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
For the Fiscal Year Ended March 28, 1999
or,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-12644
Benihana Inc.
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(Exact name of registrant as specified in its charter)
Delaware 65-0538630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8685 Northwest 53rd Terrace, Miami, Florida 33166
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (305) 593-0770
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.10 per share
Class A Common Stock, par value $.10 per share
Preferred Share Purchase Right
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of June 4, 1999, 3,571,616 shares of Common Stock and 2,566,676 shares of
Class A Common Stock were outstanding, and the aggregate market value of the
common equity of Benihana Inc. held by non-affiliates was approximately
$44,754,076.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year ended
March 28, 1999 are incorporated by reference in Parts I and II.
Portions of the Registrant's Proxy Statement for the Annual Meeting to be held
August 5, 1999 are incorporated by reference in Part III.
<PAGE>
Item 1. General
Benihana Inc. ("the Company") the leading operator of Japanese teppanyaki-style
restaurants in the United States, currently owns and operates 51 restaurants and
franchises twelve others. The Company also opened its first new sushi restaurant
concept, "Sushi Doraku by Benihana"; one unit opened in fiscal 1999. The Company
has achieved 27 consecutive quarters of comparable quarter sales growth and
customer count increases. Management attributes this success to (i) a
well-established brand identity supported by consistent marketing and
promotional activities since the opening of the first Benihana restaurant in
1964, (ii) growing consumer demand for a dining experience that features a theme
or entertainment component, (iii) the Company's continued emphasis on quality
and customer satisfaction, and (iv) Benihana's experienced management team.
The Company owns the exclusive rights to develop, operate or license Benihana
and Benihana Grill restaurants in the United States (subject to certain rights
granted to Benihana of Tokyo, Inc. ("BOT") with respect to the State of Hawaii),
Central and South America and the Caribbean Islands.
A description of the Company-owned and licensed restaurants is set forth below
under "Properties".
Sales by the Company's owned restaurants were approximately $118,351,000 for the
fiscal year ended March 28, 1999, as compared to approximately $99,062,000 for
the prior fiscal year.
Benihana Concept
The Company offers casual upscale dining in a distinctive Japanese atmosphere
enhanced by the unique entertainment provided by the Company's highly-skilled
Benihana chefs who prepare fresh steak, chicken and seafood in traditional
Japanese style at the customer's table. Most of the Company's Benihana
restaurants are open for both lunch and dinner. The restaurants have a limited
menu offering a full course meal consisting of an appetizer, soup, salad, tea,
rice, a vegetable and an entree of steak, seafood, chicken or any combination of
them. Specific menu items may be different in the various restaurants depending
upon the local geographic market. The servings are all portion controlled to
provide consistency in quantities served to each customer. Alcoholic beverages,
including specialty mixed drinks, wines, beers and soft drinks, are available.
The average check size per person was $22.39 in the fiscal 1999. During fiscal
1999, beverage sales in both the lounges and dining rooms accounted for
approximately 17% of total restaurant sales. The Company offers sushi at the
teppanyaki grill in all its restaurants and at separate sushi bars within most
restaurants.
An entire teppanyaki table generally seats eight customers. The chef is assisted
in the service of the meal by the waitress or waiter who takes beverage and food
orders. An entire dinner time meal takes approximately one hour and thirty
minutes.
Of the 51 owned Benihana restaurants, 33 are located in free-standing, special
use restaurant buildings, seven in shopping centers, and 11 in office or hotel
building complexes. The free-standing restaurants were built to the Company's
specifications as to size, style and interior and exterior decor. The other
locations were adapted to the Benihana interior decor. The free-standing,
traditional Benihana restaurant units, which are generally one story buildings,
average approximately 8,000 square feet and are constructed on a lot of
approximately 1.25 to 1.50 acres. The shopping center, office building and
hotel-based Benihana restaurants are of similar size, but differ somewhat in
appearance from location to location in order to conform to the existing
buildings. A typical Benihana restaurant has 18 teppanyaki tables. The Benihana
restaurants seat from 86 to 178 customers in the dining rooms and 8 to 120
customers in the bar lounge areas. See "Properties."
Restaurant Operations
The Company's restaurants are centrally managed by the Executive Vice
President-Restaurant Operations and are divided among seven geographic regions,
each managed by a regional manager. Food preparation in the restaurants is
supervised by eight regional chefs.
Each Benihana restaurant has a manager and one or more assistant managers
responsible for the operation of the restaurant, including personnel matters,
local inventory purchasing, maintenance of quality control standards,
cleanliness and service.
The Company uses various incentive compensation plans pursuant to which key
restaurant personnel share in the results of operations at both a local and
company-wide level.
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Specific strict guidelines as documented in restaurant operations manuals are
followed to assure consistently high quality in customer service and food
quality from location to location. Operating specifications are used for quality
of ingredients, preparation of food, maintenance of premises and employee
conduct and are incorporated in manuals used by the managers, assistant managers
and head chefs. Food products and portion sizes are regularly and systematically
tested for quality and compliance with the Company's standards. Certain seafood
items are purchased in bulk for most of the restaurants under which a certain
quantity is purchased at a specific price. Most of the other food products are
purchased in local markets. Substantially all of the restaurant operating
supplies are purchased centrally and distributed to the restaurants from the
Company's warehouse or one of the two bonded warehouses.
The chefs are trained in the teppanyaki-style of cooking and customer service in
training programs lasting from eight to twelve weeks. A portion of the training
is spent working in a Benihana restaurant under the direct supervision of an
experienced head chef. The program includes lectures on the Company's method of
restaurant operations and training in both table-side and kitchen food
preparation as applied in Benihana restaurants. Manager training is similar
except that the manager trainee is given in-depth exposure to each position in
the restaurant. Other categories of employees are trained by the manager and
assistant manager at the restaurant itself. Ongoing continuing education
programs and seminars are provided to restaurant managers and chefs to improve
restaurant quality and implement changes in operating policy or menu items.
Marketing
The Company utilizes television, radio, billboard and print media to promote its
restaurants, strengthen its brand identity and maintain high name recognition.
The advertising programs are tailored to each local market and to print media
focused on the business traveler. The advertising program is designed to
emphasize the inherently fresh aspects of a Benihana meal and the entertainment
value of the food preparation at the table. In fiscal year 1999, the Company
expended $5.7 million on advertising and other marketing, approximately 4.8% of
net sales. The entertainment value of the Benihana method of food preparation
and service is emphasized to distinguish Benihana from other restaurant
concepts.
Franchising
The Company has, from time to time, franchised experienced restaurant operators
(such as Hilton Hotels) in markets in which it considers expansion to be of
benefit to the Benihana system. The Company has begun to more aggressively
pursue franchising opportunities, particularly in foreign countries (Central and
South America and the Caribbean Islands) where the Company owns the rights to
the Benihana trademarks and system.
Franchisees bear all direct costs involved in the development, construction and
operation of their restaurants. The Company provides franchisees support for
site selection, prototypical architectural plans, interior and exterior design
and layout, training, marketing and sales techniques and opening assistance. All
franchisees are required to operate their restaurants in accordance with
Benihana standards and specifications including menu offerings, food quality and
preparation.
The current standard franchise agreement provides for payment to the Company of
a non-refundable franchise fee of $30,000 to $50,000 per restaurant and
royalties of 3% to 6% of sales. In fiscal year 1999 revenues from franchising
were $798,000.
The Company presently franchises Benihana restaurants in Anchorage, Alaska;
Austin, Texas; Las Vegas, Nevada; Reno, Nevada; Beverly Hills, California;
Seattle, Washington; Key West, Florida; Harrisburg, Pennsylvania; Bogota,
Colombia; Little Rock, Arkansas; Lima, Peru and Aruba. The Company has signed a
development agreement for Venezuela, but no restaurants have opened under the
development agreement. To comply with the terms of these franchises entered into
by the Company in the United States, the Company is prohibited from opening
additional restaurants within certain areas which the Company's existing
franchises have the exclusive right to open additional restaurants and operating
their existing Benihana restaurants. In general, such franchise agreements
currently provide for an initial payment to Benihana with respect to each new
restaurant opened by a franchisee and continuing royalty payments to the Company
based upon a percentage of a franchisee's gross sales from each such restaurant
throughout the term of the franchise.
Trade Names and Service Marks
3
<PAGE>
Benihana is Japanese for "red flower". In the United States, the "Benihana" and
"Benihana of Tokyo" names and "flower" logo, which management believes to be of
material importance to the Company's business, are owned by the Company and are
registered in the United States Patent and Trademark Office and certain foreign
countries. The Company also owns registered trademarks of Samurai, Kyoto brands
and the "Sushi Doraku by Benihana" concept.
Benihana of Tokyo, Inc. ("BOT") a privately held company and originator of the
Benihana concept continues to own the rights to the Benihana name and trademarks
outside of the United States, Central and South America and the Caribbean
Islands. BOT is a principal shareholder of the Company. The Company has no
financial interest in any restaurant operated by BOT.
Employees
At March 28, 1999, the Company employed 2,511 persons, of which, 2,459 were
restaurant employees and 52 were corporate personnel. Most employees, except
restaurant management and corporate management personnel, are paid on an hourly
basis. The Company also employs some restaurant personnel on a part-time basis
to provide the services necessary during the peak periods of restaurant
operations. The Company believes its relationship with its employees is good.
None of the Company's employees are covered by collective bargaining agreements.
Competition
The casual dining segment of the restaurant industry is expected to remain
intensely competitive with respect to price, service, location, and the type and
quality of food. Each of the Company's restaurants competes directly or
indirectly with locally-owned restaurants as well as regional and national
chains, and several of the Company's significant competitors are larger or more
diversified and have substantially greater resources than the Company. It is
also anticipated that growth in the industry will result in continuing
competition for available restaurant sites as well as continued competition in
attracting and retaining qualified management-level operating personnel. The
Company believes that its competitive position is enhanced by offering quality
food selections at an appropriate price with the unique entertainment provided
by its chefs in an attractive, relaxed atmosphere.
Government Regulation
Each of the Company's restaurants is subject to licensing and regulation by the
health, sanitation, safety standards, fire department and the alcoholic beverage
control authorities in the state or municipality where it is located.
Difficulties or failure in obtaining the required licensing or requisite
approvals could result in delays or cancellations in the opening of new
restaurants; termination of the liquor license for any Benihana restaurant would
adversely affect the revenues for the restaurant. While the Company to date has
not experienced any material difficulties in obtaining and maintaining necessary
governmental approvals, the failure to obtain or retain, or a delay in obtaining
food and liquor licenses or any other governmental approvals could have a
material adverse effect on the Company's operating results. Federal and state
environmental regulations have not had a material effect on the Company's
operations, but more stringent and varied requirements of local governmental
bodies with respect to zoning, land use and environmental factors could delay
construction of new restaurants.
The Company is also subject to federal and state regulations regarding franchise
offering and sales. Such laws impose registration and disclosure requirements on
franchisors in the offer and sale of franchises, or impose substantive standards
on the relationship between franchisee and franchisor.
The Americans with Disabilities Act (the "ADA"), prohibits discrimination on the
basis of disability in public accommodations and employment. The ADA, which
mandates accessibility standards for individuals with physical disabilities,
increases the cost of construction of new restaurants and of remodeling older
restaurants.
The Company is also subject to the Fair Labor Standards Act which governs such
matters as minimum wages, overtime and other working conditions. A significant
portion of the Company's food service personnel are paid at rates related to
federal or state minimum wage rates, and accordingly, increases in any such
minimum wage will increase the Company's labor costs.
Management Information Systems
The Company provides restaurant managers with centralized financial and
management control systems through use of data processing information systems
and prescribed reporting procedures.
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<PAGE>
Each restaurant forwards sales reports, vendor invoices, payroll and other
operational data to the home office on a weekly and four-week period basis. The
Company utilizes this information to centrally monitor sales, product, labor and
other costs and to prepare periodic financial and management reports. The
Company believes that its centralized accounting, payroll and human resources,
cash management and information systems improve its ability to control and
manage its operations efficiently.
Properties
Of the 51 restaurants operated by the Company, 45 are leased pursuant to leases
which require either a specific monthly rental or a minimum rent and additional
rent based upon a percentage of gross sales. In addition there are two Sushi
Doraku by Benihana restaurants under construction in Chicago, Illinois and Miami
Beach, Florida and two Benihana restaurants under construction in Santa Monica
and Monterey, California. Generally, these leases are "triple net" leases which
pass increases in property operating expenses, such as real estate taxes and
utilities, through to the Company as tenant. Expiration dates of these leases,
including renewal options, range from March 2000 to March 2027.
5
<PAGE>
The following table sets forth the location of the restaurants owned by the
Company:
<TABLE>
<CAPTION>
Approximate Seating
Benihana or Sushi Approx. ------------------------------------
Doraku by Benihana Sq. Ft. of Dining Sushi Date
Location Building Room Lounge Bar Opened
- ------------------ ---------- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
CALIFORNIA:
2100 E. Ball Road
Anaheim (1) 8,710 160 67 36 March, 1980
1496 Old Bayshore Hwy.
Burlingame (2) 8,740 160 99 27 February, 1978
17877 Gale Avenue
City of Industry (1) 8,000 144 50 30 November, 1988
1989 Diamond Blvd.
Concord (1) 8,250 144 84 18 February, 1980
2074 Vallco Fashion Pk.
Cupertino (1) 7,937 144 45 8 July, 1980
16226 Ventura Blvd.
Encino (2) 7,790 152 64 -0- October, 1970
14160 Panay Way
Marina Del Rey (1) 4,840 96 66 6 March, 1972
136 Oliver Street
Monterey 4,856 -0- -0- -0- under construction
4250 Birch Street
Newport Beach 8,275 144 72 26 March, 1978
3760 E. Inland Empire Blvd.
Ontario (1) 7,433 144 8 20 December, 1998
5489F Sunrise Blvd.
Citrus Heights
Sacramento (1) 3,798 88 8 5 October, 1995
477 Camino Del Rio So.
San Diego (1) 7,981 144 68 23 May, 1977
1737 Post Street
San Francisco (1) 7,990 140 45 -0- December, 1980
1447-1457 4th Street
Santa Monica 7,500 -0- -0- -0- under construction
21327 Hawthorne Blvd.
Torrance (1) 7,430 128 63 28 May, 1980
</TABLE>
(1) Lease provides for minimum rent, plus additional rent based upon a
percentage of gross sales.
(2) Lease provides for fixed rent.
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<PAGE>
<TABLE>
<CAPTION>
Approximate Seating
Benihana or Sushi Approx. ----------------------------------
Doraku by Benihana Sq. Ft. of Dining Sushi Date
Location Building Room Lounge Bar Opened
- ------------------ ---------- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
COLORADO:
3295 S. Tamarac Dr.
Denver (1) 7,572 128 82 10 February, 1977
DISTRICT OF COLUMBIA:
3222 M Street, NW
Washington (2) 7,761 136 4 24 May, 1982
FLORIDA:
300 S.W. 1st Avenue
Ft. Lauderdale 3,700 N/A N/A 103 June, 1998
276 E. Commercial Blvd.
Ft. Lauderdale 8,965 160 70 -0- June, 1970
8727 South Dixie Hwy.
Miami (2) 8,700 122 66 15 March, 1989
(Kendall)
8717 S.W. 136th St.
Miami (1) 8,162 176 42 -0- October, 1981
1665 N.E. 79th St.
Miami Beach 8,938 178 86 42 September, 1973
1751 Hotel Plaza Blvd.
Lake Buena Vista (2) 8,145 128 85 7 October, 1988
(Orlando)
1100 Lincoln Road
Miami Beach 3,900 -0- -0- -0- under construction
3602 S.E. Ocean Blvd.
Stuart 8,485 160 69 57 February, 1977
GEORGIA:
2143 Peachtree Rd., NE
Atlanta [I] (2) 8,244 136 65 16 May, 1974
229 Peachtree St. NE
Atlanta [II] (1) 6,372 115 34 11 April, 1981
</TABLE>
(1) Lease provides for minimum rent, plus additional rent based upon a
percentage of gross sales.
(2) Lease provides for fixed rent.
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<PAGE>
<TABLE>
<CAPTION>
Approximate Seating
Benihana or Sushi Approx. ----------------------------------
Doraku by Benihana Sq. Ft. of Dining Sushi Date
Location Building Room Lounge Bar Opened
- ------------------ ---------- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
ILLINOIS:
166 East Superior St.
Chicago (1) 7,288 144 9 45 April, 1968
1139 N. State St.
Chicago 4,500 -0- -0- -0- under construction
747 E. Butterfield Rd.
Lombard 9,200 168 51 -0- April, 1985
1200 E. Higgins Road
Schaumburg 8,388 160 48 -0- July, 1992
INDIANA:
8830 Keystone Crossing Rd.
Indianapolis (1) 8,460 144 93 -0- February, 1979
KENTUCKY:
1510 Lake Shore Court
Louisville (1) 7,572 128 88 -0- July, 1978
MARYLAND:
7315 Wisconsin Ave.
Bethesda (1) 6,047 128 47 11 October, 1974
MICHIGAN:
18601 Hubbard Dr.
Dearborn (1) 7,500 136 40 46 March, 1977
21150 Haggerty Rd.
Northville (2) 8,000 153 20 11 May, 1989
(Farmington Hills)
1985 W. Big Beaver Rd.
Troy (1) 8,600 128 46 57 February, 1996
</TABLE>
(1) Lease provides for minimum rent, plus additional rent based upon a
percentage of gross sales. (2) Lease provides for fixed rent.
8
<PAGE>
<TABLE>
<CAPTION>
Approximate Seating
Benihana or Sushi Approx. ----------------------------------
Doraku by Benihana Sq. Ft. of Dining Sushi Date
Location Building Room Lounge Bar Opened
- ------------------ ---------- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
MINNESOTA:
850 Louisiana Ave. So.
Golden Valley 10,400 192 45 -0- September, 1980
NEW JERSEY:
840 Morris Turnpike
Short Hills (2) 11,500 144 56 56 October 1976
5255 Marlton Pike
Pennsauken (1) 7,000 136 93 10 February, 1978
(Cherry Hill)
NEW YORK:
120 East 56th St.
New York (2) 3,859 86 24 -0- May, 1966
47 West 56th St.
New York (1) 7,340 112 59 -0- June, 1973
2105 Northern Blvd.
Munsey Park (1) 8,252 144 88 75 December, 1978
(Manhasset)
OHIO:
50 Tri-County Parkway
Cincinnati (1) 7,669 144 91 -0- June, 1978
126 East 6th St.
Cincinnati (1) 5,800 112 30 -0- August, 1979
23611 Chagrin Blvd.
Beachwood (1) 10,393 188 85 -0- May, 1973
(Cleveland)
OREGON:
9205 S.W. Cascade Ave.
Beaverton (1) 6,077 112 54 34 August, 1986
</TABLE>
(1) Lease provides for minimum rent, plus additional rent based upon a
percentage of gross sales. (2) Lease provides for fixed rent.
9
<PAGE>
<TABLE>
<CAPTION>
Approximate Seating
Benihana or Sushi Approx. ----------------------------------
Doraku by Benihana Sq. Ft. of Dining Sushi Date
Location Building Room Lounge Bar Opened
- ------------------ ---------- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
PENNSYLVANIA:
2100 Greentree Rd.
Pittsburgh (1) 8,000 150 84 -0- May, 1971
TENNESSEE:
912 Ridgelake Blvd.
Memphis (1) 8,680 144 78 11 October, 1979
TEXAS:
7775 Banner Dr.
Dallas (2) 8,007 160 115 -0- January, 1976
3848 Oak Lawn Ave.
Dallas (1)
(Turtle Creek) 3,998 96 0 10 June, 1997
1318 Louisiana St.
Houston [I] (2) 6,938 128 60 12 May, 1975
9707 Westheimer Rd.
Houston [II] (1) 7,669 144 120 10 November, 1977
2579 Town Center Blvd.
Sugar Land (1) 3,800 96 0 17 July, 1997
UTAH:
165 S.W. Temple, Bldg. 1
Salt Lake City (1) 7,530 120 72 10 April, 1977
</TABLE>
(1) Lease provides for minimum rent, plus additional rent based upon a
percentage of gross sales. (2) Lease provides for fixed rent.
10
<PAGE>
The Company leases approximately 10,100 square feet of space for its general
administrative offices in Miami, Florida at an annual rental of $172,000 and
8,000 square feet for a warehouse in Miami, Florida at an annual rental of
$25,500. The leases expire May 31, 2009 and October 31, 1999, respectively.
Item 3. Legal Proceedings
There are no material legal proceedings to which the Company or any of its
subsidiaries is a party other than ordinary litigation incidental to the conduct
of the Company's business.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth
quarter.
11
<PAGE>
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to
page 27 of the Company's 1999 Annual Report to Shareholders.
Item 6. Selected Consolidated Financial Data
The information required by this Item is incorporated herein by reference to
page 6 of the Company's 1999 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item is incorporated herein by reference to
pages 9 through 11 of the Company's 1999 Annual Report to Shareholders.
Item 7.A. Quantitative and Qualitative Disclosures About Market Risks
The information required by this item is incorporated herein by reference to
page 11 of the Company's 1999 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is incorporated herein by reference to
pages 12 through 26 of the Company's 1999 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Company
Directors. The information appearing under the caption "Election of Directors"
on pages 2 through 4 of the Company's Proxy Statement for its Annual Meeting of
Stockholders to be held on August 5, 1999 (the "Proxy Statement") is
incorporated herein by reference.
Item 11. Executive Compensation
The information appearing under the caption "Executive Compensation" commencing
on page 10 of the Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information appearing under the caption "Security Ownership of Certain
Beneficial Owners of Management" on pages 5 through 9 of the Proxy Statement is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information appearing under the captions "Certain Relationships and Related
Transactions" commencing on page 15 of the Proxy Statement is incorporated
herein by reference.
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements:
The following consolidated financial statements of the Company and
its subsidiaries, which are set forth on pages 12 through 26 of
the Company's 1999 Annual Report to Shareholders included herein
as Exhibit 13, are incorporated herein by reference as part of
this report.
Consolidated Balance Sheets as of March 28, 1999 and March 29,
1998.
Consolidated Statements of Income for the years ended March 28,
1999, March 29, 1998 and March 30, 1997.
Consolidated Statements of Stockholders' Equity for the years
ended March 28, 1999, March 29, 1998 and March 30, 1997.
Consolidated Statements of Cash Flows for the years ended March
28, 1999, March 29, 1998 and March 30, 1997.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
2. Financial Statement Schedules:
None
3. Exhibits:
2.01 Amended and Restated Agreement and Plan of
Reorganization, dated as of December 29, 1994 and
amended as of March 17, 1995 among BNC, BOT, the
Company and BNC Merger Corp. Incorporated by
reference to Exhibit 2.01 to the Company's
Registration Statement on Form S-4, Registration No.
33-88295, made effective March 23, 1995 (the "S-4").
3.01 Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit 3.01 to the S-4
and to Exhibit 1 on Form 8-A dated February 12, 1997.
3.02 By-Laws of the Company. Incorporated by reference
to Exhibit 3.02 to the S-4.
4.01 Certificate of Designation of Rights, Preferences and
Terms for the Series A Convertible Preferred Stock of
the Company. Incorporated by reference to Exhibit
4.01 to the Company's Current Report on Form 8-K
dated May 15, 1995.
4.02 Form of Certificate representing shares of the
Company's Common Stock. Incorporated by reference to
Exhibit 4.02 to the S-4.
4.03 Form of Certificate representing shares of the
Company's Class A Common Stock. Incorporated by
reference to Exhibit 4.03 to the S-4.
4.04 Warrant Agreement dated December 1, 1997 between
Benihana and Douglas M. Rudolph. Incorporated by
reference to Exhibit 4.1 to the Company's current
report on Form 8-K dated December 1, 1997.
