and to purchase previously issued warrants
from the previous lender.
In December 1993, the Company and Holdings consummated a refinancing which
included, among other things, (a) the private placement by the Company of
$50,000,000 of senior secured notes due September 15, 1998 (the "Note
Offering") and (b) the private placement by Holdings of 88,557 units
consisting of $88,557,000 aggregate principal amount of 14% senior discount
debentures due 2005 and 88,557 shares of Holdings common stock (the
"Debenture Offering") at a total price of $45,000,000.
F-12
<PAGE> 36
Substantially all of the net proceeds of the Debenture Offering were
contributed by Holdings to the Company. Beginning in June 1999, the
Company's cash flows may be affected through payments of cash dividends to
Holdings to enable Holdings to make semi-annual cash interest payments on
its 14% senior discount debentures. The combined net proceeds from the Note
Offering and the Debenture Offering were used by the Company to repay a
portion of the Company's indebtedness and to retire all of its outstanding
preferred stock at a cost which was $42,545,000 less than its book value.
The Company repaid the senior term loan and the outstanding indebtedness on
the revolving credit facility. The existing credit agreement was also
amended and restated for the revolving credit and letter of credit
facilities.
In March 1994, the Company consummated a registered exchange offer whereby
it exchanged $50,000,000 of its senior secured notes due September 15,
1998, Series B, for one hundred percent of the senior secured notes that
had been privately placed in the Note Offering.
In March 1996, Holdings completed a private placement of its 14% senior
discount debentures due 2005 with a face value of $17,000,000 producing
aggregate proceeds of approximately $7,114,000. Substantially all of the
net proceeds of the offering were contributed by Holdings to the Company.
The net proceeds were used by the Company for general corporate purposes.
In August 1996, the Company's senior secured noteholders consented to an
amendment which increased the interest rate from 12% to 13% and changed
interest payment dates from semi-annual to quarterly beginning December 15,
1996. The amendment also replaced a net worth covenant with an EBITDA
(earnings before interest, taxes, depreciation and amortization) covenant
and required the Company to consummate asset sales or sale/leaseback
transactions prior to December 31, 1996.
In September 1996, the Company completed a sale/leaseback transaction under
which it sold the real property relating to 24 Stuart Anderson's Black
Angus and Stuart Anderson's Cattle Company restaurants for an aggregate
sales price of $48,080,000 and simultaneously executed long-term leases
under which it will continue to operate the restaurants. The proceeds of
the transaction were used to redeem at par principal senior secured notes
of $32,383,000 together with interest thereon; to repay bank debt; to
partially cash collateralize outstanding letters of credit; to pay fees and
expenses of this transaction as well as the above noted consent
solicitation and a portion was retained by the Company to be invested in
productive assets within six months. The Company recorded an extraordinary
loss on extinguishment of debt relating to the write-off of capitalized
debt costs in the amount of $1,095,000. In addition, a $5,929,000 gain
related to this sale/leaseback was deferred and will be amortized over the
life of the underlying leases.
In December 1996, the Company completed a sale/leaseback transaction under
which it sold the real property relating to 30 Grandy's restaurants for an
aggregate sales price of $12,500,000 and simultaneously executed a
long-term lease under which it will continue to operate the restaurants.
The proceeds of this transaction were used to redeem at par principal
senior secured notes of $9,543,000 together with interest thereon and to
partially cash collateralize outstanding letters of credit and a portion
was retained by the Company to be invested in productive assets within six
months. The Company recorded a loss of $1,484,000 on the sale of this
property and an extraordinary loss of $593,000 on extinguishment of debt
relating to the write-off of capitalized debt costs.
During 1996, the Company also completed the sale of three additional
Grandy's restaurants and the sale/leaseback of two Spoons restaurants, the
proceeds of which were applied in accordance with the requirements of the
Company's debt instruments. The combined aggregate sales price of these
transactions was $3,918,000.
F-13
<PAGE> 37
In 1997, the Company was in default under a covenant that required certain
sales or sale/leaseback transactions by December 31, 1996.
In March 1997, the Company's senior secured noteholders consented to an
amendment which replaced the EBITDA covenants for the year ended December
30, 1996 and for the four quarters ended March 31, 1997 with an EBITDA
covenant for the twelve months ended May 31, 1997, reduced the amount of
net cash proceeds from asset sales or sale/leaseback transactions required
by December 31, 1996 to $15,000,000 (which was accomplished) and waived any
related existing defaults or events of default. The amendment provided for
an increase of $10 in the stated principal amount for each $1,000 in stated
principal amount of consenting noteholders. This resulted in an increase
of approximately $1,617,000 in the stated principal amount of the senior
secured notes and $1,200,000 in the actual outstanding principal amount of
the senior secured notes.
Substantially all assets of the Company are pledged to its senior lenders.
In addition, the subsidiaries have guaranteed the indebtedness owed by the
Company and such guarantee is secured by substantially all of the assets of
the subsidiaries. In connection with such indebtedness, contingent and
mandatory prepayments may be required under certain specified conditions and
events. There are no compensating balance requirements. A quarterly
commitment fee of 0.5% per annum is payable on the letter of credit facility
and a quarterly fee of 3.75% per annum is payable on outstanding letters of
credit.
At year end 1995 and 1996, the Company had outstanding letters of credit
primarily related to its self-insurance programs of approximately
$14,435,000 and $12,356,000, respectively.
F-14
<PAGE> 38
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 25, December 30,
1995 1996
------------ ------------
<S> <C> <C>
Senior secured notes, interest
only due semi-annually beginning
September 15, 1992 at 12%, amended to
13% beginning August 28, 1996, principal
due September 15, 1998, sinking fund
payment due September 15, 1997 $120,000 $ 84,270
Senior secured notes, interest
only due semi-annually beginning
March 15, 1994 at 12%, amended to
13% beginning August 28, 1996, principal
due September 15, 1998, sinking fund
payment due September 15, 1997 49,671 41,584
Revolving line of credit, interest
at the prime rate plus 1.875%
or LIBOR plus 3.25% due quarterly,
paid September 13, 1996 7,500 -
Subordinated note payable, quarterly
principal payments of $5,625,000
due beginning December 31, 1998,
interest only due quarterly at 10.25% 45,000 45,000
Other 638 1,938
-------- --------
222,809 172,792
Less -- Current portion 8,131 41,532
-------- --------
Long-term portion $214,678 $131,260
======== ========
</TABLE>
Maturities of long-term debt during each of the five fiscal years
subsequent to year end 1996 are $41,532,000, $85,104,000, $22,750,000,
$22,781,000 and $315,000.
5. Income Taxes
On January 1, 1993, the Company adopted, prospectively, FAS 109. The
adoption of this statement had no material effect on the Company's
financial statements.
F-15
<PAGE> 39
The Company's provision for income taxes includes the following components
(in thousands):
Year ended
------------------------------------------
December 26, December 25, December 30,
1994 1995 1996
------------ ------------ ------------
[S] [C] [C] [C]
Current:
Federal $ - $ - $ -
State 57 66 81
--- --- ---
57 66 81
--- --- ---
Deferred:
Federal - - -
State - - -
--- --- ---
- - -
--- --- ---
Provision for income taxes $57 $66 $81
=== === ===
F-16
<PAGE> 40
The deferred income tax provision resulted from the following temporary
differences in the recognition of revenues and expenses for tax and
financial reporting purposes (in thousands):
<TABLE>
<CAPTION>
Year ended
-------------------------------------------------------
December 26, December 25, December 30,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Deferred tax liability:
Decrease in liability reserves $ 841 $ - $ 825
Costs capitalized for financial
reporting purposes and
expensed on tax return 283 - 395
Other, net 370 57 113
------------ ------------ ------------
Deferred tax liability 1,494 57 1,333
------------ ------------ ------------
Deferred tax asset:
Tax depreciation less than
depreciation for financial
reporting purposes (2,850) (1,313) (639)
Long-lived asset impairment
not recognized on tax return - - (5,426)
Tax gain on sale/leaseback
transaction, net - - (3,759)
Increase in liability reserves - (1,460) -
Costs expensed for financial
reporting purposes and
capitalized on tax return - (482) -
Carryover of tax net operating loss (5,539) (16,519) (25,187)
------------ ------------ -----------
Deferred tax asset (8,389) (19,774) (35,011)
------------ ------------ ------------
Deferred asset, net of
deferred liability (6,895) (19,717) (33,678)
Valuation allowance 6,895 19,717 33,678
------------ ------------ ------------
Net deferred tax liability $ - $ - $ -
============ ============ ============
</TABLE>
F-17
<PAGE> 41
The components of the Company's deferred income tax liability are as
follows (in thousands):
<TABLE>
<CAPTION>
Year ended
-------------------------------------
December 25, December 30,
1995 1996
------------ ------------
<S> <C> <C>
Deferred tax liability:
Tax depreciation greater than
depreciation for financial
reporting purposes $ 7,639 $ 7,000
Costs capitalized for financial
reporting purposes and
expensed on tax return 4,578 4,973
Other, net 872 985
------------ ------------
Deferred tax liability 13,089 12,958
------------ ------------
Deferred tax asset:
Increase in liability reserves (3,368) (2,543)
Long-lived asset impairment not
recognized on tax return - (5,426)
Tax gain on sale/leaseback
transactions, net - (3,759)
Carryover of tax net operating loss (88,120) (113,307)
------------ ------------
Deferred tax asset (91,488) (125,035)
------------ ------------
Deferred asset, net of deferred liability (78,399) (112,077)
Valuation allowance 78,339 112,077
------------ ------------
Net deferred tax liability $ - $ -
============ ============
</TABLE>
The effective tax rate differs from the Federal statutory rate of 34
percent as a result of the following items (in thousands):
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------
December 26, December 25, December 30,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Federal income tax credit
at statutory rates $ (4,105) $ (13,464) $ (13,049)
State income tax provision
for which no federal
benefit was recorded 38 44 53
Losses for which no federal
benefit was recorded 3,422 11,513 12,834
Permanent items, principally
intangible amortization 702 1,973 243
------------ ------------ ------------
Provision for income taxes $ 57 $ 66 $ 81
============ ============ ============
</TABLE>
F-18
<PAGE> 42
At December 30, 1996, the Company had available net operating loss
carryforwards for Federal income tax purposes of $113,307,000, expiring in
2003 to 2011.
6. Commitments and Contingencies
The Company is obligated under employment agreements with certain officers
and employees. Obligations under the agreements are $2,229,000 in 1997,
provide for periodic increases and expire in 1997 unless extended.
The Company has been named as defendant in various lawsuits. It is the
opinion of management that the outcome of such litigation will not
materially affect the Company's financial position or results of
operations.
7. Redeemable Cumulative Senior and Junior Preferred Stock
At year end 1995 and 1996, there were 1,400,000 authorized shares of senior
preferred stock (one cent par value). There were no issued or outstanding
shares.
At year end 1995 and 1996, there were 100,000 authorized shares of junior
preferred stock (one cent par value). There were no issued or outstanding
shares.
8. Common Stock
Common stock (one cent par value) authorized, issued and outstanding is as
follows:
December 25, December 30,
1995 1996
------------ ------------
Shares authorized 1,000,000 1,000,000
Shares issued 93,150 93,150
Shares outstanding 93,150 93,150
All of the Company's common stock is owned by American Restaurant Group
Holdings, Inc. The Chairman and certain other members of the Company's
management own all outstanding shares of Holdings common stock other than
shares of Holdings common stock issued to holders of the debenture units in
connection with the refinancing and rights to acquire shares of Holdings
common stock issuable upon exercise of options and warrants. All such
shares owned by management are subject to a common stock voting trust
agreement, in accordance with which the Chairman and Chief Executive
Officer of the Company exercises all voting and substantially all other
rights to which stockholders would otherwise be entitled until the earlier
of December 31, 2001 or the termination of the common stock voting trust
agreement.
F-19
<PAGE> 1
EXHIBIT 4.12
EXECUTION
AMERICAN RESTAURANT GROUP
LIMITED WAIVER AND SIXTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS LIMITED WAIVER AND SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "AMENDMENT") is dated as of August 26, 1996, and entered into by
and among AMERICAN RESTAURANT GROUP, INC., a Delaware corporation ("COMPANY"),
the Subsidiaries of Company listed on the signature pages hereof (the "WORKING
CAPITAL BORROWERS"), the financial institutions listed on the signature pages
hereof ("LENDERS") and BANKERS TRUST COMPANY, as agent for Lenders ("AGENT"),
and, for purposes of Section 3 hereof, Local Favorite, Inc., a California
corporation, and is made with reference to that certain Amended and Restated
Credit Agreement, dated as of December 13, 1993, as amended by that certain
Limited Waiver and First Amendment to Amended and Restated Credit Agreement
dated as of March 23, 1994, that certain Second Amendment to Amended and
Restated Credit Agreement dated as of May 10, 1994, that certain Limited Waiver
and Third Amendment to Amended and Restated Credit Agreement dated as of March
17, 1995, and that certain Limited Waiver and Fourth Amendment to Amended and
Restated Credit Agreement dated as of November 1, 1995, and that certain Limited
Waiver and Fifth Amendment to Amended and Restated Credit Agreement dated as of
February 27, 1996 (the "CREDIT AGREEMENT"), by and among Company, the Working
Capital Borrowers, Lenders and Agent. Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement.
RECITALS
WHEREAS, Borrowers have requested Lenders to extend the maturity date of
the Working Capital Commitments from June 30, 1996 to August 29, 1996 and to
extend the maturity date of the Facility Letter of Credit Commitments from
September 30, 1996 to March 31, 1997, and Lenders have agreed to make such
extensions subject to the terms and conditions set forth herein;
WHEREAS, Company is entering into supplemental indentures amending certain
terms of the Exchange Note Indenture and the New Senior Note Indenture and an
amendment to the Subordinated Loan Agreement concurrently with entering into
this Amendment, which amendments require the consent of Agent and Requisite
Lenders;
1
<PAGE> 2
WHEREAS, Borrowers have further requested Lenders to amend certain
covenants in the Credit Agreement and Lenders have agreed to such amendments;
and
WHEREAS, Borrowers have further requested Lenders to waive compliance with
certain covenants in the Credit Agreement and Lenders have agreed to such
waivers;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1.
AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1.1.
Subsection 1.1 of the Credit Agreement is hereby amended as follows:
(a) Subsection 1.1 of the Credit Agreement is hereby amended by
amending the definitions of "Asset Sales", "Commitments", "Consolidated
Adjusted EBITDA", "Net Cash Proceeds of Asset Sale" and "Net Cash Proceeds
of Fee Collateral Sale" to read in their
entirety as follows:
`ASSET SALE' means the sale, lease, assignment or other
transfer for value by any Loan Party or any of its Subsidiaries
(including, without limitation, any Sale/leaseback) to any Person of
(i) any of the stock of any Subsidiary of any Loan Party or any of
its Subsidiaries, (ii) all or substantially all of the assets of any
division or line of business of any Loan Party or any of its
Subsidiaries, or (iii) any other assets or rights, or related group
of assets or rights, of any Loan Party or any of its Subsidiaries
having a book value or sales price in excess of $150,000 (it being
under stood that if the book value or sales price thereof exceeds
$150,000, the entire value and not just the portion thereof in
excess of $150,000 shall be subject to subsection 2.5A(ii)(a) and
2.5A(iii)) other than the trade-in or replacement of assets for or
with assets of comparable value in the ordinary course of business
of Loan Parties; provided that the sale or other transfer of assets
from Company or any Working Capital Borrower to any Working Capital
Borrower shall not constitute an Asset Sale.
`COMMITMENTS' means the Working Capital Commitments of Lenders
as set forth in subsection 2.2A and the Facility Letter of Credit
Commitments as set forth in subsection 2.10A and the Swing Line Loan
Commitment of Bankers as set forth in subsection 2.2B."
2
<PAGE> 3
`CONSOLIDATED EBITDA' means, for any period, the sum (without
duplication) of (i) Consolidated Net Income, (ii) provisions for
taxes based on income, (iii) Consolidated Interest Expense, (iv) to
the extent Consolidated Net Income has been reduced thereby,
amortization expense, depreciation expense, and other non-cash
expenses, (v) losses on Asset Sales, (vi) losses on sales or
Sale/leasebacks of Fee Collateral, (vii) to the extent Consolidated
Net Income has been reduced thereby, Designated Transaction Fees,
(viii) Consolidated Rental Expense attributable to Operating Leases
entered into in connection with Sale/leasebacks consummated pursuant
to subsections 5.19 and 5.20, and (ix) other non-cash items reducing
Consolidated Net Income (excluding any non-cash charges in an
aggregate amount not to exceed $6.7 million taken by Company in
connection with the closing of certain of its restaurants and the
writeoff of certain prepaid advertising costs) less the sum (without
duplication) of (a) gains on sale or Sale/leasebacks of Fee
Collateral, (b) gains on Asset Sales and (c) other non-cash items
increasing Consolidated Net Income, all as determined on a
consolidated basis for Company and its Subsidiaries in conformity
with GAAP."
`NET CASH PROCEEDS OF ASSET SALE' means Cash Proceeds
received from any Asset Sale (other than a sale of Fee Collateral)
net of (i) the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees
and sales commissions), (ii) taxes paid or payable ((a) including,
without limitation, income taxes reasonably estimated to be actually
payable as a result of such Asset Sale within two years of the date
of the Asset Sale and (b) but after taking into account any
reduction in tax liability due to available tax credits or
deductions and any tax sharing arrangements), (iii) amounts required
to be applied to the repayment of Indebtedness (including any
Obligations required to be paid pursuant to subsection 2.5A(iv) but
excluding all other Obligations) secured by a Lien on the asset or
assets which are the subject of such Asset Sale, (iv) any reasonable
reserve for adjustment in respect of the sale price of such asset or
assets; and (v) with respect to the Asset Sale described in
subsection 5.19, Designated Transaction Fees.
`NET CASH PROCEEDS OF FEE COLLATERAL SALE' means Cash
Proceeds (including any cash received by way of deferred payment
pursuant to, or monetization of, a note receivable or otherwise, but
only as and when so received and excluding the portion of such
deferred payment which constitutes interest, which portion shall be
deemed not to constitute Net Cash Proceeds of Fee Collateral Sale)
received from any sale or Sale/leaseback of Fee Collateral net of
(i) the direct costs relating to such sale or Sale/leaseback
(including, without limitation, legal, accounting, investment
banking fees, sales commissions, survey expenses and title insurance
fees paid by Company or any of its Subsidiaries), (ii) taxes paid or
payable ((a) including, without limitation, income taxes reasonably
estimated to be actually
3
<PAGE> 4
payable as a result of such sale or Sale/leaseback of Fee Collateral
within two years of the date of the sale or Sale/leaseback of Fee
Collateral and (b) but after taking into account any reduction in
tax liability due to available tax credits or deductions and any tax
sharing arrangements), (iii) amounts required to be applied to the
repayment of Indebtedness (including, if applicable, any Obligations
required to be paid pursuant to subsection 2.5A(iv) but excluding
all other Obligations) secured by a Lien on the asset or assets the
subject of such sale or Sale/leaseback, (iv) any reasonable reserve
for adjustment in respect of the sale price of or prorations
pertaining to such asset or assets; and (v) with respect to the
Asset Sale described in subsection 5.19, Designated Transaction
Fees."
(b) Subsection 1.1 of the Credit Agreement is hereby further
amended by adding the following definitions, which shall be inserted in
proper alphabetical order:
`DESIGNATED TRANSACTION FEES' means the consent, advisory
and legal fees paid by Company in connection with (i) the
Supplemental Indentures, (ii) the First Amendment to the
Subordinated Loan Agreement, and (iii) the Sixth Amend ment, all
such fees and any other costs, fees and expenses specified in the
Supplemental Indentures, the First Amendment to Subordinated Loan
Agreement and the First Amendment to the MLIF Registration Rights
Agreement in an aggregate amount not to exceed $4,500,000, all as
set forth in reasonable detail in an Officer's Certificate delivered
to Agent.
`FIRST AMENDMENT TO MLIF REGISTRATION RIGHTS AGREEMENT' means
the First Amendment to the MLIF Registration Rights Agreement, dated
as of August 19, 1996.
`FIRST AMENDMENT TO SUBORDINATED LOAN AGREEMENT' means the
First Amendment to the Subordinated Loan Agreement, dated as of
August 19, 1996.
`SIXTH AMENDMENT' means the Limited Waiver and Sixth Amendment
to this Agreement, dated as of August 26, 1996.
`SIXTH AMENDMENT EFFECTIVE DATE' means the date, on or before
August 29, 1996, upon which all of the conditions set forth in
Section 6 of the Sixth Amendment shall have been satisfied or
waived.
`SUPPLEMENTAL INDENTURES' means the Second Supplemental
Indenture to the Exchange Note Indenture and the First Supplemental
Indenture to the New Senior Note Indenture, each dated as of August
28, 1996, and in the forms delivered to Agent and Lenders prior to
the execution of the Limited Waiver and Sixth Amendment to this
Agreement."
4
<PAGE> 5
1.2 AMENDMENT TO SUBSECTION 2.2: WORKING CAPITAL AND SWINGLINE LOANS.
Subsection 2.2 of the Credit Agreement is hereby amended by deleting all
references to "June 30, 1996" contained in subsections 2.2A and 2.2B thereof and
substituting "August 29, 1996" therefor.
1.3 AMENDMENT TO SUBSECTION 2.3: INTEREST ON LOANS.
Subsection 2.3B(v) of the Credit Agreement is hereby amended by deleting
the reference to "June 30, 1996" contained therein and substituting "August 29,
1996" therefor.
1.4 AMENDMENT TO SUBSECTION 2.4: FEES.
Subsection 2.4 of the Credit Agreement is hereby amended as follows:
(a) Clause (iii) of subsection 2.4 is hereby amended to read in
its entirety as follows:
"(iii) for distribution to each Facility L/C Lender in
proportion to that Facility L/C Lender's Pro Rata Share of the
Facility Letter of Credit Commitments, a fee payable for the period
from and including the first day of the third Fiscal Quarter of 1996
through but excluding the Sixth Amendment Effective Date equal to
(x) the average of the daily amount of the Facility Letter of Credit
Commitments multiplied by (y) one quarter of one percent, such fee
to be due and payable in arrears on the Sixth Amendment Effective
Date."
5
<PAGE> 6
(b) Subsection 2.4 is hereby further amended by adding the
following subsection 2.4E thereto:
"E. AMENDMENT FEES IN CONNECTION WITH THE SIXTH AMENDMENT.
Borrowers jointly and severally agree to pay to Agent (i) for
distribution to each Lender in proportion to that Lender's Pro Rata
Share, an amendment fee equal to one percent of the Working Capital
Commitments and Facility Letter of Credit Commitments as of the
Sixth Amendment Effective Date, 50% of such fee to be due and
payable on the Sixth Amendment Effective Date and 50% of such fee to
be due and payable upon the consummation of the sale of the Black
Angus restaurants referenced in subsection 5.19, and (ii) if the
Facility Letter of Credit Commitments are extended on August 29,
1996 in accordance with subsection 2.10A and are not terminated on
or before February 14, 1997, for distribution to each Facility L/C
Lender in proportion to that Facility L/C Lender's Pro Rata Share of
the Facility Letter of Credit Commitments, a fee equal to the
Facility Letter of Credit Commitments as of February 14, 1997 less
the amount of cash Collateral held by Agent to cash collateralize
outstanding Facility Letters of Credit as of such date multiplied by
one percent, such fee to be due and payable on February 14, 1997."