10.01 License Agreement, dated as of May 15, 1995 between
BNC and BOT Inc. Incorporated by reference to
Exhibit 10.01 to the S-4.
10.02 7 1/2% unsecured Promissory Note dated May 15, 1995
delivered by the Company to BOT as part of the
consideration for the transfer. Incorporated by
reference to Exhibit 10.02 to the S-4.
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<PAGE>
10.03 Employment Agreement dated May 15, 1995 between Rocky
H. Aoki and the Company. Incorporated by reference to
Exhibit 10.03 to the S-4.
10.04 Employment Agreement dated May 15, 1995 between Joel
A. Schwartz and the Company. Incorporated by
reference to Exhibit 10.04 to the S-4.
10.05 Promissory Note made by BOT in favor of BNC dated
September, 1992. Incorporated by reference to Exhibit
No. 10.13 to BNC's Annual Report on Form 10-K for the
fiscal year ended March 28, 1993.
10.06 BNC's 1985 Employee's Stock Option Plan. Incorporated
by reference to Appendix II to BNC Proxy Statement
for its Annual Meeting of Stockholders held on
December 11, 1985. Incorporated by reference to
Exhibit 10.06 to the S-4.
10.07 1994 Employees' Stock Option Plan Incorporated by
reference to Exhibit 10.07 to the S-4.
10.08 Directors' Stock Option Plan. Incorporated by
reference to Exhibit 10.08 to the S-4.
10.09 Employment Agreement dated April 1, 1995 between Taka
Yoshimoto and BNC. Incorporated by reference to
Exhibit 10.09 to the S-4.
10.10 Employment Agreement dated January 1, 1995 between
Michael R. Burris and the Company. Incorporated by
reference to Exhibit 10.10 to the S-4.
10.11 Credit Agreement, dated December 1, 1997, among
Benihana Inc., its Subsidiaries named as guarantors
and First Union National Bank, as Agent for the
Lenders.
10.12 Benihana Administrative Incentive Compensation Plan.
Incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1996.
10.13 1996 Class A Stock Option Plan. Incorporated by
reference to Exhibit A to Benihana Inc. Proxy
Statement for its Annual Meeting of Stockholders
held on July 19, 1996.
10.14 Amendment dated December 11, 1997 to Employment
Agreement dated May 15, 1995 between Rocky H. Aoki
and the Company. Incorporated by reference to Exhibit
10.14 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 29, 1998.
10.15 Amendment dated May 18, 1998 to Employment Agreement
dated May 15, 1995 and amended December 11, 1997
between Rocky H. Aoki and the Company. Incorporated
by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the fiscal year ended March
29, 1998.
10.16 Amendment dated December 11, 1997 to Employment
Agreement dated May 15, 1995 between Joel A. Schwartz
and the Company. Incorporated by reference to Exhibit
10.16 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 29, 1998.
10.17 Amendment dated December 11, 1997 to Employment
Agreement dated April 1, 1995 between Taka Yoshimoto
and Benihana Inc. Incorporated by reference to
Exhibit 10.17 to the Company's Annual Report on Form
10-K for the fiscal year ended March 29, 1998.
10.18 Amendment dated December 11, 1997 to Employment
Agreement dated January 1, 1995 between Michael R.
Burris and Benihana Inc. Incorporated by reference to
Exhibit 10.18 to the Company's Annual Report on Form
10-K for the fiscal year ended March 29, 1998.
10.19 1997 Employees Class A Stock Option Plan.
Incorporated by reference to Exhibit A of Benihana
Inc.'s Proxy Statement for its Annual Meeting of
Stockholders held August 27, 1998.
14
<PAGE>
10.20 Amendments to the Directors' Stock Option Plan.
Incorporated by reference to Exhibit B of Benihana
Inc.'s Proxy Statement for its Annual Meeting of
Stockholders held August 27, 1998.
13.01 Portions of Annual Report to Stockholders for the
year ended March 28, 1999.
22.01 List of Subsidiaries. Incorporated by reference to
Exhibit No. 22.01 to the S-4.
23.01 Consent of Deloitte & Touche LLP.
23.02 Consent of Deloitte & Touche LLP.
(b) Reports on Form 8-K.
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: June 15, 1999 BENIHANA INC.
By: /s/ Joel A. Schwartz
---------------------------
Joel A. Schwartz, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on the date indicated above by the following persons on behalf
of the registrant and in the capacities indicated.
Signature Title Date
- --------- ----- ----
/s/ Joel A. Schwartz President and June 15, 1999
- ------------------------ Director (Principal
Joel A. Schwartz Executive Officer)
/s/ Taka Yoshimoto Executive Vice President - June 15, 1999
- ------------------------ Restaurant Operations
Taka Yoshimoto and Director
/s/ Michael R. Burris Senior Vice President of June 15, 1999
- ------------------------ Finance and Treasurer -
Michael R. Burris Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Kevin Aoki Vice President - June 15, 1999
- ------------------------ Marketing and Director
Kevin Aoki
/s/ Juan C. Garcia Vice President - Controller June 15, 1999
- ------------------------
Juan C. Garcia
/s/ Darwin C. Dornbush Secretary and Director June 15, 1999
- ------------------------
Darwin C. Dornbush
/s/ John E. Abdo Director June 15, 1999
- ------------------------
John E. Abdo
/s/ Norman Becker Director June 15, 1999
- ------------------------
Norman Becker
/s/ Robert B. Greenberg Director June 15, 1999
- ------------------------
Robert B. Greenberg
16
<PAGE>
EXHIBIT 13.01 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended
----------------------------------------------------------------------
March 28, March 29, March 30, March 31, March 26,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share information)
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Total revenues $119,149 $99,757 $85,204 $81,606 $73,264
Cost of sales 30,964 25,894 21,658 21,128 20,744
Restaurant expenses 70,399 58,517 51,246 48,676 44,020
General and administrative
expenses 6,144 5,408 4,217 4,801 4,841
Interest expense, net 1,644 1,076 904 1,226 1,140
Income before taxes 9,998 8,862 7,179 5,775 2,519
Net income 6,518 5,940 4,947 4,410 2,751
EBITDA 15,529 12,938 10,510 9,157 6,027
Pro forma basic earnings
per common share (1) 1.06 .96 .81 .73 .42
Pro forma diluted earnings
per common share (1) 1.02 .93 .77 .70 .41
CONSOLIDATED BALANCE SHEET
DATA:
Total assets $60,868 $58,157 $40,562 $36,257 $33,722
Long-term debt including
current maturities 12,407 16,840 6,543 7,495 9,178
Stockholders' equity 34,699 28,223 22,754 17,326 12,205
Capital expenditures 7,212 5,079 2,818 2,156 1,264
</TABLE>
(1) The pro forma basic and diluted earnings per common share were computed
using the weighted average shares and common stock equivalents outstanding
in each year. The amounts of preferred dividends and interest expense that
would have been incurred in the fiscal years ended 1996 and 1995 as a
result of the acquisition of the BOT Restaurants in fiscal year 1996, which
was accounted for in a manner similar to a pooling of interests, have been
factored in the calculation of pro forma earnings per common share for all
periods that are presented prior to the acquisition.
17
<PAGE>
Overview of Fiscal 1999
The Company ended fiscal 1999 with record high revenues, net income and earnings
per share amounts. Revenues totaled $119,149,000 in fiscal 1999 as compared to
$99,757,000 in fiscal 1998 and $85,204,000 in fiscal 1997. Net income totaled
$6,518,000 in fiscal 1999 as compared to $5,940,000 in fiscal 1998 and
$4,947,000 in fiscal 1997. Diluted earnings per share for fiscal 1999 was $1.02
as compared to $.93 in fiscal 1998 and $.77 per share in fiscal 1997.
The Company concluded its program to convert eight of the nine Samurai and Kyoto
restaurants, acquired in December 1997 with the purchase of Rudy's Restaurant
Group (Rudy's), to the Benihana standard of atmosphere, food quality and level
of service and are now operating under the Benihana brand. The ninth restaurant
will operate under its former identity as a Samurai although quality
improvements were made throughout.
During fiscal 1999, the Company opened two restaurants, a Benihana restaurant in
Ontario, California and a sushi restaurant in Fort Lauderdale, Florida. The
sushi restaurant, known as Sushi Doraku by Benihana, features a kaiten revolving
conveyor system to serve sushi to customers as well as table service by waiters
or waitresses. The Company plans to open two Sushi Doraku by Benihana
restaurants in fiscal 2000, one in Chicago and the other in Miami Beach.
The Company continues to benefit from an overall strong economy and from
favorable consumer response to the Company's concept and to the growing
popularity of sushi products, which is offered at either separate sushi bars or
at the teppanyaki grills in all of the Company's restaurants.
The Company's revenues consist of sales of food and beverages in each of the
owned restaurants and franchise fees and royalties received from franchisees.
Cost of food and beverage sales represents the direct cost of the ingredients
for the prepared food and beverages sold. Restaurant expenses consist of direct
and indirect labor, occupancy costs, advertising and other costs that are
directly attributed to each restaurant location.
Restaurant revenues and expenses are dependent upon a number of factors
including the number of restaurants in operation and restaurant patronage.
Revenues are also dependent on the average check amount and expenses are
additionally dependent upon the costs of food commodities and of beverages sold,
average wage rates, marketing costs and the costs of interest and administering
restaurant operations.
Management's Outlook
The Company has benefited from a healthy economy over the past several years and
from changes in demographic trends both of which leads to increased frequency
for people to dine out. However, diners have more choices to spend their food
dollars at a variety of restaurant concepts and at a growing number of
additional restaurant locations opened by the Company's competitors. The
competitive environment requires that the Company provide outstanding value to
its customers. Management believes that an emphasis on quality service to its
customers will increase customer return frequency and that the consumer will
accept higher menu prices along with the enhanced dining experience. The Company
has begun a service management program to focus the organization on increasing
the value of Benihana to the consumer.
The Company will continue to grow the restaurant base by adding two new owned
Benihanas and two new Sushi Doraku restaurants. New restaurant units typically
have increased costs associated with pre-opening expenses such as employee
relocation and training, advertising, and other costs associated with a new
operating restaurant. So while a new restaurant unit generally has lower
operating results than restaurants with more established locations,
profitability generally improves over time and investment spending in additional
restaurant units adds to long-term shareholder value. The Company also expects
two additional franchised units will open in fiscal 2000, one in Lima, Peru and
the other in Anchorage, Alaska. However, because of factors discussed in the
Forward-Looking Information section, there can be no assurances that anticipated
growth in restaurant units or comparable same store sales will result.
Revenues
The amounts of revenues and the changes in amount and percentage change in
amount of revenues from the previous fiscal year are shown in the following
tables (in thousands):
18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Restaurant sales $118,351 $99,062 $84,415
Franchise fees and royalties 798 695 789
-------- ------- -------
Total Revenues $119,149 $99,757 $85,204
======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Amount of change in total revenue from
the previous year $19,392 $14,553 $ 3,598
Percentage change from the previous year 19.4% 17.1% 4.4%
Comparable average restaurant sales $ 2,598 $ 2,410 $ 2,221
Percentage growth in comparable average restaurant sales 7.8% 8.5% 3.9%
</TABLE>
Year ended March 28, 1999 compared to March 29, 1998 -- Restaurant sales
increased $19,289,000 during the year and franchise revenues exceeded fiscal
1998 by $103,000. The acquisition of Rudy's represented $9,911,000 of the
increase. Increased revenues at Benihana restaurants opened longer than one year
represented $6,971,000 of the sales increase. The Company's two new units, the
traditional Benihana in Ontario, California and the Sushi Doraku by Benihana in
Fort Lauderdale, Florida, contributed $1,618,000 to the increase. The Benihana
Grill units had increased overall sales of $789,000.
Customer counts increased to 5,285,000 (19.1%) from the previous fiscal year. Of
this increase, 7.3% represents increased traffic at Benihana restaurants open
over one year. The remainder is the result of the acquisition and the two new
restaurants. The average check amount increased slightly to $22.39 from $22.32
in 1998. Management was successful in its efforts to increase the average check
amount 6% at the Benihana Grill units to improve their profitability. The
average check amount at the acquired units when they were purchased was lower
than the Company's Benihana units. As the units were converted, menu prices were
increased to reflect the improvements made in food quality and standards of
service.
The average dinner check amount was $25.06 in 1999 compared to $24.79 in 1998
and the average lunch check amount was $13.71 in 1999 compared to $13.54 in
1998.
Revenue from franchising activities increased 14.8% as a result of increased
sales of franchisees.
Year ended March 29, 1998 compared to March 30, 1997 -- Restaurant sales
increased $14,647,000 over fiscal 1997. The increase in sales was a result of an
acquisition that was completed on December 1, 1997, the opening of two new
restaurants and an increase in guest counts at units opened for longer than one
year. The nine Rudy's restaurants contributed $5,994,000 of the increase for the
thirteen weeks they were owned by the Company. The two new restaurants
represented $1,475,000 of the increase. Guest counts at units opened for longer
than one year increased by 295,751 guests, contributing $7,178,000 to the
increase. The average check size in 1998 was $22.32 compared to $22.42 in 1997.
The decrease in the average check amount was largely a result of a lower average
check amount at the restaurants acquired and because there was a higher
proportion of lunch traffic which carries a lower average check amount. The
average dinner check amount increased to $24.79 in 1998 compared to $24.73 in
1997. The average lunch check amount increased to $13.54 in 1998 compared to
$13.38 in 1997.
Costs and Expenses
Cost of restaurant food and beverage sales, which are generally variable with
sales, directly increased with changes in revenues for each of the fiscal years.
The following table reflects the proportion that the various elements of costs
and expenses bore to sales and the changes in amounts and percentage changes in
amounts from the previous fiscal year.
19
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH
COST AS PERCENTAGE OF RESTAURANT SALES: 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cost of food and beverage sales 26.1% 26.1% 25.7%
Restaurant expenses 59.5% 59.1% 60.7%
General and administrative expenses 5.2% 5.5% 5.0%
AMOUNT OF CHANGE FROM PREVIOUS
YEAR (IN THOUSANDS):
Cost of restaurant food and beverage sales $ 5,070 $4,236 $ 530
Restaurant expenses $11,882 $7,271 $2,570
General and administrative expenses $ 736 $1,191 $ (584)
Interest expense, net 568 172 (322)
Percentages increase(decrease):
Cost of restaurant food and beverage sales 19.6% 19.6% 2.5%
Restaurant expenses 20.3% 14.2% 5.3%
General and administrative expenses 13.6% 28.2% (12.2%)
Interest expense, net 52.8% 19.0% (26.3%)
</TABLE>
Year ended March 28, 1999 compared to March 29, 1998 -- The cost of food and
beverage sales held constant as a percentage of sales at 26.1%.
Restaurant expenses increased by $7,242,000 from the additional expenses
associated with the units acquired with the Rudy's Restaurant Group acquisition.
Restaurant expenses also increased as a result of increased customer counts and
from the full year effect of increases in the minimum wage.
General and administrative expenses decreased as a percentage of sales. The
total dollar amount increased, however, from additional salaries for newly hired
key employees and from normal increases in compensation. Amortization of
goodwill from the Rudy's acquisition represented $349,000 of the increase in
general and administrative expenses.
Interest expense, net increased by $568,000 over the preceding year. This
increase results from borrowings made to acquire Rudy's.
Year ended March 29, 1998 compared to March 30, 1997 -- The cost of food and
beverage sales increased in total dollar amount and when expressed as a
percentage of sales. The increase in cost of sales as a result of increases in
customer counts was $3,865,000. Commodity cost increases, principally higher
seafood costs, represented the remaining amount of the increase in cost of
sales.
Restaurant expenses increased in total amount but decreased when expressed as a
percentage of sales. The nine restaurants acquired during the year represented
$3,315,000 of the increase. The increase in sales also increased other costs
that vary with sales volume, such as credit card processing expenses and
percentage rent expense. In addition, advertising and promotional expenses
increased as a result of the Company's increased marketing efforts in television
advertising and marketing costs for the sushi bars. Spending on advertising for
the acquired restaurants by the former owner was significantly less than that of
the Company. Consequently, restaurant expenses decreased as a percentage of
sales.
General and administrative expenses increased in total dollar amount when
compared to the comparable periods of the prior year. The increase resulted from
increases in salaries and benefits, miscellaneous expenses and depreciation and
amortization. The increase in salaries and benefits resulted from increases in
the salaries and bonuses of executive officers in accordance with amended and or
new employment agreements and from additional personnel. The increase in
miscellaneous expenses reflects a one-time expense from the Rudy's acquisition.
The increase in depreciation and amortization expense resulted largely from the
amortization of goodwill from the acquisition of Rudy's.
Interest expense, net increased as a result of additional bank borrowings of
$9,400,000 to acquire Rudy's.
20
<PAGE>
Income Taxes
The Company's effective tax rate increased to 34.8% in 1999 from 33.0% in 1998
and 31.1% in 1997. The increase in 1999 reflects increased state income taxes.
The increase from 1997 to 1998 was a result of state income tax refunds of
$160,000 received in 1997.
Liquidity and Capital Resources
The Company does not require significant amounts of inventory or receivables,
and as is typical of most restaurant companies, the Company does not have to
provide financing for such assets and operates with a minimum amount or deficit
of working capital.
The Company requires capital principally for the development of new restaurants,
acquisition of other restaurant businesses, and the refurbishment of existing
restaurant units.
As of March 28, 1999, the Company had available $15,000,000 under its revolving
loan facility. Management believes that the amount available under its credit
facility together with internally generated funds from operations provide
sufficient cash resources for anticipated capital improvements as well as
construction and opening of new restaurants.
The Company has signed leases for four new restaurants. Estimated remaining
expenditures to complete construction and open these new restaurants are
expected to be $4,800,000. Two of the new restaurants will operate as
traditional Benihana restaurants in Monterey and Santa Monica, California and
are projected to open in the spring of 2000. The other two will be operated
under the Company's new sushi concept, Sushi Doraku by Benihana in Miami Beach,
Florida and Chicago, Illinois and are scheduled to open in the fall of 1999.
Seasonality and Quarterly Results
The Company operates on a 52/53 week fiscal year; the first quarter consists of
16 weeks and the remaining three quarters consist of 12 weeks, except that the
fourth quarter will have 13 weeks when the entire fiscal year consists of 53
weeks.
Although the Company's business is not highly seasonal, the Company does enjoy
greater than normal customer traffic on certain days of the year: Mother's day
falls in the first quarter, Christmas day and New Year's Eve fall in the third
quarter and Valentine's falls in the fourth quarter.
Forward-Looking Information
This annual report contains various "forward-looking statements" which represent
management's expectation or beliefs concerning future events, including unit
growth, future capital expenditures, and other operating information. A number
of factors could, either individually or in combination, cause actual results to
differ materially from those included in the forward-looking statements,
including, without limitation, changes in consumer dining preferences,
fluctuation in commodity prices, availability of qualified employees, changes in
the general economy and industry cyclicality, changes in consumer disposable
income, competition within the restaurant industry, availability of suitable
restaurant locations, harsh weather conditions in areas in which the Company and
its franchisees operate restaurants or plan to build new restaurants acceptance
of the Company's concepts in new locations, changes in governmental laws and
regulations affecting labor rates, employee benefits, and licensing, and ability
to complete new restaurant construction and obtain governmental permits on a
reasonably timely basis and other factors.
Year 2000
The Year 2000 (Y2K) issue is the result of computer programs using two digits,
as opposed to four digits, to indicate the year. Computer systems that cannot
interpret data beyond 1999 may fail and cause critical business processes to be
materially disrupted. Such failures may occure not only within our own systems,
but also in the systems of vendors in the supply chain, credit card processors
and the financial institutions upon which we rely. The Company has implemented a
plan to address the Y2K issue in steps to mitigate risks in our proprietary
systems and to identify Y2K risks in our supply chain.
21
<PAGE>
The risks in the Company's own systems were identified to include point-of-sale
systems at the restaurants and systems upon which management relies to provide
information to control and guide operations and prepare financial information.
The Company has tested the point-of-sale systems used in the restaurants and
management has determined that they were compliant with Y2K. The Company's
management information systems were not in compliance with Y2K. Management
evaluated various courses of action to make the information systems Y2K
compliant. Management determined that the system could have been made Y2K
compliant, but they were not sufficient to support future growth. Management
decided to replace existing financial systems, and after conducting interviews
with several software vendors, management contracted with a major supplier of
enterprise resource planning systems to improve our core financial information
and restaurant logistical capabilities beyond the capabilities of the previously
existing financial systems. The new system has been installed and is operating.
As of May 1999, management believes that these systems are Y2K compliant and are
reliable. The external costs associated with implementing these systems are
approximately $425,000, including the cost of software applications, the
hardware necessary to support the new applications software and contracted
services used to augment internal staff implementing the new system.
The Company's most significant vendors were formally contacted to determine
whether there would be material disruptions in the supply chain. The Company has
no significant system interfaces with vendors.
The Company's supply chain is composed of numerous different suppliers
throughout the country. Each of the restaurants purchase food, beverages and
supplies local to their markets, therefore, the Company is not materially
reliant on a few suppliers and the Company believes that the risk is minimal due
to the failure of any one vendor. However, there may be unidentifiable Y2K
problems further up the supply chain, the effects of which cannot be predicted.
Additionally, the Company relies upon utility service for electricity, gas and
water and may incur disruption in specific market areas.
Our significant vendors indicated to us that they are either Y2K compliant or
are currently taking measures to become Y2K compliant before disruptions that
might impact the Company would occur. Letters have been sent to all banks and
the credit card processors with which the Company has significant relationships
and Company management has reviewed and evaluated their responses. The bank's
and the credit card processing companies' responses to the Company were that
they are Y2K compliant.
New Accounting Standards
The effects of new accounting standards, adopted or to be adopted in future
periods, are discussed in the Summary of Significant Accounting Policies in the
notes to the consolidated financial statements.
Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates on debt and
changes in commodity prices. A discussion of the Company's accounting policy for
derivative financial instruments is included in the Summary of Significant
Accounting Policies in the notes to the consolidated financial statements.
The Company's net exposure to interest rate risk consists of floating rate
borrowings that are benchmarked to US and European short-term interest rates.
The Company may from time-to-time utilize interest rate swaps to manage overall
borrowing costs and reduce exposure to adverse fluctuations in interest rates.
The Company does not use derivative instruments for trading purposes and the
Company has a policy to that effect. At March 28, 1999, the Company had a
financial derivative with a notional amount of $5,488,000 against floating rate
debt of $11,250,000. A one percentage point interest charge on the outstanding
balance of the variable rate debt as of March 28, 1999 would not be material.
The Company purchases certain commodities such as beef, chicken and seafood.
These commodities are purchased based upon market prices established with
vendors. The Company does not use financial instruments to hedge commodity
prices because these purchase arrangements help to control the ultimate cost
paid and any cost aberrations have historically been short term in nature.