1.5 AMENDMENTS TO SUBSECTION 2.5.: PREPAYMENTS AND PAYMENTS; REDUCTIONS IN
COMMITMENTS.
Subsection 2.5 of the Credit Agreement is hereby amended as follows:
(a) The last sentence of subsection 2.5A(ii)(a) is hereby amended
to read in its entirety as follows:
"Notwithstanding anything in this subsection 2.5A(ii)(a) to
the contrary, to the extent Borrowers receive Net Cash Proceeds of
Asset Sales in excess of the Lenders' Share of Net Cash Proceeds of
Asset Sales which are not applied to the redemption of Senior Notes
in accordance with the terms of the Senior Note Indenture ("EXCESS
ASSET SALE PROCEEDS"), Borrowers shall further prepay the Loans in
an amount equal to such Excess Asset Sale Proceeds in accordance
with this subsection 2.5(A)(ii)(a); provided Borrowers may retain up
to an aggregate of $8,000,000 of the Excess Asset Sale Proceeds
received after the Sixth Amendment Effective Date (excluding
Designated Transaction Fees) to the extent permitted under the
Senior Note Indenture as amended by the Supplemental Indentures and
so long as such Excess Asset Sale Proceeds are reinvested in
Productive Assets (as defined in the Senior Note Indenture) which
are pledged to the Collateral Agent under the Collateral Documents."
6
<PAGE> 7
(b) Subsection 2.5A(iii)(b) is hereby amended to read in its
entirety:
"(b) Application of Mandatory Prepayments. Mandatory
prepayments required pursuant to subsections 2.5A(ii)(a), (b), (c),
(d), (e), (f) and (h) and 2.5A(v) (shall be applied (1) first, to
prepay Working Capital Loans, together with interest thereon to the
full extent thereof, (2) second, to prepay Facility L/C
Reimbursement Obligations to the full extent thereof, together with
accrued interest and (3) third, to cash collateralize any
outstanding Facility Letters of Credit which have not been drawn or
returned undrawn to the full extent thereof. Any amounts required to
be applied to cash collateralize outstanding Facility Letters of
Credit pursuant to this subsection 2.5A(iii)(b) shall be held by
Agent in a blocked deposit account. So long as no Event of Default
has occurred or is continuing, the funds in such account may be
invested at the direction of Company in Cash Equivalents having a
maturity no later than October 15, 1996 or if the Facility Letter of
Credit Commitments are extended in accordance with subsection 2.10A,
March 31, 1997. Upon receipt of a written request from Company,
Agent will transfer funds being held as cash collateral for the
Facility Letters of Credit to a beneficiary of a Facility Letter of
Credit provided that such Facility Letter of Credit is simulta-
neously reduced in an amount equal to the funds so transferred."
(c) Subsection 2.5A(v) is hereby amended to read in its entirety
as follows:
"(v) Additional Prepayments of Working Capital Loans and Cash
Collateralization of Facility Letters of Credit following Sixth
Amendment Effective Date. Notwithstanding anything in this Agreement
to the contrary, upon receipt of any Net Cash Proceeds from any
Asset Sales described in subsections 5.19 and 5.20, Working Capital
Borrowers shall (unless subsection 2.5A(iv) is applicable thereto in
which case such Net Cash Proceeds shall be applied in accordance
with subsection 2.5A(iv)) apply the Lenders' Share of such Net Cash
Proceeds in accordance with subsection 2.5A(iii)(b)."
7
<PAGE> 8
(d) Subsection 2.5H is hereby amended to read in its entirety as
follows:
"H. MANDATORY REDUCTIONS OF WORKING CAPITAL COMMITMENTS AND FACILITY
LETTER OF CREDIT COMMITMENTS. The Working Capital Commitments shall
be permanently reduced by the amount of any prepayments of Working
Capital Loans made pursuant to subsection 2.5A. The Facility Letter
of Credit Commitments shall be permanently reduced in the amount of
any payment of Facility L/C Reimbursement Obligations pursuant to
subsection 2.5A. The Working Capital Commitments and Facility Letter
of Credit Commitments shall further be permanently reduced in
accordance with the provisions of subsection 2.5A(iv). Any
Commitment reductions pursuant to this subsection 2.5H shall reduce
the applicable Commitments of each Lender proportionately to such
Lenders' Pro Rata Share of the applicable Commitments."
1.6 AMENDMENTS TO SUBSECTION 2.10: FACILITY LETTERS OF CREDIT.
(a) Subsection 2.10A of the Credit Agreement is hereby amended by
deleting all references to "September 30, 1996" contained therein and
substituting "October 15, 1996" therefor.
(b) Subsection 2.10A of the Credit Agreement is hereby amended by
adding the following paragraph at the end of such subsection:
"If (i) all of the outstanding Working Capital Loans are paid
in full and the Working Capital Commitments terminated on or before
August 29, 1996, and (ii) no Event of Default or Potential Event of
Default shall have occurred and be continuing as of such date, then
the maturity date of the Facility Letter of Credit Commitments shall
be extended from October 15, 1996 to March 31, 1997, and all
references to October 15, 1996 contained in this subsection 2.10A
shall be deemed references to March 31, 1997."
1.7 AMENDMENT TO SUBSECTION 2.11: LETTERS OF CREDIT GENERALLY.
Subsection 2.11A(2) of the Credit Agreement is hereby amended to read in
its entirety as follows:
"(2) a commission equal to 3.5% per annum of the maximum amount
available from time to time to be drawn under such Letter of Credit,
payable in arrears on and to (but not including) each February 28, May 31,
August 31 and November 30 of each year, commencing on August 31, 1996 for
the period from and including the Sixth Amendment Effective Date to but
not including August 31, 1996;"
8
<PAGE> 9
1.8 AMENDMENT TO SUBSECTION 5.17: SALE OF GRANDY'S.
Subsection 5.17 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"5.17 [INTENTIONALLY OMITTED.]"
1.9 AMENDMENT TO SUBSECTION 5.19: SALE OF CERTAIN BLACK ANGUS RESTAURANTS.
Subsection 5.19 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"5.19 SALE OF CERTAIN BLACK ANGUS RESTAURANTS.
Company shall on or before August 29, 1996, consummate the sale of
certain Black Angus restaurants to an unaffiliated third-party purchaser
for an aggregate purchase price of not less than $48,000,000 and Net Cash
Proceeds of not less than $43,500,000 pursuant to documentation which
shall be in form and substance reasonably satisfactory to Requisite
Lenders. Notwithstanding anything in subsection 6.8 to the contrary,
Company may leaseback the Black Angus restaurants sold pursuant to this
subsection 5.19, provided that all documentation relating to both the sale
and the leaseback of such restaurants is in form and substance reasonably
satisfactory to Requisite Lenders. Notwithstanding anything in subsections
6.4 and 6.8 to the contrary, Company may guarantee the lease obligations
of ARG Enterprises, Inc. in connection with the leaseback of such
restaurants, provided that all documentation relating to the guarantees of
such leases in connection with the leaseback of such restaurants is in
form and substance reasonably satisfactory to Requisite Lenders. Requisite
Lenders' approval of the documentation relating to the Asset Sales
contemplated by this subsection 5.19 and subsection 5.20 shall constitute
Requisite Lenders' consent to such Asset Sales for purposes of subsection
6.7B(ii)."
9
<PAGE> 10
1.10 AMENDMENT TO SECTION 5: AFFIRMATIVE COVENANTS.
Section 5 of the Credit Agreement is hereby amended to add the following
subsection 5.20 thereto:
"5.20 CONSUMMATION OF OTHER ASSET SALES.
Company shall in the period from July 15, 1996 to December 31, 1996,
consummate Asset Sales in addition to the Asset Sale contemplated by
subsection 5.19 to one or more unaffiliated third-party purchasers (or to
an Affiliate other than Holdings or a Subsidiary of Company provided
Company delivers to Agent an opinion from an independent financial advisor
reasonably acceptable to Agent and Requisite Lenders that the Company is
receiving fair market value for the assets subject to such sale) for
aggregate Net Cash Proceeds of not less than $25,000,000 which shall be
applied in accordance with subsection 2.5A(v), such Asset Sales to be in
form and substance and pursuant to documentation reasonably satisfactory
to Requisite Lenders. Notwithstanding anything in subsection 6.8 to the
contrary, Company may leaseback restaurants sold pursuant to this
subsection 5.20."
1.11 AMENDMENTS TO SUBSECTION 6.1: INDEBTEDNESS.
(a) Subsection 6.1(iv) is hereby amended to read in its entirety as
follows:
"(iv) Loan Parties and their Subsidiaries may become and remain
liable with respect to (a) Capital Leases entered into in connection
with Sale/leasebacks permitted by subsections 5.19 and 5.20 and (b)
Capital Leases if such Capital Leases would be permitted under
subsection 6.6F, provided that (1) the aggregate principal amount
incurred pursuant to clause (iv)(b) in any Fiscal Year shall not
exceed $5,000,000 (provided that any unused amounts may be carried
forward to the next two (but not any subsequent) Fiscal Years) and
(2) the aggregate principal amount incurred pursuant to clause
(iv)(b) at any time outstanding shall not exceed $15,000,000;"
(b) Subsection 6.1 of the Credit Agreement is further hereby amended by
deleting the reference to "December 31, 1995" in clause (ix) thereof and
substituting "March 31, 1997" therefor."
1.12 AMENDMENTS TO SUBSECTION 6.6: FINANCIAL COVENANTS.
Subsection 6.6 of the Credit Agreement is hereby amended as follows:
(a) Subsection 6.6A is hereby amended to read in its entirety as
follows:
10
<PAGE> 11
"Company and its Subsidiaries shall not permit Consolidated
EBITDA as of the last day of any Fiscal Quarter for the two
consecutive Fiscal Quarter period ended on such day to be less than
$13,000,000.
Company and its Subsidiaries further shall not permit
Consolidated EBITDA (i) as of the last day of the second Fiscal
Quarter of 1996 for the two consecutive Fiscal Quarter period ended
as of such date to be less than $18,000,000, (ii) as of the last day
of the third Fiscal Quarter of 1996 for the three consecutive Fiscal
Quarter period ended as of such date to be less than $23,000,000,
(iii) as of the last day of the fourth Fiscal Quarter of 1996 for
the four consecutive Fiscal Quarters period ended as of such date to
be less than $33,000,000 and (iv) as of the last day of the first
Fiscal Quarter of 1997 for the four consecutive Fiscal Quarter
period ended as of such date to be less than $34,000,000."
(b) Subsection 6.6B is hereby amended to read in its entirety as
follows:
"[Intentionally Omitted]".
(c) Subsection 6.6C is hereby amended to read in its entirety as
follows:
"[Intentionally Omitted]".
(d) Subsection 6.6D is hereby amended to read in its entirety as
follows:
"[Intentionally Omitted]".
(e) Subsection 6.6E is hereby amended to read in its entirety as
follows:
"[Intentionally Omitted]".
(f) Subsection 6.6F is hereby amended by deleting such
subsection in its entirety and substituting the following therefor:
"Company and its Subsidiaries shall not permit Consolidated
GAAP Capital Expenditures as of the last day of each Fiscal Quarter
shown below to exceed the correlative amount indicated (the "MAXIMUM
CAPITAL EXPENDITURE AMOUNT"); provided that if the Maximum Capital
Expenditures Amount for any Fiscal Quarter exceeds the actual
Consolidated GAAP Capital Expenditure for such Fiscal Quarter, the
amount of such excess may be carried forward and added to the
Maximum Capital Expenditures Amount permitted for succeeding Fiscal
Quarters:
11
<PAGE> 12
<TABLE>
<CAPTION>
Maximum Capital
Fiscal Quarter Expenditure Amount
=====================================================
<S> <C>
First Fiscal Quarter 1996 $3,000,000
Second Fiscal Quarter 1996 $4,000,000
Third Fiscal Quarter 1996 $4,000,000
Fourth Fiscal Quarter 1996 $4,000,000
First Fiscal Quarter 1997 $4,000,000
=====================================================
</TABLE>
To the extent Company and its Subsidiaries use net cash proceeds
received from Sale/leasebacks permitted pursuant to subsection 6.8 to make
Consolidated GAAP Capital Expenditures, such Consolidated GAAP Capital
Expenditures shall be disregarded for purposes of determining compliance
with this subsection 6.6F."
(g) Subsection 6.6 is hereby amended by adding the following
subsections 6.6G and 6.6H thereto:
"G. MAXIMUM CONSOLIDATED TOTAL DEBT.
Company and its Subsidiaries shall not permit Consolidated
Total Debt (excluding Capital Leases entered into in connection
with Sale/leasebacks permitted under subsections 5.19 and 5.20) as
of the last day of any Fiscal Quarter to exceed $250,000,000 less
the aggregate amount of all repayments made of the Loans and the
Senior Notes in connection with the Sixth Amendment and the
Supplemental Indentures and at any time after the Sixth Amendment
Effective Date."
"H. MAXIMUM OPERATING LEASE EXPENSE.
Company and its Subsidiaries shall not permit the aggregate amount
of all rents paid by Company and its Subsidiaries on a
consolidated basis during any four Fiscal Quarter period under
all Operating Leases of Company and its Subsidiaries
(excluding Operating Leases entered into in connection with
Sale/leasebacks permitted under subsections 5.19 and 5.20) to
exceed $24,000,000."
1.13 AMENDMENT TO SUBSECTION 6.8
Subsection 6.8 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"No Loan Party will, nor will it permit any of its Subsidiaries,
directly or indirectly,
12
<PAGE> 13
to become or remain liable as a lessee or as a guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease
of any property (whether real or personal or mixed) whether now owned or
hereafter acquired, (i) that such Loan Party or its Subsidiaries has sold
or transferred or is to sell or transfer to any other Person (other than
another Loan Party) or (ii) that such Loan Party or its Subsidiaries
intends to use for substantially the same purpose as any other property
that has been or is to be sold or transferred by such Loan Party or any
such Subsidiary to any Person (other than another Loan Party) in
connection with such lease (a "SALE/LEASEBACK"). Notwithstanding the
foregoing, Loan Parties may enter into Sale/leasebacks of restaurants
(including the real property on which such restaurant is located and any
furniture, fixtures and equipments located at such restaurants
(collectively, "RESTAURANT PROPERTIES" and each individually, a
"RESTAURANT PROPERTY"); provided, that (i) any such sale is for the fair
market value of the Restaurant Property, (ii) all of the consideration for
such sale is paid in cash, (iii) the aggregate net proceeds from such sale
shall be reinvested in assets of a kind used or usable in the business of
the Loan Parties within 180 days of receipt, (iv) the aggregate cumulative
value of all Restaurant Properties subject to Sale/leasebacks on or after
the Sixth Amendment Effective Date shall not exceed $10,000,000 (with the
value of each Restaurant Property to be deemed the greater of the cost or
fair market value of such Restaurant Property), (v) the lease, whether an
Operating Lease or Capital Lease, shall otherwise be permitted under this
Agreement and (vi) such Restaurant Property was acquired by the Loan
Parties on or after the Sixth Amendment Effective Date and the
Sale/leaseback of the Restaurant Property is consummated within 90 days
after such Restaurant Property has been put into service. Prior to the
consummation of any Sale/leaseback permitted under this subsection 6.8,
Company shall deliver to Agent an Officer's Certificate, in form and
substance reasonably satisfactory to Agent setting forth the following:
(i) the date the Restaurant Property was put in service, (ii) the cost of
the Restaurant Property, (iii) the fair market value of the Restaurant
Property, (iv) the proposed date upon which the Sale/leaseback is to be
consummated and (v) the aggregate cumulative value of all Restaurant
Property subject to Sale/leasebacks prior to the date of the Officer's
Certificate. Any Sale/leasebacks permitted by this subsection 6.8 shall
not be subject to the provisions of the mandatory prepayment provisions of
subsection 2.5A(ii)(a) or 2.5A(ii)(b) or the provisions of 6.7(ii)
governing Asset Sales generally."
1.14 AMENDMENT TO SECTION 6.
Section 6 of the Credit Agreement is hereby amended by adding the
following subsection 6.14 thereto:
13
<PAGE> 14
"6.14 COMPENSATION LIMITATIONS.
Company shall not pay compensation to Anwar Soliman or Ralph Roberts
in excess of the amounts permitted to be paid to them under the Senior
Note Indenture as amended by the Supplemental Indentures."
1.15 AMENDMENTS TO SUBSECTION 7.3: BREACH OF CERTAIN COVENANTS.
Subsection 7.3 is hereby amended to read in its entirety as follows:
"Failure of Company or any Working Capital Borrower to conform or
comply with any term or condition contained in subsections 2.5, 2.6. 5.2,
5.6, 5.17, 5.18, 5.19, 5.20 or Section 6; or"
1.16 AMENDMENT TO SUBSECTION 9.7: AMENDMENTS AND WAIVERS.
Subsection 9.7 is hereby amended by amending the fifth sentence thereof to
read in its entirety as follows:
"No amendment, modification, termination or waiver of any provision of
subsection 5.19 or 5.20 shall be effective without the written concurrence
of Lenders having 60% or more of the aggregate amount of the Commitments
or, if the Commitments have been terminated, Lenders having 60% or more of
the aggregate outstanding principal amount of the Loans."
SECTION 2.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, each Loan Party represents and
warrants to each Lender that the following statements are true, correct and
complete:
2.1 CORPORATE POWER AND AUTHORITY.
Each Loan Party has all requisite corporate power and authority to enter
into this Amendment and to carry out the transactions contemplated by, and
perform its obligations under, the Credit Agreement as amended by this Amendment
(the "AMENDED AGREEMENT").
14
<PAGE> 15
2.2 AUTHORIZATION OF AGREEMENTS.
The execution and delivery of this Amendment and the performance of the
Amended Agreement have been duly authorized by all necessary corporate action on
the part of each Loan Party.
2.3 NO CONFLICT.
The execution and delivery by each Loan Party of this Amendment and the
performance by each Loan Party of the Amended Agreement do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to any Loan Party, the Certificate or Articles of Incorporation or
Bylaws of any Loan Party or any order, judgment or decree of any court or other
agency of government binding on any Loan Party, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of any Loan Party, except for conflicts,
breaches or defaults which would not singly or in the aggregate have a Material
Adverse Effect, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of any Loan Party (other than any
Liens in favor of Collateral Agent for the benefit of Lenders and the Senior
Note Holders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of any Loan Party, except
for such approvals or consents which have been obtained on or before the Sixth
Amendment Effective Date (as hereinafter defined in Section 6) or the absence of
which would not singly or in the aggregate have a Material Adverse Effect.
2.4 GOVERNMENTAL CONSENTS.
The execution, delivery and performance by each Loan Party of this
Amendment and the Amended Agreement do not and will not require any registration
with, consent or approval of, or notice to, or action to, with or by, any
Federal, state or other governmental authority or regulatory body, other than
registrations, consents, approvals, notices and actions that have been taken or
obtained prior to the Sixth Amendment Effective Date or the absence of which
would not have a Material Adverse Effect.
2.5 BINDING OBLIGATION.
This Amendment and the Amended Agreement have been duly executed and
delivered by each Loan Party which is a party thereto and are the legally valid
and binding obligations of each such Loan Party, enforceable against each such
Loan Party in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally or by equitable principles relating
to enforceability.
15
<PAGE> 16
2.6 INCORPORATION OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Section 4 of the Credit
Agreement and in each of the Collateral Documents are and will be true, correct
and complete in all material respects on and as of the Sixth Amendment Effective
Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
2.7 ABSENCE OF DEFAULT.
As of the Sixth Amendment Effective Date, after giving effect to this
Amendment, no event has occurred and is continuing or will result from the
consummation of the transactions contemplated by this Amendment that would
constitute an Event of Default or a Potential Event of Default.
2.8 SCHEDULES TO COLLATERAL DOCUMENTS.
All of the schedules annexed to each of the Collateral Documents, as
supplemented prior to the Sixth Amendment Effective Date by the supplements
attached hereto as Exhibit H, are and will be true, correct and complete in all
material respects on and as of the Sixth Amendment Effective Date.
SECTION 3.
ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Guaranty pursuant to which Company has
guarantied certain Obligations under the Credit Agreement. Each Subsidiary of
Company is a party to the Subsidiary Guaranty Agreement pursuant to which each
such Subsidiary has guarantied certain Obligations under the Credit Agreement.
Each of the Loan Parties is a party to certain Collateral Documents pursuant to
which the Loan Parties have granted Liens on certain Collateral to the
Collateral Agent, for the benefit of Lenders and the Senior Note Holders. The
Company Guaranty, the Subsidiary Guaranty Agreement and the Collateral Documents
are collectively referred to herein as the "CREDIT SUPPORT DOCUMENTS".
Each Loan Party hereby acknowledges that it has reviewed the terms and
provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Each Loan
Party hereby confirms that each Credit Support Document to which it is a party
or otherwise bound and all Collateral encumbered thereby will continue to
guaranty or secure, as the case may be, to the fullest extent possible the
payment and
16
<PAGE> 17
performance of all "GUARANTIED OBLIGATIONS" and "SECURED OBLIGATIONS", as the
case may be (in each case as such terms are defined in the applicable Credit
Support Document), including without limitation the payment and performance of
all such "GUARANTIED OBLIGATIONS" or "SECURED OBLIGATIONS", as the case may be,
in respect of the Obligations now or hereafter existing under or in respect of
the Amended Agreement.
Each Loan Party acknowledges and agrees that any of the Credit Support
Documents to which it is a party or otherwise bound shall continue in full force
and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Loan Party represents and warrants that
all representations and warranties contained in the Amended Agreement and the
Credit Support Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Sixth Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
Each Loan Party (other than Borrowers) acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Loan Party is not required by the terms of the Credit Agreement or any
other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment and (ii) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to require the consent
of such Loan Party to any future amendments to the Credit Agreement.
Notwithstanding anything to the contrary contained herein, each Loan Party
acknowledges and agrees that for the period from and including June 30, 1996 to
and including the Sixth Amendment Effective Date, the Working Capital Loans
shall bear interest at the rate specified in subsection 2.2E of the Credit
Agreement.
SECTION 4.
AGENT AND REQUISITE LENDER CONSENT
Agent and Requisite Lenders hereby consent to the Company entering into
(i) the Supplemental Indentures to the extent such Supplemental Indentures are
in the forms attached hereto as Exhibit A and Exhibit B, (ii) the First
Amendment to the Subordinated Loan Agreement to the extent such amendment is in
the form attached hereto as Exhibit C, (iii) the First Amendment to the MLIF
Registration Rights Agreement to the extent such amendment is in the form
attached hereto as Exhibit D and (iv) the First Amendments to the Employment
Agreements to the extent such amendments are in the form attached hereto as
Exhibit E.
17
<PAGE> 18
SECTION 5.
LIMITED WAIVER
5.1 WAIVER. Subject to the terms and conditions set forth herein and in
reliance on the representations and warranties of each Loan Party herein
contained, Lenders hereby waive compliance by the Company and its Subsidiaries
with the provisions of subsections 6.6A, 6.6B, 6.6C, 6.6D and 6.6E for the
Fiscal Quarter ended June 24, 1996 solely to the extent reported by Company in
that certain Compliance Certificate dated July 26, 1996.
5.2 LIMITATION OF WAIVER. Without limiting the generality of the
provisions of subsection 9.7 of the Credit Agreement, the waiver set forth above
shall be limited precisely as written and relates solely to the noncompliance by
Company and its Subsidiaries with the provisions of subsections 6.6A, 6.6B,
6.6C, 6.6D and 6.6E of the Credit Agreement in the manner and to the extent
described above, and nothing in this Section 5 shall be deemed to:
(i) constitute a waiver of compliance by Company or any of its
Subsidiaries with respect to subsections 6.6A, 6.6B, 6.6C, 6.6D and 6.6E
of the Credit Agreement in any other instance or (ii) any other term,
provision or condition of the Credit Agreement or any other instrument or
agreement referred to therein; or
(ii) prejudice any right or remedy that Agent or any Lender may now
have or may have in the future under or in connection with the Credit
Agreement or any other instrument or agreement referred to therein.
Except as expressly set forth herein, the terms, provisions and conditions
of the Credit Agreement and the other Loan Documents shall remain in full force
and effect and in all other respects are hereby ratified and confirmed.
SECTION 6.
CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the satisfaction of all of
the following conditions precedent (the date of satisfaction of such conditions
being referred to herein as the "SIXTH AMENDMENT EFFECTIVE DATE"):
6.1 DOCUMENTS.
On or before the Sixth Amendment Effective Date, Loan Parties shall
deliver to Agent for Lenders (with sufficient originally executed copies, where
appropriate, for each Lender) the following, each, unless otherwise noted, dated
the Sixth Amendment Effective Date:
(a) Resolutions of its Board of Directors approving and
authorizing the execution,
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<PAGE> 19
delivery and performance of this Amendment, certified as of the Sixth
Amendment Effective Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment; and
(b) Originally executed copies of this Amendment, duly executed
and delivered by each of the parties hereto.
6.2 OPINIONS.
Lenders shall have received originally executed copies of one or more
favorable written opinions of (i) Simpson Thacher & Bartlett, counsel for Loan
Parties, and (ii) the general counsel of Company, each in form and substance
satisfactory to Agent and its counsel, dated as of the Sixth Amendment Effective
Date, and setting forth substantially the matters and the opinions designated in
Exhibit F and Exhibit G, respectively, hereto and as to such other matters as
Agent may reasonably request.
6.3 SUPPLEMENTAL INDENTURES, FIRST AMENDMENT TO SUBORDINATED LOAN AGREEMENT,
FIRST AMENDMENT TO MLIF REGISTRATION RIGHTS AGREEMENT AND FIRST AMENDMENTS
TO EMPLOYMENT AGREEMENTS.
Lenders (i) shall have received executed copies of each of the
Supplemental Indentures, First Amendment to Subordinated Loan Agreement, First
Amendment to MLIF Registration Rights Agreement and First Amendments to
Employment Agreements which shall be in the forms of Exhibits A, B, C, D and E
hereto, (ii) all necessary consents to the Supplemental Indentures, First
Amendment to Subordinated Loan Agreement, First Amendment to MLIF Registration
Rights Agreement and First Amendments to Employment Agreements shall have been
obtained, (iii) the Supplemental Indentures, the First Amendment to Subordinated
Loan Agreement, the First Amendment to MLIF Registration Rights Agreement and
First Amendments to Employment Agreements shall be in full force and effect as
of the Sixth Amendment Effective Date and (iv) Lenders shall have received an
Officer's Certificate of Company certifying as to the matters set forth in
clauses (i), (ii) and (iii).
6.4 FEES AND EXPENSES.
Lenders shall have received all accrued and unpaid fees payable under
subsections 2.5D and 2.5E as of the Sixth Amendment Effective Date and all fees
and expenses incurred and payable pursuant to subsection 9.3 of the Credit
Agreement as of the Sixth Amendment Effective Date (including fees and expenses
of counsel to Agent).
19
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SECTION 7.
MISCELLANEOUS
7.1 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(a) On and after the Sixth Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the "Credit
Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement shall mean and be a reference to the Amended
Agreement.
(b) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(c) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of
Agent, the Collateral Agent or any Lender under, the Credit Agreement or
any of the other Loan Documents.
7.2 FEES AND EXPENSES.
Company acknowledges that all reasonable costs, fees and expenses as
described in subsection 9.3 of the Credit Agreement incurred by Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Company.
7.3 HEADINGS.
Section and subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose or be given any substantive effect.
7.4 APPLICABLE LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5.1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
20
<PAGE> 21
7.5 COUNTERPARTS.
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank.]
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
AMERICAN RESTAURANT GROUP, INC.,
a Delaware corporation
ARG ENTERPRISES, INC.,
a California corporation
SPECTRUM FOODS, INC.,
a California corporation
SPOONS RESTAURANTS, INC.,
a Texas corporation
ARG PROPERTY MANAGEMENT CORPORATION,
a California corporation
GRANDY'S, INC.,
a California corporation
By: /s/ WILLIAM J. McCAFFREY, JR.
------------------------------------
William J. McCaffrey, Jr.
Vice President and
Chief Financial Officer
of each of the foregoing
FOR PURPOSES OF SECTION 3 ONLY:
LOCAL FAVORITE, INC.,
a California corporation
By: /s/ WILLIAM J. McCAFFREY, JR.
-------------------------------------
William J. McCaffrey, Jr.
Vice President and
Chief Financial Officer
S-1
<PAGE> 23
BANKERS TRUST COMPANY,
individually, as Agent and a Lender
By: /s/ MARY JO JOLLY
------------------------------------
Name: Mary Jo Jolly
Title: Assistant Vice President
BANQUE NATIONALE DE PARIS,
as a Lender
By: /s/ C. BETTLES
------------------------------------
Name: C. Bettles
Title: Sr. V.P. & Manager
By: /s/ ROBERT NICKEL
------------------------------------
Name: Robert Nickel
Title: Vice President
BANQUE PARIBAS,
as a Lender
By: /s/ EDWARD V. CANALE
------------------------------------
Name: Edward V. Canale
Title: Senior Vice President
By: /s/ ALBERT A. YOUNG, JR.
------------------------------------
Name: Albert A. Young, Jr.
Title: Vice President
S-2
<PAGE> 24
SWISS BANK CORPORATION
CAYMAN ISLANDS BRANCH,
as a Lender
By: /s/ DANIEL W. LADD III
------------------------------------
Name: Daniel W. Ladd III
Title: Director - Attorney-In-Fact
By: /s/ LESLIE A. PAINE
------------------------------------
Name: Leslie A. Paine
Title: Attorney-In-Fact
DRESDNER BANK AG,
as a Lender
By: /s/ THOMAS J. NADRAMIA
------------------------------------
Name: Thomas J. Nadramia
Title: Vice President
By: /s/ JOHN W. SWEENEY
------------------------------------
Name: John W. Sweeney
Title: Assistant Vice President
S-3
<PAGE> 25
EXHIBIT A
FORM OF SECOND SUPPLEMENTAL INDENTURE TO
EXCHANGE NOTE INDENTURE
A-1
<PAGE> 26
EXHIBIT B
FORM OF FIRST SUPPLEMENTAL INDENTURE TO
NEW SENIOR NOTE INDENTURE
B-1
<PAGE> 27
EXHIBIT C
FORM OF FIRST AMENDMENT TO
SUBORDINATED LOAN AGREEMENT
C-1
<PAGE> 28
EXHIBIT D
FORM OF FIRST AMENDMENT TO
MLIF REGISTRATION RIGHTS AGREEMENT
D-1
<PAGE> 29
EXHIBIT E
FORM OF FIRST AMENDMENT TO
EMPLOYMENT AGREEMENTS
E-1
<PAGE> 30
EXHIBIT F
Opinions to be Given by Simpson Thacher & Bartlett
--------------------------------------------------
All terms used herein without definition shall have the meanings given
such terms in the Credit Agreement, as amended.
1. The Company is validly existing and in good standing as a
corporation under the laws of the jurisdiction of its incorporation.
2. The Company has the corporate power and authority to execute and
deliver the (a) Limited Waiver and Sixth Amendment to Amended and Restated
Credit Agreement (the "AMENDMENT"), the Supplemental Indentures and the First
Amendment to the Subordinated Loan Agreement (all of the foregoing collectively
referred to as the "AMENDMENTS") and to perform its obligations thereunder. The
Company has taken all necessary corporate action to authorize the execution,
delivery and performance by it of the Amendments. The Company has duly executed
and delivered the Amendments. Each of the Amendments constitutes the valid and
legally binding obligation of each Loan Party, party thereto, enforceable
against such Loan Party in accordance with its terms.
3. Neither the execution nor the delivery by any Loan Party of the
Amendments nor the performance of its obligations thereunder, nor the
consummation of the transactions contemplated thereby, will (a) contravene any
applicable provision of any law, statute, rule or regulation (including, without
limitation, regulations G, T, U and X of the Board of Governors of the Federal
Reserve System of the United States of America or the State of New York, or of
any governmental or regulatory body thereof, or any applicable provision of the
General Corporation Law of the State of Delaware or, to the best of our
knowledge, any order, writ, injunction or decree of any United States Federal or
New York State court binding on such Loan Party or any of its assets; (b) result
in any breach, or constitute a default under, any of the terms, covenants,
conditions or provisions of the Senior Debt Documents, the Subordinated Loan
Documents or any other agreement, contract or instrument certified by the
Company to us as being material to which the Company is a party or by which any
of its property or assets are bound (collectively, the "SPECIFIED AGREEMENTS");
(c) result in the creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of any Loan Party pursuant
to the terms of any Specified Agreement other than those in favor of the
Collateral Agent; or (d) violate any provision of the Certificate of
Incorporation or Bylaws of the Company.
4. No order, consent, approval, license, authorization or validation,
or filing, recording, declaration or registration with, or authorization or
exemption by, any governmental or regulatory authority pursuant to any law or
regulation of the United States of America or the State of New York
F-1
<PAGE> 31
or pursuant to the General Corporation Law of the State of Delaware is required
to be obtained or made by any Loan Party in connection with (a) the execution
and delivery by each Loan Party of the Amendments to which it is party or (b)
the performance by each Loan Party of the obligations to be performed by it on
or prior to the Sixth Amendment Effective Date pursuant to the Amendments to
which it is a party.
5. To our knowledge, there does not exist any judgment, order,
injunction or other restraint of any United States Federal or New York State
court issued or filed binding on any Loan Party or any hearing seeking
injunctive relief with respect to any Loan Party or any other restraint pending,
noticed or threatened with respect to any Loan Party (a) with respect to the
making or maintenance of the Loans by the Lenders or the performance by the Loan
Parties of their obligations under the Amendments or Loan Documents or (b) that
could reasonably be expected to have a Material Adverse Effect.
F-2
<PAGE> 32
EXHIBIT G
Opinions to be Given by the General Counsel to Company
------------------------------------------------------
All capitalized terms used herein without definition shall have the
meanings given such terms in the Credit Agreement, as amended.
1. Each of the Loan Parties has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the state of
its incorporation. Each Loan Party has the corporate power and authority to own
and operate its properties and assets and to transact the business in which it
is engaged and currently proposes to engage. Each Loan Party is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties or assets owned or leased
by such Loan Party or the nature of the business conducted by such Loan Party
makes such qualification necessary, except for such jurisdictions where, in the
aggregate, the failure to so qualify could not reasonably be expected to have a
Material Adverse Effect.
2. Each Loan Party has the corporate power and authority to execute and
deliver the Limited Waiver and Sixth Amendment to Amended and Restated Credit
Agreement (the "AMENDMENT") and to perform its obligations thereunder. Each Loan
Party has taken all necessary corporate action to authorize the execution,
delivery and performance by it of the Amendment. Each Loan Party has duly
executed and delivered the Amendment.
3. Neither the execution nor the delivery by any Loan Party of the
Amendment or by the Company of the Supplemental Indentures or the First
Amendment to the Subordinated Loan Agreement, nor the consummation of the
transactions contemplated thereby, will (a) contravene any applicable provision
of any law, statute, rule or regulation of the state of California, or any
governmental or regulatory body thereof, or, to the best of my knowledge, any
order, writ, injunction or decree of any California State court binding on such
Loan Party or any of its assets; (b) conflict with, or result in any breach of,
or constitute a default under, any of the terms, covenants, conditions or
provisions of the Senior Debt Documents, the Subordinated Loan Documents or, to
my knowledge, any other indenture, mortgage, deed of trust, loan agreement, or
any other material agreement, contract or instrument to which any Loan Party is
a party or by which any of its property or assets are bound (collectively, the
"SPECIFIED AGREEMENTS"); (c) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the properties or assets of
any Loan Party pursuant to the terms of any Specified Agreement other than those
in favor of the Collateral Agent; or (d) violate any provision of the
Certificate or Articles of Incorporation or Bylaws of any Loan Party.
G-1
<PAGE> 33
4. No order, consent, approval or license or validation of,
authorization or exemption by, or registration, declaration, recording or filing
with, any governmental or regulatory authority pursuant to any law or regulation
of the State of California is required to be obtained or made by any Loan Party
in connection with (a) the execution and delivery by each Loan Party of the
Amendment or the execution and delivery by the Company of the Supplemental
Indentures or the First Amendment to the Subordinated Loan Agreement or (b) the
performance by each Loan Party of the obligations to be performed by it on or
prior to the Sixth Amendment Effective Date pursuant to the Amendment, the
Supplemental Indentures and the First Amendment to the Subordinated Loan
Agreement.
5. To the best of my knowledge, there does not exist any judgment,
order, injunction or other restraint of any California State court issued or
filed binding on any Loan Party or any hearing seeking injunctive relief with
respect to any Loan Party or other restraint pending, noticed or threatened with
respect to any Loan Party (a) with respect to the making or maintenance of any
of the Loans by the Lenders or the performance by the Loan Parties of their
obligations under the Amendment or other Loan Documents or the Supplemental
Indentures or the First Amendment to the Subordinated Loan Agreement or (b) that
could reasonably be expected to have a Material Adverse Effect.
G-2
<PAGE> 34
EXHIBIT H
Supplement to Schedules to Collateral Documents
H-1
<PAGE> 1
EXHIBIT 4.13
EXECUTION
AMERICAN RESTAURANT GROUP
LIMITED WAIVER AND SEVENTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS LIMITED WAIVER AND SEVENTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT (this "AMENDMENT") is dated as of September 10, 1996, and
entered into by and among AMERICAN RESTAURANT GROUP, INC., a Delaware
corporation ("COMPANY"), the Subsidiaries of Company listed on the signature
pages hereof (the "WORKING CAPITAL BORROWERS"), the financial institutions
listed on the signature pages hereof ("LENDERS") and BANKERS TRUST COMPANY, as
agent for Lenders ("AGENT"), and, for purposes of Section 3 hereof, Local
Favorite, Inc., a California corporation, and is made with reference to that
certain Amended and Restated Credit Agreement, dated as of December 13, 1993,
as amended by that certain Limited Waiver and First Amendment to Amended and
Restated Credit Agreement dated as of March 23, 1994, that certain Second
Amendment to Amended and Restated Credit Agreement dated as of May 10, 1994,
that certain Limited Waiver and Third Amendment to Amended and Restated Credit
Agreement dated as of March 17, 1995, and that certain Limited Waiver and
Fourth Amendment to Amended and Restated Credit Agreement dated as of November
1, 1995, that certain Limited Waiver and Fifth Amendment to Amended and
Restated Credit Agreement dated as of February 27, 1996 and that certain
Limited Waiver and Sixth Amendment to Amended and Restated Credit Agreement
dated as of August 26, 1996 (the "CREDIT AGREEMENT"), by and among Company, the
Working Capital Borrowers, Lenders and Agent. Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.
RECITALS
WHEREAS, Borrowers have requested Lenders to extend the maturity date
of the Facility Letter of Credit Commitments and Lenders have agreed to make
such extensions subject to the terms and conditions set forth herein;
WHEREAS, Borrowers have requested Lenders to waive the Events of
Default resulting from Borrowers failure (a) to pay all outstanding Working
Capital Loans upon their maturity on August 29, 1996 and (b) to consummate the
Asset Sale described in subsection 5.19 of the Credit Agreement on or prior to
August 29, 1996;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1.
AMENDMENTS TO THE CREDIT AGREEMENT
(a) Subsection 2.10A of the Credit Agreement is hereby amended by
deleting all references to "October 15, 1996" contained therein and
substituting "November 15, 1996" therefor.
(b) Subsection 2.10A of the Credit Agreement is hereby further amended
by adding the following paragraph at the end of such subsection:
"If (i) all of the outstanding Working Capital Loans
are paid in full and the Working Capital Commitments
terminated on or before September 13, 1996, and (ii) no Event
of Default or Potential Event of Default shall have occurred
and be continuing as of such date, then the maturity date of
the Facility Letter of Credit Commitments shall be extended
from November 15, 1996 to March 31, 1997, and all references
to November 15, 1996 contained in this subsection 2.10A shall
be deemed references to March 31, 1997."
SECTION 2.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, each Loan Party represents
and warrants to each Lender that the following statements are true, correct and
complete:
2.1 CORPORATE POWER AND AUTHORITY.
Each Loan Party has all requisite corporate power and authority to
enter into this Amendment and to carry out the transactions contemplated by,
and perform its obligations under, the Credit Agreement as amended by this
Amendment (the "AMENDED AGREEMENT").
2.2 AUTHORIZATION OF AGREEMENTS.
The execution and delivery of this Amendment and the performance of
the Amended Agreement have been duly authorized by all necessary corporate
action on the part of each Loan Party.
2
<PAGE> 3
2.3 NO CONFLICT.
The execution and delivery by each Loan Party of this Amendment and
the performance by each Loan Party of the Amended Agreement do not and will not
(a) violate any provision of any law or any governmental rule or regulation
applicable to any Loan Party, the Certificate or Articles of Incorporation or
Bylaws of any Loan Party or any order, judgment or decree of any court or other
agency of government binding on any Loan Party, (b) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of any Loan Party, except for conflicts,
breaches or defaults which would not singly or in the aggregate have a Material
Adverse Effect, (c) result in or require the creation or imposition of any Lien
upon any of the properties or assets of any Loan Party (other than any Liens in
favor of Collateral Agent for the benefit of Lenders and the Senior Note
Holders), or (d) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of any Loan Party,
except for such approvals or consents which have been obtained on or before the
Seventh Amendment Effective Date (as hereinafter defined in Section 5) or the
absence of which would not singly or in the aggregate have a Material Adverse
Effect.
2.4 GOVERNMENTAL CONSENTS.
The execution, delivery and performance by each Loan Party of this
Amendment and the Amended Agreement do not and will not require any
registration with, consent or approval of, or notice to, or action to, with or
by, any Federal, state or other governmental authority or regulatory body,
other than registrations, consents, approvals, notices and actions that have
been taken or obtained prior to the Seventh Amendment Effective Date or the
absence of which would not have a Material Adverse Effect.
2.5 BINDING OBLIGATION.
This Amendment and the Amended Agreement have been duly executed and
delivered by each Loan Party which is a party thereto and are the legally valid
and binding obligations of each such Loan Party, enforceable against each such
Loan Party in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally or by equitable principles relating
to enforceability.
2.6 INCORPORATION OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Section 4 of the
Credit Agreement and each Collateral Document are and will be true, correct and
complete in all material respects on and as of the Seventh Amendment Effective
Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
3
<PAGE> 4
2.7 ABSENCE OF DEFAULT.
As of the Seventh Amendment Effective Date, after giving effect to
this Amendment, no event has occurred and is continuing or will result from the
consummation of the transactions contemplated by this Amendment that would
constitute an Event of Default or a Potential Event of Default.
SECTION 3.
ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Guaranty pursuant to which Company
has guarantied certain Obligations under the Credit Agreement. Each Subsidiary
of Company is a party to the Subsidiary Guaranty Agreement pursuant to which
each such Subsidiary has guarantied certain Obligations under the Credit
Agreement. Each of the Loan Parties is a party to certain Collateral Documents
pursuant to which the Loan Parties have granted Liens on certain Collateral to
the Collateral Agent, for the benefit of Lenders and the Senior Note Holders.
The Company Guaranty, the Subsidiary Guaranty Agreement and the Collateral
Documents are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS".
Each Loan Party hereby acknowledges that it has reviewed the terms and
provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Each
Loan Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered thereby will continue to
guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all "GUARANTIED OBLIGATIONS" and "SECURED
OBLIGATIONS", as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including without limitation the payment
and performance of all such "GUARANTIED OBLIGATIONS" or "SECURED OBLIGATIONS",
as the case may be, in respect of the Obligations now or hereafter existing
under or in respect of the Amended Agreement.
Each Loan Party acknowledges and agrees that any of the Credit Support
Documents to which it is a party or otherwise bound shall continue in full
force and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Loan Party represents and warrants that
all representations and warranties contained in the Amended Agreement and the
Credit Support Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Seventh
Amendment Effective Date to the same extent as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true, correct and complete
in all material respects on and as of such earlier date.
4
<PAGE> 5
Each Loan Party (other than Borrowers) acknowledges and agrees that
(a) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Loan Party is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (b) nothing in the Credit
Agreement, this Amendment or any other Loan Document shall be deemed to require
the consent of such Loan Party to any future amendments to the Credit Agreement.
SECTION 4.
LIMITED WAIVER
4.1 WAIVER. Subject to the terms and conditions set forth herein
and in reliance on the representations and warranties of each Loan Party herein
contained, Lenders hereby waive (a) the Event of Default which has occurred and
is continuing under subsection 7.1 as a result of Borrowers failure to pay all
outstanding Working Capital Loans at their stated maturity on August 29, 1996,
(b) the Event of Default which has occurred and is continuing under 7.3 as a
result of the Company's failure to consummate the Asset Sale described in
subsection 5.19 on or before August 29, 1996 and (c) the payment of default
rate interest pursuant to subsection 2.3E of the Credit Agreement from and
including August 29, 1996 through and including September 13, 1996. The
waivers set forth in this Section 4.1 shall be effective until and only until
September 13, 1996.
4.2 LIMITATION OF WAIVER. Without limiting the generality of the
provisions of subsection 9.7 of the Credit Agreement, the waivers set forth
above shall be limited precisely as written and relate solely to the
noncompliance by Company and its Subsidiaries with the provisions of
subsections 2.3E, 7.1 and 7.3 of the Credit Agreement in the manner and to the
extent described above, and nothing in this Section 4 shall be deemed to:
(a) constitute a waiver of compliance by Company or any
of its Subsidiaries with respect to (i) subsections 2.3E, 7.1 or 7.3
of the Credit Agreement in any other instance or (ii) any other term,
provision or condition of the Credit Agreement or any other instrument
or agreement referred to therein; or
(b) prejudice any right or remedy that Agent or any Lender may
now have or may have in the future under or in connection with the
Credit Agreement or any other instrument or agreement referred to
therein.
Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and in all other respects are hereby ratified and
confirmed.
5
<PAGE> 6
SECTION 5.