22
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share information)
<TABLE>
<CAPTION>
Year ended March 28, March 29, March 30,
1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Restaurant sales $118,351 $99,062 $84,415
Franchise fees and royalties 798 695 789
- --------------------------------------------------------------------------------------------------
Total revenues 119,149 99,757 85,204
- --------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of food and beverage sales 30,964 25,894 21,658
Restaurant expenses 70,399 58,517 51,246
General and administrative expenses 6,144 5,408 4,217
Interest expense, net 1,644 1,076 904
- --------------------------------------------------------------------------------------------------
Total costs and expenses 109,151 90,895 78,025
- --------------------------------------------------------------------------------------------------
Income from operations before income taxes 9,998 8,862 7,179
Income tax provision 3,480 2,922 2,232
- --------------------------------------------------------------------------------------------------
Net Income $ 6,518 $ 5,940 $ 4,947
==================================================================================================
Earnings Per Share
Basic earnings per common share $ 1.06 $ .96 $ .81
Diluted earnings per common share $ 1.02 $ .93 $ .77
</TABLE>
See notes to consolidated financial statements
23
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)
<TABLE>
<CAPTION>
March 28, March 29,
1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,684 $ 1,169
Receivables (net of allowance for doubtful accounts of $35
in 1999 and $0 in 1998, respectively) 269 385
Inventories 3,106 3,768
Prepaid expenses 635 758
- ----------------------------------------------------------------------------------------------------------
Total current assets 5,694 6,080
Property and equipment, net 37,128 32,998
Deferred income taxes, net 3,385 3,781
Goodwill, net 12,150 12,663
Other assets 2,511 2,635
- ----------------------------------------------------------------------------------------------------------
$60,868 $58,157
==========================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $10,497 $ 9,323
Current maturities of long-term debt and
obligations under capital leases 2,298 1,939
- ----------------------------------------------------------------------------------------------------------
Total current liabilities 12,795 11,262
Long-term debt 10,672 15,407
Obligations under capital leases 2,702 3,265
Stockholders' Equity:
Series A Convertible Preferred stock - $1.00 par value;
authorized - 5,000,000 shares, issued and outstanding -
700 shares and 1,000 shares, respectively 1 1
Common stock - $.10 par value; convertible into Class A Common,
authorized - 12,000,000 shares, issued and
outstanding - 3,571,616 and 3,571,116 shares, respectively 357 357
Class A Common stock - $.10 par value; authorized - 20,000,000
shares, issued and outstanding -
2,563,443 and 2,517,463 shares, respectively 256 252
Additional paid-in capital 4,604 14,600
Retained earnings 19,597 13,129
Treasury stock - 9,177 shares at cost (116) (116)
- ----------------------------------------------------------------------------------------------------------
Total stockholders' equity 34,699 28,223
- ----------------------------------------------------------------------------------------------------------
$60,868 $58,157
==========================================================================================================
</TABLE>
See notes to consolidated financial statements
24
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share information)
<TABLE>
<CAPTION>
Class A Additional Total
Preferred Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Stock Capital Earnings Stock Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1996 $ 2 $ 352 $ 232 $ 14,285 $ 2,455 $ $17,326
Net income 4,947 4,947
Issuance of 41,000 shares of
stock under exercise of options 4 178 182
Purchase of 9,177 shares of stock (116) (116)
Dividend on preferred stock (120) (120)
Issuance of 300 shares of stock
for incentive compensation 3 3
Issuance of 200,000 shares under
exercise of warrants 20 512 532
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, March 30, 1997 2 356 252 14,978 7,282 (116) 22,754
Net income 5,940 5,940
Fair market value of warrant issued
in connection with the acquisition
of Rudy's 563 563
Redemption of preferred stock (1) (999) (1,000)
Dividend on preferred stock (93) (93)
Issuance of 14,913 shares of stock
under exercise of options 1 58 59
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, March 29, 1998 1 357 252 14,600 13,129 (116) 28,223
Net income 6,518 6,518
Conversion of 300 shares of preferred
stock into 45,113 shares of Class A
Common Stock 4 (4)
Dividend on preferred stock (50) (50)
Issuance of 1,367 shares of stock
under exercise of options 8 8
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, March 28, 1999 $ 1 $ 357 $ 256 $14,604 $19,597 $ (116) $34,699
==================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
March 28, March 29, March 30,
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net income $ 6,518 $5,940 $4,947
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,887 3,000 2,427
Issuance of common stock for incentive compensation 3
Deferred income taxes 396 1,043 90
Change in operating assets and liabilities that provided
(used) cash:
Receivables 116 233 (290)
Inventories 662 (264) (1,315)
Prepaid expenses 123 135 83
Other assets (150) (494) (124)
Accounts payable and accrued expenses 1,174 1,652 479
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,726 11,245 6,300
- ----------------------------------------------------------------------------------------------------------------
Investing Activities:
Payment for purchase of Rudy's Restaurant Group
net of cash acquired (19,138)
Expenditures for property and equipment (7,212) (5,079) (2,818)
Other (18) (1) (35)
- ----------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (7,230) (24,218) (2,853)
- ----------------------------------------------------------------------------------------------------------------
Financing Activities:
Preferred stock redeemed (1,000)
Dividends paid on preferred stock (50) (93) (120)
Proceeds from issuance of long-term debt 18,000
Repayment of long-term debt and obligations under
capital leases (4,939) (9,867) (1,604)
Proceeds from issuance of common stock 59 714
Purchase of treasury stock (116)
Conversion of preferred stock 8
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (4,981) 7,099 (1,126)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 515 (5,874) 2,321
Cash and cash equivalents, beginning of year 1,169 7,043 4,722
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $1,684 $1,169 $7,043
================================================================================================================
Supplemental Cash Flow Information
Cash paid during the fiscal year for:
Interest $1,159 $ 860 $ 733
Income taxes $2,992 $2,804 $2,061
Noncash investing and financing activities:
Fair market value of warrant issued $ 563
Non-competition agreement $ 684
Business acquisitions, net of cash acquired:
Fair value of assets acquired, other than cash $ 8,888
Liabilities assumed (2,577)
Purchase price in excess of the net assets acquired 12,827
-------
$19,138
=======
During the fiscal year ended March 28, 1999, 300 shares of
Preferred stock were converted into 45,113 shares of Class A Common Stock
See notes to consolidated financial statements
</TABLE>
26
<PAGE>
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 28, 1999, MARCH 29, 1998 AND MARCH 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - Benihana Inc. owns and operates 51 Japanese teppanyaki-style
and sushi restaurants and franchises twelve others. The Company has the
rights to open, license and develop Benihana restaurants in the United
States, Central and South America and the Caribbean islands.
On December 1, 1997 the Company acquired Rudy's Restaurant Group, Inc.
(Rudy's), a company that owns nine teppanyaki-style Japanese theme
restaurants similar to those owned by the Company. The Company paid
approximately $20,000,000 and issued a warrant to purchase 200,000
shares of the Company's Class A Common Stock at $8.00 per share. The
excess of the purchase price over the tangible and intangible net
assets acquired of approximately $13 million has been allocated to
goodwill.
Operating Segments - Statement of Financial Accounting Standards (FAS)
131 "Disclosures about Segments of an Enterprise and Related
Information", requires disclosure of certain information about
products, services and geographic territories in which the Company
operates, and major customers. The Company operates within only one
reportable operating segment.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires that
management make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual amounts and results could differ from those
estimates.
Fiscal Year - The Company's fiscal year is a 52/53 week year. All of
years presented in these financial statements consisted of 52 weeks.
Principles of Consolidation - The consolidated financial statements
include the accounts of Benihana Inc., and all of its subsidiaries. In
consolidation, significant intercompany accounts and transactions are
eliminated.
Cash and Cash Equivalents - The Company considers all highly liquid
investment instruments purchased with an initial maturity of three
months or less to be cash equivalents.
Inventories - Inventories, which consist principally of restaurant
operating supplies and food and beverage, are stated at the lower of
cost (first-in, first-out method) or market.
Depreciation and Amortization - Depreciation and amortization are
computed by the straight-line method over the estimated useful life
(buildings - 30 years, restaurant furniture, fixtures and equipment - 8
years, office equipment - 8 years, personal computers, software and
related equipment - 3 years, and leaseholds - lesser of the lease
terms, including renewal options, or useful life). Goodwill is being
amortized on a straight-line basis over a 25 year period, the estimated
benefit period for the business acquired. Accumulated amortization of
goodwill was $677,000 at March 28, 1999.
Accounting for Long-Lived Assets - The Company evaluates its net
investment in restaurant properties and goodwill for impairment
whenever events or changes in circumstances indicate
27
<PAGE>
that the carrying amounts of an asset may not be recoverable. During
the periods presented, no such impairment was incurred.
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use - The Company adopted in fiscal 1999, Statement of
Position (SOP) 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which was issued in March
1998. SOP 98-1 identifies the characteristics of internal-use software
and specifies that once the preliminary project stage is complete,
certain external direct costs, certain direct internal payroll and
payroll-related costs and interest costs incurred during the
development of computer software for internal use should be capitalized
and amortized. The Company reflects all unamortized costs in other
assets and amortizes such costs over a three-year period.
Derivative Instruments - From time to time, The Company utilizes
interest rate swaps to hedge its exposure to fluctuations in variable
interest rates. The Company recognizes the interest differential to be
paid or received on an interest rate swap as an adjustment to interest
expense as the differential occurs. If the Company was to terminate an
interest rate swap, any gain or loss realized upon termination would be
deferred and amortized to interest expense over the remaining term of
the underlying debt instrument it was intended to modify or would be
recognized immediately if the underlying debt instrument were settled
prior to maturity.
Stock-Based Compensation - The Company applies the intrinsic value
method in accounting for stock options. Accordingly, compensation cost
for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of grant over the
amount an employee must pay to acquire the stock.
Earnings Per Share - Basic earnings per common share is computed by
dividing net income available to common shareholders by the weighted
average number of common shares outstanding during each period. The
diluted earnings per common share computation includes dilutive common
share equivalents issued under the Company's various stock option plans
and dilutive convertible preferred stock.
The computation of basic earnings per common share and diluted earnings
per common share for each year is shown below (in thousands):
<TABLE>
<CAPTION>
March 28, March 29, March 30,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Income from operations $6,518 $5,940 $4,947
Less preferred dividends (50) (93) (120)
------ ------ ------
Income for computation of basic
earnings per common share 6,468 5,847 4,827
Convertible preferred dividends 50 93 120
------ ------ ------
Income for computation of diluted
earnings per common share $6,518 $5,940 $4,947
====== ====== ======
Weighted average number of common
shares used in basic EPS 6,105 6,080 5,947
Effect of dilutive securities:
Stock options and warrants 180 86 144
Convertible preferred shares 134 233 300
------ ------ ------
Weighted average number of common
shares and dilutive potential common
shares used in diluted EPS 6,419 6,399 6,391
====== ====== ======
</TABLE>
28
<PAGE>
Comprehensive Income - The Company adopted the provisions of FAS 130,
"Reporting Comprehensive Income." FAS 130 establishes standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. There are no items requiring separate disclosure
in accordance with FAS 130.
New Accounting Standards Not Yet Adopted - In June 1998, FAS 133,
"Accounting for Derivative Instruments and Hedging Activities" was
issued. The new statement requires all derivatives to be recorded on
the balance sheet at fair value and establishes new accounting rules
for hedging instruments. The statement is effective for years beginning
after June 15, 1999. Company management is assessing the impact this
statement will have on the consolidated financial statements, but does
not currently believe it will be material.
Reclassifications - Certain prior year amounts have been reclassified
to conform to the fiscal year 1999 presentation.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has estimated the fair value of financial instruments that
are included as assets and liabilities in the accompanying consolidated
balance sheets. The estimated fair value has been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in
interpreting data to develop such estimates. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange. The use of
different market assumptions could have a material effect on estimated
fair value. The carrying value and estimated fair value of the
financial instruments held by the Company as of March 28, 1999 and
March 29, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
March 28, 1999 March 29, 1998
------------------------- -----------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents $ 1,684 $ 1,684 $ 1,169 $ 1,169
Receivables $ 430 $ 422 $ 628 $ 612
Cash surrender value of officer's
life insurance $ 324 $ 324 $ 306 $ 306
Financial liabilities
Bank and other indebtedness $12,407 $12,636 $16,840 $17,091
</TABLE>
The following methods and assumptions were used to estimate the fair
value of the Company's financial instruments for which it was
practicable to estimate that value:
Cash and cash equivalents
The carrying value approximates fair value because of the
short-term nature of the instruments.
Receivables
The carrying value approximates the fair value of current
receivables because of the short-term nature of these instruments.
The fair value of long-term receivables was estimated based on
discounted cash flows expected to be received using interest rates
at which similar loans are made to borrowers with similar credit
ratings.
29
<PAGE>
Long-term debt
The fair value of outstanding borrowings under its long-term debt
agreement approximates the carrying value since the interest rate
floats subject to market conditions. The value of the interest
rate swap agreement included in the fair value of the debt was
obtained from dealer quotes which represent the estimated amount
the Company would receive or pay to terminate the agreement taking
into consideration current market interest rates.
3. INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
March 28, March 29,
1999 1998
-------- --------
<S> <C> <C>
Food and beverage $1,147 $1,574
Supplies 1,959 2,194
------ ------
$3,106 $3,768
====== ======
4. PROPERTY AND EQUIPMENT
</TABLE>
<TABLE>
<CAPTION>
Property and equipment consist of (in thousands):
March 28, March 29,
1999 1998
-------- --------
<S> <C> <C>
Land $ 5,925 $ 5,925
Buildings 11,373 10,224
Leasehold improvements 32,744 28,325
Restaurant furniture, fixtures, and equipment 17,753 16,288
Restaurant facilities and equipment under
capital leases 7,638 7,655
------- --------
75,433 68,417
Less accumulated depreciation and amortization
(Including accumulated amortization of restaurant
facilities and equipment under capital leases
of $6,203 and $5,907 in 1999 and 1998,
respectively) 39,648 36,657
------- -------
35,785 31,760
Construction in progress 1,343 1,238
------- -------
$37,128 $32,998
======= =======
</TABLE>
30
<PAGE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of (in thousands):
<TABLE>
<CAPTION>
March 28, March 29,
1999 1998
-------- --------
<S> <C> <C>
Accounts payable $ 3,761 $ 3,766
Accrued payroll, incentive
compensation and related taxes 2,826 2,500
Accrued gift certificates 550 420
Accrued sales taxes 634 596
Accrued property taxes 403 384
Accrued percentage rent 545 537
Other accrued operating expenses 1,778 1,120
-------- ------
$10,497 $ 9,323
======= =======
</TABLE>
6. LEASE OBLIGATIONS
The Company generally operates its restaurants in leased premises.
The typical restaurant premises lease is for a term of between 15
to 25 years with renewal options ranging from 5 to 25 years. The
leases generally provide for the payment of property taxes,
utilities, and various other use and occupancy costs. Rentals
under certain leases are based on a percentage of sales in excess
of a certain minimum level. Certain leases provide for increases
based upon the changes in the consumer price index. The Company is
also obligated under various leases for restaurant equipment and
for office space and equipment.
Minimum payments under lease commitments are summarized below for
capital and operating leases. The imputed interest rates used in
the calculations for capital leases vary from 9.75% to 12% and are
equivalent to the rates which would have been incurred to borrow,
over a similar term, the amounts necessary to purchase the leased
assets.
The amounts of operating and capital lease obligations are as
follows (in thousands):
<TABLE>
<CAPTION>
Operating Capital
Leases Leases
--------- -------
<S> <C> <C>
Fiscal year ending:
2000 $ 4,458 $ 893
2001 3,736 893
2002 3,513 893
2003 3,399 784
2004 3,330 458
Thereafter 27,149 315
------- -------
Total minimum lease payments $45,585 4,236
=======
Less amount representing interest 971
-------
Total obligations under capital leases 3,265
Less current maturities 563
-------
Long-term obligations under capitalized
leases at March 28, 1999 $2,702
======
</TABLE>
31
<PAGE>
Rental expense consists of (in thousands):
<TABLE>
<CAPTION>
March 28, March 29, March 30,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Minimum rental commitments $4,844 $3,957 $3,310
Rental based on percentage of sales 1,491 1,253 1,036
------ ------ ------
$6,335 $5,210 $4,346
====== ====== ======
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
March 28, March 29,
1999 1998
-------- --------
<S> <C> <C>
Notes payable - bank (see below):
Term loan $11,250 $12,000
Revolving line of credit 3,000
Notes payable - other:
7 1/2% unsecured promissory note payable
in monthly installments of $13 174 313
7% promissory note payable in monthly
installments of $30 347 670
7% unsecured note obligation payable in
monthly installments of $7 143 210
Note obligation under terms of non
competition agreement with former shareholder
of Rudy's - discounted at 8%, payable in
monthly installments $17 493 647
------- --------
12,407 16,840
Less current portion 1,735 1,433
------- --------
$10,672 $15,407
======= ========
</TABLE>
The Company has a credit arrangement with a bank that includes a
term loan and a revolving line of credit under which $15,000,000
was available at March 28, 1999. Interest under the credit
arrangement accrues at the Company's option at either prime rate
plus a margin up to 1.0% or at LIBOR plus a margin of 1.0% to
2.25%. At March 28, 1999, interest was accrued at 7.31%. The
applicable interest rate margin varies with the Company's leverage
ratio (defined as earnings before interest, taxes, and
depreciation and amortization divided by funded indebtedness). The
final maturity date of both the term loan and the revolving line
of credit is March 31, 2004. The credit arrangement restricts the
Company from making dividend payments and purchases of the
Company's common equity securities and limits the amounts of
capital expenditures that the Company can make annually during the
term of the agreement. The credit arrangement also requires the
Company to achieve certain ratios of operating cash flow to debt
and other financial benchmarks. The credit agreement is
collateralized by a security interest in the Company's assets.
In fiscal 1996, the Company entered into a seven year interest
rate swap agreement involving an exchange of floating rate
interest payment obligations for fixed rate payment obligations.
The swap agreement was entered into to protect against significant
increases in interest rates on the variable rate bank
indebtedness. Periodic cash payments either received or paid
pursuant to the swap are accrued on a settlement basis as an
adjustment to interest expense. The notional amount of the
agreement at March 28, 1999 was $5,488,000 and that amount is
reduced by $74,000 monthly until May 2002 when the balance of the
agreement expires.
32
<PAGE>
Principal maturities of long-term debt obligations at March 28, 1999
are as follows:
Fiscal year ending
2000 $ 1,735
2001 2,027
2002 2,645
2003 2,250
2004 3,000
Thereafter 750
-------
Total $12,407
=======
8. INCOME TAXES
Deferred tax assets and liabilities reflect the tax effect of temporary
differences between amounts of assets and liabilities for financial
reporting purposes and the amounts of such assets and liabilities as
measured by income tax law. A valuation allowance is recognized to
reduce deferred tax assets to the amounts that are more likely than not
to be realized.
The net deferred tax asset balance consists of (in thousands):
<TABLE>
<CAPTION>
March 28, 1999 March 29, 1998
Assets Liabilities Total Assets Liabilities Total
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Excess book amortization for
for pre-opening costs and
capital leases $ 812 $ $ 812 $ 846 $ - $ 846
Tax loss carryforwards
principally Rudy's
Restaurant Group, Inc. 2,460 2,460 2,891 - 2,891
Accelerated depreciation for
tax purposes (620) (620) (799) (799)
Income tax credits 507 507 940 - 940
Other 333 333 10 - 10
Less - valuation allowance (107) (107) (107) - (107)
--------------------------------------------------------------------------------------
Total asset (liability) $4,005 $ (620) $3,385 $4,580 $ (799) $3,781
======================================================================================
</TABLE>
The Company's net operating loss carryforwards was $6,149,000 for
ordinary income tax purposes and $6,462,000 for alternative minimum
income tax purposes and are available to reduce future taxable income.
Certain of the net operating loss carryforwards are subject to certain
so-called "SRLY" rules which limit their use to offset future income
earned by the entity that generated the loss. All other net operating
loss carryforwards are available to offset income of Rudy's.
Furthermore, the net operating loss carryforwards are subject to the
change of control provision limiting the usage of the net operating
loss carryforwards to approximately $1,100,000 per year. The valuation
allowance has been established to reserve for net operating loss
carryforwards not expected to be realized. All net operating loss
carryforwards expire as follows (in thousands):
Fiscal year ending
2000 $ 573
2001 196
2004 297
2005 4,613
2006 470
------
$6,149
======
33
<PAGE>
The income tax provision consists of (in thousands):
<TABLE>
<CAPTION>
March 28, March 29, March 30,
1999 1998 1997
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal (net of utilization of net operating
loss of $1,079, $352 and $0 in fiscal years
1999, 1998 and 1997, respectively) $2,273 $1,254 $1,637
State 811 625 505
Deferred:
Federal and State 396 1,043 90
-------------------------------------------
Income tax provision $3,480 $2,922 $2,232
===========================================
</TABLE>
The income tax provision differed from the amount computed at the
statutory rate as follows (in thousands):
<TABLE>
<CAPTION>
March 28, March 29, March 30,
1999 1998 1997
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax provision at statutory rate of 34% $3,399 $3,013 $2,441
Change in valuation allowance (92)
State income taxes, net of federal benefit 535 413 333
Tax credits, net (593) (498) (426)
Other 139 86 (116)
-------------------------------------------
Income tax provision $3,480 $2,922 $2,232
===========================================
Effective income tax rate 34.8% 33.0% 31.1%
===========================================
</TABLE>
9. STOCKHOLDERS' EQUITY
Series A Convertible Preferred Stock - The preferred stock has a
liquidation preference of $1,000 per share, carries a cumulative
dividend of 6% and entitles the holder a right to convert into a
maximum of 104,887 shares of the Company's Class A Common Stock.
Common and Class A Common Stock - The Company's Common Stock is
convertible to Class A Common Stock on a one-for-one basis. The Class A
Common Stock is identical to the Common Stock except that it gives the
holder one-tenth (1/10) vote per share, voting together with the
Company's Common Stock as a single class on all matters except the
election of directors. For election of directors, the Class A Common
Stockholders vote as a class to elect 25% of the members of the Board
of Directors.
Stock Options - The Company has various stock option plans, a 1994
Employee Stock Option Plan (1994 Plan), a 1996 Class A Stock Option
Plan (1996 Plan), a 1997 Class A Stock Option Plan (1997 Plan) and a
Directors' Stock Option Plan (Directors' Plan), under which a maximum
of approximately 1,785,000 shares of the Company's Common Stock may be
issued.
Options granted under the 1996 and 1997 plans have a term of ten years
from date of issuance, and are exercisable ratably over a three year
period commencing with the date of the grant. Options granted under
these plans require that the exercise price be at market value on the
date of the grant, or for optionees that own more than 10% of the
combined voting rights of the Company, at 110% of market value for
incentive stock options.
Options granted under the 1994 Plan are exercisable on the date of
grant. Under the Directors' Plan, options to purchase 10,000 shares are
automatically granted to each of the Company's non-employee directors
on the date of the Company's annual meeting. Options granted under the
34
<PAGE>
Directors Plan are exercisable ratably over two years commencing with
the first anniversary of the date of the grant. Certain options granted
under such plan are still exercisable on varying dates through 2005.
The Company accounts for stock-based compensation using the intrinsic
value method. If the fair value method of accounting for stock-based
compensation had been used, the pro forma net income and diluted
earnings per share would be as follows:
<TABLE>
<CAPTION>
March 28, March 29, March 30,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net Income
As reported $6,518 $5,940 $4,947
Pro forma $5,760 $5,372 $4,870
Diluted Earnings Per Common Share
As reported $1.02 $.93 $.77
Pro forma $ .90 $.84 $.76
</TABLE>
The following weighted average assumptions were used in the
Black-Scholes option-pricing model: a risk-free interest rate of 5.5%
for fiscal year 1999, 5.7% for 1998 and 6.8% for 1997, respectively; an
expected life of four years, no expected dividend yield and a
volatility factor of 58%, 34% and 45% for fiscal years 1999, 1998 and
1997, respectively.
Due to the inclusion of only the grants made subsequent to fiscal 1995,
the effects may not be representative of the pro forma impact in future
years.