CONDITIONS TO EFFECTIVENESS
This Amendment (including the limited waivers set forth in Section 4
hereof) shall become effective only upon the satisfaction of all of the
following conditions precedent (the date of satisfaction of such conditions
being referred to herein as the "SEVENTH AMENDMENT EFFECTIVE DATE"); provided
that notwithstanding anything herein to the contrary, the extension of the
maturity date of the Facility Letters of Credit set forth in clause (a) of
Section 1 of this Amendment shall become effective upon the execution of
counterparts hereof by each of the Borrowers and Lenders and receipt by Agent
of written or telephonic notification of such execution.
5.1 DOCUMENTS.
On or before the Seventh Amendment Effective Date, Loan Parties shall
deliver to Agent for Lenders (with sufficient originally executed copies, where
appropriate, for each Lender) the following, each, unless otherwise noted,
dated the Seventh Amendment Effective Date:
(a) Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Amendment,
certified as of the Seventh Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment; and
(b) Originally executed copies of this Amendment, duly
executed and delivered by each of the parties hereto.
5.2 OPINIONS.
Lenders shall have received originally executed copies of one or more
favorable written opinions of (a) Simpson Thacher & Bartlett, counsel for Loan
Parties, and (b) the general counsel of Company, each in form and substance
satisfactory to Agent and its counsel, dated as of the Seventh Amendment
Effective Date.
5.3 FEES AND EXPENSES.
Lenders shall have received all accrued and unpaid fees payable under
subsections 2.5D and 2.5E as of the Seventh Amendment Effective Date and all
fees and expenses incurred and payable pursuant to subsection 9.3 of the Credit
Agreement as of the Seventh Amendment Effective Date (including fees and
expenses of counsel to Agent).
6
<PAGE> 7
SECTION 6.
MISCELLANEOUS
6.1 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(a) On and after the Seventh Amendment Effective Date,
each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring to
the Credit Agreement, and each reference in the other Loan Documents
to the "Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement shall mean and be a reference
to the Amended Agreement.
(b) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of existing Event of Default or Potential Event of Default or
any provision of, or operate as a waiver of any right, power or remedy
of Agent, the Collateral Agent or any Lender under, the Credit
Agreement or any of the other Loan Documents.
6.2 FEES AND EXPENSES.
Company acknowledges that all reasonable costs, fees and expenses as
described in subsection 9.3 of the Credit Agreement incurred by Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Company.
6.3 HEADINGS.
Section and subsection headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
6.4 APPLICABLE LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5.1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
7
<PAGE> 8
6.5 COUNTERPARTS.
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank.]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
AMERICAN RESTAURANT GROUP, INC.,
a Delaware corporation
ARG ENTERPRISES, INC.,
a California corporation
SPECTRUM FOODS, INC.,
a California corporation
SPOONS RESTAURANTS, INC.,
a Texas corporation
ARG PROPERTY MANAGEMENT
CORPORATION,
a California corporation
GRANDY'S, INC.,
a California corporation
By: /s/ WILLIAM J. McCAFFREY, JR.
-----------------------------
William J. McCaffrey, Jr.
Vice President and
Chief Financial Officer
of each of the foregoing
FOR PURPOSES OF SECTION 3 ONLY:
LOCAL FAVORITE, INC.,
a California corporation
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
William J. McCaffrey, Jr.
Vice President and
Chief Financial Officer
S-1
<PAGE> 10
BANKERS TRUST COMPANY,
individually, as Agent and a Lender
By: /s/ ROBERT R. TELESCA
----------------------------------
Name: Robert R. Telesca
Title: Assistant Vice President
BANQUE NATIONALE DE PARIS,
as a Lender
By: /s/ C. BETTLES
----------------------------------
Name: C. Bettles
Title: Sr. V.P. & Manager
By: /s/ PATRICK MANSOORIAN
----------------------------------
Name: Patrick Mansoorian
Title: Assistant Vice President
BANQUE PARIBAS,
as a Lender
By: /s/ EDWARD V. CANALE
----------------------------------
Name: Edward V. Canale
Title: S.V.P.
By: /s/ ALBERT A. YOUNG, JR.
----------------------------------
Name: Albert A. Young, Jr.
Title: Vice President
S-2
<PAGE> 11
SWISS BANK CORPORATION
CAYMAN ISLANDS BRANCH,
as a Lender
By: /s/ WALTER S. POLLARD
----------------------------------
Name: Walter S. Pollard
Title: Attorney-In-Fact
By: /s/ LESLIE A. PAINE
----------------------------------
Name: Leslie A. Paine
Title: Attorney-In-Fact
DRESDNER BANK AG,
as a Lender
By: /s/ THOMAS J. NADRAMIA
----------------------------------
Name: Thomas J. Nadramia
Title: Vice President
By: /s/ JOHN W. SWEENEY
----------------------------------
Name: John W. Sweeney
Title: Assistant Vice President
S-3
<PAGE> 1
EXHIBIT 4.14
EXECUTION
AMERICAN RESTAURANT GROUP
EIGHTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"AMENDMENT") is dated as of February 25, 1997, and entered into by and among
AMERICAN RESTAURANT GROUP, INC., a Delaware corporation ("COMPANY"), the
Subsidiaries of Company listed on the signature pages hereof (the "WORKING
CAPITAL BORROWERS"), the financial institutions listed on the signature pages
hereof ("LENDERS") and BANKERS TRUST COMPANY, as agent for Lenders ("AGENT"),
and, for purposes of Section 3 hereof, Local Favorite, Inc., a California
corporation, and is made with reference to that certain Amended and Restated
Credit Agreement, dated as of December 13, 1993, as amended by that certain
Limited Waiver and First Amendment to Amended and Restated Credit Agreement
dated as of March 23, 1994, that certain Second Amendment to Amended and
Restated Credit Agreement dated as of May 10, 1994, that certain Limited Waiver
and Third Amendment to Amended and Restated Credit Agreement dated as of March
17, 1995, that certain Limited Waiver and Fourth Amendment to Amended and
Restated Credit Agreement dated as of November 1, 1995, that certain Limited
Waiver and Fifth Amendment to Amended and Restated Credit Agreement dated as of
February 27, 1996, that certain Limited Waiver and Sixth Amendment to Amended
and Restated Credit Agreement dated as of August 26, 1996, and that certain
Limited Waiver and Seventh Amendment to Amended and Restated Credit Agreement
dated as of September 10, 1996 (the "CREDIT AGREEMENT"), by and among Company,
the Working Capital Borrowers, Lenders and Agent. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, Borrowers have requested Lenders to extend the maturity date
of the Facility Letter of Credit Commitments and Lenders have agreed to make
such extension subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
<PAGE> 2
SECTION 1.
AMENDMENT TO THE CREDIT AGREEMENT
Subsection 2.10A of the Credit Agreement is hereby amended by
deleting all references to "March 31, 1997" contained therein and substituting
"April 15, 1997" therefor.
SECTION 2.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, each Loan Party represents
and warrants to each Lender that the following statements are true, correct and
complete:
2.1 CORPORATE POWER AND AUTHORITY.
Each Loan Party has all requisite corporate power and authority to
enter into this Amendment and to carry out the transactions contemplated by,
and perform its obligations under, the Credit Agreement as amended by this
Amendment (the "AMENDED AGREEMENT").
2.2 AUTHORIZATION OF AGREEMENTS.
The execution and delivery of this Amendment and the performance of
the Amended Agreement have been duly authorized by all necessary corporate
action on the part of each Loan Party.
2.3 NO CONFLICT.
The execution and delivery by each Loan Party of this Amendment and
the performance by each Loan Party of the Amended Agreement do not and will not
(a) violate any provision of any law or any governmental rule or regulation
applicable to any Loan Party, the Certificate or Articles of Incorporation or
Bylaws of any Loan Party or any order, judgment or decree of any court or other
agency of government binding on any Loan Party, (b) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of any Loan Party, except for conflicts,
breaches or defaults which would not singly or in the aggregate have a Material
Adverse Effect, (c) result in or require the creation or imposition of any Lien
upon any of the properties or assets of any Loan Party (other than any Liens in
favor of Collateral Agent for the benefit of Lenders and the Senior Note
Holders), or (d) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of any Loan Party,
except for such approvals or consents which have been obtained on or before the
Eighth Amendment Effective Date (as hereinafter defined) or the absence of
which would not singly or in the aggregate have a Material Adverse Effect.
2
<PAGE> 3
2.4 GOVERNMENTAL CONSENTS.
The execution, delivery and performance by each Loan Party of this
Amendment and the Amended Agreement do not and will not require any
registration with, consent or approval of, or notice to, or action to, with or
by, any Federal, state or other governmental authority or regulatory body,
other than registrations, consents, approvals, notices and actions that have
been taken or obtained prior to the Eighth Amendment Effective Date or the
absence of which would not have a Material Adverse Effect.
2.5 BINDING OBLIGATION.
This Amendment and the Amended Agreement have been duly executed and
delivered by each Loan Party which is a party thereto and are the legally valid
and binding obligations of each such Loan Party, enforceable against each such
Loan Party in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally or by equitable principles relating
to enforceability.
2.6 INCORPORATION OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Section 4 of the
Credit Agreement and each Collateral Document are and will be true, correct and
complete in all material respects on and as of the Eighth Amendment Effective
Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
2.7 ABSENCE OF DEFAULT.
As of the Eighth Amendment Effective Date, except as previously
disclosed to Lenders, no event has occurred and is continuing that would
constitute an Event of Default or a Potential Event of Default.
SECTION 3.
ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Guaranty pursuant to which Company
has guarantied certain Obligations under the Credit Agreement. Each Subsidiary
of Company is a party to the Subsidiary Guaranty Agreement pursuant to which
each such Subsidiary has guarantied certain Obligations under the Credit
Agreement. Each of the Loan Parties is a party to certain Collateral Documents
pursuant to which the Loan Parties have granted Liens on certain Collateral to
the Collateral Agent, for the benefit of Lenders and the Senior Note Holders.
The Company Guaranty, the Subsidiary Guaranty Agreement and the Collateral
Documents are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS".
3
<PAGE> 4
Each Loan Party hereby acknowledges that it has reviewed the terms and
provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Each
Loan Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered thereby will continue to
guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all "GUARANTIED OBLIGATIONS" and "SECURED
OBLIGATIONS", as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including without limitation the payment
and performance of all such "GUARANTIED OBLIGATIONS" or "SECURED OBLIGATIONS",
as the case may be, in respect of the Obligations now or hereafter existing
under or in respect of the Amended Agreement.
Each Loan Party acknowledges and agrees that any of the Credit Support
Documents to which it is a party or otherwise bound shall continue in full
force and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Loan Party represents and warrants that
all representations and warranties contained in the Amended Agreement and the
Credit Support Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Eighth Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
Each Loan Party (other than Borrowers) acknowledges and agrees that
(a) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Loan Party is not required by the terms of the Credit Agreement
or any other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment and (b) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to require the
consent of such Loan Party to any future amendments to the Credit Agreement.
SECTION 4.
MISCELLANEOUS
4.1 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(a) On and after the Eighth Amendment Effective Date,
each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring to
the Credit Agreement, and each reference in the other Loan Documents
to the "Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement shall mean and be a reference
to the Amended Agreement.
4
<PAGE> 5
(b) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and performance of this
Amendment shall not constitute a waiver of any existing Event of
Default or Potential Event of Default or any provision of, or operate
as a waiver of any right, power or remedy of Agent, the Collateral
Agent or any Lender under, the Credit Agreement or any of the other
Loan Documents.
4.2 FEES AND EXPENSES.
Company acknowledges that all reasonable costs, fees and expenses as
described in subsection 9.3 of the Credit Agreement incurred by Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Company.
4.3 HEADINGS.
Section and subsection headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
4.4 APPLICABLE LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5.1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
4.5 EXECUTION BY AGENT.
Upon authority of subsection 9.7 of the Credit Agreement, Agent
obtained the concurrence of all of the Lenders to this Amendment and Agent
executes and delivers this Amendment on behalf of and at the direction of all
of the Lenders.
4.6 COUNTERPARTS; EFFECTIVENESS.
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This
5
<PAGE> 6
Amendment shall become effective (the "EIGHTH AMENDMENT EFFECTIVE DATE") upon
the execution of a counterpart hereof by each of the parties hereto and receipt
by Company and Agent of written or telephonic notification of such execution
and authorization of delivery thereof.
[Remainder of page intentionally left blank.]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
AMERICAN RESTAURANT GROUP, INC.,
a Delaware corporation
ARG ENTERPRISES, INC.,
a California corporation
SPECTRUM FOODS, INC.,
a California corporation
SPOONS RESTAURANTS, INC.,
a Texas corporation
ARG PROPERTY MANAGEMENT
CORPORATION,
a California corporation
GRANDY'S, INC.,
a California corporation
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
William J. McCaffrey, Jr.
Vice President and
Chief Financial Officer
of each of the foregoing
FOR PURPOSES OF SECTION 3 ONLY:
LOCAL FAVORITE, INC.,
a California corporation
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
William J. McCaffrey, Jr.
Vice President and
Chief Financial Officer
S-1
<PAGE> 8
BANKERS TRUST COMPANY,
individually, as Agent and a Lender
By: /s/ ROBERT R. TELESCA
----------------------------------
Name: Robert R. Telesca
Title: Assistant Vice President
S-2
<PAGE> 1
EXHIBIT 4.15
EXECUTION
AMERICAN RESTAURANT GROUP
LIMITED WAIVER AND NINTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS LIMITED WAIVER AND NINTH AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "AMENDMENT") is dated as of February 27, 1997, and entered into
by and among AMERICAN RESTAURANT GROUP, INC., a Delaware corporation
("COMPANY"), the Subsidiaries of Company listed on the signature pages hereof
(the "WORKING CAPITAL BORROWERS"), the financial institutions listed on the
signature pages hereof ("LENDERS") and BANKERS TRUST COMPANY, as agent for
Lenders ("AGENT"), and, for purposes of Section 4 hereof, Local Favorite, Inc.,
a California corporation, and is made with reference to that certain Amended
and Restated Credit Agreement, dated as of December 13, 1993, as amended by
that certain Limited Waiver and First Amendment to Amended and Restated Credit
Agreement dated as of March 23, 1994, that certain Second Amendment to Amended
and Restated Credit Agreement dated as of May 10, 1994, that certain Limited
Waiver and Third Amendment to Amended and Restated Credit Agreement dated as of
March 17, 1995, that certain Limited Waiver and Fourth Amendment to Amended and
Restated Credit Agreement dated as of November 1, 1995, that certain Limited
Waiver and Fifth Amendment to Amended and Restated Credit Agreement dated as of
February 27, 1996, that certain Limited Waiver and Sixth Amendment to Amended
and Restated Credit Agreement dated as of August 26, 1996, that certain Limited
Waiver and Seventh Amendment to Amended and Restated Credit Agreement dated as
of September 10, 1996 and that certain Eighth Amendment to Amended and Restated
Credit Agreement dated as of February 25, 1997 (the "CREDIT AGREEMENT"), by and
among Company, the Working Capital Borrowers, Lenders and Agent. Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement.
RECITALS
WHEREAS, Borrowers have requested Lenders to extend the maturity date
of the Facility Letter of Credit Commitments from April 15, 1997 to July 31,
1997, and Lenders have agreed to make such extensions subject to the terms and
conditions set forth herein;
WHEREAS, Company is entering into supplemental indentures amending
certain terms of the Exchange Note Indenture and the New Senior Note Indenture
concurrently with entering into this Amendment, which amendments require the
consent of Agent and Requisite Lenders;
WHEREAS, Borrowers have further requested Lenders to amend certain
covenants in the Credit Agreement and Lenders have agreed to such amendments;
and
<PAGE> 2
WHEREAS, Borrowers have further requested Lenders to waive compliance
with certain covenants in the Credit Agreement and Lenders have agreed to such
waivers;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1.
LIMITED WAIVER
1.1 WAIVER. Subject to the terms and conditions set forth herein
and in reliance on the representations and warranties of each Loan Party herein
contained, Lenders hereby waive compliance by the Company and its Subsidiaries
with the provisions of (a) subsection 6.6A of the Credit Agreement to the
extent and only to the extent Consolidated EBITDA for the four consecutive
Fiscal Quarters ended December 30, 1996 was a minimum of $28,000,000 rather
than the minimum of $33,000,000 required by subsection 6.6A and (b) subsection
5.20 of the Credit Agreement to the extent and only to the extent the Net Cash
Proceeds received by the Company from Asset Sales in addition to the Asset Sale
contemplated by subsection 5.19 were an aggregate of $15,000,000 as of December
31, 1996 rather than $25,000,000 as required by subsection 5.20.
1.2 LIMITATION OF WAIVER. Without limiting the generality of the
provisions of subsection 9.7 of the Credit Agreement, the waiver set forth
above shall be limited precisely as written and relates solely to the
noncompliance by Company and its Subsidiaries with the provisions of
subsections 6.6A and 5.20 of the Credit Agreement in the manner and to the
extent described above, and nothing in this Section 1 shall be deemed to:
(a) constitute a waiver of compliance by Company or any
of its Subsidiaries with respect to subsections (i) 6.6A and 5.20 of
the Credit Agreement in any other instance or (ii) any other term,
provision or condition of the Credit Agreement or any other instrument
or agreement referred to therein; or
(b) prejudice any right or remedy that Agent or any
Lender may now have (except to the extent such right or remedy was
based on existing defaults that will not exist after giving effect to
the waiver provided in this Section 1) or may have in the future under
or in connection with the Credit Agreement or any other instrument or
agreement referred to therein.
Except as expressly set forth herein, the terms, provisions
and conditions of the Credit Agreement and the other Loan Documents
shall remain in full force and effect and in all other respects are
hereby ratified and confirmed.
2
<PAGE> 3
SECTION 2.
AMENDMENTS TO THE CREDIT AGREEMENT
2.1 AMENDMENTS TO SECTION 1.1: DEFINITIONS.
Subsection 1.1 of the Credit Agreement is hereby amended by adding the
following definitions, which shall be inserted in proper alphabetical order:
" `NINTH AMENDMENT' means the Limited Waiver and
Ninth Amendment to this Agreement, dated as of February 27, 1997.
`NINTH AMENDMENT EFFECTIVE DATE' means the date, on
or before February 27, 1997, upon which all of the conditions
set forth in Section 6 of the Ninth Amendment shall have been
satisfied or waived. "
2.2 AMENDMENT TO SUBSECTION 2.4: FEES.
Subsection 2.4 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Borrowers jointly and severally agree to pay to Agent for
distribution to each Facility L/C Lender in proportion to that
Facility L/C Lender's Pro Rata Share of the Facility Letter of Credit
Commitments, an amendment fee for the period from and including April
1, 1997 to and excluding July 31, 1997 equal to the amount of the
Facility Letter of Credit Commitments as of the Ninth Amendment
Effective Date multiplied by one percent per annum (calculated on the
basis of a 360-day year), such amendment fee to be due and payable on
the Eighth Amendment Effective Date."
2.3 AMENDMENT TO SUBSECTION 2.10: FACILITY LETTERS OF CREDIT.
Subsection 2.10A of the Credit Agreement is hereby amended by deleting
all references to "April 15, 1997" contained therein and substituting "July 31,
1997" therefor.
2.4 AMENDMENT TO SUBSECTION 2.11: LETTERS OF CREDIT GENERALLY.
Subsection 2.11A(2) of the Credit Agreement is hereby amended to read
in its entirety as follows:
"(2) a commission equal to 3.5% per annum of the
maximum amount available from time to time to be drawn under
such Letter of Credit, payable in arrears on and to (but not
including) each February 28, May 31, August 31 and November 30
of each year, commencing on August 31, 1996 to but not
including the date of termination of the Facility Letter of
Credit Commitments;"
3
<PAGE> 4
2.5 AMENDMENT TO SUBSECTION 6.1: INDEBTEDNESS.
Subsection 6.1 of the Credit Agreement is amended by deleting the
reference to "March 31, 1997" in clause (ix) thereof and substituting "July 31,
1997" therefor.
2.6 AMENDMENT TO SUBSECTION 5.1: FINANCIAL STATEMENTS AND OTHER REPORTS.
Subsection 5.1 of the Credit Agreement is hereby amended by deleting
the "and" at the end of paragraph (xv) thereof; deleting the period at the end
of paragraph (xvi) thereof and substituting "; and" therefor; and adding the
following two paragraphs at the end thereof:
" (xvii) Company shall deliver to Agent no later than June 30,
1997, an Officers' Certificate setting forth in reasonable detail the
calculation of Consolidated EBITDA for the twelve consecutive calendar
month period ended May 31, 1997; and
(xviii) upon request of Agent or any Lender, Company shall
deliver to Agent or such Lender a report in reasonable detail
regarding the status of Company's efforts to sell all or substantially
all of the assets constituting its Black Angus division (or the
Capital Stock of its Subsidiaries holding such assets)."
2.7 AMENDMENTS TO SUBSECTION 6.6: FINANCIAL COVENANTS.
Subsection 6.6 of the Credit Agreement is hereby amended as follows:
Subsection 6.6A is hereby amended to read in its entirety as
follows:
"(i) Company and its Subsidiaries shall not
permit Consolidated EBITDA as of May 31, 1997 for the
consecutive twelve calendar month period ending as of such
date to be less than $34,000,000.
(ii) Company and its Subsidiaries shall not permit
Consolidated EBITDA as of June 30, 1997 (a) for the four
consecutive Fiscal Quarter period ended as of such date to be
less than $35,000,000 or (b) for the two consecutive Fiscal
Quarter period ended as of such date to be less than
$13,000,000."
SECTION 3.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, each Loan Party represents
and warrants to each Lender that the following statements are true, correct and
complete:
4
<PAGE> 5
3.1 CORPORATE POWER AND AUTHORITY.
Each Loan Party has all requisite corporate power and authority to
enter into this Amendment and to carry out the transactions contemplated by,
and perform its obligations under, the Credit Agreement as amended by this
Amendment (the "AMENDED AGREEMENT").
3.2 AUTHORIZATION OF AGREEMENTS.
The execution and delivery of this Amendment and the performance of
the Amended Agreement have been duly authorized by all necessary corporate
action on the part of each Loan Party.
3.3 NO CONFLICT.
The execution and delivery by each Loan Party of this Amendment and
the performance by each Loan Party of the Amended Agreement do not and will not
(a) violate any provision of any law or any governmental rule or regulation
applicable to any Loan Party, the Certificate or Articles of Incorporation or
Bylaws of any Loan Party or any order, judgment or decree of any court or other
agency of government binding on any Loan Party, (b) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of any Loan Party, except for conflicts,
breaches or defaults which would not singly or in the aggregate have a Material
Adverse Effect, (c) result in or require the creation or imposition of any Lien
upon any of the properties or assets of any Loan Party (other than any Liens in
favor of Collateral Agent for the benefit of Lenders and the Senior Note
Holders), or (d) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of any Loan Party,
except for such approvals or consents which have been obtained on or before the
Ninth Amendment Effective Date (as hereinafter defined in Section 6) or the
absence of which would not singly or in the aggregate have a Material Adverse
Effect.
3.4 GOVERNMENTAL CONSENTS.
The execution, delivery and performance by each Loan Party of this
Amendment and the Amended Agreement do not and will not require any
registration with, consent or approval of, or notice to, or action to, with or
by, any Federal, state or other governmental authority or regulatory body,
other than registrations, consents, approvals, notices and actions that have
been taken or obtained prior to the Ninth Amendment Effective Date or the
absence of which would not have a Material Adverse Effect.
3.5 BINDING OBLIGATION.
This Amendment and the Amended Agreement have been duly executed and
delivered by each Loan Party which is a party thereto and are the legally valid
and binding obligations of each such Loan Party, enforceable against each such
Loan Party in accordance with their respective
5
<PAGE> 6
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
3.6 INCORPORATION OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Section 4 of the
Credit Agreement and in each of the Collateral Documents are and will be true,
correct and complete in all material respects on and as of the Ninth Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
3.7 ABSENCE OF DEFAULT.
As of the Ninth Amendment Effective Date, after giving effect to this
Amendment, no event has occurred and is continuing or will result from the
consummation of the transactions contemplated by this Amendment that would
constitute an Event of Default or a Potential Event of Default.
SECTION 4.
ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Guaranty pursuant to which Company
has guarantied certain Obligations under the Credit Agreement. Each Subsidiary
of Company is a party to the Subsidiary Guaranty Agreement pursuant to which
each such Subsidiary has guarantied certain Obligations under the Credit
Agreement. Each of the Loan Parties is a party to certain Collateral Documents
pursuant to which the Loan Parties have granted Liens on certain Collateral to
the Collateral Agent, for the benefit of Lenders and the Senior Note Holders.
The Company Guaranty, the Subsidiary Guaranty Agreement and the Collateral
Documents are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS".
Each Loan Party hereby acknowledges that it has reviewed the terms and
provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Each
Loan Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered thereby will continue to
guaranty or secure, as the case may be, to the fullest extent possible the
payment and performance of all "GUARANTIED OBLIGATIONS" and "SECURED
OBLIGATIONS", as the case may be (in each case as such terms are defined in the
applicable Credit Support Document), including without limitation the payment
and performance of all such "GUARANTIED OBLIGATIONS" or "SECURED
OBLIGATIONS", as the case may be, in respect of the Obligations now or
hereafter existing under or in respect of the Amended Agreement.
6
<PAGE> 7
Each Loan Party acknowledges and agrees that any of the Credit Support
Documents to which it is a party or otherwise bound shall continue in full
force and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Loan Party represents and warrants that
all representations and warranties contained in the Amended Agreement and the
Credit Support Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Ninth Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
Each Loan Party (other than Borrowers) acknowledges and agrees that
(a) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Loan Party is not required by the terms of the Credit Agreement
or any other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment and (b) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to require the
consent of such Loan Party to any future amendments to the Credit Agreement.
SECTION 5.
AGENT AND REQUISITE LENDER CONSENT
Agent and Requisite Lenders hereby consent to the Company entering
into the Fourth Supplemental Indenture to the Exchange Note Indenture and the
Second Supplemental Indenture to the New Senior Note Indenture to the extent
such Supplemental Indentures are in the forms attached hereto as Exhibit A and
Exhibit B (the "1997 SUPPLEMENTAL INDENTURES").
SECTION 6.
CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the satisfaction of
all of the following conditions precedent (the date of satisfaction of such
conditions being referred to herein as the "NINTH AMENDMENT EFFECTIVE DATE"):
6.1 DOCUMENTS.
On or before the Ninth Amendment Effective Date, Loan Parties shall
deliver to Agent for Lenders (with sufficient originally executed copies, where
appropriate, for each Lender) the following, each, unless otherwise noted,
dated the Ninth Amendment Effective Date:
(a) Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Amendment,
certified as of the Ninth
7
<PAGE> 8
Amendment Effective Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment; and
(b) Originally executed copies of this Amendment, duly
executed and delivered by each of the parties hereto.
6.2 OPINIONS.
Lenders shall have received originally executed copies of one or more
favorable written opinions of (a) Simpson Thacher & Bartlett, counsel for Loan
Parties, and (b) the general counsel of Company, each in form and substance
satisfactory to Agent and its counsel, dated as of the Ninth Amendment
Effective Date, and setting forth substantially the matters and the opinions
designated in Exhibit C and Exhibit D, respectively, hereto and as to such
other matters as Agent may reasonably request.
6.3 1997 SUPPLEMENTAL INDENTURES.
Lenders shall have received (a) executed copies of each of the 1997
Supplemental Indentures which shall be in the forms of Exhibits A and B, (b)
all necessary consents to the 1997 Supplemental Indentures shall have been
obtained, (c) the 1997 Supplemental Indentures shall be in full force and
effect as of the Ninth Amendment Effective Date and (d) Lenders shall have
received an Officer's Certificate of Company certifying as to the matters set
forth in clauses (a), (b) and (c).
6.4 FEES AND EXPENSES.
Lenders shall have received all accrued and unpaid fees payable under
subsection 2.4 as of the Ninth Amendment Effective Date and all fees and
expenses incurred and payable pursuant to subsection 9.3 of the Credit
Agreement as of the Ninth Amendment Effective Date (including fees and expenses
of counsel to Agent).
SECTION 7.
MISCELLANEOUS
7.1 REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(a) On and after the Ninth Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to the
Amended Agreement.
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<PAGE> 9
(b) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of Agent, the Collateral Agent or any Lender under, the
Credit Agreement or any of the other Loan Documents.
7.2 FEES AND EXPENSES.
Company acknowledges that all reasonable costs, fees and expenses as
described in subsection 9.3 of the Credit Agreement incurred by Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Company.
7.3 HEADINGS.
Section and subsection headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
7.4 APPLICABLE LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5.1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
7.5 COUNTERPARTS.
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank.]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
AMERICAN RESTAURANT GROUP, INC.,
a Delaware corporation
ARG ENTERPRISES, INC.,
a California corporation
SPECTRUM FOODS, INC.,
a California corporation
SPOONS RESTAURANTS, INC.,
a Texas corporation
ARG PROPERTY MANAGEMENT
CORPORATION,
a California corporation
GRANDY'S, INC.,
a California corporation
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
William J. McCaffrey, Jr.
Vice President and
Chief Financial Officer
of each of the foregoing
FOR PURPOSES OF SECTION 4 ONLY:
LOCAL FAVORITE, INC.,
a California corporation
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
William J. McCaffrey, Jr.
Vice President and
Chief Financial Officer
S-1
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BANKERS TRUST COMPANY,
individually, as Agent and a Lender
By: /s/ MARY JO JOLLY
----------------------------------
Name: Mary Jo Jolly
Title: Assistant Vice President
BANQUE NATIONALE DE PARIS,
as a Lender
By: /s/ C. BETTLES
----------------------------------
Name: C. Bettles
Title: Sr. V.P. & Manager
By: /s/ ROBERT NICKEL
----------------------------------
Name: R. Nickel
Title: A.V.P.
BANQUE PARIBAS,
as a Lender
By: /s/ EDWARD V. CANALE
----------------------------------
Name: Edward V. Canale
Title: Senior Vice President
By: /s/ ALBERT A. YOUNG, JR.
----------------------------------
Name: Albert A. Young, Jr.
Title: Vice President
S-2
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SWISS BANK CORPORATION
CAYMAN ISLANDS BRANCH,
as a Lender
By: /s/ LESLIE A. PAINE
----------------------------------
Name: Leslie A. Paine
Title: Attorney-In-Fact
By: /s/ JIM CULLINANE
----------------------------------
Name: Jim Cullinane
Title: Attorney-In-Fact
DRESDNER BANK AG,
as a Lender
By: /s/ THOMAS J. NADRAMIA
----------------------------------
Name: Thomas J. Nadramia
Title: Vice President
By: /s/ CHRISTOPHER E. SARISKY
----------------------------------
Name: Christopher E. Sarisky
Title: Assistant Treasurer
S-3
<PAGE> 13
EXHIBIT A
FORM OF FOURTH SUPPLEMENTAL INDENTURE TO
EXCHANGE NOTE INDENTURE
A-1
<PAGE> 14
EXHIBIT B
FORM OF SECOND SUPPLEMENTAL INDENTURE TO
NEW SENIOR NOTE INDENTURE
B-1
<PAGE> 15
EXHIBIT C
Opinions to be Given by Simpson Thatcher & Bartlett
All terms used herein without definition shall have the meanings given
such terms in the Credit Agreement, as amended.
1. The Company is validly existing and in good standing as a
corporation under the laws of the jurisdiction of its
incorporation.
2. The Company has the corporate power and authority to execute
and deliver the Limited Waiver and Ninth Amendment to Amended and Restated
Credit Agreement (the "AMENDMENT"), the Fourth Supplemental Indenture to the
Exchange Note Indenture and the Second Supplemental Indenture to the New Senior
Note Indenture (all of the foregoing collectively referred to as the
"AMENDMENTS") and to perform its obligations thereunder. The Company has taken
all necessary corporate action to authorize the execution, delivery and
performance by it of the Amendments. The Company has duly executed and
delivered the Amendments. Each of the Amendments constitutes the valid and
legally binding obligation of each Loan Party, party thereto, enforceable
against such Loan Party in accordance with its terms.
3. Neither the execution nor the delivery by any Loan Party of
the Amendments nor the performance of its obligations thereunder, nor the
consummation of the transactions contemplated thereby, will (a) contravene any
applicable provision of any law, statute, rule or regulation (including,
without limitation, regulations G, T, U and X of the Board of Governors of the
Federal Reserve System of the United States of America or the State of New
York, or of any governmental or regulatory body thereof, or any applicable
provision of the General Corporation Law of the State of Delaware or, to the
best of our knowledge, any order, writ, injunction or decree of any United
States Federal or New York State court binding on such Loan Party or any of its
assets; (b) result in any breach, or constitute a default under, any of the
terms, covenants, conditions or provisions of the Senior Debt Documents, the
Subordinated Loan Documents or any other agreement, contract or instrument
certified by the Company to us as being material to which the Company is a
party or by which any of its property or assets are bound (collectively, the
"SPECIFIED AGREEMENTS"); (c) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets of
any Loan Party pursuant to the terms of any Specified Agreement other than
those in favor of the Collateral Agent; or (d) violate any provision of the
Certificate of Incorporation or Bylaws of the Company.
4. No order, consent, approval, license, authorization or
validation, or filing, recording, declaration or registration with, or
authorization or exemption by, any governmental or regulatory authority
pursuant to any law or regulation of the United States of America or the State
of New York or pursuant to the General Corporation Law of the State of Delaware
is
C-1
<PAGE> 16
required to be obtained or made by any Loan Party in connection with (a) the
execution and delivery by each Loan Party of the Amendments to which it is
party or (b) the performance by each Loan Party of the obligations to be
performed by it on or prior to the Ninth Amendment Effective Date pursuant to
the Amendments to which it is a party.
5. To our knowledge, there does not exist any judgment, order,
injunction or other restraint of any United States Federal or New York State
court issued or filed binding on any Loan Party or any hearing seeking
injunctive relief with respect to any Loan Party or any other restraint
pending, noticed or threatened with respect to any Loan Party (a) with respect
to the making or maintenance of the Loans by the Lenders or the performance by
the Loan Parties of their obligations under the Amendments or Loan Documents or
(b) that could reasonably be expected to have a Material Adverse Effect.
C-2
<PAGE> 17
EXHIBIT D
Opinions to be Given by the General Counsel to Company
All capitalized terms used herein without definition shall have the
meanings given such terms in the Credit Agreement, as amended.
1. Each of the Loan Parties has been duly incorporated and is
validly existing and in good standing as a corporation under the laws of the
state of its incorporation. Each Loan Party has the corporate power and
authority to own and operate its properties and assets and to transact the
business in which it is engaged and currently proposes to engage. Each Loan
Party is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the character of the properties or
assets owned or leased by such Loan Party or the nature of the business
conducted by such Loan Party makes such qualification necessary, except for
such jurisdictions where, in the aggregate, the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect.
2. Each Loan Party has the corporate power and authority to
execute and deliver the Limited Waiver and Ninth Amendment to Amended and
Restated Credit Agreement (the "AMENDMENT") and to perform its obligations
thereunder. Each Loan Party has taken all necessary corporate action to
authorize the execution, delivery and performance by it of the Amendment. Each
Loan Party has duly executed and delivered the Amendment.
3. Neither the execution nor the delivery by any Loan Party of
the Amendment or by the Company of the 1997 Supplemental Indentures (as defined
in the Amendment) nor the consummation of the transactions contemplated
thereby, will (a) contravene any applicable provision of any law, statute, rule
or regulation of the state of California, or any governmental or regulatory
body thereof, or, to the best of my knowledge, any order, writ, injunction or
decree of any California State court binding on such Loan Party or any of its
assets; (b) conflict with, or result in any breach of, or constitute a default
under, any of the terms, covenants, conditions or provisions of the Senior Debt
Documents, the Subordinated Loan Documents or, to my knowledge, any other
indenture, mortgage, deed of trust, loan agreement, or any other material
agreement, contract or instrument to which any Loan Party is a party or by
which any of its property or assets are bound (collectively, the "SPECIFIED
AGREEMENTS"); (c) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the properties or assets of any Loan
Party pursuant to the terms of any Specified Agreement other than those in
favor of the Collateral Agent; or (d) violate any provision of the Certificate
or Articles of Incorporation or Bylaws of any Loan Party.
D-1
<PAGE> 18
4. No order, consent, approval or license or validation of,
authorization or exemption by, or registration, declaration, recording or
filing with, any governmental or regulatory authority pursuant to any law or
regulation of the State of California is required to be obtained or made by any
Loan Party in connection with (a) the execution and delivery by each Loan Party
of the Amendment or the execution and delivery by the Company of the 1997
Supplemental Indentures or (b) the performance by each Loan Party of the
obligations to be performed by it on or prior to the Ninth Amendment Effective
Date pursuant to the Amendment and the 1997 Supplemental Indentures.
5. To the best of my knowledge, there does not exist any
judgment, order, injunction or other restraint of any California State court
issued or filed binding on any Loan Party or any hearing seeking injunctive
relief with respect to any Loan Party or other restraint pending, noticed or
threatened with respect to any Loan Party (a) with respect to the making or
maintenance of any of the Loans by the Lenders or the performance by the Loan
Parties of their obligations under the Amendment or other Loan Documents or the
1997 Supplemental Indentures or (b) that could reasonably be expected to have
a Material Adverse Effect.
D-2
<PAGE> 1
EXHIBIT 4.16
EXECUTION COPY
=================================================================
AMERICAN RESTAURANT GROUP, INC.
AND
SUBSIDIARY GUARANTORS
AND
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
_________________________
SECOND SUPPLEMENTAL
INDENTURE
Dated as of August 28, 1996
=================================================================
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE dated as of August 28, 1996 among
American Restaurant Group, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors and U.S. Trust Company of California, N.A., a national
banking association, as trustee (the "Trustee") under the Indenture dated as of
September 15, 1992, as amended by a First Supplemental Indenture dated as of
December 9, 1993 (the "Indenture").
RECITALS
WHEREAS, pursuant to the Indenture, the Company issued
$120,000,000 aggregate principal amount of its 12% Senior Secured Notes due
September 15, 1998 (the "Securities");
WHEREAS, Section 9.02 of the Indenture provides, among other
things, that the Company, the Subsidiary Guarantors and the Trustee may, with
the consent of the holders of at least a majority in principal amount of the
then outstanding Securities (or, in the case of certain amendments, the consent
of each Securityholder affected), amend the Indenture and the Securities in
certain respects;
WHEREAS, the Company, pursuant to the foregoing authority,
proposes in and by this Second Supplemental Indenture to amend the Indenture
and the Securities in certain respects; and
WHEREAS, all things necessary to make this Second Supplemental
Indenture a valid agreement of the Company, the Subsidiary Guarantors and the
Trustee and a valid amendment of and supplement to the Indenture and the
Securities have been done.
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, the Company, the
Subsidiary Guarantors and the Trustee agree as follows:
ARTICLE ONE
AMENDMENTS TO THE INDENTURE AND THE SECURITIES
SECTION 1.01. Amendment to Section 1.01--Consolidated EBITDA.
The definition of "Consolidated EBITDA" contained in Section 1.01 of the
Indenture is hereby amended by (a) adding the following new clauses (vii) and
(viii) after clause (vi) thereof:
", (vii) in the case of calculations pursuant to Sections 4.04
and 4.26 only, rental expense attributable to Operating Leases
resulting from Sale/leasebacks (other than Specified
Sale/leaseback Transactions) consummated on or after the
Supplemental Indenture Effective Date, and (viii) in the case
of calculations pursuant to Sections 4.04 and 4.26 only, to
the extent
<PAGE> 3
2
Consolidated Net Income has been reduced thereby, the amounts
described in clause (v) of the definition of Net Cash Proceeds"
and (b) adding the following clause (c) after clause (b) thereof:
"and (c) in the case of calculations pursuant to Sections 4.04
and 4.26 only, any portion of Consolidated EBITDA for such
period (determined without giving effect to this clause (c))
attributable to any operating unit, or any material portion of
the assets of an operating unit, of the Company and its
Subsidiaries as to which an EBITDA Adjustment Amount has been
established"
SECTION 1.02. Amendment to Section 1.01--Net Cash Proceeds.
The definition of "Net Cash Proceeds" contained in Section 1.01 of the
Indenture is hereby amended by adding the following new clause (v) to the end
thereof:
"and (v) in the case of the Required Black Angus
Sale/leaseback Transaction, (1) consent fees paid by the
Company in connection with the Second Supplemental Indenture
or in connection with the First Supplemental Indenture with
respect to the Indenture dated as of December 1, 1993
governing the Company's $50,000,000 Senior Secured Notes Due
September 15, 1998, (2) reasonable consent fees, if any, paid
to the Lenders in connection with modifications to the Credit
Agreement or to the holders of the Subordinated Notes in
connection with modifications to the Subordinated Loan
Agreement, in each case consummated substantially concurrently
with the Supplemental Indenture Effective Date, and (3)
without duplication of clause (i) above, the reasonable fees
and expenses of advisors and legal counsel to the Company, the
Trustee, the Holders, the Credit Agent, the Lenders or the
holders of the Subordinated Notes, in each case to the extent
reimbursed by the Company, in connection with the transactions
described in clauses (1) and (2) above, all as certified in
reasonable detail to the Trustee by the Chief Financial
Officer of the Company"
SECTION 1.03. Amendment to Section 1.01--Net Proceeds Offer
Trigger Date. The definition of "Net Proceeds Offer Trigger Date" contained in
Section 1.01 of the Indenture is hereby amended by (a) inserting the words "the
Reinvestment Net Cash Proceeds relating to" before the words "an Asset Sale"
contained in clause (b) thereof, (b) changing each reference to "Net Cash
Proceeds" or "gross proceeds" in clause (b) thereof to "Reinvestment Net Cash
Proceeds" and (c) adding a new clause (c) to the end thereof which shall read
in its entirety as follows:
"and (c) with respect to the Net Cash Proceeds (other than
Reinvestment Net Cash Proceeds) relating to an Asset Sale, the
date of receipt of such Net Cash Proceeds"
<PAGE> 4
3
SECTION 1.04. Amendment to Section 1.01--New Definitions.
Section 1.01 of the Indenture is hereby amended by adding the following
definitions in the appropriate alphabetical order:
"Aggregate EBITDA Adjustment Amount" means, at any date of
determination, the aggregate of all EBITDA Adjustment Amounts (if any)
determined with respect to Asset Sales consummated during the period
from the Supplemental Indenture Effective Date to and including such
date of determination.
"Consent Solicitation Statement" means the Consent
Solicitation Statement of the Company dated August 2, 1996 relating to
the Second Supplemental Indenture.
"EBITDA Adjustment Amount" means, with respect to any Asset
Sale (other than a Sale/leaseback) consummated on or after the
Supplemental Indenture Effective Date involving an operating unit, or
a material portion of the assets of an operating unit, of the Company
and its Subsidiaries, that portion of Consolidated EBITDA attributable
to such operating unit or material portion of the assets thereof for
the most recent period of four consecutive fiscal quarters ending
prior to the date of such Asset Sale for which the relevant financial
information is available, as certified in reasonable detail to the
Trustee by the Chief Financial Officer of the Company.
"Reinvestment Net Cash Proceeds" means, with respect to any
Asset Sale, the maximum portion of the Net Cash Proceeds thereof that
may be reinvested as provided in the first proviso contained in clause
(A) of Section 4.17 (it being understood that all Net Cash Proceeds of
a Specified Sale/leaseback Transaction shall constitute Reinvestment
Net Cash Proceeds).
"Required Black Angus Sale/leaseback Transaction" means the
Sale/leaseback described in Section 4.24 to the extent such
transaction generates the minimum gross cash proceeds and minimum Net
Cash Proceeds required thereby.
"Second Supplemental Indenture" means the Second Supplemental
Indenture, dated as of August 28, 1996, with respect to this
Indenture.
"Specified Reinvested Net Cash Proceeds" shall have the
meaning provided in Section 3.07.
"Specified Sale/leaseback Transaction" means any
Sale/leaseback with respect to all or any portion of the assets
comprising a restaurant first opened by the Company or any of its
Subsidiaries after the Supplemental Indenture Effective Date.
"Supplemental Indenture Effective Date" means the date on
which the Second Supplemental Indenture has become effective in
accordance with its terms.
<PAGE> 5
4
"13% Security" means any Security or portion thereof which
bears interest at a stated per annum rate equal to 13% (representing
the portion of the Securities (and any replacements therefor) as to
which consents have been obtained pursuant to the Consent Solicitation
Statement).
"12% Security" means any Security or portion thereof which
bears interest at a stated per annum rate equal to 12% (representing
the portion of the Securities (and any replacements therefor) as to
which consents have not been obtained pursuant to the Consent
Solicitation Statement).
SECTION 1.05. Amendment to Section 1.01--Deletion of Certain
Definitions. Section 1.01 of the Indenture is hereby amended by deleting in
their entirety the definitions "Accelerated Payment", "Accelerated Payment
Date", "Acceleration Date" and "Offer".
SECTION 1.06. Amendment to Section 3.07. Section 3.07 of the
Indenture is hereby amended by (a) inserting at the end of the second proviso
of paragraph (a) thereof the parenthetical "(so long as such Net Cash Proceeds
are applied to prepay Working Capital Loans, secure Letter of Credit
Obligations or reduce the outstanding amount of letters of credit under the
Credit Agreement)"; (b) changing the amount "$5,000,000" contained in the third
proviso of paragraph (a) thereof to the amount "$2,000,000"; (c) deleting the
last sentence of paragraph (a) thereof; (d) replacing the words "not more than
10 days after" contained in paragraph (b) thereof with the word "on"; (e)
inserting after the word "tendered" contained in clause (7) of paragraph (b)
thereof the parenthetical "(or, in the case of 13% Securities, deemed
tendered)"; and (f) replacing the last paragraph of paragraph (b) thereof with
the following paragraphs:
"Notwithstanding anything to the contrary in
this Section 3.07, with respect to each Net Proceeds Offer,
each Holder of 13% Securities shall, without any action on the
part of such Holder, (i) be deemed to have tendered on the
relevant Net Proceeds Offer Trigger Date the entire amount of
such Holder's 13% Securities in connection with such Net
Proceeds Offer and (ii) be entitled to redemption of a portion
of such Holder's 13% Securities on a pro rata basis determined
on the assumption that all Securities (including all 12%
Securities) have been tendered in connection with such Net
Proceeds Offer, with the Proceeds Purchase Date (a "13%
Securities Proceeds Purchase Date") associated with such
redemption being the Business Day immediately succeeding such
Net Proceeds Offer Trigger Date. Unless the Company defaults
in making payment therefor in accordance with the next
succeeding paragraph, the 13% Securities to be so redeemed
shall cease to accrue interest after the relevant 13%
Securities Proceeds Purchase Date.