The following table summarizes information about fixed-price stock
options outstanding at March 28, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ----------------------------
Weighted-
Average Weighted Weighted
Ranges of Remaining Average Average
exercise Contractual Exercise Exercise
Prices Number Life Price Number Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1 3/8 - $3 1/4 31,500 4.8 $ 2.75 31,500 $ 2.75
6 3/4 - 8 3/8 404,803 8.7 7.43 198,503 7.51
9 3/16 - 10 1/8 124,757 7.3 9.42 122,257 9.42
10 1/4 - 12 1/4 316,500 8.5 12.14 215,167 12.11
----------------- ------- -------
$ 1 3/8 - $12 1/4 877,560 567,427
Transactions under the above plans for the years ended are as follows:
</TABLE>
<TABLE>
<CAPTION>
March 28, March 29, March 30,
1999 1998 1997
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year 669,427 222,407 129,900
Granted 209,500 467,750 133,507
Canceled (3,750)
Expired (2,067)
Exercised (1,367) (14,913) (41,000)
---------------------------------------------
Balance, end of year 877,560 669,427 222,407
=============================================
Weighted average fair value of options
granted during year $ 5.26 $ 4.47 $ 3.57
</TABLE>
On March 28, 1999, options for 567,427 of the shares are exercisable at
prices ranging from $1 3/8 to $12 1/4.
35
<PAGE>
There were approximately 966,000 shares of common stock reserved at
March 28, 1999, for issuance upon exercise of stock options.
Stock Rights - The Company has a Shareholder Rights Plan under which a
Preferred Share Purchase Right (Right) is represented by each
outstanding share of the Company's Common and Class A Common Stock. The
Rights operate to create substantial dilution to a potential acquiror
who seeks to make an acquisition, the terms of which the Company's
Board of Directors believes is inadequate or structured in a coercive
manner.
The Rights become exercisable on the tenth day (or such later date as
the Board of Directors may determine) after public announcement that a
person or a group (subject to certain exceptions) has acquired 20% or
more of the outstanding Common Stock or an announcement of a tender
offer that would result in beneficial ownership by a person or a group
of 20% or more of the Common Stock.
10. INCENTIVE AND DEFERRED COMPENSATION PLANS
The Company has an incentive compensation plan (Plan) whereby bonus
awards are made if the Company attains a certain targeted return on its
opening equity. The purpose of the Plan is to improve the long-term
sustainable results of operations of the Company by more fully aligning
the interests of management and key employees with the shareholders of
the Company. One-third of the amounts awarded are immediately made
available to the employee and the remaining two-thirds becomes
available ratably over the succeeding two years. Amounts allocated
under the Plan may be taken in cash or deferred in a non-qualified
deferred compensation plan. The target rate, which was 16% for 1999,
17.5% for 1998 and 20% for 1997, is approved annually based upon a
review of the return of other publicly traded restaurant businesses by
the Compensation Committee of the Board of Directors. The amount of the
awards is capped at 50% of the eligible salary of the employee. The
Company accrued $575,000, $475,000 and $450,000 for fiscal years 1999,
1998 and 1997, respectively.
The Company has an executive retirement plan whereby certain key
employees may elect to defer up to 20% of their salary and 100% of
their bonus until retirement or age 55, whichever is later, or due to
disability or death. Employees may select from various investment
options for their available account balances. Investment earnings are
credited to their accounts.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter ended (in thousands except for per share information)
<TABLE>
CAPTION>
March 28, 1999
4th 3rd 2nd 1st
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $30,085 $27,899 $26,347 $34,818
GROSS PROFIT 22,268 20,512 19,218 25,389
NET INCOME 2,452 1,753 1,145 1,168
BASIC EARNINGS
PER SHARE: $ .39 $ .29 $ .19 $ .19
DILUTED EARNINGS
PER SHARE: $ .38 $ .28 $ .18 $ .18
</TABLE>
36
<PAGE>
Quarter ended (in thousands except for per share amounts)
<TABLE>
<CAPTION>
March 29, 1998
4th 3rd 2nd 1st
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $26,880 $24,096 $21,192 $ 27,589
GROSS PROFIT 19,836 17,743 15,725 20,559
NET INCOME 1,598 1,562 1,140 1,640
BASIC EARNINGS
PER SHARE: $ .26 $ .25 $ .18 $ .26
DILUTED EARNINGS
PER SHARE : $ .25 $ .24 $ .16 $ .26
</TABLE>
37
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Benihana Inc.:
We have audited the accompanying consolidated balance sheets of Benihana Inc.
and subsidiaries (the Company) as of March 28, 1999 and March 29, 1998, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended March 28, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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, such consolidated financial statements present fairly, in all
material respects, the financial position of Benihana Inc. and subsidiaries as
of March 28, 1999 and March 29, 1998, and the results of their operations and
their cash flows for each of the three years in the period ended March 28, 1999
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
May 7, 1999
38
<PAGE>
COMMON STOCK INFORMATION
The Company's Common Stock and Class A Stock are traded on the Nasdaq National
Market System. There were 294 holders of record of the Company's Common Stock
and 383 holders of record of the Class A Common Stock at March 28, 1999.
The table below sets forth high and low bid prices for the Company's Common
Stock and Class A Common Stock, which do not include commissions and mark-ups or
mark-downs for the periods indicated. Such bid prices reflect inter-dealer
prices without retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
March 28, 1999 March 29, 1998
----------------------- ----------------------
COMMON STOCK High Low High Low
<S> <C> <C> <C> <C>
1st Quarter 12 3/8 10 1/8 9 3/4 6 3/4
2nd Quarter 11 1/4 6 3/16 13 8 7/8
3rd Quarter 11 6 7/8 15 11 3/8
4th Quarter 11 3/4 9 3/4 12 3/4 11
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended
March 28, 1999 March 29, 1998
----------------------- ----------------------
CLASS A
COMMON STOCK High Low High Low
<S> <C> <C> <C> <C>
1st Quarter 12 1/6 9 3/4 8 5/8 6 1/2
2nd Quarter 10 7/8 5 5/8 12 3/8 8 1/8
3rd Quarter 9 1/2 6 1/4 13 11
4th Quarter 12 9 3/8 12 1/8 10 1/2
</TABLE>
The Class A Common Stock is identical to the Common Stock except that it gives
the holder one-tenth (1/10) vote per share, voting together with the Company's
Common Stock as a single class on all matters except the election of directors.
For election of directors, the Class A Common stockholders vote as a class to
elect 25% of the members of the Board of Directors.
The Company has not declared or paid a cash dividend since its organization and
has no present intention of paying any such dividend in the foreseeable future.
The Company intends to retain all available cash for the operation and expansion
of its business. In addition, the Company's present loan agreement restricts the
payment of dividends.
39
<PAGE>
Exhibit 10.11
CREDIT AGREEMENT
Dated as of December 1, 1997
among
BENIHANA INC.
as Borrower,
AND
CERTAIN SUBSIDIARIES OF THE BORROWER
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO
AND
FIRST UNION NATIONAL BANK,
as Agent
40
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 1, 1997 (as amended,
modified, restated or supplemented from time to time, the "Credit Agreement"),
is by and among BENIHANA INC., a Delaware corporation (the "Borrower"), the
Guarantors (as defined herein), the Lenders (as defined herein) and FIRST UNION
NATIONAL BANK, as Agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a
$27,000,000 credit facility for the purposes hereinafter set forth; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Acquired Company" means Rudy's Restaurant Group, Inc., a
Nevada corporation.
"Acquisition" means the acquisition by any Person of the
Capital Stock or all or substantially all of the Property of another
Person, whether or not involving a merger or consolidation with such
Person.
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date by execution of a Joinder Agreement.
"Adjusted Base Rate" means the Base Rate plus the Applicable
Margin.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Margin.
"Affiliate" means, with respect to any Person, any other
Person (a) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (b) directly or
indirectly owning or holding five percent (5%) or more of the equity
interest in such Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Agent" shall have the meaning assigned to such term in the
heading hereof, together with any successors or assigns.
"Agent's Fee Letter" means that certain letter agreement,
dated as of July 14, 1997, between the Agent and the Borrower, as
amended, modified, restated or supplemented from time to time.
41
<PAGE>
"Agent's Fees" shall have the meaning assigned to
such term in Section 3.5(c).
"Applicable Lending Office" means, for each Lender,
the office of such Lender (or of an Affiliate of such Lender)
as such Lender may from time to time specify to the Agent and
the Borrower by written notice as the office by which its
Eurodollar Loans are made and maintained.
"Applicable Margin" means, for purposes of
calculating the applicable interest rate for any day for any
Revolving Loan or any Term Loan, the applicable rate of the
Commitment Fee for any day for purposes of Section 3.5(a) and
the applicable rate of the Standby Letter of Credit Fee for
any day for purposes of Section 3.5(b)(i), the appropriate
Applicable Margin corresponding to the Leverage Ratio in
effect as of the most recent Calculation Date:
<TABLE>
<CAPTION>
Applicable
Applicable Applicable Margin For Applicable
Margin For Margin For Standby Margin For
Pricing Leverage Eurodollar Base Rate Letter of Commitment
Level Ratio Loans Loans Credit Fee Fees
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
I Greater than 2.25% 1.00% 2.25% .50%
or equal to
2.25 to 1.0
--------------------------------------------------------------------------------------------------
II Less than 2.00% .75% 2.00% .375%
2.25 to 1.0
but greater
or equal to
1.75 to 1.0
-------------------------------------------------------------------------------------------------
III Less than 1.50% .25% 1.50% .25%
1.75 to 1.0
but greater
than or equal
to 1.25 to 1.0
-------------------------------------------------------------------------------------------------
IV Less than 1.25 1.00% 0.00% 1.00% .25%
to 1.0
-------------------------------------------------------------------------------------------------
</TABLE>
The Applicable Margins shall be determined and adjusted quarterly
on the date (each a "Calculation Date") five Business Days after
the date by which the Borrower is required to provide the
officer's certificate in accordance with the provisions of Section
7.1(c) for the most recently ended fiscal quarter of the
Consolidated Parties the first of which to occur on March 29,
1998; provided, however, that (i) the initial Applicable Margins
shall be based on Pricing Level II (as shown above) and shall
remain at Pricing Level II until March 29, 1998 and, thereafter,
the Pricing Level shall be determined by the Leverage Ratio as of
the last day of the most recently ended fiscal quarter of the
Consolidated Parties preceding the applicable Calculation Date;
provided further that if the Borrower fails to provide the
officer's certificate required by Section 7.1(d) on or before the
most recent Calculation Date, the Applicable Margin from such
Calculation Date shall be based on Pricing Level I until such time
as an appropriate officer's certificate is provided whereupon the
Pricing Level shall be determined by the then current Leverage
Ratio. Each Applicable Margin shall be effective from one
Calculation Date until the next Calculation Date. Any adjustment
in the Applicable Margins shall be applicable to all existing
Loans as well as any new Loans made or issued.
42
<PAGE>
"Application Period", in respect of any Asset Disposition,
shall have the meaning assigned to such term in Section 8.5.
"Asset Disposition" means the disposition of any or all of the
assets (including without limitation the Capital Stock of a Subsidiary
but excluding the sale of inventory in the ordinary course of business)
of any Consolidated Party whether by sale, lease, transfer or
otherwise. The term "Asset Disposition" shall not include any Equity
Issuance.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (a) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
ordering the winding up or liquidation of its affairs; or (b) there
shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or any case, proceeding or other action for the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (c) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the
benefit of creditors; or (d) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they
become due.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (.5%) and (b) the Prime Rate for such day. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
43
<PAGE>
"Borrower" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina or New
York, New York are authorized or required by law to close, except that,
when used in connection with a Eurodollar Loan, such day shall also be
a day on which dealings between banks are carried on in U.S. dollar
deposits in London, England.
"Calculation Date" has the meaning set forth in the definition
of "Applicable Margin" set forth in this Section 1.1.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Stock" means (a) in the case of a corporation,
capital stock, (b) in the case of an association or business entity,
any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (c) in the case of a
partnership, partnership interests (whether general or limited), (d) in
the case of a limited liability company, membership interests and (e)
any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
44
<PAGE>
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and certificates
of deposit of (i) any Lender, (ii) any domestic commercial bank of
recognized standing having capital and surplus in excess of
$500,000,000 or (iii) any bank whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from Moody's is
at least P-1 or the equivalent thereof (any such bank being an
"Approved Bank"), in each case with maturities of not more than 270
days from the date of acquisition, (c) commercial paper and variable or
fixed rate notes issued by any Approved Bank (or by the parent company
thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody's and
maturing within six months of the date of acquisition, (d) repurchase
agreements with a bank or trust company (including any of the Lenders)
or recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by
the United States of America in which any Credit Party shall have a
perfected first priority security interest (subject to no other Liens)
and having, on the date of purchase thereof, a fair market value of at
least 100% of the amount of the repurchase obligations and (e)
Investments, classified in accordance with GAAP as current assets, in
money market investment programs registered under the Investment
Company Act of 1940, as amended, which are administered by reputable
financial institutions having capital of at least $500,000,000 and the
portfolios of which are limited to Investments of the character
described in the foregoing subdivisions (a) through (d).
"Change of Control" means the occurrence of any of the
following events: (a) the failure of Rocky H. Aoki or Benihana of
Tokyo, Inc. to maintain beneficial ownership, directly or indirectly,
of Voting Stock of the Borrower representing at least 35% of the
combined voting power of all Voting Stock of the Borrower, (b) any
Person or two or more Persons acting in concert shall have acquired
beneficial ownership, directly or indirectly, or shall have acquired by
contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their
acquisition of control over, Voting Stock of the Borrower (or other
securities convertible into such Voting Stock) representing 20% or more
of the combined voting power of all Voting Stock of the Borrower at any
time when Benihana of Tokyo, Inc., Rocky H. Aoki and other officers and
directors of the Borrower possess, collectively, directly or
indirectly, less than sufficient voting power to elect a majority of
the directors of the Borrower, or (c) Continuing Directors shall cease
for any reason to constitute a majority of the members of the board of
directors of the Borrower then in office. As used herein, "beneficial
ownership" shall have the meaning provided in Rule 13d-3 of the
Securities and Exchange Commission promulgated under the Securities
Exchange Act of 1934."
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Collateral" means a collective reference to the collateral
which is identified in, and at any time will be covered by, the
Collateral Documents.
"Collateral Documents" means a collective reference to the
Security Agreement, the Pledge Agreement and such other documents
executed and delivered in connection with the attachment and perfection
of the Agent's security interests and liens arising thereunder,
including without limitation, UCC financing statements and patent and
trademark filings.
45
<PAGE>
"Commitment" means (a) with respect to each Lender, the
Revolving Commitment of such Lender and the Term Loan Commitment of
such Lender and (b) with respect to the Issuing Lender, the LOC
Commitment.
"Commitment Fee" shall have the meaning assigned to such term
in Section 3.5(a).
"Commitment Fee Calculation Period" shall have the meaning
assigned to such term in Section 3.5(a).
"Consolidated Accrued Interest Expense" means, for any period,
accrued interest expense (including the amortization of debt discount
and premium and the interest component under Capital Leases) of the
Consolidated Parties on a consolidated basis for such period, as
determined in accordance with GAAP. The applicable period shall be for
the four consecutive quarters ending as of the date of determination,
except that for the first three complete fiscal quarters to occur after
the Closing Date, Consolidated Accrued Interest Expense shall be
determined by annualizing the components thereof for the complete
fiscal quarters occurring after the Closing Date (such that
Consolidated Accrued Interest Expense for the first complete fiscal
quarter to occur after the Closing Date would be multiplied by four
(4), the first two complete fiscal quarters would be multiplied by two
(2) and the first three (3) complete fiscal quarters would be
multiplied by one and one-third (1-1/3)).
"Consolidated Capital Expenditures" means, for any period, all
capital expenditures of the Consolidated Parties on a consolidated
basis for such period, as determined in accordance with GAAP.
"Consolidated Cash Taxes" means, for any period, the aggregate
of all taxes of the Consolidated Parties on a consolidated basis for
such period, as determined in accordance with GAAP, to the extent the
same are paid in cash during such period.
46
<PAGE>
"Consolidated EBITDA" means, for any period, the sum of (a)
Consolidated Net Income for such period, plus (b) an amount which, in
the determination of Consolidated Net Income for such period, has been
deducted for (i) Consolidated Accrued Interest Expense, (ii) total
accrued federal, state, local and foreign income, value added and
similar taxes and (iii) depreciation and amortization expense, all as
determined in accordance with GAAP. The applicable period shall be for
the four consecutive quarters ending as of the date of determination,
except that for the first three complete fiscal quarters to occur after
the Closing Date, Consolidated EBITDA shall be determined by
annualizing the components thereof for the complete fiscal quarters
occurring after the Closing Date (such that Consolidated EBITDA for the
first complete fiscal quarter to occur after the Closing Date would be
multiplied by four (4), the first two complete fiscal quarters would be
multiplied by two (2) and the first three complete fiscal quarters
would be multiplied by one and one-third (1-1/3)).
"Consolidated EBITDA Threshold" means, with respect to each
fiscal year end set forth below, the amount corresponding thereto:
Fiscal Year Amount
----------- ------
1999 $15,820,000
2000 $16,910,000
2001 $17,815,000
2002 $19,465,000
2003 $21,216,000
"Consolidated Excess EBITDA" means, as of the end of each
fiscal year of the Consolidated Parties, the dollar amount by which
Consolidated EBITDA exceeds the Consolidated EBITDA Threshold.
"Consolidated Net Income" means, for any period, net income
(excluding extraordinary items) after taxes for such period of the
Consolidated Parties on a consolidated basis, as determined in
accordance with GAAP.
"Consolidated Parties" means a collective reference to the
Borrower and its Subsidiaries, and "Consolidated Party" means any one
of them.
"Consolidated Scheduled Funded Debt Payments" means, as of the
end of each fiscal quarter of the Consolidated Parties, for the
Consolidated Parties on a consolidated basis, the sum of all scheduled
payments of principal on Funded Indebtedness for the applicable period
ending on such date (including the principal component of payments due
on Capital Leases during the applicable period ending on such date); it
being understood that Scheduled Funded Debt Payments shall not include
voluntary prepayments or the mandatory prepayments required pursuant to
Section 3.3.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 3.2 hereof of a Eurodollar Loan from
one Interest Period to the next Interest Period.
47
<PAGE>
"Continuing Directors" means, during any period of up to 24
consecutive months, commencing after the Closing Date, individuals who
at the beginning of such 24 month period were directors of the Borrower
(together with any new director whose election by the Borrower's board
of directors or whose nomination for election by the Borrower's
shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved).
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to Section 3.2 or Sections 3.7 through 3.12,
inclusive, of a Base Rate Loan into a Eurodollar Loan.
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, the LOC Documents, each Joinder Agreement, the
Agent's Fee Letter, the Collateral Documents and all other related
agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto (in each case as the same may be amended,
modified, restated, supplemented, extended, renewed or replaced from
time to time), and "Credit Document" means any one of them.
"Credit Parties" means a collective reference to the Borrower
and the Guarantors, and "Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (a) all
of the obligations of the Credit Parties to the Lenders (including the
Issuing Lender) and the Agent, whenever arising, under this Credit
Agreement, the Notes, the Collateral Documents or any of the other
Credit Documents (including, but not limited to, any interest accruing
after the occurrence of a Bankruptcy Event with respect to any Credit
Party, regardless of whether such interest is an allowed claim under
the Bankruptcy Code) and (b) all liabilities and obligations, whenever
arising, owing from the Borrower to any Lender, or any Affiliate of a
Lender, arising under any Hedging Agreement.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that (a)
has failed to make a Loan or purchase a Participation Interest required
pursuant to the term of this Credit Agreement within one Business Day
of when due, (b) other than as set forth in (a) above, has failed to
pay to the Agent or any Lender an amount owed by such Lender pursuant
to the terms of this Credit Agreement within one Business Day of when
due, or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or with respect to which (or with
respect to any of assets of which) a receiver, trustee or similar
official has been appointed.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the
laws of any State of the United States or the District of Columbia.
48
<PAGE>
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a
Lender; and (c) any other Person approved by the Agent and, unless an
Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with Section 11.3, the Borrower
(such approval not to be unreasonably withheld or delayed by the
Borrower and such approval to be deemed given by the Borrower if no
objection is received by the assigning Lender and the Agent from the
Borrower within two Business Days after notice of such proposed
assignment has been provided by the assigning Lender to the Borrower);
provided, however, that neither the Borrower nor an Affiliate of the
Borrower shall qualify as an Eligible Assignee.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Equity Issuance" means any issuance by any Consolidated Party
to any Person which is not a Credit Party of shares of its Capital
Stock, including, without limitation, (a) any shares of its Capital
Stock pursuant to the exercise of options or warrants and (b) any
shares of its Capital Stock pursuant to the conversion of any debt
securities to equity. The term "Equity Issuance" shall not include (i)
any Asset Disposition or (ii) the issuance of shares of the Borrower's
common stock or Class A common stock pursuant to options granted
pursuant to any employee stock option plan or non-employee directors
stock option plan of the Borrower, or upon the exercise of that certain
warrant to purchase 200,000 shares of the Borrower's Class A common
stock issued by the Borrower in connection with the Acquisition of the
Acquired Company.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with any Credit Party within the meaning of Section 4001(a)(14)
of ERISA, or is a member of a group which includes the Borrower and
which is treated as a single employer under Sections 414(b) or (c) of
the Code.
49
<PAGE>
"ERISA Event" means (a) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (b) the
withdrawal by any Consolidated Party or any ERISA Affiliate from a
Multiple Employer Plan during a plan year in which it was a substantial
employer (as such term is defined in Section 4001(a)(2) of ERISA), or
the termination of a Multiple Employer Plan; (c) the distribution of a
notice of intent to terminate or the actual termination of a Plan
pursuant to Section 4041(a)(2) or 4041A of ERISA; (d) the institution
of proceedings to terminate or the actual termination of a Plan by the
PBGC under Section 4042 of ERISA; (e) any event or condition which
might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan; (f) the complete or partial withdrawal of any Consolidated Party
or any ERISA Affiliate from a Multiemployer Plan; (g) the conditions
for imposition of a lien under Section 302(f) of ERISA exist with
respect to any Plan; or (h) the adoption of an amendment to any Plan
requiring the provision of security to such Plan pursuant to Section
307 of ERISA.
"Eurodollar Loan" means any Loan that bears interest at a rate
based upon the Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Agent to be
equal to the quotient obtained by dividing (a) the London Interbank
Offered Rate for such Eurodollar Loan for such Interest Period by (b) 1
minus the Eurodollar Reserve Requirement for such Eurodollar Loan for
such Interest Period.
"Eurodollar Reserve Requirement" means, at any time, the
maximum rate at which reserves (including, without limitation, any
marginal, special, supplemental, or emergency reserves) are required to
be maintained under regulations issued from time to time by the Board
of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities"
(as such term is used in Regulation D). Without limiting the effect of
the foregoing, the Eurodollar Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks with
respect to (a) any category of liabilities which includes deposits by
reference to which the Adjusted Eurodollar Rate is to be determined, or
(b) any category of extensions of credit or other assets which include
Eurodollar Loans. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Requirement.
"Event of Default" means such term as defined in Section 9.1.
50
<PAGE>
"Excluded Asset Disposition" means any Asset Disposition by
any Consolidated Party to any Credit Party if (a) the Credit Parties
shall cause to be executed and delivered such documents, instruments
and certificates as the Agent may request so as to cause the Credit
Parties to be in compliance with the terms of Section 7.13 after giving
effect to such Asset Disposition and (b) after giving effect such Asset
Disposition, no Default or Event of Default exists.
"Existing Credit Agreement" means the Second Amended and
Restated Credit Agreement dated as of May 1, 1995 by and among Benihana
National Corp., the Co-Makers, Benihana Inc., the Guarantors, First
Union National Bank of Florida, as a Lender and as the Agent.
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Agent (in its individual capacity) on such day on such
transactions as determined by the Agent.
"First Union National Bank" means First Union National Bank
and its successors.