On or before a Proceeds Purchase Date
(including, in the case of 13% Securities, the applicable 13%
Securities Proceeds Purchase Date), the Company shall (i)
accept for payment Securities or portions thereof tendered
(or, in the case of 13% Securities, deemed tendered) pursuant
to the
<PAGE> 6
5
Net Proceeds Offer (with the amount so accepted being
calculated (x) in the case of 13% Securities, in the manner
specified in the preceding paragraph and (y) in the case of
12% Securities, on a pro rata basis if required pursuant to
paragraph (7) above) and (ii) by 10:00 a.m., New York City
time, deposit with the Paying Agent U.S. Legal Tender or
Securities acquired in the manner described in clause (a) of
this Section 3.07 sufficient to pay the purchase price of all
Securities or portions thereof so accepted or to be credited
against the Net Proceeds Offer. Upon surrender of the
relevant Securities to the Paying Agent, the Paying Agent
shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to
such Holders new Securities equal in principal amount to any
unpurchased portion of the Securities surrendered. Any
Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. For purposes
of this Section 3.07, the Trustee shall act as the Paying
Agent.
In the event that any Net Cash Proceeds
subject to a Net Proceeds Offer shall remain ("Remaining Net
Cash Proceeds") after the Proceeds Purchase Date associated
with the redemption of 12% Securities in connection with such
Net Proceeds Offer, unless the Company shall have elected to
reinvest such Net Cash Proceeds ("Specified Reinvested Net
Cash Proceeds") in the manner described, and subject to the
limitations set forth, in Section 4.17(iii)(A), such Proceeds
Purchase Date shall be deemed to be a Net Proceeds Offer
Trigger Date with respect to such Remaining Net Cash Proceeds
and the Company shall make a Net Proceeds Offer (a "Subsequent
Net Proceeds Offer") with respect to such Remaining Net Cash
Proceeds. Any Remaining Net Cash Proceeds remaining after the
purchase of Securities in connection with a Subsequent Net
Proceeds Offer shall become general unrestricted funds of the
Company and its Subsidiaries, and may be applied without
regard to the restrictions contained in this Section 3.07,
Section 4.13(d)(vii) and Section 4.17."
SECTION 1.07. Amendment to Section 4.04. Section 4.04 of the
Indenture is hereby amended and restated in its entirety as follows:
"SECTION 4.04. Maintenance of Consolidated EBITDA.
(a) The Company shall not permit the sum of
(i) Consolidated EBITDA for any period of four consecutive
fiscal quarters ending on any date set forth below plus (ii)
the Aggregate EBITDA Adjustment Amount as of such date to be
less than the amount set forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ----------
<S> <C>
December 30, 1996 $33,000,000
March 31, 1997 34,000,000
</TABLE>
<PAGE> 7
6
<TABLE>
<S> <C>
June 30, 1997 35,000,000
September 29, 1997 35,500,000
December 29, 1997 36,000,000
March 30, 1998 36,500,000
June 29, 1998 37,000,000
</TABLE>
(b) The Company shall not permit the sum of
(i) Consolidated EBITDA for the period of two consecutive
fiscal quarters ending September 23, 1996 plus (ii) 50% of the
Aggregate EBITDA Adjustment Amount as of the last day of such
period to be less than $14,000,000.
(c) The Company shall not permit the sum of
(i) Consolidated EBITDA for any period of two consecutive
fiscal quarters ending after September 23, 1996 plus (ii) 50%
of the Aggregate EBITDA Adjustment Amount as of the last day
of such period to be less than $13,000,000."
SECTION 1.08. Amendment to Section 4.08. Section 4.08 of the
Indenture is hereby amended by (a) changing the number "120" contained in the
first sentence of paragraph (a) thereof to the number "90"; (b) inserting the
words "and within 45 days after the end of the Company's first, second and
third fiscal quarters of each fiscal year" after the words "the Company's
fiscal year" contained in the first sentence of paragraph (a) thereof; (c)
inserting the words "(or portion of the fiscal year ending with the fiscal
quarter covered by such Officers' Certificate, in the case of quarterly
certificates)" after each occurrence of the word "year" (other than the first
such occurrence) contained in the first sentence of paragraph (a) thereof; and
(d) deleting clause (iii) of paragraph (c) thereof (which clause (iii) ends
immediately before the words ", an Officers' Certificate") in its entirety.
SECTION 1.09. Amendment to Section 4.13. Clause (vi) of
paragraph (d) of Section 4.13 of the Indenture is hereby amended by (a) adding
a subclause reference "(1)" to the beginning thereof, (b) changing each
reference to "clause (vi)" contained in such newly designated subclause (1) to
the reference "subclause (1)" and (c) adding a new subclause (2) after the
amount "$15,000,000" contained therein which shall read in its entirety as
follows:
"and (2) Indebtedness consisting of Capital Lease Obligations
incurred in connection with any Sale/leaseback consummated in
order to comply with the requirements of Section 4.24 or 4.25
and any renewals, extensions, refinancings or replacements
thereof"
SECTION 1.10. Amendment to Section 4.17. Section 4.17 of the
Indenture is hereby amended by:
(a) amending and restating in its entirety the first proviso
contained in clause (A) thereof as follows:
<PAGE> 8
7
"provided, however, that (x) the Net Cash Proceeds which may
be so reinvested pursuant to any Asset Sale (other than a
Specified Sale-leaseback Transaction) shall not exceed the sum
of (I) 5% of such Net Cash Proceeds (or, in the case of the
Required Black Angus Sale/leaseback Transaction, 10% of such
Net Cash Proceeds) and (II) any Specified Reinvested Net Cash
Proceeds associated with such Asset Sale, and (y) the total
Net Cash Proceeds (including Specified Reinvested Net Cash
Proceeds) which may be so reinvested pursuant to all Asset
Sales (other than Specified Sale/leaseback Transactions)
consummated after the Supplemental Indenture Effective Date
shall not exceed $8,000,000"; and
(b) amending and restating in its entirety the penultimate
proviso thereof as follows:
"; provided, further, that the Company may exclude from the
provisions of this Section 4.17, to the extent applicable, up
to $2,000,000 of Net Cash Proceeds which the Company has
elected to exclude from the obligation to make a Net Proceeds
Offer pursuant to and in accordance with Section 3.07(a) so
long as such Net Cash Proceeds are applied to prepay Working
Capital Loans, secure Letter of Credit Obligations or reduce
the outstanding amount of letters of credit under the Credit
Agreement".
SECTION 1.11. New Covenants. The Indenture is hereby amended
by adding the following Sections to the end of Article Four thereof:
"SECTION 4.24. Black Angus Sale/leaseback Transaction.
After July 15, 1996 and on or before
September 15, 1996, the Company and the relevant Subsidiaries
shall consummate a Sale/leaseback transaction with respect to
Black Angus restaurants generating gross cash proceeds equal
to at least $48,000,000 and Net Cash Proceeds equal to at
least $43,500,000, provided, that no more than 24 such
restaurants may be the subject of such Sale/leaseback
transaction for the purpose of complying with this Section
4.24.
SECTION 4.25. Additional Asset Sales.
After July 15, 1996 and on or before December
31, 1996, the Company and its Subsidiaries shall consummate
one or more Asset Sales (including Sale/leasebacks but
excluding the Required Black Angus Sale/leaseback Transaction)
generating Net Cash Proceeds equal to at least $25,000,000.
<PAGE> 9
8
SECTION 4.26. Senior Executive Compensation.
The Company shall not permit the aggregate
base salaries of Anwar Soliman and Ralph Roberts (the "Senior
Executives") to exceed $1,938,575. Commencing on the
Supplemental Indenture Effective Date, the rate at which the
salaries of the Senior Executives are earned shall be reduced
by an aggregate amount equal to 20% of the aggregate base
salaries of the Senior Executives then in effect (the
aggregate amount of any such reduction for any fiscal year or,
in the case of the 1996 fiscal year, the portion thereof since
the Supplemental Indenture Effective Date, being referred to
as the "Holdback Amount"). The Company shall not permit any
portion of the Holdback Amount or any bonuses or other form of
compensation (other than (a) the reduced base salaries and (b)
benefits of the type historically provided by the Company to
the Senior Executives (including life insurance, medical,
disability and automobile benefits)) to be paid to the Senior
Executives with respect to any fiscal year of the Company
until the audited financial statements of the Company for such
fiscal year have been delivered to the Trustee. After such
audited financial statements have been so delivered, the
ability of the Company to pay such Holdback Amount and bonuses
to the Senior Executives shall be determined on the basis of
the sum of Consolidated EBITDA for the relevant fiscal year
plus the Aggregate EBITDA Adjustment Amount as of the last day
of such fiscal year, as set forth below:
<TABLE>
<CAPTION>
Consolidated EBITDA plus Holdback Amount Payment/
Aggregate EBITDA Adjustment Amount Bonus Payment
---------------------------------- ------------------------
<S> <C>
Less than $28,000,000 The Company shall defer payment
of the entire Holdback Amount.
The Company shall pay no
bonuses to the Senior Executives.
$28,000,000-$32,999,999 The Company may pay one-half of
the Holdback Amount. The
Company shall defer payment of
the remaining one-half of the
Holdback Amount. The Company
shall pay no bonuses to the Senior
Executives.
$33,000,000-$39,999,999 The Company may pay the entire
Holdback Amount. The Company
shall pay no bonuses to the Senior
Executives.
</TABLE>
<PAGE> 10
9
<TABLE>
<S> <C>
$40,000,000-$44,999,999 The Company may pay the entire
Holdback Amount. In addition,
the Company may pay bonuses to
the Senior Executives in an
aggregate amount not to exceed
10% of the aggregate base salaries
of the Senior Executives for the
preceding fiscal year.
$45,000,000-$49,999,999 The Company may pay the entire
Holdback Amount. In addition,
the Company may pay bonuses to
the Senior Executives in an
aggregate amount not to exceed
20% of the aggregate base salaries
of the Senior Executives for the
preceding fiscal year.
$50,000,000 or above The Company may pay the entire
Holdback Amount. In addition,
the Company may pay bonuses to
the Senior Executives in an amount
determined by the Board of
Directors of the Company.
</TABLE>
Any Holdback Amount that is deferred as provided above may be
paid by the Company upon delivery to the Trustee of audited
financial statements of the Company in any subsequent year if
the sum of Consolidated EBITDA for the fiscal year covered by
such financial statements plus the Aggregate EBITDA Adjustment
Amount as of the last day of such fiscal year is at least
$36,500,000. The Company shall not pay any Holdback Amount or
bonuses to the Senior Executives at any time when a Default or
Event of Default (other than solely pursuant to Section 4.04)
shall have occurred and be continuing."
SECTION 1.12. Amendment to Section 6.01. Section 6.01 of the
Indenture is hereby amended by adding the following words to the end of the
parenthetical contained in the last paragraph thereof:
"and other than in the case of any Default under Section 4.04,
4.24 or 4.25, which Defaults shall be Events of Default
without any requirement for the giving of notice and without
the passage of time specified in this paragraph"
SECTION 1.13. Deletion of Certain References to Section 4.04.
The Indenture is hereby amended by deleting each reference to Section 4.04 from
(a) the definition of "Paying Agent" contained in Section 1.01 thereof, (b)
Section 2.03 thereof, (c)
<PAGE> 11
10
Section 2.06 thereof and (d) the form of Option of Holder to Elect Purchase.
In addition, Section 6.01 of the Indenture is hereby amended by deleting the
words "4.04 or" appearing before the reference to Section 4.17 contained in the
last paragraph thereof.
SECTION 1.14. Deletion of References to Accelerated Payments.
The Indenture is hereby amended by (a) deleting the words "an Accelerated
Payment or" from paragraph (2) of Section 6.01 thereof and (b) deleting the
words "an Accelerated Payment and" from Section 7.05 thereof. In addition,
each Security and Exhibit A to the Indenture are hereby amended by deleting the
words ", including an Accelerated Payment" from paragraph 18 thereof.
SECTION 1.15. Amendment to Paragraph 6 of the Securities and
the Form of Note. Paragraph 6 of each Security and Exhibit A to the Indenture
is hereby amended by adding the following sentence after the second sentence
thereof:
"In addition, the Company may credit against such sinking fund
payment (other than the portion thereof allocable to 12%
Securities) 100% of the principal amount of any Securities
previously purchased by the Company pursuant to a Net Proceeds
Offer."
<PAGE> 12
11
SECTION 1.16. Amendment to Paragraph 8 of the Securities and
the Form of Note. Paragraph 8 of each Security and Exhibit A to the Indenture
is hereby amended and restated in its entirety as follows:
"8. Maintenance of Consolidated EBITDA.
The Indenture requires the Company to
maintain Consolidated EBITDA (subject to certain adjustments)
for certain periods specified therein at the levels specified
therein."
SECTION 1.17. Amendment to Timing of Interest Payments and
Record Dates. Each Security and Exhibit A to the Indenture are hereby amended
by (a) deleting the dates listed after the caption "Interest Payment Dates" and
inserting, in lieu thereof, the dates "March 15, June 15, September 15 and
December 15", (b) deleting the dates listed after the caption "Record Dates"
and inserting, in lieu thereof, the dates "March 1, June 1, September 1 and
December 1" and (c) deleting the words "semi-annually on March 15 and September
15 of each year" contained in paragraph 1 thereof and inserting, in lieu
thereof, the words "quarterly on March 15, June 15, September 15 and December
15 of each year". The amendments described in this Section 1.17 shall not be
applicable to any 12% Security.
SECTION 1.18. Amendment to Interest Rate. Each Security and
Exhibit A to the Indenture are hereby amended by changing each reference to the
percentage "12%" to the percentage "13%". In addition, each Security and
Exhibit A to the Indenture are hereby amended by changing the percentage "14%"
contained in paragraph 1 thereof to the percentage "15%". The amendments
described in this Section 1.18 shall not be applicable to any 12% Security.
ARTICLE TWO
MISCELLANEOUS
SECTION 2.01. Conditions Precedent; Reaffirmation of
Subsidiary Guarantee. The effectiveness of this Second Supplemental Indenture
is conditioned upon the receipt by the Trustee of (a) counterparts hereof
executed and delivered by the Company and each Subsidiary Guarantor and (b) a
satisfactory opinion of counsel stating that this Second Supplemental Indenture
complies with the provisions of Section 9.02 of the Indenture and covering
other customary corporate matters, which opinion may be relied upon by each
person that is a Securityholder on the Supplemental Indenture Effective Date.
By its execution and delivery of this Second Supplemental Indenture, each
Subsidiary Guarantor reaffirms and restates its obligation set forth in Article
11 of the Indenture.
SECTION 2.02. Incorporation of Indenture. All the provisions
of this Second Supplemental Indenture shall be deemed to be incorporated in,
and made a part of, the Indenture; and the Indenture, as supplemented and
amended by this Second Supplemental Indenture, shall be read, taken and
construed as one and the same instrument.
<PAGE> 13
12
SECTION 2.03. Headings. The headings of the Articles and
Sections of this Second Supplemental Indenture are inserted for convenience of
reference and shall not be deemed to be a part thereof.
SECTION 2.04. Counterparts. This Second Supplemental
Indenture may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 2.05. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
which is required to be included in this Second Supplemental Indenture by any
of the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 2.06. Successors. All covenants and agreements in
this Second Supplemental Indenture by the Company and each Subsidiary Guarantor
shall bind their respective successors. All covenants and agreements of the
Trustee in this Second Supplemental Indenture shall bind its successor.
SECTION 2.07. Separability Clause. In case any provision in
this Second Supplemental Indenture shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 2.08. Benefits of Second Supplemental Indenture.
Nothing in this Second Supplemental Indenture, express or implied, shall give
to any person, other than the
<PAGE> 14
13
parties hereto and their successors hereunder and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Second Supplemental
Indenture.
SECTION 2.09. Terms Defined. All terms defined elsewhere in
the Indenture have the same meanings herein.
SECTION 2.10. Expenses. The Company agrees to pay the
reasonable costs and expenses of the Trustee and the Holders, including the
reasonable expenses of one firm of counsel to certain of the Holders, in
connection with the negotiation and execution of this Second Supplemental
Indenture.
SECTION 2.11. Acknowledgement of Waiver, etc. The Company
and the Trustee hereby acknowledge that, in connection with the Consent
Solicitation Statement, the holders of a majority in principal amount of
outstanding Securities have waived compliance with (a) the requirements of
Sections 4.04 and 4.08 of the Indenture (as in effect prior to giving effect to
this Second Supplemental Indenture), (b) the Consent Period requirement of
Section 9.02 of the Indenture and (c) any restrictions contained in the
Indenture on dividing the existing Global Security into two separate Global
Securities, with one such Global Security evidencing the 13% Securities (i.e.,
the portion of the Securities as to which consents have been obtained pursuant
to the Consent Solicitation Statement) and the other such Global Security
evidencing the 12% Securities (i.e., the portion of the Securities as to which
consents have not been obtained pursuant to the Consent Solicitation
Statement). The Company also hereby instructs the Trustee to distribute to the
Consenting Holders the Consent Payments (as each such term is defined in the
Consent Solicitation Statement) in the amounts, and at the times, specified in
the Consent Solicitation Statement.
<PAGE> 15
14
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed and attested, all as of the day and
year first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By: /s/ SANDRA H. LEESS
----------------------------------
Name: Sandra H. Leess
Title: Senior Vice President
SUBSIDIARY GUARANTORS:
ARG ENTERPRISES, INC.
SPECTRUM FOODS, INC.
SPOONS RESTAURANTS, INC.
ARG PROPERTY MANAGEMENT CORPORATION
GRANDY'S, INC.
LOCAL FAVORITE, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
(for each of the above-listed
Subsidiary Guarantors)
<PAGE> 1
EXHIBIT 4.17
EXECUTION COPY
=================================================================
AMERICAN RESTAURANT GROUP, INC.
AND
SUBSIDIARY GUARANTORS
AND
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
_________________________
THIRD SUPPLEMENTAL
INDENTURE
Dated as of January 15, 1997
=================================================================
<PAGE> 2
THIRD SUPPLEMENTAL INDENTURE dated as of January 15, 1997 among
American Restaurant Group, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors and U.S. Trust Company of California, N.A., a national
banking association, as trustee (the "Trustee") under the Indenture dated as of
September 15, 1992, as amended by a First Supplemental Indenture dated as of
December 9, 1993 and a Second Supplemental Indenture dated as of August 28,
1996 (the "Indenture").
RECITALS
WHEREAS, pursuant to the Indenture, the Company issued
$120,000,000 aggregate principal amount of its 12% Senior Secured Notes due
September 15, 1998 (the "Securities");
WHEREAS, Section 9.01 of the Indenture provides, among other
things, that the Company and the Subsidiary Guarantors, when authorized by a
Board Resolution, and the Trustee, together, may amend or supplement the
Indenture or the Securities without notice to or consent of any Securityholder
to make any change that does not materially adversely affect the rights of any
Securityholders under the Indenture or under the Collateral Documents;
WHEREAS, the Company, pursuant to the foregoing authority,
proposes in and by this Third Supplemental Indenture to amend the Indenture and
the Securities in certain respects; and
WHEREAS, all things necessary to make this Third Supplemental
Indenture a valid agreement of the Company, the Subsidiary Guarantors and the
Trustee and a valid amendment of and supplement to the Indenture and the
Securities have been done.
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, the Company, the
Subsidiary Guarantors and the Trustee agree as follows:
ARTICLE ONE
AMENDMENTS TO THE INDENTURE AND THE SECURITIES
SECTION 1.01. Amendment to Section 1.01--New Definitions.
Section 1.01 of the Indenture is hereby amended by adding the following
definitions in the appropriate alphabetical order:
"Third Supplemental Indenture" means the Third Supplemental
Indenture, dated as of January 15, 1997, with respect to this
Indenture.
<PAGE> 3
2
"Third Supplemental Indenture Effective Date" means the date
on which the Third Supplemental Indenture has become effective in
accordance with its terms.
SECTION 1.02. Amendment to Section 1.01--Amended and Restated
Definitions. The following definitions contained in Section 1.01 of the
Indenture are hereby amended and restated in their entirety as follows:
"13% Security" means any Security or portion thereof which
bears interest at a stated per annum rate equal to 13%.
"12% Security" means any Security or portion thereof which
bears interest at a stated per annum rate equal to 12%. It is
understood that, effective on the Third Supplemental Indenture
Effective Date, no 12% Securities shall be outstanding.
SECTION 1.03. Amendment to Timing of Interest Payments and
Record Dates. Each Security that, immediately prior to the Third Supplemental
Indenture Effective Date, constituted a 12% Security is hereby amended,
effective on the Third Supplemental Indenture Effective Date, by (a) deleting
the dates listed after the caption "Interest Payment Dates" and inserting, in
lieu thereof, the dates "March 15, June 15, September 15 and December 15", (b)
deleting the dates listed after the caption "Record Dates" and inserting, in
lieu thereof, the dates "March 1, June 1, September 1 and December 1" and (c)
deleting the words "semi-annually on March 15 and September 15 of each year"
contained in paragraph 1 thereof and inserting, in lieu thereof, the words
"quarterly on March 15, June 15, September 15 and December 15 of each year".
SECTION 1.04. Amendment to Interest Rate. Each Security
that, immediately prior to the Third Supplemental Indenture Effective Date,
constituted a 12% Security is hereby amended, effective on the Third
Supplemental Indenture Effective Date, by changing each reference to the
percentage "12%" to the percentage "13%". In addition, each such Security is
hereby amended, effective on the Third Supplemental Indenture Effective Date,
by changing the percentage "14%" contained in paragraph 1 thereof to the
percentage "15%"
ARTICLE TWO
MISCELLANEOUS
SECTION 2.01. Conditions Precedent; Reaffirmation of
Subsidiary Guarantee. The effectiveness of this Third Supplemental Indenture
is conditioned upon the receipt by the Trustee of (a) counterparts hereof
executed and delivered by the Company and each Subsidiary Guarantor and (b) a
satisfactory Officers' Certificate and opinion of counsel each stating that
this Third Supplemental Indenture complies with the provisions of Section 9.01
of the Indenture and covering other customary corporate matters. By its
execution and delivery of this Third Supplemental Indenture, each Subsidiary
Guarantor reaffirms and restates its obligation set forth in Article 11 of the
Indenture.
<PAGE> 4
3
SECTION 2.02. Incorporation of Indenture. All the provisions
of this Third Supplemental Indenture shall be deemed to be incorporated in, and
made a part of, the Indenture; and the Indenture, as supplemented and amended
by this Third Supplemental Indenture, shall be read, taken and construed as one
and the same instrument.
SECTION 2.03. Headings. The headings of the Articles and
Sections of this Third Supplemental Indenture are inserted for convenience of
reference and shall not be deemed to be a part thereof.