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"Fixed Charge Coverage Ratio" means, as of the end of each
fiscal quarter of the Consolidated Parties for the twelve month period
ending on such date, the ratio of (a) Consolidated EBITDA for the
applicable period to (b) the sum of (i) Consolidated Accrued Interest
Expense for the applicable period plus (ii) Consolidated Capital
Expenditures for the applicable period plus (iii) Consolidated Cash
Taxes for the applicable period plus (iv) dividends paid during such
period plus (v) Consolidated Scheduled Funded Debt Payments for the
applicable period plus (vi) any amounts paid for the repurchase of
preferred stock for the applicable period. The applicable period for
the foregoing components shall be for the four consecutive quarters
ending as of the date of determination, except that for the first three
complete fiscal quarters to occur after the Closing Date, the Fixed
Charge Coverage Ratio shall be determined by annualizing the components
thereof for the complete fiscal quarters occurring after the Closing
Date (such that the components of the Fixed Charge Coverage Ratio for
the first complete fiscal quarter to occur after the Closing Date would
be multiplied by four (4), the first two complete fiscal quarters would
be multiplied by two (2) and the first three complete fiscal quarters
would be multiplied by one and one-third (1-1/3)).
"Foreign Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is not a Domestic Subsidiary of such
Person.
"Funded Indebtedness" means, with respect to any Person,
without duplication, (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, or upon which interest
payments are customarily made, (c) all obligations of such Person under
conditional sale or other title retention agreements relating to
Property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the
ordinary course of business), (d) all obligations of such Person issued
or assumed as the deferred purchase price of Property or services
purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within six months of the incurrence
thereof) which would appear as liabilities on a balance sheet of such
Person, (e) all Guaranty Obligations of such Person, (f) the maximum
amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed),
(g) all preferred Capital Stock issued by such Person and required by
the terms thereof to be redeemed, or for which mandatory sinking fund
payments are due, by a fixed date, (h) Indebtedness in respect of any
synthetic lease, end loaded lease financing, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing
product to which such Person is a party, (i) all Indebtedness of
another Person of the type referred to in clauses (a)-(h) above secured
by (or for which the holder of such Funded Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on, or
payable out of the proceeds of production from, Property owned or
acquired by such Person, whether or not the obligations secured thereby
have been assumed, (j) all Guaranty Obligations of such Person with
respect to Indebtedness of the type referred to in clauses (a)-(h)
above of another Person and (k) Indebtedness of the type referred to in
clauses (a)-(h) above of any partnership or unincorporated joint
venture in which such Person is legally obligated or has a reasonable
expectation of being liable with respect thereto.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
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"Guarantor" means each of the Persons identified as a
"Guarantor" on the signature pages hereto and each Additional Credit
Party which may hereafter execute a Joinder Agreement, together with
their successors and permitted assigns, and "Guarantor" means any one
of them.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (a) to purchase any such Indebtedness or any
Property constituting security therefor, (b) to advance or provide
funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (c) to lease or purchase Property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness, or (d) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount
of any Guaranty Obligation hereunder shall (subject to any limitations
set forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
"Hedging Agreements" means any interest rate protection
agreement or foreign currency exchange agreement between any
Consolidated Party and any Lender, or any Affiliate of a Lender.
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"Indebtedness" of any Person means (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments, or upon which
interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements
relating to Property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (d) all obligations
of such Person issued or assumed as the deferred purchase price of
Property or services purchased by such Person (other than trade debt
incurred in the ordinary course of business and due within six months
of the incurrence thereof) which would appear as liabilities on a
balance sheet of such Person, (e) all obligations of such Person under
take-or-pay or similar arrangements or under commodities agreements,
(f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production
from, Property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all Guaranty
Obligations of such Person, (h) the principal portion of all
obligations of such Person under Capital Leases, (i) all obligations of
such Person under Hedging Agreements, (j) the maximum amount of all
standby letters of credit issued or bankers' acceptances facilities
created for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent unreimbursed), (k) all preferred
Capital Stock issued by such Person and required by the terms thereof
to be redeemed, or for which mandatory sinking fund payments are due,
by a fixed date and (l) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner
or a joint venturer.
"Interest Coverage Ratio" means, with respect to the
Consolidated Parties on a consolidated basis for the twelve month
period ending on the last day of any fiscal quarter of the Consolidated
Parties, the ratio of (a) Consolidated EBITDA for such period to (b)
Consolidated Accrued Interest Expense for such period.
"Interest Payment Date" means (a) as to Base Rate Loans, the
last day of each fiscal quarter of the Borrower and the Maturity Date,
and (b) as to Eurodollar Loans, the last day of each applicable
Interest Period and the Maturity Date.
"Interest Period" means, as to Eurodollar Loans, a period of
one, two or three months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Maturity Date, (c) with
regard to the Term Loans, no Interest Period shall extend beyond any
Principal Amortization Payment Date unless the portion of Term Loans
comprised of Base Rate Loans together with the portion of Term Loans
comprised of Eurodollar Loans with Interest Periods expiring prior to
the date such Principal Amortization Payment is due, is at least equal
to the amount of such Principal Amortization Payment due on such date
and (d) where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the
Interest Period is to end, such Interest Period shall end on the last
Business Day of such calendar month.
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"Investment" in any Person means (a) the acquisition (whether
for cash, property, services, assumption of Indebtedness, securities or
otherwise) of assets (excluding goods and inventory used or sold in the
ordinary course of business), shares of Capital Stock, bonds, notes,
debentures, partnership, joint ventures or other ownership interests or
other securities of such other Person or (b) any deposit with, or
advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the purchase of equipment or other
assets in the ordinary course of business) or (c) any other capital
contribution to or investment in such Person, including, without
limitation, any Guaranty Obligations (including any support for a
letter of credit issued on behalf of such Person) incurred for the
benefit of such Person, but excluding any Restricted Payment to such
Person.
"Issuing Lender" means First Union National Bank.
"Issuing Lender Fees" shall have the meaning assigned to such
term in Section 3.5(b)(iii).
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.12 hereto, executed and delivered by an
Additional Credit Party in accordance with the provisions of Section
7.12.
"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Person which may become a Lender by
way of assignment in accordance with the terms hereof, together with
their successors and permitted assigns.
"Letter of Credit" means any letter of credit issued by the
Issuing Lender for the account of any Credit Party in accordance with
the terms of Section 2.2.
"Leverage Ratio" means, with respect to the Consolidated
Parties on a consolidated basis for the twelve month period ending on
the last day of any fiscal quarter, the ratio of (a) Funded
Indebtedness of the Consolidated Parties on a consolidated basis on the
last day of such period to (b) Consolidated EBITDA for such period.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans and/or the Term
Loans (or a portion of any Revolving Loan or Term Loan bearing interest
at the Adjusted Base Rate or the Adjusted Eurodollar Rate),
individually or collectively, as appropriate.
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"LOC Commitment" means the commitment of the Issuing Lender to
issue Letters of Credit in an aggregate face amount at any time
outstanding (together with the amounts of any unreimbursed drawings
thereon) of up to the LOC Committed Amount.
"LOC Committed Amount" shall have the meaning assigned to such
term in Section 2.2.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (a) the rights and obligations of the parties concerned
or at risk or (b) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (a) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (b) the aggregate amount of all drawings
under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed by the Borrower.
"London Interbank Offered Rate" shall mean, with respect to
any Eurodollar Loan for the Interest Period applicable thereto, the
rate of interest per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such
Interest Period; provided, however, if more than one rate is specified
on Telerate Page 3750, the applicable rate shall be the arithmetic mean
of all such rates. If, for any reason, such rate is not available, the
term "London Interbank Offered Rate" shall mean, with respect to any
Eurodollar Loan for the Interest Period applicable thereto, the rate of
interest per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) appearing on Reuters Screen LIBO Page as the London interbank
offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such
rates.
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"Material Adverse Effect" means a material adverse effect on
(a) the condition (financial or otherwise), operations, business,
assets, liabilities or prospects of any Consolidated Party, (b) the
ability of any Credit Party to perform any material obligation under
the Credit Documents to which it is a party or (c) the material rights
and remedies of the Lenders under the Credit Documents.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Maturity Date" means (a) as to the Revolving Loans and
Letters of Credit (and the related LOC Obligations), March 31, 2004 and
(b) as to the Term Loan, the date of the final maturity of such Term
Loan.
"Merger Agreement" means the Agreement and Plan of Merger
dated as of July 22, 1997 by and among the Borrower, Benihana Merger
Corp., Rudy's Restaurant Group, Inc., Bayview Partners and Douglas M.
Rudolph.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which any Consolidated
Party or any ERISA Affiliate and at least one employer other than the
Consolidated Parties or any ERISA Affiliate are contributing sponsors.
"Net Cash Proceeds" means the aggregate cash proceeds received
by the Consolidated Parties in respect of any Asset Disposition or
Equity Issuance, net of (a) direct costs (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), (b) taxes paid or payable as a result thereof; it being
understood that "Net Cash Proceeds" shall include, without limitation,
any cash received upon the sale or other disposition of any non-cash
consideration received by the Consolidated Parties in any Asset
Disposition or Equity Issuance, and (c) in the case of an Asset
Disposition only, any amounts payable in respect of Indebtedness which
is secured by, or otherwise related to, any Property which is the
subject thereof to the extent such Indebtedness and any payments in
respect thereof are paid with a portion of the proceeds therefrom.
"Note" or "Notes" means the Revolving Notes and/or the Term
Notes, individually or collectively, as appropriate.
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"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Exhibit 2.1(b)(i), as required by Section
2.1(b)(i), Section 2.3(b) or Section 2.4(b).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Exhibit 3.2, as
required by Section 3.2.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Other Taxes" means such term as is defined in Section 3.11.
"Participation Interest" means a purchase by a Lender of a
participation in Letters of Credit or LOC Obligations as provided in
Section 2.2 or in any Loans as provided in Section 3.14.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permitted Investments" means Investments which are either (a)
cash and Cash Equivalents; (b) accounts receivable created, acquired or
made by any Consolidated Party in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; (c)
Investments existing as of the Closing Date and set forth in Schedule
1.1A, (d) Guaranty Obligations permitted by Section 8.8; (e)
transactions permitted by Section 8.9, (f) advances or loans to
directors, officers, employees, agents, customers or suppliers that do
not exceed $500,000 in the aggregate at any one time outstanding for
all of the Consolidated Parties; (g) Investments in any Credit Party;
or (h) equity securities listed on the New York Stock Exchange,
provided that (i) the long-term credit rating of the corporation
issuing such securities shall be A- (or the equivalent thereof) or
better from S&P or A3 (or the equivalent thereof) or better from
Moody's and (ii) the purchase price paid for all such equity securities
held at any time shall not exceed $500,000.
"Permitted Liens" means:
(a) Liens in favor of the Agent to secure the Credit Party
Obligations;
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(b) Liens (other than Liens created or imposed under ERISA) for taxes,
assessments or governmental charges or levies not yet due or Liens for
taxes being contested in good faith by appropriate proceedings for
which adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such Lien is
not yet subject to foreclosure, sale or loss on account thereof);
(c) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and suppliers and other Liens imposed by law or
pursuant to customary reservations or retentions of title arising in
the ordinary course of business, provided that such Liens secure only
amounts not yet due and payable or, if due and payable, are unfiled and
no other action has been taken to enforce the same or are being
contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established (and
as to which the Property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof);
(d) Liens (other than Liens created or imposed under ERISA) incurred or
deposits made by any Consolidated Party in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);
(e) Liens in connection with attachments or judgments (including
judgment or appeal bonds) provided that no Event of Default shall have
occurred hereunder, and provided further, that the judgments secured
shall, within 30 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall have been discharged
within 30 days after the expiration of any such stay;
(f) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect, impairing
the use of the encumbered Property for its intended purposes;
(g) Liens on Property securing purchase money Indebtedness (including
Capital Leases) to the extent permitted under Section 8.1(c), provided
that any such Lien attaches to such Property concurrently with or
within 30 days after the acquisition thereof;
(h) any interest of title of a lessor under, and Liens arising from UCC
financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by
this Credit Agreement;
(i) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions provided, that no Event
of Default shall have occurred hereunder; and
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(j) Liens existing as of the Closing Date and set forth on Schedule
1.1B; provided that (i) no such Lien shall at any time be extended to
or cover any Property other than the Property subject thereto on the
Closing Date and (ii) the principal amount of the Indebtedness secured
by such Liens shall not be extended, renewed, refunded or refinanced.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Consolidated Party or any ERISA Affiliate is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to
be) an "employer" within the meaning of Section 3(5) of ERISA.
"Pledge Agreement" means the pledge agreement dated as of the
Closing Date in the form of Exhibit 1.1A to be executed in favor of the
Agent by each of the Credit Parties, as amended, modified, restated or
supplemented from time to time.
"Prime Rate" means the per annum rate of interest established
from time to time by First Union National Bank as its prime rate, which
rate may not be the lowest rate of interest charged by First Union
National Bank to its customers.
"Principal Amortization Payment" means a principal payment on
the Term Loans as set forth in Section 2.3(d).
"Principal Amortization Payment Date" means the date a
Principal Amortization Payment is due.
"Principal Office" means the principal office of First Union
National Bank, presently located at Charlotte, North Carolina.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Register" shall have the meaning given such term in Section
11.3(c).
"Regulation G, T, U, or X" means Regulation G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
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"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including the abandonment or
discarding of barrels, containers and other closed receptacles
containing any Materials of Environmental Concern).
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the
notice requirement has been waived by regulation.
"Required Lenders" means, at any time, Lenders which are then
in compliance with their obligations hereunder (as determined by the
Agent) and holding in the aggregate at least 51% of (a) the Revolving
Commitments (and Participation Interests therein) and the outstanding
Term Loans (and Participation Interests therein) or (b) if the
Commitments have been terminated, the outstanding Loans and
Participation Interests (including the Participation Interests of the
Issuing Lender in any Letters of Credit).
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its material property is subject.
"Responsible Officer" means either the president or chief
financial officer of the Borrower.
"Restricted Payment" means (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of Capital Stock of any Consolidated Party, now or hereafter
outstanding, (b) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of Capital Stock of any Consolidated Party,
now or hereafter outstanding and (c) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of Capital Stock of any
Consolidated Party, now or hereafter outstanding.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Commitment Percentage of
the Revolving Committed Amount, (a) to make Revolving Loans in
accordance with the provisions of Section 2.1(a) and (b) to purchase
Participation Interests in Letters of Credit in accordance with the
provisions of Section 2.2(c).
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"Revolving Commitment Percentage" means, for any Lender, the
percentage identified as its Revolving Commitment Percentage on
Schedule 2.1(a), as such percentage may be modified in connection with
any assignment made in accordance with the provisions of Section 11.3.
"Revolving Committed Amount" shall have the meaning assigned
to such term in Section 2.1(a).
"Revolving Loans" shall have the meaning assigned to such term
in Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrower in favor of each of the Lenders evidencing the
Revolving Loans provided pursuant to Section 2.1(e), individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, restated, supplemented, extended, renewed or replaced from
time to time.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to any Consolidated Party of any Property,
whether owned by such Consolidated Party as of the Closing Date or
later acquired, which has been or is to be sold or transferred by such
Consolidated Party to such Person or to any other Person from whom
funds have been, or are to be, advanced by such Person on the security
of such Property.
"Security Agreement" means the security agreement dated as of
the Closing Date in the form of Exhibit 1.1B to be executed in favor of
the Agent by each of the Credit Parties, as amended, modified, restated
or supplemented from time to time.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
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"Solvent" or "Solvency" means, with respect to any Person as
of a particular date, that on such date (a) such Person is able to
realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal course of business, (b) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (c) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction,
for which such Person's Property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in
the industry in which such Person is engaged or is to engage, (d) the
fair value of the Property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent
liabilities, of such Person and (e) the present fair salable value of
the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as
they become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Standby Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(b)(i).
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose Capital Stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at the
time, any class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time owned by such Person directly or indirectly through Subsidiaries,
and (b) any partnership, association, joint venture or other entity in
which such Person directly or indirectly through Subsidiaries has more
than 50% equity interest at any time.
"Taxes" means such term as is defined in Section 3.11.
"Trade Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.5(b)(ii).
"Term Loan" shall have the meaning assigned to such term in
Section 2.3(a).
"Term Loan Commitment" means, with respect to each Lender, the
commitment of such Lender to make its portion of the Term Loan in a
principal amount equal to such Lender's Term Loan Commitment Percentage
of the Term Loan Committed Amount.
"Term Loan Commitment Percentage" means, for any Lender, the
percentage identified as its Term Loan Commitment Percentage on
Schedule 2.1(a), as such percentage may be modified in connection with
any assignment made in accordance with the provisions of Section 11.3.
"Term Loan Committed Amount" shall have the meaning assigned
to such term in Section 2.3(a).
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"Term Note" or "Term Notes" means the promissory notes of the Borrower
in favor of each of the Lenders evidencing the Term Loans provided
pursuant to Section 2.3(f), individually or collectively, as
appropriate, as such promissory notes may be amended, modified,
restated, supplemented, extended, renewed or replaced from time to
time.
"Voting Stock" means, with respect to any Person, Capital
Stock issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of
such a contingency.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
100% of whose Voting Stock or other equity interests is at the time
owned by such Person directly or indirectly through other Wholly Owned
Subsidiaries.
1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to Section 7.1,
consistent with the financial statements as at March 30, 1997); provided,
however, if (a) the Borrower shall object to determining such compliance on such
basis at the time of delivery of such financial statements due to any change in
GAAP or the rules promulgated with respect thereto or (b) the Agent or the
Required Lenders shall so object in writing within 60 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Borrower
to the Lenders as to which no such objection shall have been made.
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SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein, each Lender severally agrees to make available to the
Borrower such Lender's Revolving Commitment Percentage of revolving
credit loans requested by the Borrower in Dollars ("Revolving Loans")
from time to time from the Closing Date until the Maturity Date, or
such earlier date as the Revolving Commitments shall have been
terminated as provided herein for the purposes hereinafter set forth;
provided, however, that the sum of the aggregate principal amount of
outstanding Revolving Loans shall not exceed FIFTEEN MILLION DOLLARS
($15,000,000) (as such aggregate maximum amount may be reduced from
time to time as provided in Section 3.4, the "Revolving Committed
Amount"); provided, further, (A) with regard to each Lender
individually, such Lender's outstanding Revolving Loans shall not
exceed such Lender's Revolving Commitment Percentage of the Revolving
Committed Amount, and (B) the aggregate principal amount of outstanding
Revolving Loans plus LOC Obligations outstanding shall not exceed the
Revolving Committed Amount. Revolving Loans may consist of Base Rate
Loans or Eurodollar Loans, or a combination thereof, as the Borrower
may request, and may be repaid and reborrowed in accordance with the
provisions hereof; provided, however, that no more than 5 Eurodollar
Loans shall be outstanding hereunder at any time. For purposes hereof,
Eurodollar Loans with different Interest Periods shall be considered as
separate Eurodollar Loans, even if they begin on the same date,
although borrowings, extensions and conversions may, in accordance with
the provisions hereof, be combined at the end of existing Interest
Periods to constitute a new Eurodollar Loan with a single Interest
Period. Revolving Loans hereunder may be repaid and reborrowed in
accordance with the provisions hereof.
(b) Revolving Loan Borrowings.
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(i) Notice of Borrowing. The Borrower shall request a
Revolving Loan borrowing by written notice (or telephonic
notice promptly confirmed in writing) to the Agent not later
than 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day prior to the date of the requested borrowing in
the case of Base Rate Loans, and on the third Business Day
prior to the date of the requested borrowing in the case of
Eurodollar Loans. Each such request for borrowing shall be
irrevocable and shall specify (A) that a Revolving Loan is
requested, (B) the date of the requested borrowing (which
shall be a Business Day), (C) the aggregate principal amount
to be borrowed, and (D) whether the borrowing shall be
comprised of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested,
the Interest Period(s) therefor. If the Borrower shall fail to
specify in any such Notice of Borrowing (I) an applicable
Interest Period in the case of a Eurodollar Loan, then such
notice shall be deemed to be a request for an Interest Period
of one month, or (II) the type of Revolving Loan requested,
then such notice shall be deemed to be a request for a Base
Rate Loan hereunder. The Agent shall give notice to each
affected Lender promptly upon receipt of each Notice of
Borrowing pursuant to this Section 2.1(b)(i), the contents
thereof and each such Lender's share of any borrowing to be
made pursuant thereto.
(ii) Minimum Amounts. Each Eurodollar Loan or Base
Rate Loan that is a Revolving Loan shall be in a minimum
aggregate principal amount of $100,000 and integral multiples
of $25,000 in excess thereof (or the remaining amount of the
Revolving Committed Amount, if less).
(iii) Advances. Each Lender will make its Revolving
Commitment Percentage of each Revolving Loan borrowing
available to the Agent for the account of the Borrower as
specified in Section 3.15(a), or in such other manner as the
Agent may specify in writing, by 1:00 P.M. (Charlotte, North
Carolina time) on the date specified in the applicable Notice
of Borrowing in Dollars and in funds immediately available to
the Agent. Such borrowing will then be made available to the
Borrower by the Agent by crediting the account of the Borrower
on the books of such office with the aggregate of the amounts
made available to the Agent by the Lenders and in like funds
as received by the Agent.
(c) Repayment. The principal amount of all Revolving Loans
shall be due and payable in full on the Maturity
Date, unless accelerated sooner pursuant to Section 9.2.
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as Revolving
Loans shall be comprised in whole or in part of Base Rate
Loans, such Base Rate Loans shall bear interest at a per annum
rate equal to the Adjusted Base Rate.
(ii) Eurodollar Loans. During such periods as
Revolving Loans shall be comprised in whole or in part of
Eurodollar Loans, such Eurodollar Loans shall bear interest at
a per annum rate equal to the Adjusted Eurodollar Rate.
Interest on Revolving Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(e) Revolving Notes. The Revolving Loans made by each Lender
shall be evidenced by a duly executed promissory note of the Borrower
to such Lender in an original principal amount equal to such Lender's
Revolving Commitment Percentage of the Revolving Committed Amount and
in substantially the form of Exhibit 2.1(e).
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2.2 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require and in reliance upon the
representations and warranties set forth herein, the Issuing Lender
agrees to issue, and each Lender severally agrees to participate in the
issuance by the Issuing Lender of, standby and trade Letters of Credit
in Dollars from time to time from the Closing Date until the Maturity
Date as the Borrower may request, in a form acceptable to the Issuing
Lender; provided, however, that (i) the LOC Obligations outstanding
shall not at any time exceed ONE MILLION DOLLARS ($1,000,000) (the "LOC
Committed Amount") and (ii) the sum of the aggregate principal amount
of outstanding Revolving Loans plus LOC Obligations outstanding shall
not at any time exceed the Revolving Committed Amount. No Letter of
Credit shall (x) have an original expiry date more than one year from
the date of issuance or (y) as originally issued or as extended, have
an expiry date extending beyond the Maturity Date. Each Letter of
Credit shall comply with the related LOC Documents. The issuance and
expiry dates of each Letter of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted by the Borrower to the Issuing
Lender at least three (3) Business Days prior to the requested date of
issuance. The Issuing Lender will, at least quarterly and more
frequently upon request, disseminate to each of the Lenders a detailed
report specifying the Letters of Credit which are then issued and
outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein,
among other things, the beneficiary, the face amount and the expiry
date, as well as any payment or expirations which may have occurred.
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(c) Participation. Each Lender, upon issuance of a Letter of
Credit, shall be deemed to have purchased without recourse a
Participation Interest from the applicable Issuing Lender in such
Letter of Credit and the obligations arising thereunder and any
collateral relating thereto, in each case in an amount equal to its pro
rata share of the obligations under such Letter of Credit (based on the
respective Revolving Commitment Percentages of the Lenders) and shall
absolutely, unconditionally and irrevocably assume and be obligated to
pay to the Issuing Lender and discharge when due, its pro rata share of
the obligations arising under such Letter of Credit. Without limiting
the scope and nature of each Lender's Participation Interest in any
Letter of Credit, to the extent that the Issuing Lender has not been
reimbursed as required hereunder or under any such Letter of Credit,
each such Lender shall pay to the Issuing Lender its pro rata share of
such unreimbursed drawing in same day funds on the day of notification
by the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) below. The obligation of each Lender to so
reimburse the Issuing Lender shall be absolute and unconditional and
shall not be affected by the occurrence of a Default, an Event of
Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the Borrower to
reimburse the Issuing Lender under any Letter of Credit, together with
interest as hereinafter provided.
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(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the Borrower.
Unless the Borrower shall immediately notify the Issuing Lender that
the Borrower intends to otherwise reimburse the Issuing Lender for such
drawing, the Borrower shall be deemed to have requested that the
Lenders make a Revolving Loan in the amount of the drawing as provided
in subsection (e) below on the related Letter of Credit, the proceeds
of which will be used to satisfy the related reimbursement obligations.
The Borrower promises to reimburse the Issuing Lender on the day of
drawing under any Letter of Credit (either with the proceeds of a
Revolving Loan obtained hereunder or otherwise) in same day funds. If
the Borrower shall fail to reimburse the Issuing Lender as provided
hereinabove, the unreimbursed amount of such drawing shall bear
interest at a per annum rate equal to the Base Rate plus 3%. The
Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of
setoff, counterclaim or defense to payment the Borrower may claim or
have against the Issuing Lender, the Agent, the Lenders, the
beneficiary of the Letter of Credit drawn upon or any other Person,
including without limitation any defense based on any failure of the
Borrower or any other Credit Party to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of
Credit. The Issuing Lender will promptly notify the other Lenders of
the amount of any unreimbursed drawing and each Lender shall promptly
pay to the Agent for the account of the Issuing Lender in Dollars and
in immediately available funds, the amount of such Lender's pro rata
share of such unreimbursed drawing. Such payment shall be made on the
day such notice is received by such Lender from the Issuing Lender if
such notice is received at or before 2:00 P.M. (Charlotte, North
Carolina time) otherwise such payment shall be made at or before 12:00
Noon (Charlotte, North Carolina time) on the Business Day next
succeeding the day such notice is received. If such Lender does not pay
such amount to the Issuing Lender in full upon such request, such
Lender shall, on demand, pay to the Agent for the account of the
Issuing Lender interest on the unpaid amount during the period from the
date of such drawing until such Lender pays such amount to the Issuing
Lender in full at a rate per annum equal to, if paid within two (2)
Business Days of the date that such Lender is required to make payments
of such amount pursuant to the preceding sentence, the Federal Funds
Rate and thereafter at a rate equal to the Base Rate. Each Lender's
obligation to make such payment to the Issuing Lender, and the right of
the Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and
without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default
or the acceleration of the obligations of the Borrower hereunder and
shall be made without any offset, abatement, withholding or reduction
whatsoever. Simultaneously with the making of each such payment by a
Lender to the Issuing Lender, such Lender shall, automatically and
without any further action on the part of the Issuing Lender or such
Lender, acquire a Participation Interest in an amount equal to such
payment (excluding the portion of such payment constituting interest
owing to the Issuing Lender) in the related unreimbursed drawing
portion of the LOC Obligation and in the interest thereon and in the
related LOC Documents, and shall have a claim against the Borrower with
respect thereto.
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(e) Repayment with Revolving Loans. On any day on which the
Borrower shall have requested, or been deemed to have requested, a
Revolving Loan advance to reimburse a drawing under a Letter of Credit,
the Agent shall give notice to the Lenders that a Revolving Loan has
been requested or deemed requested by the Borrower to be made in
connection with a drawing under a Letter of Credit, in which case a
Revolving Loan advance comprised of Base Rate Loans (or Eurodollar
Loans to the extent the Borrower has complied with the procedures of
Section 2.1(b)(i) with respect thereto) shall be immediately made to
the Borrower by all Lenders (notwithstanding any termination of the
Commitments pursuant to Section 9.2) pro rata based on the respective
Revolving Commitment Percentages of the Lenders (determined before
giving effect to any termination of the Commitments pursuant to Section
9.2) and the proceeds thereof shall be paid directly to the Issuing
Lender for application to the respective LOC Obligations. Each such
Lender hereby irrevocably agrees to make its pro rata share of each
such Revolving Loan immediately upon any such request or deemed request
in the amount, in the manner and on the date specified in the preceding
sentence notwithstanding (i) the amount of such borrowing may not
comply with the minimum amount for advances of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 5.2 are then satisfied, (iii) whether a Default or an Event of
Default then exists, (iv) failure for any such request or deemed
request for Revolving Loan to be made by the time otherwise required
hereunder, (v) whether the date of such borrowing is a date on which
Revolving Loans are otherwise permitted to be made hereunder or (vi)
any termination of the Commitments relating thereto immediately prior
to or contemporaneously with such borrowing. In the event that any
Revolving Loan cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code with respect to
the Borrower or any Credit Party), then each such Lender hereby agrees
that it shall forthwith purchase (as of the date such borrowing would
otherwise have occurred, but adjusted for any payments received from
the Borrower on or after such date and prior to such purchase) from the
Issuing Lender such Participation Interests in the outstanding LOC
Obligations as shall be necessary to cause each such Lender to share in
such LOC Obligations ratably (based upon the respective Revolving
Commitment Percentages of the Lenders (determined before giving effect
to any termination of the Commitments pursuant to Section 9.2)),
provided that at the time any purchase of Participation Interests
pursuant to this sentence is actually made, the purchasing Lender shall
be required to pay to the Issuing Lender, to the extent not paid to the
Issuer by the Borrower in accordance with the terms of subsection (d)
above, interest on the principal amount of Participation Interests
purchased for each day from and including the day upon which such
borrowing would otherwise have occurred to but excluding the date of
payment for such Participation Interests, at the rate equal to, if paid
within two (2) Business Days of the date of the Revolving Loan advance,
the Federal Funds Rate, and thereafter at a rate equal to the Base
Rate.
(f) Designation of Consolidated Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a), a Letter of
Credit issued hereunder may contain a statement to the effect that such
Letter of Credit is issued for the account of a Consolidated Party
other than the Borrower, provided that notwithstanding such statement,
the Borrower shall be the actual account party for all purposes of this
Credit Agreement for such Letter of Credit and such statement shall not
affect the Borrower's reimbursement obligations hereunder with respect
to such Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any Letter
of Credit shall, for purposes hereof, be treated in all respects the
same as the issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP
may be incorporated therein and deemed in all respects to be a part
thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
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(i) In addition to its other obligations under this
Section 2.2, the Borrower hereby agrees to pay, and protect,
indemnify and save each Lender harmless from and against, any
and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees)
(unless the same shall have resulted from such Lender's gross
negligence or willful misconduct) that such Lender may incur
or be subject to as a consequence, direct or indirect, of (A)
the issuance of any Letter of Credit or (B) the failure of
such Lender to honor a drawing under a Letter of Credit as a
result of any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto government or
Governmental Authority (all such acts or omissions, herein
called "Government Acts").
(ii) As between the Borrower and the Lenders
(including the Issuing Lender), the Borrower shall assume all
risks of the acts, omissions or misuse of any Letter of Credit
by the beneficiary thereof. Unless the same shall have
resulted from such Lenders gross negligence or willful
misconduct, no Lender (including the Issuing Lender) shall be
responsible: (A) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for
and issuance of any Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) for the validity or
sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or
in part, that may prove to be invalid or ineffective for any
reason; (C) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in
cipher; (D) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing
under a Letter of Credit or of the proceeds thereof; and (E)
for any consequences arising from causes beyond the control of
such Lender, including, without limitation, any Government
Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by any Lender (including the
Issuing Lender), under or in connection with any Letter of
Credit or the related certificates, if taken or omitted in
good faith, shall not put such Lender under any resulting
liability to the Borrower or any other Credit Party. It is the
intention of the parties that this Credit Agreement shall be
construed and applied to protect and indemnify each Lender
(including the Issuing Lender) against any and all risks
involved in the issuance of the Letters of Credit, all of
which risks are hereby assumed by the Borrower (on behalf of
itself and each of the other Credit Parties), including,
without limitation, any and all Government Acts. No Lender
(including the Issuing Lender) shall, in any way, be liable
for any failure by such Lender or anyone else to pay any
drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of such
Lender.
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(iv) Nothing in this subsection (h) is intended to
limit the reimbursement obligations of the Borrower contained
in subsection (d) above. The obligations of the Borrower under
this subsection (h) shall survive the termination of this
Credit Agreement. No act or omissions of any current or prior
beneficiary of a Letter of Credit shall in any way affect or
impair the rights of the Lenders (including the Issuing
Lender) to enforce any right, power or benefit under this
Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (h), the Borrower shall have no
obligation to indemnify any Lender (including the Issuing
Lender) in respect of any liability incurred by such Lender
(A) arising solely out of the gross negligence or willful
misconduct of such Lender, as determined by a court of
competent jurisdiction, or (B) caused by such Lender's failure
to pay under any Letter of Credit after presentation to it of
a request strictly complying with the terms and conditions of
such Letter of Credit, as determined by a court of competent
jurisdiction, unless such payment is prohibited by any law,
regulation, court order or decree.
(j) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5.2 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section
2.2 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the
Issuing Lender.
(k) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document (including any
letter of credit application), this Credit Agreement shall control.
2.3 Term Loan.
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(a) Term Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein each Lender severally agrees to make available to the
Borrower on the Closing Date such Lender's Term Loan Commitment
Percentage of a term loan in Dollars (the "Term Loan") in the aggregate
principal amount of TWELVE MILLION DOLLARS ($12,000,000) (the "Term
Loan Committed Amount") for the purposes hereinafter set forth. The
Term Loan may consist of Base Rate Loans or Eurodollar Loans, or a
combination thereof, as the Borrower may request; provided, however,
that no more than 5 Eurodollar Loans shall be outstanding hereunder at
any time. For purposes hereof, Eurodollar Loans with different Interest
Periods shall be considered as separate Eurodollar Loans, even if they
begin on the same date, although borrowings, extensions and conversions
may, in accordance with the provisions hereof, be combined at the end
of existing Interest Periods to constitute a new Eurodollar Loan with a
single Interest Period. Amounts repaid on the Term Loan may not be
reborrowed.
(b) Borrowing Procedures. The Borrower shall submit an
appropriate Notice of Borrowing to the Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the Closing Date, with respect to
the portion of the Term Loan initially consisting of a Base Rate Loan,
or on the third Business Day prior to the Closing Date, with respect to
the portion of the Term Loan initially consisting of one or more
Eurodollar Loans, which Notice of Borrowing shall be irrevocable and
shall specify (i) that the funding of a Term Loan is requested and (ii)
whether the funding of the Term Loan shall be comprised of Base Rate
Loans, Eurodollar Loans or a combination thereof, and if Eurodollar
Loans are requested, the Interest Period(s) therefor. If the Borrower
shall fail to deliver such Notice of Borrowing to the Agent by 11:00
A.M. (Charlotte, North Carolina time) on the third Business Day prior
to the Closing Date, then the full amount of the Term Loan shall be
disbursed on the Closing Date as a Base Rate Loan. Each Lender shall
make its Term Loan Commitment Percentage of the Term Loan available to
the Agent for the account of the Borrower at the office of the Agent
specified in Schedule 2.1(a), or at such other office as the Agent may
designate in writing, by 1:00 P.M. (Charlotte, North Carolina time) on
the Closing Date in Dollars and in funds immediately available to the
Agent.
(c) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan
that is part of the Term Loan shall be in an aggregate principal amount
that is not less than $500,000 and integral multiples of $100,000 (or
the then remaining principal balance of the Term Loan, if less).
(d) Repayment of Term Loan. The principal amount of the Term
Loan shall be repaid in twenty-four (24) consecutive quarterly
installments as follows, unless accelerated sooner pursuant to Section
9.2:
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Principal Amortization Term Loan Principal
Payment Dates Amortization Payment
-------------------------- ------------------------
June 30, 1998 $250,000
September 30, 1998 $250,000
December 31, 1998 $250,000
March 31, 1998 $250,000
June 30, 1999 $250,000
September 30, 1999 $250,000
December 31, 1999 $250,000
March 31, 2000 $250,000
June 30, 2000 $500,000
September 30, 2000 $500,000
December 31, 2000 $500,000
March 31, 2001 $500,000
June 30, 2001 $500,000
September 30, 2001 $500,000
December 31, 2001 $500,000
March 31, 2002 $500,000
June 30, 2002 $750,000
September 30, 2002 $750,000
December 31, 2002 $750,000
March 31, 2003 $750,000
June 30, 2003 $750,000
September 30, 2003 $750,000
December 31, 2003 $750,000
March 31, 2004 $750,000
(e) Interest. Subject to the provisions of Section 3.1,
the Term Loan shall bear interest at a per annum rate equal to:
(i) Base Rate Loans. During such periods as the
Term Loan shall be comprised in whole or in part of Base
Rate Loans, such Base Rate Loans shall bear interest at a
per annum rate equal to the Adjusted Base Rate.
(ii) Eurodollar Loans. During such periods as the
Term Loan shall be comprised in whole or in part of
Eurodollar Loans, such Eurodollar Loans shall bear
interest at a per annum rate equal to the Adjusted
Eurodollar Rate.
Interest on the Term Loan shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(f) Term Notes. The portion of the Term Loan made by each
Lender shall be evidenced by a duly executed promissory note of
the Borrower to such Lender in an original principal amount equal
to such Lender's Term Loan Commitment Percentage of the Term Loan
and substantially in the form of Exhibit 2.3(f).
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SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 Default Rate.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate equal to the Base
Rate plus 3%.
3.2 Extension and Conversion.
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Subject to the terms of Section 5.2, the Borrower shall have the
option, on any Business Day, to extend existing Loans into a subsequent
permissible Interest Period or to convert Loans into Loans of another interest
rate type; provided, however, that (i) except as provided in Section 3.8,
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
the Interest Period applicable thereto, (ii) Eurodollar Loans may be extended,
and Base Rate Loans may be converted into Eurodollar Loans, only if no Default
or Event of Default is in existence on the date of extension or conversion,
(iii) Loans extended as, or converted into, Eurodollar Loans shall be subject to
the terms of the definition of "Interest Period" set forth in Section 1.1 and
shall be in such minimum amounts as provided in, with respect to Revolving
Loans, Section 2.1(b)(ii), or, with respect to the Term Loan, Section 2.3(c),
(iv) no more than 5 Eurodollar Loans shall be outstanding hereunder at any time
(it being understood that, for purposes hereof, Eurodollar Loans with different
Interest Periods shall be considered as separate Eurodollar Loans, even if they
begin on the same date, although borrowings, extensions and conversions may, in
accordance with the provisions hereof, be combined at the end of existing
Interest Periods to constitute a new Eurodollar Loan with a single Interest
Period) and (v) any request for extension or conversion of a Eurodollar Loan
which shall fail to specify an Interest Period shall be deemed to be a request
for an Interest Period of one month. Each such extension or conversion shall be
effected by the Borrower by giving a Notice of Extension/Conversion (or
telephonic notice promptly confirmed in writing) to the office of the Agent
specified in specified in Schedule 2.1(a), or at such other office as the Agent
may designate in writing, prior to 11:00 A.M. (Charlotte, North Carolina time)
on the Business Day of, in the case of the conversion of a Eurodollar Loan into
a Base Rate Loan, and on the third Business Day prior to, in the case of the
extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a
Eurodollar Loan, the date of the proposed extension or conversion, specifying
the date of the proposed extension or conversion, the Loans to be so extended or
converted, the types of Loans into which such Loans are to be converted and, if
appropriate, the applicable Interest Periods with respect thereto. Each request
for extension or conversion shall be irrevocable and shall constitute a
representation and warranty by the Borrower of the matters specified in
subsections (b), (c) and (d) of Section 5.2. In the event the Borrower fails to
request extension or conversion of any Eurodollar Loan in accordance with this
Section, or any such conversion or extension is not permitted or required by
this Section, then such Eurodollar Loan shall be automatically converted into a
Base Rate Loan at the end of the Interest Period applicable thereto. The Agent
shall give each Lender notice as promptly as practicable of any such proposed
extension or conversion affecting any Loan.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time, but otherwise
without premium or penalty; provided, however, that each partial
prepayment of Loans shall be in a minimum principal amount of $250,000
and integral multiples of $50,000. Subject to the foregoing terms,
amounts prepaid under this Section 3.3(a) with respect to the Term Loan
shall be applied ratably to the remaining Principal Amortization
Payments thereof; provided that if the Borrower fails to specify a
voluntary prepayment then such prepayment shall be applied first to
Revolving Loans and then to the Term Loan (ratably to the remaining
Principal Amortization Payments thereof), in each case first to Base
Rate Loans and then to Eurodollar Loans in direct order of Interest
Period maturities. All prepayments under this Section 3.3(a) shall be
subject to Section 3.12.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time, the
sum of the aggregate principal amount of outstanding Revolving
Loans plus LOC Obligations outstanding shall exceed the
Revolving Committed Amount, the Borrower immediately shall
prepay the Revolving Loans and (after all Revolving Loans have
been repaid) cash collateralize the LOC Obligations, in an
amount sufficient to eliminate such excess.
(ii) Asset Dispositions. Immediately upon the
occurrence of any Asset Disposition other than an Excluded
Asset Disposition, the Borrower shall prepay the Loans in an
aggregate amount equal to the Net Cash Proceeds of the related
Asset Disposition (such prepayment to be applied as set forth
in clause (iv) below); provided, however, that no mandatory
prepayments shall be required hereunder if, at the time such
Asset Disposition occurs, the ratio of Funded Indebtedness of
the Consolidated Parties to Consolidated EBITDA at the end of
the immediately preceding fiscal quarter was less than 2.0 to
1.0.
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(iii) Issuances of Equity. Immediately upon receipt
by a Consolidated Party of proceeds from any Equity Issuance
occurring at any time when the Leverage Ratio at the end of
the immediately preceding fiscal quarter was greater than 2.0
to 1.0, the Borrower shall prepay the Loans in an aggregate
amount equal to 50% of the Net Cash Proceeds of such Equity
Issuance to the Lenders (such prepayment to be applied as set
forth in clause (iv) below); provided, however, that no
mandatory prepayments shall be required hereunder if, at the
time such Equity Issuance occurs, the Leverage Ratio at the
end of the immediately preceding fiscal quarter was less than
2.0 to 1.0; provided further, that if mandatory prepayments
are required to be made hereunder, then such prepayments shall
be made only to the extent required to restore the Leverage
Ratio to 2.0 to 1.0.
(iv) Application of Mandatory Prepayments. All
amounts required to be paid pursuant to this Section 3.3(b)
shall be applied as follows: (A) with respect to all amounts
prepaid pursuant to Section 3.3(b)(i), to Revolving Loans and
(after all Revolving Loans have been repaid) to a cash
collateral account in respect of LOC Obligations, (B) with
respect to all amounts prepaid pursuant to Section 3.3(b)(ii)
and 3.3(b)(iii), (1) first to the Term Loan (ratably to the
remaining Principal Amortization Payments thereof) and (2)
second to the Revolving Loans and (after all Revolving Loans
have been repaid) to a cash collateral account in respect of
LOC Obligations (with a corresponding reduction in the
Revolving Committed Amount in an amount equal to all amounts
applied pursuant to this clause (2)). Within the parameters of
the applications set forth above, prepayments shall be applied
first to Base Rate Loans and then to Eurodollar Loans in
direct order of Interest Period maturities. All prepayments
under this Section 3.3(b) shall be subject to Section 3.12.
3.4 Termination and Reduction of Revolving Committed Amount.
(a) Voluntary Reductions. The Borrower may from time to time
permanently reduce or terminate the Revolving Committed Amount in whole
or in part (in minimum aggregate amounts of $250,000 or in integral
multiples of $50,000 in excess thereof (or, if less, the full remaining
amount of the then applicable Revolving Committed Amount)) upon five
Business Days' prior written notice to the Agent; provided, however, no
such termination or reduction shall be made which would cause the
aggregate principal amount of outstanding Revolving Loans plus LOC
Obligations outstanding to exceed the Revolving Committed Amount,
unless, concurrently with such termination or reduction, the Revolving
Loans are repaid to the extent necessary to eliminate such excess. The
Agent shall promptly notify each affected Lender of receipt by the
Agent of any notice from the Borrower pursuant to this Section 3.4(a).
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(b) Mandatory Reductions. On any date that the Revolving Loans
are required to be prepaid pursuant to the terms of Section 3.3(b)(ii)
or (iii), the Revolving Committed Amount automatically shall be
permanently reduced by the amount of such required prepayment and/or
reduction.
(c) Maturity Date. The Revolving Commitments of the Lenders
and the LOC Commitment of the Issuing Lender shall automatically
terminate on the Maturity Date.
(d) General. The Borrower shall pay to the Agent for the
account of the Lenders in accordance with the terms of Section 3.5(a),
on the date of each termination or reduction of the Revolving Committed
Amount, the Commitment Fee accrued through the date of such termination
or reduction on the amount of the Revolving Committed Amount so
terminated or reduced.
3.5 Fees.
(a) Commitment Fee. In consideration of the Revolving
Commitments of the Lenders hereunder, the Borrower agrees to pay to the
Agent for the account of each Lender a fee (the "Commitment Fee") on
the unused portion of the Revolving Committed Amount computed at a per
annum rate for each day during the applicable Commitment Fee
Calculation Period (hereinafter defined) at a rate equal to the
Applicable Margin in effect from time to time. The Commitment Fee shall
commence to accrue on the Closing Date and shall be due and payable in
arrears on the last business day of each March, June, September and
October (and any date that the Revolving Committed Amount is reduced as
provided in Section 3.4(a) and the Maturity Date) for the immediately
preceding quarter (or portion thereof) (each such quarter or portion
thereof for which the Commitment Fee is payable hereunder being herein
referred to as an "Commitment Fee Calculation Period"), beginning with
the first of such dates to occur after the Closing Date.
(b) Letter of Credit Fees.
(i) Standby Letter of Credit Issuance Fee.
In consideration of the issuance of standby Letters
of Credit hereunder, the Borrower promises to pay to
the Agent for the account of each Lender a fee (the
"Standby Letter of Credit Fee") on such Lender's
Revolving Commitment Percentage of the average daily
maximum amount available to be drawn under each such
standby Letter of Credit computed at a per annum rate
for each day from the date of issuance to the date of
expiration equal to the Applicable Margin. The
Standby Letter of Credit Fee will be payable
quarterly in arrears on the last Business Day of each
March, June, September and October for the
immediately preceding quarter (or a portion thereof).
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(ii) Trade Letter of Credit Drawing Fee. In
consideration of the issuance of trade Letters of
Credit hereunder, the Borrower promises to pay to the
Agent for the account of each Lender a fee (the
"Trade Letter of Credit Fee") equal to one quarter of
one percent (1/4%) on such Lender's Revolving
Commitment Percentage of the amount of each drawing
under any such trade Letter of Credit. The Trade
Letter of Credit Fee will be payable on each date of
drawing under a trade Letter of Credit.
(iii) Issuing Lender Fees. In addition to
the Standby Letter of Credit Fee payable pursuant to
clause (i) above and the Trade Letter of Credit Fee
payable pursuant to clause (ii) above, the Borrower
promises to pay to the Issuing Lender for its own
account without sharing by the other Lenders the
letter of credit fronting and negotiation fees agreed
to by the Borrower and the Issuing Lender from time
to time and the customary charges from time to time
of the Issuing Lender with respect to the issuance,
amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of
Credit (collectively, the "Issuing Lender Fees").
(c) Administrative Fees. The Borrower agrees to pay to the
Agent, for its own account, as applicable, the fees referred to in the
Agent's Fee Letter (collectively, the "Agent's Fees").