SECTION 2.04. Counterparts. This Third Supplemental
Indenture may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 2.05. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
which is required to be included in this Third Supplemental Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 2.06. Successors. All covenants and agreements in
this Third Supplemental Indenture by the Company and each Subsidiary Guarantor
shall bind their respective successors. All covenants and agreements of the
Trustee in this Third Supplemental Indenture shall bind its successor.
SECTION 2.07. Separability Clause. In case any provision in
this Third Supplemental Indenture shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 2.08. Benefits of Third Supplemental Indenture.
Nothing in this Third Supplemental Indenture, express or implied, shall give to
any person, other than the parties hereto and their successors hereunder and
the Holders, any benefit or any legal or equitable right, remedy or claim under
this Third Supplemental Indenture.
SECTION 2.09. Terms Defined. All terms defined elsewhere in
the Indenture have the same meanings herein.
<PAGE> 5
4
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed and attested, all as of the day and
year first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By: /s/ SANDEE PARKS
----------------------------------
Name: Sandee Parks
Title: Vice President
SUBSIDIARY GUARANTORS:
ARG ENTERPRISES, INC.
SPECTRUM FOODS, INC.
SPOONS RESTAURANTS, INC.
ARG PROPERTY MANAGEMENT CORPORATION
GRANDY'S, INC.
LOCAL FAVORITE, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
(for each of the above-listed
Subsidiary Guarantors)
<PAGE> 1
EXHIBIT 4.18
EXECUTION COPY
=================================================================
AMERICAN RESTAURANT GROUP, INC.
AND
SUBSIDIARY GUARANTORS
AND
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
_________________________
FOURTH SUPPLEMENTAL
INDENTURE
Dated as of March 13, 1997
=================================================================
<PAGE> 2
FOURTH SUPPLEMENTAL INDENTURE dated as of March 13, 1997 among
American Restaurant Group, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors and U.S. Trust Company of California, N.A., a national
banking association, as trustee (the "Trustee") under the Indenture dated as of
September 15, 1992, as amended by a First Supplemental Indenture dated as of
December 9, 1993, a Second Supplemental Indenture dated as of August 28, 1996
and a Third Supplemental Indenture dated as of January 15, 1997 (the
"Indenture").
RECITALS
WHEREAS, pursuant to the Indenture, the Company issued
$120,000,000 original aggregate principal amount of its Senior Secured Notes
due September 15, 1998 (the "Securities");
WHEREAS, Section 9.02 of the Indenture provides, among other
things, that the Company, the Subsidiary Guarantors and the Trustee may, with
the consent of the holders of at least a majority in principal amount of the
then outstanding Securities, amend the Indenture and the Securities in certain
respects;
WHEREAS, the Company, pursuant to the foregoing authority,
proposes in and by this Fourth Supplemental Indenture to amend the Indenture
and the Securities in certain respects; and
WHEREAS, all things necessary to make this Fourth Supplemental
Indenture a valid agreement of the Company, the Subsidiary Guarantors and the
Trustee and a valid amendment of and supplement to the Indenture and the
Securities have been done.
NOW, THEREFORE, THIS FOURTH SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, the Company, the
Subsidiary Guarantors and the Trustee agree as follows:
ARTICLE ONE
AMENDMENTS TO THE INDENTURE AND THE SECURITIES
SECTION 1.01. Amendment and Restatement of Section 4.04.
Section 4.04 of the Indenture is hereby amended and restated in its entirety as
follows:
"SECTION 4.04. Maintenance of Consolidated EBITDA.
(a) The Company shall not permit the sum of
(i) Consolidated EBITDA for any period of four consecutive
fiscal quarters ending on any
<PAGE> 3
2
date set forth below plus (ii) the Aggregate EBITDA Adjustment
Amount as of such date to be less than the amount set forth
opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- -----------
<S> <C>
June 30, 1997 $35,000,000
September 29, 1997 35,500,000
December 29, 1997 36,000,000
March 30, 1998 36,500,000
June 29, 1998 37,000,000
</TABLE>
(b) The Company shall not permit the sum of
(i) Consolidated EBITDA for the period of twelve consecutive
calendar months ending May 31, 1997 plus (ii) the Aggregate
EBITDA Adjustment Amount as of such date to be less than
$34,000,000.
(c) The Company shall not permit the sum of
(i) Consolidated EBITDA for the period of two consecutive
fiscal quarters ending September 23, 1996 plus (ii) 50% of the
Aggregate EBITDA Adjustment Amount as of the last day of such
period to be less than $14,000,000.
(d) The Company shall not permit the sum of
(i) Consolidated EBITDA for any period of two consecutive
fiscal quarters ending on or after June 30, 1997 plus (ii) 50%
of the Aggregate EBITDA Adjustment Amount as of the last day
of such period to be less than $13,000,000."
SECTION 1.02. Amendment to Section 4.08. Section 4.08 of the
Indenture is hereby amended by (a) adding the following sentence to the end of
paragraph (a) thereof:
"In addition, no later than June 30, 1997, the Company shall
deliver to the Trustee an Officers' Certificate setting forth
in reasonable detail a calculation of the sum of (i)
Consolidated EBITDA for the period of twelve consecutive
calendar months ending on May 31, 1997 plus (ii) the Aggregate
EBITDA Adjustment Amount as of such date."
and (b) adding a new paragraph (d) to the end thereof which shall read in its
entirety as follows:
(d) The Company, upon request of any Holder, shall report in
reasonable detail regarding the status of the Company's
efforts to sell (the "Black Angus Transaction") all or
substantially all of the assets constituting its Black Angus
division (or the Capital Stock of Subsidiaries holding such
assets), provided that the Company will not, pursuant to such
reports, be required to provide non-public information with
respect to the Black Angus Transaction except in the case of
any such reports requested on or after July 1, 1997.
<PAGE> 4
3
SECTION 1.03. Amendment to Section 4.25. Section 4.25 of the
Indenture is hereby amended by changing the amount "$25,000,000" contained
therein to the amount "$15,000,000".
ARTICLE TWO
MISCELLANEOUS
SECTION 2.01. Conditions Precedent; Reaffirmation of
Subsidiary Guarantee. The effectiveness of this Fourth Supplemental Indenture
is conditioned upon (a) the receipt by the Trustee of (i) counterparts hereof
executed and delivered by the Company and each Subsidiary Guarantor and (ii) a
satisfactory opinion of counsel stating that this Fourth Supplemental Indenture
complies with the provisions of Section 9.02 of the Indenture and covering
other customary corporate matters and (b) the payment by the Company of any
invoiced amounts referred to in Section 2.10. By its execution and delivery of
this Fourth Supplemental Indenture, each Subsidiary Guarantor reaffirms and
restates its obligation set forth in Article 11 of the Indenture.
SECTION 2.02. Incorporation of Indenture. All the provisions
of this Fourth Supplemental Indenture shall be deemed to be incorporated in,
and made a part of, the Indenture; and the Indenture, as supplemented and
amended by this Fourth Supplemental Indenture, shall be read, taken and
construed as one and the same instrument.
SECTION 2.03. Headings. The headings of the Articles and
Sections of this Fourth Supplemental Indenture are inserted for convenience of
reference and shall not be deemed to be a part thereof.
SECTION 2.04. Counterparts. This Fourth Supplemental
Indenture may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 2.05. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
which is required to be included in this Fourth Supplemental Indenture by any
of the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 2.06. Successors. All covenants and agreements in
this Fourth Supplemental Indenture by the Company and each Subsidiary Guarantor
shall bind their respective successors. All covenants and agreements of the
Trustee in this Fourth Supplemental Indenture shall bind its successor.
SECTION 2.07. Separability Clause. In case any provision in
this Fourth Supplemental Indenture shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
<PAGE> 5
4
SECTION 2.08. Benefits of Fourth Supplemental Indenture.
Nothing in this Fourth Supplemental Indenture, express or implied, shall give
to any person, other than the parties hereto and their successors hereunder and
the Holders, any benefit or any legal or equitable right, remedy or claim under
this Fourth Supplemental Indenture.
SECTION 2.09. Terms Defined. All terms defined elsewhere in
the Indenture have the same meanings herein.
SECTION 2.10. Expenses. The Company agrees to pay the
reasonable costs and expenses of the Trustee and the Holders, including the
reasonable fees and disbursements (not to exceed $25,000) of one firm of
counsel to certain of the Holders, in connection with the negotiation and
execution of this Fourth Supplemental Indenture.
SECTION 2.11. Acknowledgement of Waiver, etc. The Company
and the Trustee hereby acknowledge that, in connection with the Consent
Solicitation Statement of the Company dated February 14, 1997, as supplemented
by a letter from the Company dated February 25, 1997, relating to this Fourth
Supplemental Indenture (the "February 1997 Consent Solicitation Statement"),
the holders of a majority in principal amount of outstanding Securities have
waived compliance with (a) any Default or Event of Default under Section 4.04
or 4.25 of the Indenture (as in effect prior to giving effect to this Fourth
Supplemental Indenture), (b) the Consent Period requirement of Section 9.02 of
the Indenture and (c) any restrictions contained in the Indenture on exchanging
the existing global Securities for new global Securities reflecting the
Proposed Modifications (including, to the extent applicable, the Principal
Increase) (as each such term is defined in the February 1997 Consent
Solicitation Statement). The Company hereby advises the Trustee that the
aggregate stated face amount of Consenting Notes (as defined in the February
1997 Consent Solicitation Statement) is equal to $116,245,407. Accordingly, as
provided in the February 1997 Consent Solicitation Statement, as of the date
hereof, (i) the aggregate stated face amount of the Principal Increase shall
equal $1,162,454 and (ii) after giving effect to the Principal Increase, (A)
the aggregate stated face amount of the Securities shall equal $121,152,454 and
(B) the aggregate outstanding amount of the Securities shall equal $85,091,426.
The Company hereby instructs the Trustee to take such actions as may be
necessary to effectuate the transactions described in clause (c) of the first
sentence of this Section 2.11.
<PAGE> 6
5
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Supplemental Indenture to be duly executed, all as of the day and year first
above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By: /s/ SANDEE PARKS
----------------------------------
Name: Sandee Parks
Title: Vice President
SUBSIDIARY GUARANTORS:
ARG ENTERPRISES, INC.
SPECTRUM FOODS, INC.
SPOONS RESTAURANTS, INC.
ARG PROPERTY MANAGEMENT CORPORATION
GRANDY'S, INC.
LOCAL FAVORITE, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
(for each of the above-listed
Subsidiary Guarantors)
<PAGE> 1
EXHIBIT 4.19
EXECUTION COPY
=================================================================
AMERICAN RESTAURANT GROUP, INC.
AND
SUBSIDIARY GUARANTORS
AND
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
_________________________
FIRST SUPPLEMENTAL
INDENTURE
Dated as of August 28, 1996
=================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE dated as of August 28, 1996 among
American Restaurant Group, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors and U.S. Trust Company of California, N.A., a national
banking association, as trustee (the "Trustee") under the Indenture dated as of
December 1, 1993 (the "Indenture").
RECITALS
WHEREAS, pursuant to the Indenture, the Company issued
$50,000,000 aggregate principal amount of its 12% Senior Secured Notes due
September 15, 1998 (the "Securities");
WHEREAS, Section 9.02 of the Indenture provides, among other
things, that the Company, the Subsidiary Guarantors and the Trustee may, with
the consent of the holders of at least a majority in principal amount of the
then outstanding Securities (or, in the case of certain amendments, the consent
of each Securityholder affected), amend the Indenture and the Securities in
certain respects;
WHEREAS, the Company, pursuant to the foregoing authority,
proposes in and by this First Supplemental Indenture to amend the Indenture and
the Securities in certain respects; and
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of the Company, the Subsidiary Guarantors and the
Trustee and a valid amendment of and supplement to the Indenture and the
Securities have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, the Company, the
Subsidiary Guarantors and the Trustee agree as follows:
ARTICLE ONE
AMENDMENTS TO THE INDENTURE AND THE SECURITIES
SECTION 1.01. Amendment to Section 1.01--Consolidated EBITDA.
The definition of "Consolidated EBITDA" contained in Section 1.01 of the
Indenture is hereby amended by (a) adding the following new clauses (vii) and
(viii) after clause (vi) thereof:
", (vii) in the case of calculations pursuant to Sections 4.04
and 4.26 only, rental expense attributable to Operating Leases
resulting from Sale/leasebacks (other than Specified
Sale/leaseback Transactions) consummated on or after the
Supplemental Indenture Effective Date, and (viii) in the case
of calculations pursuant to Sections 4.04 and 4.26 only, to
the extent Consolidated Net Income has been reduced thereby,
the amounts described in clause (v) of the definition of Net
Cash Proceeds"
<PAGE> 3
2
and (b) adding the following clause (c) after clause (b) thereof:
"and (c) in the case of calculations pursuant to Sections 4.04
and 4.26 only, any portion of Consolidated EBITDA for such
period (determined without giving effect to this clause (c))
attributable to any operating unit, or any material portion of
the assets of an operating unit, of the Company and its
Subsidiaries as to which an EBITDA Adjustment Amount has been
established"
SECTION 1.02. Amendment to Section 1.01--Net Cash Proceeds.
The definition of "Net Cash Proceeds" contained in Section 1.01 of the
Indenture is hereby amended by adding the following new clause (v) to the end
thereof:
"and (v) in the case of the Required Black Angus
Sale/leaseback Transaction, (1) consent fees paid by the
Company in connection with the First Supplemental Indenture or
in connection with the Second Supplemental Indenture with
respect to the Existing Note Indenture, (2) reasonable consent
fees, if any, paid to the Lenders in connection with
modifications to the Credit Agreement or to the holders of the
Subordinated Notes in connection with modifications to the
Subordinated Loan Agreement, in each case consummated
substantially concurrently with the Supplemental Indenture
Effective Date, and (3) without duplication of clause (i)
above, the reasonable fees and expenses of advisors and legal
counsel to the Company, the Trustee, the Holders, the Credit
Agent, the Lenders or the holders of the Subordinated Notes,
in each case to the extent reimbursed by the Company, in
connection with the transactions described in clauses (1) and
(2) above, all as certified in reasonable detail to the
Trustee by the Chief Financial Officer of the Company"
SECTION 1.03. Amendment to Section 1.01--Net Proceeds Offer
Trigger Date. The definition of "Net Proceeds Offer Trigger Date" contained in
Section 1.01 of the Indenture is hereby amended by (a) inserting the words "the
Reinvestment Net Cash Proceeds relating to" before the words "an Asset Sale"
contained in clause (b) thereof, (b) changing each reference to "Net Cash
Proceeds" or "gross proceeds" in clause (b) thereof to "Reinvestment Net Cash
Proceeds" and (c) adding a new clause (c) to the end thereof which shall read
in its entirety as follows:
"and (c) with respect to the Net Cash Proceeds (other than
Reinvestment Net Cash Proceeds) relating to an Asset Sale, the
date of receipt of such Net Cash Proceeds"
SECTION 1.04. Amendment to Section 1.01--New Definitions.
Section 1.01 of the Indenture is hereby amended by adding the following
definitions in the appropriate alphabetical order:
<PAGE> 4
3
"Aggregate EBITDA Adjustment Amount" means, at any date of
determination, the aggregate of all EBITDA Adjustment Amounts (if any)
determined with respect to Asset Sales consummated during the period
from the Supplemental Indenture Effective Date to and including such
date of determination.
"Consent Solicitation Statement" means the Consent
Solicitation Statement of the Company dated August 2, 1996 relating to
the First Supplemental Indenture.
"EBITDA Adjustment Amount" means, with respect to any Asset
Sale (other than a Sale/leaseback) consummated on or after the
Supplemental Indenture Effective Date involving an operating unit, or
a material portion of the assets of an operating unit, of the Company
and its Subsidiaries, that portion of Consolidated EBITDA attributable
to such operating unit or material portion of the assets thereof for
the most recent period of four consecutive fiscal quarters ending
prior to the date of such Asset Sale for which the relevant financial
information is available, as certified in reasonable detail to the
Trustee by the Chief Financial Officer of the Company.
"First Supplemental Indenture" means the First Supplemental
Indenture, dated as of August 28, 1996, with respect to this
Indenture.
"Reinvestment Net Cash Proceeds" means, with respect to any
Asset Sale, the maximum portion of the Net Cash Proceeds thereof that
may be reinvested as provided in the first proviso contained in clause
(A) of Section 4.17 (it being understood that all Net Cash Proceeds of
a Specified Sale/leaseback Transaction shall constitute Reinvestment
Net Cash Proceeds).
"Required Black Angus Sale/leaseback Transaction" means the
Sale/leaseback described in Section 4.24 to the extent such
transaction generates the minimum gross cash proceeds and minimum Net
Cash Proceeds required thereby.
"Specified Sale/leaseback Transaction" means any
Sale/leaseback with respect to all or any portion of the assets
comprising a restaurant first opened by the Company or any of its
Subsidiaries after the Supplemental Indenture Effective Date.
"Supplemental Indenture Effective Date" means the date on
which the First Supplemental Indenture has become effective in
accordance with its terms.
"13% Security" means any Security or portion thereof which
bears interest at a stated per annum rate equal to 13% (representing
the portion of the Securities (and any replacements therefor) as to
which consents have been obtained pursuant to the Consent Solicitation
Statement).
"12% Security" means any Security or portion thereof which
bears interest at a stated per annum rate equal to 12% (representing
the portion of the Securities (and any replacements therefor) as to
which consents have not been obtained pursuant to
<PAGE> 5
4
the Consent Solicitation Statement). It is understood that, effective
on the Supplemental Indenture Effective Date, no 12% Securities shall
be outstanding.
SECTION 1.05. Amendment to Section 1.01--Deletion or
Amendment and Restatement of Certain Definitions. Section 1.01 of the
Indenture is hereby amended by (a) deleting in their entirety the definitions
"Accelerated Payment", "Accelerated Payment Date", "Acceleration Date" and
"Offer" and (b) amending and restating in their entirety the following
definitions:
"Existing Notes" means the Company's 12% Senior Secured Notes
issued pursuant to the Existing Note Indenture, as such notes may be
amended, supplemented or otherwise modified from time to time.
"Existing Note Indenture" means the Note Indenture dated as of
September 15, 1992 by and among the Company, the Subsidiary Guarantors
and the Existing Notes Trustee, as such indenture may be amended,
supplemented or otherwise modified from time to time.
SECTION 1.06. Amendment to Section 3.07. Section 3.07 of the
Indenture is hereby amended by (a) inserting the words "or concurrently
required to be applied or offered to be applied to purchase Existing Notes in
accordance with the Existing Note Indenture" after the words "the Letter of
Credit Obligations under the Credit Agreement" contained in clause (2) of
paragraph (a) thereof; (b) inserting at the end of the second proviso of
paragraph (a) thereof the parenthetical "(so long as such Net Cash Proceeds are
applied to prepay Working Capital Loans, secure Letter of Credit Obligations or
reduce the outstanding amount of letters of credit under the Credit
Agreement)"; (c) changing the amount "$5,000,000" contained in the third
proviso of paragraph (a) thereof to the amount "$2,000,000"; (d) deleting the
last sentence of paragraph (a) thereof; (e) replacing the words "not more than
10 days after" contained in paragraph (b) thereof with the word "on"; (f)
inserting after the word "tendered" contained in clause (7) of paragraph (b)
thereof the parenthetical "(or, in the case of 13% Securities, deemed
tendered)"; and (g) replacing the last paragraph of paragraph (b) thereof with
the following paragraphs:
"Notwithstanding anything to the contrary in
this Section 3.07, with respect to each Net Proceeds Offer,
each Holder of 13% Securities shall, without any action on the
part of such Holder, (i) be deemed to have tendered on the
relevant Net Proceeds Offer Trigger Date the entire amount of
such Holder's 13% Securities in connection with such Net
Proceeds Offer and (ii) be entitled to redemption of a portion
of such Holder's 13% Securities on a pro rata basis determined
on the assumption that all Securities (including all 12%
Securities) have been tendered in connection with such Net
Proceeds Offer, with the Proceeds Purchase Date (a "13%
Securities Proceeds Purchase Date") associated with such
redemption being the Business Day immediately succeeding such
Net Proceeds Offer Trigger Date. Unless the Company defaults
in making payment therefor in accordance with the next
succeeding
<PAGE> 6
5
paragraph, the 13% Securities to be so redeemed shall cease to
accrue interest after the relevant 13% Securities Proceeds
Purchase Date.
On or before a Proceeds Purchase Date
(including, in the case of 13% Securities, the applicable 13%
Securities Proceeds Purchase Date), the Company shall (i)
accept for payment Securities or portions thereof tendered
(or, in the case of 13% Securities, deemed tendered) pursuant
to the Net Proceeds Offer (with the amount so accepted being
calculated (x) in the case of 13% Securities, in the manner
specified in the preceding paragraph and (y) in the case of
12% Securities, on a pro rata basis if required pursuant to
paragraph (7) above) and (ii) by 10:00 a.m., New York City
time, deposit with the Paying Agent U.S. Legal Tender or
Securities acquired in the manner described in clause (a) of
this Section 3.07 sufficient to pay the purchase price of all
Securities or portions thereof so accepted or to be credited
against the Net Proceeds Offer. Upon surrender of the
relevant Securities to the Paying Agent, the Paying Agent
shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to
such Holders new Securities equal in principal amount to any
unpurchased portion of the Securities surrendered. Any
Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. For purposes
of this Section 3.07, the Trustee shall act as the Paying
Agent."
SECTION 1.07. Amendment to Section 4.04. Section 4.04 of the
Indenture is hereby amended and restated in its entirety as follows:
"SECTION 4.04. Maintenance of Consolidated EBITDA.
(a) The Company shall not permit the sum of
(i) Consolidated EBITDA for any period of four consecutive
fiscal quarters ending on any date set forth below plus (ii)
the Aggregate EBITDA Adjustment Amount as of such date to be
less than the amount set forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- -----------
<S> <C>
December 30, 1996 $33,000,000
March 31, 1997 34,000,000
June 30, 1997 35,000,000
September 29, 1997 35,500,000
December 29, 1997 36,000,000
March 30, 1998 36,500,000
June 29, 1998 37,000,000
</TABLE>
(b) The Company shall not permit the sum of
(i) Consolidated EBITDA for the period of two consecutive
fiscal quarters ending September
<PAGE> 7
6
23, 1996 plus (ii) 50% of the Aggregate EBITDA Adjustment
Amount as of the last day of such period to be less than
$14,000,000.
(c) The Company shall not permit the sum of
(i) Consolidated EBITDA for any period of two consecutive
fiscal quarters ending after September 23, 1996 plus (ii) 50%
of the Aggregate EBITDA Adjustment Amount as of the last day
of such period to be less than $13,000,000."
SECTION 1.08. Amendment to Section 4.08. Section 4.08 of the
Indenture is hereby amended by (a) changing the number "120" contained in the
first sentence of paragraph (a) thereof to the number "90"; (b) inserting the
words "and within 45 days after the end of the Company's first, second and
third fiscal quarters of each fiscal year" after the words "the Company's
fiscal year" contained in the first sentence of paragraph (a) thereof; (c)
inserting the words "(or portion of the fiscal year ending with the fiscal
quarter covered by such Officers' Certificate, in the case of quarterly
certificates)" after each occurrence of the word "year" (other than the first
such occurrence) contained in the first sentence of paragraph (a) thereof; and
(d) deleting clause (iii) of paragraph (c) thereof (which clause (iii) ends
immediately before the words ", an Officers' Certificate") in its entirety.
SECTION 1.09. Amendment to Section 4.13. Clause (vi) of
paragraph (d) of Section 4.13 of the Indenture is hereby amended by (a) adding
a subclause reference "(1)" to the beginning thereof, (b) changing each
reference to "clause (vi)" contained in such newly designated subclause (1) to
the reference "subclause (1)" and (c) adding a new subclause (2) after the
amount "$15,000,000" contained therein which shall read in its entirety as
follows:
"and (2) Indebtedness consisting of Capital Lease Obligations
incurred in connection with any Sale/leaseback consummated in
order to comply with the requirements of Section 4.24 or 4.25
and any renewals, extensions, refinancings or replacements
thereof"
SECTION 1.10. Amendment to Section 4.17. Section 4.17 of the
Indenture is hereby amended by:
(a) amending and restating in its entirety the first proviso
contained in clause (A) thereof as follows:
"provided, however, that (x) the Net Cash Proceeds which may
be so reinvested pursuant to any Asset Sale (other than a
Specified Sale-leaseback Transaction) shall not exceed 5% of
such Net Cash Proceeds (or, in the case of the Required Black
Angus Sale/leaseback Transaction, 10% of such Net Cash
Proceeds), and (y) the total Net Cash Proceeds which may be so
reinvested pursuant to all Asset Sales (other than Specified
Sale/leaseback Transactions) consummated after the
Supplemental Indenture Effective Date shall not exceed
$8,000,000"; and
<PAGE> 8
7
(b) amending and restating in its entirety the penultimate
proviso thereof as follows:
"; provided, further, that the Company may exclude from the
provisions of this Section 4.17, to the extent applicable, up
to $2,000,000 of Net Cash Proceeds which the Company has
elected to exclude from the obligation to make a Net Proceeds
Offer pursuant to and in accordance with Section 3.07(a) so
long as such Net Cash Proceeds are applied to prepay Working
Capital Loans, secure Letter of Credit Obligations or reduce
the outstanding amount of letters of credit under the Credit
Agreement".
SECTION 1.11. New Covenants. The Indenture is hereby amended
by adding the following Sections to the end of Article Four thereof:
"SECTION 4.24. Black Angus Sale/leaseback Transaction.
After July 15, 1996 and on or before
September 15, 1996, the Company and the relevant Subsidiaries
shall consummate a Sale/leaseback transaction with respect to
Black Angus restaurants generating gross cash proceeds equal
to at least $48,000,000 and Net Cash Proceeds equal to at
least $43,500,000, provided, that no more than 24 such
restaurants may be the subject of such Sale/leaseback
transaction for the purpose of complying with this Section
4.24.
SECTION 4.25. Additional Asset Sales.
After July 15, 1996 and on or before December
31, 1996, the Company and its Subsidiaries shall consummate
one or more Asset Sales (including Sale/leasebacks but
excluding the Required Black Angus Sale/leaseback Transaction)
generating Net Cash Proceeds equal to at least $25,000,000.
SECTION 4.26. Senior Executive Compensation.
The Company shall not permit the aggregate
base salaries of Anwar Soliman and Ralph Roberts (the "Senior
Executives") to exceed $1,938,575. Commencing on the
Supplemental Indenture Effective Date, the rate at which the
salaries of the Senior Executives are earned shall be reduced
by an aggregate amount equal to 20% of the aggregate base
salaries of the Senior Executives then in effect (the
aggregate amount of any such reduction for any fiscal year or,
in the case of the 1996 fiscal year, the portion thereof since
the Supplemental Indenture Effective Date, being referred to
as the "Holdback Amount"). The Company shall not permit any
portion of the Holdback Amount or any bonuses or other form of
compensation (other than (a) the reduced base salaries and (b)
benefits of the type historically provided by the Company to
the Senior Executives (including life insurance, medical,
<PAGE> 9
8
disability and automobile benefits)) to be paid to the Senior
Executives with respect to any fiscal year of the Company
until the audited financial statements of the Company for such
fiscal year have been delivered to the Trustee. After such
audited financial statements have been so delivered, the
ability of the Company to pay such Holdback Amount and bonuses
to the Senior Executives shall be determined on the basis of
the sum of Consolidated EBITDA for the relevant fiscal year
plus the Aggregate EBITDA Adjustment Amount as of the last day
of such fiscal year, as set forth below:
<TABLE>
<CAPTION>
Consolidated EBITDA plus Holdback Amount Payment/
Aggregate EBITDA Adjustment Amount Bonus Payment
---------------------------------- ------------------------
<S> <C>
Less than $28,000,000 The Company shall defer payment
of the entire Holdback Amount.
The Company shall pay no
bonuses to the Senior Executives.
$28,000,000-$32,999,999 The Company may pay one-half of
the Holdback Amount. The
Company shall defer payment of
the remaining one-half of the
Holdback Amount. The Company
shall pay no bonuses to the Senior
Executives.
$33,000,000-$39,999,999 The Company may pay the entire
Holdback Amount. The Company
shall pay no bonuses to the Senior
Executives.
$40,000,000-$44,999,999 The Company may pay the entire
Holdback Amount. In addition,
the Company may pay bonuses to
the Senior Executives in an
aggregate amount not to exceed
10% of the aggregate base salaries
of the Senior Executives for the
preceding fiscal year.
$45,000,000-$49,999,999 The Company may pay the entire
Holdback Amount. In addition,
the Company may pay bonuses to
the Senior Executives in an
aggregate amount not to exceed
</TABLE>
<PAGE> 10
9
<TABLE>
<S> <C>
20% of the aggregate base salaries
of the Senior Executives for the
preceding fiscal year.
$50,000,000 or above The Company may pay the entire
Holdback Amount. In addition,
the Company may pay bonuses to
the Senior Executives in an amount
determined by the Board of
Directors of the Company.
</TABLE>
Any Holdback Amount that is deferred as provided above may be
paid by the Company upon delivery to the Trustee of audited
financial statements of the Company in any subsequent year if
the sum of Consolidated EBITDA for the fiscal year covered by
such financial statements plus the Aggregate EBITDA Adjustment
Amount as of the last day of such fiscal year is at least
$36,500,000. The Company shall not pay any Holdback Amount or
bonuses to the Senior Executives at any time when a Default or
Event of Default (other than solely pursuant to Section 4.04)
shall have occurred and be continuing."
SECTION 1.12. Amendment to Section 6.01. Section 6.01 of the
Indenture is hereby amended by adding the following words to the end of the
parenthetical contained in the last paragraph thereof:
"and other than in the case of any Default under Section 4.04,
4.24 or 4.25, which Defaults shall be Events of Default
without any requirement for the giving of notice and without
the passage of time specified in this paragraph"
SECTION 1.13. Amendment to Section 8.01. Paragraph (c) of
Section 8.01 of the Indenture is hereby amended by adding the words "and
Sections 4.24 through 4.26" after the reference "4.21" contained therein.
SECTION 1.14. Deletion of Certain References to Section 4.04.
The Indenture is hereby amended by deleting each reference to Section 4.04 from
(a) the definition of "Paying Agent" contained in Section 1.01 thereof, (b)
Section 2.03 thereof, (c) Section 2.06 thereof and (d) the form of Option of
Holder to Elect Purchase. In addition, Section 6.01 of the Indenture is hereby
amended by deleting the words "4.04 or" appearing before the reference to
Section 4.17 contained in the last paragraph thereof.
SECTION 1.15. Deletion of References to Accelerated Payments.
The Indenture is hereby amended by (a) deleting the words "an Accelerated
Payment or" from paragraph (2) of Section 6.01 thereof and (b) deleting the
words "an Accelerated Payment and" from Section 7.05 thereof. In addition,
each Security and Exhibit A-2 to the Indenture are hereby amended by deleting
the words ", including an Accelerated Payment" from paragraph 18 thereof.
<PAGE> 11
10
SECTION 1.16. Amendment to Paragraph 6 of the Securities and
the Form of Note. Paragraph 6 of each Security and Exhibit A-2 to the
Indenture is hereby amended by adding the following sentence after the second
sentence thereof:
"In addition, the Company may credit against such sinking fund
payment 100% of the principal amount of any Securities
previously purchased by the Company pursuant to a Net Proceeds
Offer."
SECTION 1.17. Amendment to Paragraph 8 of the Securities and
the Form of Note. Paragraph 8 of each Security and Exhibit A-2 to the
Indenture is hereby amended and restated in its entirety as follows:
"8. Maintenance of Consolidated EBITDA.
The Indenture requires the Company to
maintain Consolidated EBITDA (subject to certain adjustments)
for certain periods specified therein at the levels specified
therein."
SECTION 1.18. Amendment to Timing of Interest Payments and
Record Dates. Each Security and Exhibit A-2 to the Indenture are hereby
amended by (a) deleting the dates listed after the caption "Interest Payment
Dates" and inserting, in lieu thereof, the dates "March 15, June 15, September
15 and December 15", (b) deleting the dates listed after the caption "Record
Dates" and inserting, in lieu thereof, the dates "March 1, June 1, September 1
and December 1" and (c) deleting the words "semi-annually on March 15 and
September 15 of each year" contained in paragraph 1 thereof and inserting, in
lieu thereof, the words "quarterly on March 15, June 15, September 15 and
December 15 of each year".
SECTION 1.19. Amendment to Interest Rate. The Indenture and
each Security and Exhibit A-2 to the Indenture are hereby amended by changing
each reference to the percentage "12%" to the percentage "13%". In addition,
each Security and Exhibit A-2 to the Indenture are hereby amended by changing
the percentage "14%" contained in paragraph 1 thereof to the percentage "15%".
ARTICLE TWO
MISCELLANEOUS
SECTION 2.01. Conditions Precedent; Reaffirmation of
Subsidiary Guarantee. The effectiveness of this First Supplemental Indenture
is conditioned upon the receipt by the Trustee of (a) counterparts hereof
executed and delivered by the Company and each Subsidiary Guarantor and (b) a
satisfactory opinion of counsel stating that this First Supplemental Indenture
complies with the provisions of Section 9.02 of the Indenture and covering
other customary corporate matters, which opinion may be relied upon by each
person that is a Securityholder on the Supplemental Indenture Effective Date.
By its
<PAGE> 12
11
execution and delivery of this First Supplemental Indenture, each Subsidiary
Guarantor reaffirms and restates its obligation set forth in Article 11 of the
Indenture.
SECTION 2.02. Incorporation of Indenture. All the provisions
of this First Supplemental Indenture shall be deemed to be incorporated in, and
made a part of, the Indenture; and the Indenture, as supplemented and amended
by this First Supplemental Indenture, shall be read, taken and construed as one
and the same instrument.
SECTION 2.03. Headings. The headings of the Articles and
Sections of this First Supplemental Indenture are inserted for convenience of
reference and shall not be deemed to be a part thereof.
SECTION 2.04. Counterparts. This First Supplemental
Indenture may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 2.05. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
which is required to be included in this First Supplemental Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 2.06. Successors. All covenants and agreements in
this First Supplemental Indenture by the Company and each Subsidiary Guarantor
shall bind their respective successors. All covenants and agreements of the
Trustee in this First Supplemental Indenture shall bind its successor.
SECTION 2.07. Separability Clause. In case any provision in
this First Supplemental Indenture shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 2.08. Benefits of First Supplemental Indenture.
Nothing in this First Supplemental Indenture, express or implied, shall give to
any person, other than the
<PAGE> 13
12
parties hereto and their successors hereunder and the Holders, any benefit or
any legal or equitable right, remedy or claim under this First Supplemental
Indenture.
SECTION 2.09. Terms Defined. All terms defined elsewhere in
the Indenture have the same meanings herein.
SECTION 2.10. Expenses. The Company agrees to pay the
reasonable costs and expenses of the Trustee and the Holders, including the
reasonable expenses of one firm of counsel to certain of the Holders, in
connection with the negotiation and execution of this First Supplemental
Indenture.
SECTION 2.11. Acknowledgement of Waiver, etc. The Company
and the Trustee hereby acknowledge that, in connection with the Consent
Solicitation Statement, the holders of a majority in principal amount of
outstanding Securities have waived compliance with (a) the requirements of
Sections 4.04 and 4.08 of the Indenture (as in effect prior to giving effect to
this First Supplemental Indenture) and (b) the Consent Period requirement of
Section 9.02 of the Indenture. The Company also hereby instructs the Trustee
to distribute to the Consenting Holders the Consent Payments (as each such term
is defined in the Consent Solicitation Statement) in the amounts, and at the
times, specified in the Consent Solicitation Statement.
<PAGE> 14
13
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and attested, all as of the day and
year first above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By: /s/ SANDRA H. LEESS
---------------------------------
Name: Sandra H. Leess
Title: Senior Vice President
SUBSIDIARY GUARANTORS:
ARG ENTERPRISES, INC.
SPECTRUM FOODS, INC.
SPOONS RESTAURANTS, INC.
ARG PROPERTY MANAGEMENT CORPORATION
GRANDY'S, INC.
LOCAL FAVORITE, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
---------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
(for each of the above-listed
Subsidiary Guarantors)
<PAGE> 1
EXHIBIT 4.20
EXECUTION COPY
===============================================================================
AMERICAN RESTAURANT GROUP, INC.
AND
SUBSIDIARY GUARANTORS
AND
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
_________________________
SECOND SUPPLEMENTAL
INDENTURE
Dated as of March 13, 1997
===============================================================================
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE dated as of March 13, 1997 among
American Restaurant Group, Inc., a Delaware corporation (the "Company"), the
Subsidiary Guarantors and U.S. Trust Company of California, N.A., a national
banking association, as trustee (the "Trustee") under the Indenture dated as of
December 1, 1993, as amended by a First Supplemental Indenture dated as of
August 28, 1996 (the "Indenture").
RECITALS
WHEREAS, pursuant to the Indenture, the Company issued
$50,000,000 original aggregate principal amount of its Senior Secured Notes due
September 15, 1998 (the "Securities");
WHEREAS, Section 9.02 of the Indenture provides, among other
things, that the Company, the Subsidiary Guarantors and the Trustee may, with
the consent of the holders of at least a majority in principal amount of the
then outstanding Securities, amend the Indenture and the Securities in certain
respects;
WHEREAS, the Company, pursuant to the foregoing authority,
proposes in and by this Second Supplemental Indenture to amend the Indenture
and the Securities in certain respects; and
WHEREAS, all things necessary to make this Second Supplemental
Indenture a valid agreement of the Company, the Subsidiary Guarantors and the
Trustee and a valid amendment of and supplement to the Indenture and the
Securities have been done.
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, the Company, the
Subsidiary Guarantors and the Trustee agree as follows:
ARTICLE ONE
AMENDMENTS TO THE INDENTURE AND THE SECURITIES
SECTION 1.01. Amendment and Restatement of Section 4.04.
Section 4.04 of the Indenture is hereby amended and restated in its entirety as
follows:
"SECTION 4.04. Maintenance of Consolidated EBITDA.
(a) The Company shall not permit the sum of
(i) Consolidated EBITDA for any period of four consecutive
fiscal quarters ending on any date set forth below plus (ii)
the Aggregate EBITDA Adjustment Amount as of such date to be
less than the amount set forth opposite such date:
<PAGE> 3
2
<TABLE>
<CAPTION>
Date Amount
---- -----------
<S> <C>
June 30, 1997 $35,000,000
September 29, 1997 35,500,000
December 29, 1997 36,000,000
March 30, 1998 36,500,000
June 29, 1998 37,000,000
</TABLE>
(b) The Company shall not permit the sum of
(i) Consolidated EBITDA for the period of twelve consecutive
calendar months ending May 31, 1997 plus (ii) the Aggregate
EBITDA Adjustment Amount as of such date to be less than
$34,000,000.
(c) The Company shall not permit the sum of
(i) Consolidated EBITDA for the period of two consecutive
fiscal quarters ending September 23, 1996 plus (ii) 50% of the
Aggregate EBITDA Adjustment Amount as of the last day of such
period to be less than $14,000,000.
(d) The Company shall not permit the sum of
(i) Consolidated EBITDA for any period of two consecutive
fiscal quarters ending on or after June 30, 1997 plus (ii) 50%
of the Aggregate EBITDA Adjustment Amount as of the last day
of such period to be less than $13,000,000."
SECTION 1.02. Amendment to Section 4.08. Section 4.08 of the
Indenture is hereby amended by (a) adding the following sentence to the end of
paragraph (a) thereof:
"In addition, no later than June 30, 1997, the Company shall
deliver to the Trustee an Officers' Certificate setting forth
in reasonable detail a calculation of the sum of (i)
Consolidated EBITDA for the period of twelve consecutive
calendar months ending on May 31, 1997 plus (ii) the Aggregate
EBITDA Adjustment Amount as of such date."
and (b) adding a new paragraph (d) to the end thereof which shall read in its
entirety as follows:
(d) The Company, upon request of any Holder, shall report in
reasonable detail regarding the status of the Company's
efforts to sell (the "Black Angus Transaction") all or
substantially all of the assets constituting its Black Angus
division (or the Capital Stock of Subsidiaries holding such
assets), provided that the Company will not, pursuant to such
reports, be required to provide non-public information with
respect to the Black Angus Transaction except in the case of
any such reports requested on or after July 1, 1997.
<PAGE> 4
3
SECTION 1.03. Amendment to Section 4.25. Section 4.25 of the
Indenture is hereby amended by changing the amount "$25,000,000" contained
therein to the amount "$15,000,000".
ARTICLE TWO
MISCELLANEOUS
SECTION 2.01. Conditions Precedent; Reaffirmation of
Subsidiary Guarantee. The effectiveness of this Second Supplemental Indenture
is conditioned upon (a) the receipt by the Trustee of (i) counterparts hereof
executed and delivered by the Company and each Subsidiary Guarantor and (ii) a
satisfactory opinion of counsel stating that this Second Supplemental Indenture
complies with the provisions of Section 9.02 of the Indenture and covering
other customary corporate matters and (b) the payment by the Company of any
invoiced amounts referred to in Section 2.10. By its execution and delivery of
this Second Supplemental Indenture, each Subsidiary Guarantor reaffirms and
restates its obligation set forth in Article 11 of the Indenture.
SECTION 2.02. Incorporation of Indenture. All the provisions
of this Second Supplemental Indenture shall be deemed to be incorporated in,
and made a part of, the Indenture; and the Indenture, as supplemented and
amended by this Second Supplemental Indenture, shall be read, taken and
construed as one and the same instrument.
SECTION 2.03. Headings. The headings of the Articles and
Sections of this Second Supplemental Indenture are inserted for convenience of
reference and shall not be deemed to be a part thereof.
SECTION 2.04. Counterparts. This Second Supplemental
Indenture may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 2.05. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
which is required to be included in this Second Supplemental Indenture by any
of the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 2.06. Successors. All covenants and agreements in
this Second Supplemental Indenture by the Company and each Subsidiary Guarantor
shall bind their respective successors. All covenants and agreements of the
Trustee in this Second Supplemental Indenture shall bind its successor.
SECTION 2.07. Separability Clause. In case any provision in
this Second Supplemental Indenture shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
<PAGE> 5
4
SECTION 2.08. Benefits of Second Supplemental Indenture.
Nothing in this Second Supplemental Indenture, express or implied, shall give
to any person, other than the parties hereto and their successors hereunder and
the Holders, any benefit or any legal or equitable right, remedy or claim under
this Second Supplemental Indenture.
SECTION 2.09. Terms Defined. All terms defined elsewhere in
the Indenture have the same meanings herein.
SECTION 2.10. Expenses. The Company agrees to pay the
reasonable costs and expenses of the Trustee and the Holders, including the
reasonable fees and disbursements (not to exceed $25,000) of one firm of
counsel to certain of the Holders, in connection with the negotiation and
execution of this Second Supplemental Indenture.
SECTION 2.11. Acknowledgement of Waiver, etc. The Company
and the Trustee hereby acknowledge that, in connection with the Consent
Solicitation Statement of the Company dated February 14, 1997, as supplemented
by a letter from the Company dated February 25, 1997, relating to this Fourth
Supplemental Indenture (the "February 1997 Consent Solicitation Statement"),
the holders of a majority in principal amount of outstanding Securities have
waived compliance with (a) any Default or Event of Default under Section 4.04
or 4.25 of the Indenture (as in effect prior to giving effect to this Fourth
Supplemental Indenture), (b) the Consent Period requirement of Section 9.02 of
the Indenture and (c) any restrictions contained in the Indenture on exchanging
the existing global Securities for new global Securities reflecting the
Proposed Modifications (including, to the extent applicable, the Principal
Increase) (as each such term is defined in the February 1997 Consent
Solicitation Statement). The Company hereby advises the Trustee that the
aggregate stated face amount of Consenting Notes (as defined in the February
1997 Consent Solicitation Statement) is equal to $45,500,000. Accordingly, as
provided in the February 1997 Consent Solicitation Statement, as of the date
hereof, (i) the aggregate stated face amount of the Principal Increase shall
equal $455,000 and (ii) after giving effect to the Principal Increase, (A) the
aggregate stated face amount of the Securities shall equal $50,455,000 and (B)
the aggregate outstanding amount of the Securities shall equal $42,193,498.
The Company hereby instructs the Trustee to take such actions as may be
necessary to effectuate the transactions described in clause (c) of the first
sentence of this Section 2.11.
<PAGE> 6
5
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, all as of the day and year first
above written.
AMERICAN RESTAURANT GROUP, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By: /s/ SANDEE PARKS
----------------------------------
Name: Sandee Parks
Title: Vice President
SUBSIDIARY GUARANTORS:
ARG ENTERPRISES, INC.
SPECTRUM FOODS, INC.
SPOONS RESTAURANTS, INC.
ARG PROPERTY MANAGEMENT CORPORATION
GRANDY'S, INC.
LOCAL FAVORITE, INC.
By: /s/ WILLIAM J. McCAFFREY, JR.
----------------------------------
Name: William J. McCaffrey, Jr.
Title: Vice President and
Chief Financial Officer
(for each of the above-listed
Subsidiary Guarantors)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 30, 1996 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) CONSOLIDATED FINANCIAL STATEMENTS ON FORM
10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-START> DEC-26-1995
<PERIOD-END> DEC-30-1996
<CASH> 7,493,000
<SECURITIES> 0
<RECEIVABLES> 8,506,000
<ALLOWANCES> 1,041,000
<INVENTORY> 6,818,000
<CURRENT-ASSETS> 26,261,000
<PP&E> 219,253,000
<DEPRECIATION> 118,084,000
<TOTAL-ASSETS> 172,129,000
<CURRENT-LIABILITIES> 118,066,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (91,447,000)
<TOTAL-LIABILITY-AND-EQUITY> 172,129,000
<SALES> 445,424,000
<TOTAL-REVENUES> 445,424,000
<CGS> 141,032,000
<TOTAL-COSTS> 413,111,000
<OTHER-EXPENSES> 41,291,000
<LOSS-PROVISION> 332,000
<INTEREST-EXPENSE> 27,714,000
<INCOME-PRETAX> (36,692,000)
<INCOME-TAX> 81,000
<INCOME-CONTINUING> (36,773,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,688,000)
<CHANGES> 0
<NET-INCOME> (38,461,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