3.6 Capital Adequacy.
If any Lender has determined, after the date hereof, that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then,
upon notice from such Lender to the Borrower, the Borrower shall be obligated to
pay to such Lender such additional amount or amounts as will compensate such
Lender for such reduction. Each determination by any such Lender of amounts
owing under this Section shall, absent manifest error, be conclusive and binding
on the parties hereto.
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3.7 Limitation on Eurodollar Loans.
If on or prior to the first day of any Interest Period for any
Eurodollar Loan:
(a) the Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination shall
be conclusive) and notify the Agent that the Eurodollar Rate will not
adequately and fairly reflect the cost to the Lenders of funding
Eurodollar Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans, Continue Eurodollar Loans, or to Convert Base
Rate Loans into Eurodollar Loans and the Borrower shall, on the last day(s) of
the then current Interest Period(s) for the outstanding Eurodollar Loans, either
prepay such Eurodollar Loans or Convert such Eurodollar Loans into Base Rate
Loans in accordance with the terms of this Credit Agreement.
3.8 Illegality.
Notwithstanding any other provision of this Credit Agreement, in the
event that it becomes unlawful for any Lender or its Applicable Lending Office
to make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender's obligation to make or
Continue Eurodollar Loans and to Convert Base Rate Loans into Eurodollar Loans
shall be suspended until such time as such Lender may again make, maintain, and
fund Eurodollar Loans (in which case the provisions of Section 3.10 shall be
applicable).
3.9 Requirements of Law.
(a) If, after the date hereof, the adoption of any applicable law,
rule, or regulation, or any change in any applicable law, rule, or regulation,
or any change in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such Governmental Authority, central bank, or
comparable agency:
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(i) shall subject such Lender (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any
Eurodollar Loans, its Notes, or its obligation to make Eurodollar
Loans, or change the basis of taxation of any amounts payable to such
Lender (or its Applicable Lending Office) under this Credit Agreement
or its Notes in respect of any Eurodollar Loans (other than taxes
imposed on the overall net income of such Lender by the jurisdiction in
which such Lender has its principal office or such Applicable Lending
Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement (other
than the Eurodollar Reserve Requirement utilized in the determination
of the Adjusted Eurodollar Rate) relating to any extensions of credit
or other assets of, or any deposits with or other liabilities or
commitments of, such Lender (or its Applicable Lending Office),
including the Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable
Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting
this Credit Agreement or its Notes or any of such extensions of credit
or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar Loans or to reduce any sum received or receivable by
such Lender (or its Applicable Lending Office) under this Credit Agreement or
its Notes with respect to any Eurodollar Loans, then the Borrower shall pay to
such Lender on demand such amount or amounts as will compensate such Lender for
such increased cost or reduction. If any Lender requests compensation by the
Borrower under this Section 3.9(a), the Borrower may, by notice to such Lender
(with a copy to the Agent), suspend the obligation of such Lender to make or
Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans,
until the event or condition giving rise to such request ceases to be in effect
(in which case the provisions of Section 3.10 shall be applicable); provided
that such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) If, after the date hereof, any Lender shall have determined that
the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any Governmental Authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
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(c) Each Lender shall promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section 3.9 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming
compensation under Section 3.6 or under this Section 3.9 shall furnish to the
Borrower and the Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
3.10 Treatment of Affected Loans.
If the obligation of any Lender to make any Eurodollar Loan or to
Continue, or to Convert Base Rate Loans into, Eurodollar Loans shall be
suspended pursuant to Section 3.8 or 3.9 hereof, such Lender's Eurodollar Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of the
then current Interest Period(s) for such Eurodollar Loans (or, in the case of a
Conversion required by Section 3.8 hereof, on such earlier date as such Lender
may specify to the Borrower with a copy to the Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 3.8 or 3.9 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have
been so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Eurodollar Loans shall be made or Continued instead as
Base Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain as Base Rate
Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 3.8 or 3.9 hereof that gave rise to the
Conversion of such Lender's Eurodollar Loans pursuant to this Section 3.10 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans made by other Lenders are
outstanding, such Lender's Base Rate Loans shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Loans, to the extent necessary so that, after giving effect thereto,
all Loans held by the Lenders holding Eurodollar Loans and by such Lender are
held pro rata (as to principal amounts, interest rate basis, and Interest
Periods) in accordance with their respective Commitments.
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3.11 Taxes.
(a) Any and all payments by the Borrower to or for the account
of any Lender or the Agent hereunder or under any other Credit Document
shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding,
in the case of each Lender and the Agent, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction under the laws
of which such Lender (or its Applicable Lending Office) or the Agent
(as the case may be) is organized or any political subdivision thereof
(all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable under this Credit Agreement or
any other Credit Document to any Lender or the Agent, (i) the sum
payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 3.11) such Lender or the Agent receives an
amount equal to the sum it would have received had no such deductions
been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and
(iv) the Borrower shall furnish to the Agent, at its address referred
to in Section 11.1, the original or a certified copy of a receipt
evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all
present or future stamp or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any
payment made under this Credit Agreement or any other Credit Document
or from the execution or delivery of, or otherwise with respect to,
this Credit Agreement or any other Credit Document (hereinafter
referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent
for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 3.11) paid by such
Lender or the Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto.
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(d) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Credit Agreement in the case of each Lender listed on
the signature pages hereof and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to
time thereafter if requested in writing by the Borrower or the Agent
(but only so long as such Lender remains lawfully able to do so), shall
provide the Borrower and the Agent with (i) Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is entitled
to benefits under an income tax treaty to which the United States is a
party which reduces the rate of withholding tax on payments of interest
or certifying that the income receivable pursuant to this Credit
Agreement is effectively connected with the conduct of a trade or
business in the United States, (ii) Internal Revenue Service Form W-8
or W-9, as appropriate, or any successor form prescribed by the
Internal Revenue Service, and (iii) any other form or certificate
required by any taxing authority (including any certificate required by
Sections 871(h) and 881(c) of the Internal Revenue Code), certifying
that such Lender is entitled to an exemption from or a reduced rate of
tax on payments pursuant to this Credit Agreement or any of the other
Credit Documents.
(e) For any period with respect to which a Lender has failed
to provide the Borrower and the Agent with the appropriate form
pursuant to Section 3.11(d) (unless such failure is due to a change in
treaty, law, or regulation occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 3.11(a) or 3.11(b) with
respect to Taxes imposed by the United States; provided, however, that
should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure
to deliver a form required hereunder, the Borrower shall take such
steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
(f) If the Borrower is required to pay additional amounts to
or for the account of any Lender pursuant to this Section 3.11, then
such Lender will agree to use reasonable efforts to change the
jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of
Taxes, the Borrower shall furnish to the Agent the original or a
certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 3.11 shall survive the repayment of
the Loans, LOC Obligations and other obligations under the Credit
Documents and the termination of the Commitments hereunder.
3.12 Compensation.
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Upon the request of the Agent, on behalf of a Lender, the Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar
Loan for any reason (including, without limitation, the acceleration of
the Loans pursuant to Section 9.2) on a date other than the last day of
the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any condition precedent specified in
Section 5 to be satisfied) to borrow, Convert, Continue, or prepay a
Eurodollar Loan on the date for such borrowing, Conversion,
Continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation, or Conversion under this Credit
Agreement.
With respect to Eurodollar Loans, such indemnification may include an amount
equal to the excess, if any, of (a) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of the applicable Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Loans provided for herein (excluding,
however, the Applicable Margin included therein, if any) over (b) the amount of
interest (as reasonably determined by such Lender) which would have accrued to
such Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank Eurodollar market. The covenants of
the Borrower set forth in this Section 3.12 shall survive the repayment of the
Loans, LOC Obligations and other obligations under the Credit Documents and the
termination of the Commitments hereunder.
3.13 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or (subject to the terms of
Section 3.3) prepayment of principal of any Loan or reimbursement
obligations arising from drawings under Letters of Credit, each payment
of interest on the Loans or reimbursement obligations arising from
drawings under Letters of Credit, each payment of Commitment Fees, each
payment of the Standby Letter of Credit Fee, each payment of the Trade
Letter of Credit Fee, each reduction of the Revolving Committed Amount
and each conversion or extension of any Loan, shall be allocated pro
rata among the Lenders in accordance with the respective principal
amounts of their outstanding Loans and Participation Interests.
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Advances. No Lender shall be responsible for the
failure or delay by any other Lender in its obligation to make its
ratable share of a borrowing hereunder; provided, however, that the
failure of any Lender to fulfill its obligations hereunder shall not
relieve any other Lender of its obligations hereunder. Unless the Agent
shall have been notified by any Lender in writing not less than the
earlier to occur of one Business Day or 24 hours prior to the date of
any requested borrowing that such Lender does not intend to make
available to the Agent its ratable share of such borrowing to be made
on such date, the Agent may assume that such Lender has made such
amount available to the Agent on the date of such borrowing, and the
Agent in reliance upon such assumption, may (in its sole discretion but
without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent, the Agent shall be able to recover such
corresponding amount from such Lender with interest at a rate per annum
equal to the Federal Funds Rate. If such Lender does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the
Agent will promptly notify the Borrower, and the Borrower shall
immediately pay such corresponding amount to the Agent. The Agent shall
also be entitled to recover from the Lender or the Borrower, as the
case may be, interest on such corresponding amount in respect of each
day from the date such corresponding amount was made available by the
Agent to the Borrower to the date such corresponding amount is
recovered by the Agent at a per annum rate equal to (i) from the
Borrower at the applicable rate for the applicable borrowing pursuant
to the Notice of Borrowing and (ii) from a Lender at the Federal Funds
Rate.
3.14 Sharing of Payments.
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The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a Participation Interest in such Loans, LOC
Obligations and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
Participation Interest theretofore sold, return its share of that benefit
(together with its share of any accrued interest payable with respect thereto)
to each Lender whose payment shall have been rescinded or otherwise restored.
The Borrower agrees that any Lender so purchasing such a Participation Interest
may, to the fullest extent permitted by law, exercise all rights of payment,
including setoff, banker's lien or counterclaim, with respect to such
Participation Interest as fully as if such Lender were a holder of such Loan,
LOC Obligations or other obligation in the amount of such Participation
Interest. Except as otherwise expressly provided in this Credit Agreement, if
any Lender or the Agent shall fail to remit to the Agent or any other Lender an
amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such amount is due until the date such amount is paid to the Agent or such
other Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.14 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.14 to share in the benefits of any recovery on such secured claim.
3.15 Payments, Computations, Etc.
(a) Except as otherwise specifically provided herein, all
payments hereunder shall be made to the Agent in dollars in immediately
available funds, without offset, deduction, counterclaim or withholding
of any kind, at the Agent's office specified in Schedule 2.1(a) not
later than 4:00 P.M. (Charlotte, North Carolina time) on the date when
due. Payments received after such time shall be deemed to have been
received on the next succeeding Business Day. The Agent may (but shall
not be obligated to) debit the amount of any such payment which is not
made by such time to any ordinary deposit account of the Borrower
maintained with the Agent (with notice to the Borrower). The Borrower
shall, at the time it makes any payment under this Credit Agreement,
specify to the Agent the Loans, LOC Obligations, Fees, interest or
other amounts payable by the Borrower hereunder to which such payment
is to be applied (and in the event that it fails so to specify, or if
such application would be inconsistent with the terms hereof, the Agent
shall distribute such payment to the Lenders in such manner as the
Agent may determine to be appropriate in respect of obligations owing
by the Borrower hereunder, subject to the terms of Section 3.13(a)).
The Agent will distribute such payments to such Lenders, if any such
payment is received prior to 12:00 Noon (Charlotte, North Carolina
time) on a Business Day in like funds as received prior to the end of
such Business Day and otherwise the Agent will distribute such payment
to such Lenders on the next succeeding Business Day. Whenever any
payment hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and Fees for
the period of such extension), except that in the case of Eurodollar
Loans, if the extension would cause the payment to be made in the next
following calendar month, then such payment shall instead be made on
the next preceding Business Day. Except as expressly provided otherwise
herein, all computations of interest and fees shall be made on the
basis of actual number of days elapsed over a year of 360 days, except
with respect to computation of interest on Base Rate Loans which
(unless the Base Rate is determined b reference to the Federal Funds
Rate) shall be calculated based on a year of 365 or 366 days, as
appropriate. Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.
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(b) Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, after the occurrence and during the continuance of an Event
of Default, all amounts collected or received by the Agent or any
Lender on account of the Credit Party Obligations or any other amounts
outstanding under any of the Credit Documents or in respect of the
Collateral shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agent in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Agent with respect to the Collateral under or pursuant to the terms of
the Collateral Documents;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation, reasonable attorneys' fees)
of each of the Lenders in connection with enforcing its rights under
the Credit Documents or otherwise with respect to the Credit Party
Obligations owing to such Lender;
FOURTH, to the payment of all of the Credit Party Obligations
consisting of accrued fees and interest;
FIFTH, to the payment of the outstanding principal amount of
the Credit Party Obligations (including the payment or cash
collateralization of the outstanding LOC Obligations);
SIXTH, to all other Credit Party Obligations and other
obligations which shall have become due and payable under the Credit
Documents or otherwise and not repaid pursuant to clauses "FIRST"
through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to
the next succeeding category; (ii) each of the Lenders shall receive an
amount equal to its pro rata share (based on the proportion that the
then outstanding Loans and LOC Obligations held by such Lender bears to
the aggregate then outstanding Loans and LOC Obligations) of amounts
available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH"
and "SIXTH" above; and (iii) to the extent that any amounts available
for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of outstanding Letters of Credit, such
amounts shall be held by the Agent in a cash collateral account and
applied (A) first, to reimburse the Issuing Lender from time to time
for any drawings under such Letters of Credit and (B) then, following
the expiration of all Letters of Credit, to all other obligations of
the types described in clauses "FIFTH" and "SIXTH" above in the manner
provided in this Section 3.15(b).
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3.16 Evidence of Debt.
(a) Each Lender shall maintain an account or accounts
evidencing each Loan made by such Lender to the Borrower from time to
time, including the amounts of principal and interest payable and paid
to such Lender from time to time under this Credit Agreement. Each
Lender will make reasonable efforts to maintain the accuracy of its
account or accounts and to promptly update its account or accounts from
time to time, as necessary.
(b) The Agent shall maintain the Register pursuant to Section
11.3(c), and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount, type and
Interest Period of each such Loan hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable to
each Lender hereunder and (iii) the amount of any sum received by the
Agent hereunder from or for the account of the Borrower and each
Lender's share thereof. The Agent will make reasonable efforts to
maintain the accuracy of the subaccounts referred to in the preceding
sentence and to promptly update such subaccounts from time to time, as
necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.16 (and, if
consistent with the entries of the Agent, subsection (a)) shall be
prima facie evidence of the existence and amounts of the obligations of
the Borrower therein recorded; provided, however, that the failure of
any Lender or the Agent to maintain any such account, such Register or
such subaccount, as applicable, or any error therein, shall not in any
manner affect the obligation of the Borrower to repay the Loans made by
such Lender in accordance with the terms hereof.
3.17 Replacement Lenders.
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If any Lender either (i) becomes a Defaulting Lender or (ii) delivers a
notice pursuant to Sections 3.6, 3.9 or 3.11, the Borrower shall have the right,
if no Default or Event of Default then exists, to replace such Lender (the
"Replaced Lender") with one or more assignees eligible under Section 11.3(b)
hereof (collectively, the "Replacement Lender"), provided that (A) at the time
of any replacement pursuant to this Section, the Replacement Lender shall enter
into one or more assignment agreements substantially in the form of Exhibit
11.3(b) pursuant to, and in accordance with the terms of, Section 11.3(b)
pursuant to which the Replacement Lender shall acquire all of the rights and
obligations of the Replaced Lender hereunder and, in connection therewith, shall
pay to (1) the Replaced Lender in respect thereof of an amount equal to the sum
of (x) the principal of, and all accrued interest on, all outstanding Loans of
the Replaced Lender, (y) all unreimbursed drawings under the Letters of Credit
that have been funded by the Replaced Lender, together with all then unpaid
interest with respect thereto at such time and (z) all accrued but theretofore
unpaid, fees and other amounts owing to the Replaced Lender pursuant to Section
3.5 and (2) each Issuing Lender an amount equal to such Replaced Lender's
Revolving Commitment Percentage of any unreimbursed drawings under Letters of
Credit issued by such Issuing Lender to the extent such amount was not
heretofore funded by Replaced Lender, and (B) all obligations of the Borrower
owing to the Replaced Lender (including all obligations, if any, owing pursuant
to Section 3.6, 3.9 or 3.11, but excluding those obligations specifically
described in clause (A) above in respect of which the assignment purchase price
has been, or is concurrently being paid) shall be paid in full by the Borrower
to such Replaced Lender concurrently with such replacement.
SECTION 4
GUARANTY
4.1 The Guaranty.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, each Affiliate of a Lender that enters into a Hedging Agreement, and the
Agent as hereinafter provided the prompt payment of the Credit Party Obligations
in full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise) strictly in
accordance with the terms thereof. The Guarantors hereby further agree that if
any of the Credit Party Obligations are not paid in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise), the Guarantors will, jointly and severally,
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Credit Party
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration, as a mandatory
cash collateralization or otherwise) in accordance with the terms of such
extension or renewal.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, the obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code or any comparable provisions of any
applicable state law.
4.2 Obligations Unconditional.
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The obligations of the Guarantors under Section 4.1 are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release, impairment or exchange of any other guarantee of or
security for any of the Credit Party Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances. Each Guarantor agrees that such Guarantor shall
have no right of subrogation, indemnity, reimbursement or contribution against
the Borrower or any other Guarantor of the Credit Party Obligations for amounts
paid under this Section 4 until such time as the Lenders (and any Affiliates of
Lenders entering into Hedging Agreements) have been paid in full, all
Commitments under this Credit Agreement have been terminated and no Person or
Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received under
the Credit Documents or Hedging Agreements. Without limiting the generality of
the foregoing, it is agreed that, to the fullest extent permitted by law, the
occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of
the Credit Party Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any
of the Credit Documents, any Hedging Agreement or any other agreement
or instrument referred to in the Credit Documents or Hedging Agreements
shall be done or omitted;
(c) the maturity of any of the Credit Party Obligations shall
be accelerated, or any of the Credit Party Obligations shall be
modified, supplemented or amended in any respect, or any right under
any of the Credit Documents, any Hedging Agreement or any other
agreement or instrument referred to in the Credit Documents or Hedging
Agreements shall be waived or any other guarantee of any of the Credit
Party Obligations or any security therefor shall be released, impaired
or exchanged in whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Agent or any
Lender or Lenders as security for any of the Credit Party Obligations
shall fail to attach or be perfected; or
(e) any of the Credit Party Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of any Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents,
any Hedging Agreement or any other agreement or instrument referred to in the
Credit Documents or Hedging Agreements, or against any other Person under any
other guarantee of, or security for, any of the Credit Party Obligations.
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4.3 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
Without limiting the generality of the provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss.
26-7 through 26-9, inclusive, to the extent applicable. Each Guarantor further
agrees that such Guarantor shall have no right of recourse to security for the
Credit Party Obligations, except through the exercise of rights of subrogation
pursuant to Section 4.2 and through the exercise of rights of contribution
pursuant to Section 4.6.
4.5 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Credit Party
Obligations being deemed to have become automatically due and payable), the
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of Section
4.1. The Guarantors acknowledge and agree that their obligations hereunder are
secured in accordance with the terms of the Security Agreements and the other
Collateral Documents and that the Lenders may exercise their remedies thereunder
in accordance with the terms thereof.
4.6 Rights of Contribution.
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The Guarantors hereby agree as among themselves that, if any Guarantor
shall make an Excess Payment (as defined below), such Guarantor shall have a
right of contribution from each other Guarantor in an amount equal to such other
Guarantor's Contribution Share (as defined below) of such Excess Payment. The
payment obligations of any Guarantor under this Section 4.6 shall be subordinate
and subject in right of payment to the prior payment in full to the Agent and
the Lenders of the Guaranteed Obligations, and none of the Guarantors shall
exercise any right or remedy under this Section 4.6 against any other Guarantor
until payment and satisfaction in full of all of such Guaranteed Obligations.
For purposes of this Section 4.6, (a) "Guaranteed Obligations" shall mean any
obligations arising under the other provisions of this Section 4; (b) "Excess
Payment" shall mean the amount paid by any Guarantor in excess of its Pro Rata
Share of any Guaranteed Obligations; (c) "Pro Rata Share" shall mean, for any
Guarantor in respect of any payment of Guaranteed Obligations, the ratio
(expressed as a percentage) as of the date of such payment of Guaranteed
Obligations of (i) the amount by which the aggregate present fair salable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair salable value
of all assets and other properties of the Borrower and all of the Guarantors
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder) of the Borrower and
all of the Guarantors; provided, however, that, for purposes of calculating the
Pro Rata Shares of the Guarantors in respect of any payment of Guaranteed
Obligations, any Guarantor that became a Guarantor subsequent to the date of any
such payment shall be deemed to have been a Guarantor on the date of such
payment and the financial information for such Guarantor as of the date such
Guarantor became a Guarantor shall be utilized for such Guarantor in connection
with such payment; and (d) "Contribution Share" shall mean, for any Guarantor in
respect of any Excess Payment made by any other Guarantor, the ratio (expressed
as a percentage) as of the date of such Excess Payment of (i) the amount by
which the aggregate present fair salable value of all of its assets and
properties exceeds the amount of all debts and liabilities of such Guarantor
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of such Guarantor hereunder) to (ii) the amount by
which the aggregate present fair salable value of all assets and other
properties of the Borrower and all of the Guarantors other than the maker of
such Excess Payment exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of the Borrower and the Guarantors hereunder) of
the Borrower and all of the Guarantors other than the maker of such Excess
Payment; provided, however, that, for purposes of calculating the Contribution
Shares of the Guarantors in respect of any Excess Payment, any Guarantor that
became a Guarantor subsequent to the date of any such Excess Payment shall be
deemed to have been a Guarantor on the date of such Excess Payment and the
financial information for such Guarantor as of the date such Guarantor became a
Guarantor shall be utilized for such Guarantor in connection with such Excess
Payment. This Section 4.6 shall not be deemed to affect any right of
subrogation, indemnity, reimbursement or contribution that any Guarantor may
have under applicable law against the Borrower in respect of any payment of
Guaranteed Obligations. Notwithstanding the foregoing, all rights of
contribution against any Guarantor shall terminate from and after such time, if
ever, that such Guarantor shall be relieved of its obligations pursuant to
Section 8.4.
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4.7 Continuing Guarantee.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Credit Party Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 Closing Conditions.
The obligation of the Lenders to enter into this Credit Agreement and
to make the initial Loans or the Issuing Lender to issue the initial Letter of
Credit, whichever shall occur first, shall be subject to satisfaction of the
following conditions (in form and substance acceptable to the Lenders):
(a) Executed Credit Documents. Receipt by the Agent of duly
executed copies of: (i) this Credit Agreement; (ii) the Notes; (iii)
the Collateral Documents and (iv) all other Credit Documents, each in
form and substance acceptable to the Lenders in their sole discretion.
(b) Corporate Documents. Receipt by the Agent of the
following:
(i) Charter Documents. Copies of the articles or
certificates of incorporation or other charter documents of
each Credit Party certified to be true and complete as of a
recent date by the appropriate Governmental Authority of the
state or other jurisdiction of its incorporation and certified
by a secretary or assistant secretary of such Credit Party to
be true and correct as of the Closing Date.
(ii) Bylaws. A copy of the bylaws of each Credit
Party certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the Board
of Directors of each Credit Party approving and adopting the
Credit Documents to which it is a party, the transactions
contemplated therein and authorizing execution and delivery
thereof, certified by a secretary or assistant secretary of
such Credit Party to be true and correct and in force and
effect as of the Closing Date.
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(iv) Good Standing. Copies of (A) certificates of
good standing, existence or its equivalent with respect to
each Credit Party certified as of a recent date by the
appropriate Governmental Authorities of the state or other
jurisdiction of incorporation and each other jurisdiction in
which the failure to so qualify and be in good standing could
have a Material Adverse Effect and (B) to the extent
available, a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each
Credit Party certified by a secretary or assistant secretary
to be true and correct as of the Closing Date.
(c) Financial Statements. Receipt by the Agent and the Lenders
of (i) the consolidated financial statements of the Borrower and its
Subsidiaries, including balance sheets and income and cash flow
statements for the fiscal quarter ended October 12, 1997, (ii) a
satisfactory estimated consolidated balance sheet of the Borrower as of
November 9, 1997 giving effect to the acquisition of the Acquired
Company and the transactions contemplated by the Merger Agreement and
reflecting estimated purchase price accounting adjustments, prepared by
the Company, (iii) projected financial statements of the Consolidated
Parties for the fiscal years ending 1998 through and including the
twelve month period ending March 31, 2002, including consolidated
balance sheets, statements of income and cash flow statements of the
Consolidated Parties giving effect to the Acquisition of the Acquired
Company, together with appropriate supporting details and such other
facts as relate to the ongoing business of the Consolidated Parties
(collectively, the "Projections") which shall be accompanied by a
certificate of a Responsible Officer to the effect that the Projections
(A) are based on reasonable estimates and assumptions, all of which are
fair in light of the conditions which existed at the time the
Projections were made, (B) have been prepared on the basis of the
assumptions stated therein, and (C) reflect, as of the time so
furnished and the Closing Date, the reasonable estimate of the Borrower
of the results of the operations and other information projected
therein, and (iv) such other information relating to the Borrower and
its Subsidiaries or the Acquired Company as the Agent may reasonably
require in connection with the structuring and syndication of credit
facilities of the type described herein.
(d) Opinions of Counsel. The Agent shall have received
favorable opinions dated as of the Closing Date of counsel to the
Credit Parties addressed to the lenders with respect to the Credit
Parties, the Credit Documents and such other matters as the lenders
shall request:
(e) Personal Property Collateral. The Agent shall have
received:
(i) searches of Uniform Commercial Code filings in the
jurisdiction of the chief executive office of each Credit
Party and each jurisdiction where any Collateral is located or
where a filing would need to be made in order to perfect the
Agent's security interest in the Collateral, copies of the
financing statements on file in such jurisdictions and
evidence that no Liens exist other than Permitted Liens;
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(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Agent's security interest in the
Collateral;
(iii) searches of ownership of intellectual property in
the appropriate governmental offices and such
patent/trademark/copyright filings as requested by the Agent
in order to perfect the Agent's security interest in the
Collateral;
(iv) all stock certificates evidencing the Capital Stock
pledged to the Agent pursuant to the Pledge Agreement,
together with duly executed in blank undated stock powers
attached thereto (unless, with respect to the pledged Capital
Stock of any Foreign Subsidiary, such stock powers are deemed
unnecessary by the Agent in its reasonable discretion under
the law of the jurisdiction of incorporation of such Person);
(v) such patent/trademark/copyright filings as requested
by the Agent in order to
perfect the Agent's security interest in the Collateral;
(vi) all instruments and chattel paper in the possession
of any of the Credit Parties, together with allonges or
assignments as may be necessary or appropriate to perfect the
Agent's security interest in the Collateral; and
(vii) duly executed consents as are necessary, in the
Agent's sole discretion, to perfect the Lenders' security
interest in the Collateral.
(f) Priority of Liens. The Agent shall have received
satisfactory evidence that (i) the Agent, on behalf of the Lenders,
holds a perfected, first priority Lien on all Collateral and (ii) none
of the Collateral is subject to any other Liens other than Permitted
Liens.
(g) Evidence of Insurance. Receipt by the Agent of copies of
insurance policies or certificates of insurance of the Consolidated
Parties evidencing liability and casualty insurance meeting the
requirements set forth in the Credit Documents, including, but not
limited to, naming the Agent as sole loss payee on behalf of the
Lenders.
(h) Corporate Structure. The corporate capital and ownership
structure of the Consolidated Parties (after giving effect to the
purchase of the Acquired Company) shall be as described in Schedule
5.1(h).
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(i) Government Consent. Receipt by the Agent of evidence that
all governmental, shareholder and material third party consents
(including Hart-Scott-Rodino clearance) and approvals necessary or
desirable in connection with the acquisition of the Acquired Company
and the related financings and other transactions contemplated hereby
and expiration of all applicable waiting periods without any action
being taken by any authority that could restrain, prevent or impose any
material adverse conditions on the acquisition of the Acquired Company
or such other transactions or that could seek or threaten any of the
foregoing, and no law or regulation shall be applicable which in the
judgment of the Agent could have such effect.
(j) Material Adverse Effect. No material adverse change shall
have occurred since March 30, 1997 in the condition (financial or
otherwise), business, management or prospects of the Consolidated
Parties taken as a whole.
(k) Litigation. There shall not exist (i) any order, decree,
judgment, ruling or injunction which restrains the consummation of the
acquisition of the Acquired Company in the manner contemplated by the
Merger Agreement or (ii) any pending or threatened action, suit,
investigation or proceeding against a Consolidated Party that could
have a Material Adverse Effect.
(l) Other Indebtedness. Receipt by the Agent of evidence that,
after the acquisition of the Acquired Company, the Consolidated Parties
shall have no Funded Indebtedness other than the Indebtedness under the
Credit Documents.
(m) Merger Agreement. There shall not have been any material
modification, amendment, supplement or waiver to the Merger Agreement
without the prior written consent of the Agent, including, but not
limited to, any modification, amendment, supplement or waiver relating
to the amount or type of consideration to be paid in connection with
the acquisition of the Acquired Company and the contents of all
disclosure schedules and exhibits, and the acquisition of the Acquired
Company shall have been consummated in accordance with the terms of the
Merger Agreement (without waiver of any conditions precedent to the
obligations of the buyer thereunder) and the expenses of the Borrower
related to such acquisition shall not exceed $1,000,000 in the
aggregate. The Agent shall have received a final copy of the Merger
Agreement, together with all exhibits and schedules thereto, certified
by an officer of the Borrower.
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(n) Officer's Certificates. The Agent shall have received a
certificate or certificates executed by a Responsible Officer of the
Borrower as of the Closing Date stating that (i) all governmental,
shareholder and third party consents and approvals, if any, with
respect to the Credit Documents and the transactions contemplated
thereby have been obtained, (ii) each Consolidated Party is in
compliance with all existing financial obligations, (iii) no action,
suit, investigation or proceeding is pending or threatened in any court
or before any arbitrator or governmental instrumentality that purports
to affect any Consolidated Party or any transaction contemplated by the
Credit Documents, if such action, suit, investigation or proceeding
could have a Material Adverse Effect, (iv) the transactions
contemplated by the Merger Agreement have been consummated in
accordance with the terms thereof and (v) immediately after giving
effect to this Credit Agreement, the other Credit Documents and all the
transactions contemplated therein to occur on such date, (A) each of
the Credit Parties is Solvent, (B) no Default or Event of Default
exists, (C) all representations and warranties contained herein and in
the other Credit Documents are true and correct in all material
respects, and (D) the Credit Parties are in compliance with each of the
financial covenants set forth in Section 7.11.
(o) Existing Credit Agreement. The Agent shall have
received satisfactory evidence that the Existing Credit Agreement has
been terminated.
(p) Fees and Expenses. Payment by the Credit Parties of all
fees and expenses owed by them to the Lenders and the Agent, including,
without limitation, payment to the Agent of the fees set forth in the
Fee Letter.
(q) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by any
Lender, including, but not limited to, information regarding
litigation, tax, accounting, labor, insurance, pension liabilities
(actual or contingent), real estate leases, material contracts, debt
agreements, property ownership and contingent liabilities of the
Consolidated Parties.
5.2 Conditions to all Extensions of Credit.
The obligations of each Lender to make, convert or extend any Loan and
of the Issuing Lender to issue or extend any Letter of Credit (including the
initial Loans and the initial Letter of Credit) are subject to satisfaction of
the following conditions in addition to satisfaction on the Closing Date of the
conditions set forth in Section 5.1:
(a) The Borrower shall have delivered (i) in the case of any
Revolving Loan or any portion of the Term Loan, an appropriate Notice
of Borrowing or Notice of Extension/Conversion or (ii) in the case of
any Letter of Credit, the Issuing Lender shall have received an
appropriate request for issuance in accordance with the provisions of
Section 2.2(b);
(b) The representations and warranties set forth in Section 6
shall, subject to the limitations set forth therein, be true and
correct in all material respects as of such date (except for those
which expressly relate to an earlier date);
(c) No Default or Event of Default shall exist and be
continuing either prior to or after giving effect thereto;
(d) Immediately after giving effect to the making of such Loan
(and the application of the proceeds thereof) or to the issuance of
such Letter of Credit, as the case may be, (i) the sum of the aggregate
principal amount of outstanding Revolving Loans plus LOC Obligations
outstanding shall not exceed the Revolving Committed Amount, and (ii)
the LOC Obligations shall not exceed the LOC Committed Amount.
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The delivery of each Notice of Borrowing, each Notice of Extension/Conversion
and each request for a Letter of Credit pursuant to Section 2.2(b) shall
constitute a representation and warranty by the Borrower of the correctness of
the matters specified in subsections (b), (c), and (d), above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 Financial Condition.
(a) The audited consolidated and consolidating balance sheet
of the Consolidated Parties as of March 30, 1997 and the audited
consolidated statements of earnings and statements of cash flows for
the years ended March 31, 1996, March 26, 1995 and March 27, 1994 and
for the seven 4-week periods ended October 12, 1997 have heretofore
been furnished to each Lender. Such financial statements (including the
notes thereto) (i) have been audited by Deloitte & Touche LLP (except
for the seven 4-week periods ending October 12, 1997 which have not
been audited), (ii) have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby and (iii)
present fairly (on the basis disclosed in the footnotes to such
financial statements) the consolidated financial condition, results of
operations and cash flows of the Consolidated Parties as of such date
and for such periods. The unaudited interim balance sheets of the
Consolidated Parties as at the end of, and the related unaudited
interim statements of earnings and of cash flows for, each fiscal month
and quarterly period ended after December 31, 1996 and prior to the
Closing Date have heretofore been furnished to each Lender. Such
interim financial statements for each such quarterly period, (i) have
been prepared in accordance with GAAP consistently applied throughout
the periods covered thereby and (ii) present fairly (on the basis
disclosed in the footnotes to such financial statements) the
consolidated financial condition, results of operations and cash flows
of the Consolidated Parties as of such date and for such periods.
During the period from December 31, 1996 to and including the Closing
Date, there has been no sale, transfer or other disposition by any
Consolidated Party of any material part of the business or property of
the Consolidated Parties, taken as a whole, and no purchase or other
acquisition by any of them of any business or property (including any
capital stock of any other person) material in relation to the
consolidated financial condition of the Consolidated Parties, taken as
a whole, in each case, which, is not reflected in the foregoing
financial statements or in the notes thereto and has not otherwise been
disclosed in writing to the Lenders on or prior to the Closing Date.
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(b) The pro forma consolidated balance sheet of the
Consolidated Parties as of November 9, 1997 giving effect to the
Acquisition, in accordance with the terms of the Merger Agreement and
reflecting estimated purchase price accounting adjustments, has
heretofore been furnished to each Lender. Such pro forma balance sheet
is based upon reasonable assumptions made known to the Lenders and upon
information not known as of the date hereof to be incorrect or
misleading in any material respect.
(c) The financial statements delivered to the Lenders pursuant
to Section 7.1(a) and (b), (i) have been prepared in accordance with
GAAP (except as may otherwise be permitted under Section 7.1(a) and
(b)) and (ii) present fairly (on the basis disclosed in the footnotes
to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of
such date and for such periods.
6.2 No Material Change.
Since March 30, 1997, (a) there has been no development or event
relating to or affecting a Consolidated Party which has had or could have a
Material Adverse Effect and (b) except as otherwise permitted under this Credit
Agreement, no dividends or other distributions have been declared, paid or made
upon the Capital Stock in a Consolidated Party nor has any of the Capital Stock
in a Consolidated Party been redeemed, retired, purchased or otherwise acquired
for value.
6.3 Organization and Good Standing.
Each of the Consolidated Parties (a) is duly organized, validly
existing and is in good standing under the laws of the jurisdiction of its
incorporation or organization, (b) has the corporate or other necessary power
and authority, and the legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged and (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing could have a Material Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations.
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Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrower, to obtain
extensions of credit hereunder, and has taken all necessary corporate action to
authorize the borrowings and other extensions of credit on the terms and
conditions of this Credit Agreement and to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Credit Party in connection with the borrowings or
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Credit Party is a party, except for (a) consents, authorizations, notices and
filings described in Schedule 6.4, all of which have been obtained or made or
have the status described in such Schedule 6.4 and (b) filings to perfect the
Liens created by the Collateral Documents. This Credit Agreement has been, and
each other Credit Document to which any Credit Party is a party will be, duly
executed and delivered on behalf of the Credit Parties. This Credit Agreement
constitutes, and each other Credit Document to which any Credit Party is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of such Credit Party enforceable against such party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
6.5 No Conflicts.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws or other organizational or governing documents of such
Person, (b) violate, contravene or materially conflict with any Requirement of
Law or any other law, regulation (including, without limitation, Regulation U or
Regulation X), order, writ, judgment, injunction, decree or permit applicable to
it, (c) violate, contravene or conflict with contractual provisions of, or cause
an event of default under, any indenture, loan agreement, mortgage, deed of
trust, contract or other agreement or instrument to which it is a party or by
which it may be bound, the violation of which could have a Material Adverse
Effect, or (d) result in or require the creation of any Lien (other than those
contemplated in or created in connection with the Credit Documents) upon or with
respect to its properties.
6.6 No Default.
No Consolidated Party is in default in any respect under any contract,
lease, loan agreement, indenture, mortgage, security agreement or other
agreement or obligation to which it is a party or by which any of its properties
is bound which default could have a Material Adverse Effect. No Default or Event
of Default has occurred or exists except as previously disclosed in writing to
the Lenders.
6.7 Ownership.
Each Consolidated Party is the owner of, and has good and marketable
title to, all of its respective assets and none of such assets is subject to any
Lien other than Permitted Liens.
6.8 Indebtedness.
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Except as otherwise permitted under Section 8.1, the Consolidated
Parties have no Indebtedness.
6.9 Litigation.
Except as disclosed in Schedule 6.9, there are no actions, suits or
legal, equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Credit Party, threatened against any Consolidated Party which
might have a Material Adverse Effect.
6.10 Taxes.
Each Consolidated Party has filed, or caused to be filed, all tax
returns (federal, state, local and foreign) required to be filed and paid (a)
all amounts of taxes shown thereon to be due (including interest and penalties)
and (b) all other taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing by it, except for such taxes (i) which are not yet delinquent or
(ii) that are being contested in good faith and by proper proceedings, and
against which adequate reserves are being maintained in accordance with GAAP. No
Credit Party is aware as of the Closing Date of any proposed tax assessments
against it or any other Consolidated Party.
6.11 Compliance with Law.
Each Consolidated Party is in compliance with all Requirements of Law
and all other laws, rules, regulations, orders and decrees (including without
limitation Environmental Laws) applicable to it, or to its properties, unless
such failure to comply could not have a Material Adverse Effect. No Requirement
of Law could cause a Material Adverse Effect.
6.12 ERISA.
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no ERISA Event has
occurred, and, to the best knowledge of the Credit Parties, no event or
condition has occurred or exists as a result of which any ERISA Event
could reasonably be expected to occur, with respect to any Plan; (ii)
no "accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, has
occurred with respect to any Plan; (iii) each Plan has been maintained,
operated, and funded in compliance with its own terms and in material
compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no lien in favor of the PBGC
or a Plan has arisen or is reasonably likely to arise on account of any
Plan.
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(b) The actuarial present value of all "benefit liabilities"
(as defined in Section 4001(a)(16) of ERISA), whether or not vested,
under each Single Employer Plan, as of the last annual valuation date
prior to the date on which this representation is made or deemed made
(determined, in each case, utilizing the actuarial assumptions used in
such Plan's most recent actuarial valuation report), did not exceed as
of such valuation date the fair market value of the assets of such
Plan.
(c) Neither any Consolidated Party nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be
reasonably expected to incur, any withdrawal liability under ERISA to
any Multiemployer Plan or Multiple Employer Plan. Neither any
Consolidated Party nor any ERISA Affiliate would become subject to any
withdrawal liability under ERISA if any Consolidated Party or any ERISA
Affiliate were to withdraw completely from all Multiemployer Plans and
Multiple Employer Plans as of the valuation date most closely preceding
the date on which this representation is made or deemed made. Neither
any Consolidated Party nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization (within
the meaning of Section 4241 of ERISA), is insolvent (within the meaning
of Section 4245 of ERISA), or has been terminated (within the meaning
of Title IV of ERISA), and no Multiemployer Plan is, to the best
knowledge of the Credit Parties, reasonably expected to be in
reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject any Consolidated Party or any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which any Consolidated Party or any ERISA Affiliate has
agreed or is required to indemnify any person against any such
liability.
(e) Neither any Consolidated Party nor any ERISA Affiliates
has any material liability with respect to "expected post-retirement
benefit obligations" within the meaning of the Financial Accounting
Standards Board Statement 106.
6.13 Subsidiaries.
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Set forth on Schedule 6.13 is a complete and accurate list of all
Subsidiaries of each Consolidated Party. Information on Schedule 6.13 includes
jurisdiction of incorporation, the number of shares of each class of Capital
Stock outstanding, the number and percentage of outstanding shares of each class
owned (directly or indirectly) by such Consolidated Party; and the number and
effect, if exercised, of all outstanding options, warrants, rights of conversion
or purchase and all other similar rights with respect thereto. The outstanding
Capital Stock of all such Subsidiaries is validly issued, fully paid and
non-assessable and is owned by each such Consolidated Party, directly or
indirectly, free and clear of all Liens (other than those arising under or
contemplated in connection with the Credit Documents). Other than as set forth
in Schedule 6.13, no Consolidated Party has outstanding any securities
convertible into or exchangeable for its Capital Stock nor does any such Person
have outstanding any rights to subscribe for or to purchase or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to
its Capital Stock. Schedule 6.13 may be updated from time to time by the
Borrower by giving written notice thereof to the Agent.
6.14 Governmental Regulations, Etc.
(a) No part of the Letters of Credit or proceeds of the Loans
will be used, directly or indirectly, for the purpose of purchasing or
carrying any "margin stock" within the meaning of Regulation G or
Regulation U, or for the purpose of purchasing or carrying or trading
in any securities. If requested by any Lender or the Agent, the
Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form U-1
referred to in Regulation U. No indebtedness being reduced or retired
out of the proceeds of the Loans was or will be incurred for the
purpose of purchasing or carrying any margin stock within the meaning
of Regulation U or any "margin security" within the meaning of
Regulation T. "Margin stock" within the meaning of Regulation U does
not constitute more than 25% of the value of the consolidated assets of
the Consolidated Parties. None of the transactions contemplated by this
Credit Agreement (including, without limitation, the direct or indirect
use of the proceeds of the Loans) will violate or result in a violation
of the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or regulations issued pursuant thereto, or
Regulation G, T, U or X.
(b) No Consolidated Party is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act or
the Investment Company Act of 1940, each as amended. In addition, no
Consolidated Party is (i) an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as
amended, and is not controlled by such a company, or (ii) a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary" of a "holding
company", within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(c) No director, executive officer or principal shareholder of
any Consolidated Party is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms
"director", "executive officer" and "principal shareholder" (when used
with reference to any Lender) have the respective meanings assigned
thereto in Regulation O issued by the Board of Governors of the Federal
Reserve System.
(d) Each Consolidated Party has obtained and holds in full
force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of
way and other rights, consents and approvals which are necessary for
the ownership of its respective Property and to the conduct of its
respective businesses as presently conducted.
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(e) No Consolidated Party is in violation of any applicable
statute, regulation or ordinance of the United States of America, or of
any state, city, town, municipality, county or any other jurisdiction,
or of any agency thereof (including without limitation, environmental
laws and regulations), which violation could have a Material Adverse
Effect.
(f) Each Consolidated Party is current with all material
reports and documents, if any, required to be filed with any state or
federal securities commission or similar agency and is in full
compliance in all material respects with all applicable rules and
regulations of such commissions.
6.15 Purpose of Loans and Letters of Credit.
The proceeds of the Loans hereunder shall be used solely by the
Borrower to (a) finance a portion of the purchase price of the Acquisition and
to pay certain fees and expenses related thereto, (b) refinance existing
Indebtedness and (c) provide for working capital and capital expenditures. The
Letters of Credit shall be used only for or in connection with appeal bonds,
reimbursement obligations arising in connection with surety and reclamation
bonds, reinsurance, domestic or international trade transactions and obligations
not otherwise aforementioned relating to transactions entered into by the
applicable account party in the ordinary course of business.
6.16 Environmental Matters.
(a) Each of the facilities and properties owned, leased or
operated by the Consolidated Parties (the "Properties") and all
operations at the Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any Environmental Law
with respect to the Properties or the businesses operated by the
Consolidated Parties (the "Businesses"), and there are no conditions
relating to the Businesses or Properties that could give rise to
liability under any applicable Environmental Laws.
(b) None of the Properties contains, or has previously
contained, any Materials of Environmental Concern at, on or under the
Properties in amounts or concentrations that constitute or constituted
a violation of, or could give rise to liability under, Environmental
Laws.
(c) No Consolidated Party has received any written or verbal
notice of, or inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the
Businesses, nor does any Consolidated Party have knowledge or reason to
believe that any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties, or generated, treated,
stored or disposed of at, on or under any of the Properties or any
other location, in each case by or on behalf of any Consolidated Party
in violation of, or in a manner that could give rise to liability
under, any applicable Environmental Law.
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(e) No judicial proceeding or governmental or administrative
action is pending or, to the best knowledge of any Credit Party,
threatened, under any Environmental Law to which any Consolidated Party
is or will be named as a party, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders,
or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Consolidated Parties, the
Properties or the Businesses.
(f) There has been no release or, threat of release of
Materials of Environmental Concern at or from the Properties, or
arising from or related to the operations (including, without
limitation, disposal) of any Consolidated Party in connection with the
Properties or otherwise in connection with the Businesses, in violation
of or in amounts or in a manner that could give rise to liability under
Environmental Laws.
6.17 Intellectual Property.
Each Consolidated Party owns, or has the legal right to use, all
trademarks, tradenames, copyrights, technology, know-how and processes (the
"Intellectual Property") necessary for each of them to conduct its business as
currently conducted except for those the failure to own or have such legal right
to use could not have a Material Adverse Effect. Set forth on Schedule 6.17 is a
list of all Intellectual Property owned by each Consolidated Party or that any
Consolidated Party has the right to use. Except as provided on Schedule 6.17, no
claim has been asserted and is pending by any Person challenging or questioning
the use of any such Intellectual Property or the validity or effectiveness of
any such Intellectual Property, nor does any Credit Party know of any such
claim, and to the Credit Parties' knowledge the use of such Intellectual
Property by any Consolidated Party does not infringe on the rights of any
Person, except for such claims and infringements that in the aggregate, could
not have a Material Adverse Effect. Schedule 6.17 may be updated from time to
time by the Borrower by giving written notice thereof to the Agent.
6.18 Solvency.
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement (including without limitation the
acquisition of the Acquired Company by the Borrower), will be Solvent.
6.19 Investments.
All Investments of each Consolidated Party are Permitted Investments.
6.20 Location of Collateral.
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Set forth on Schedule 6.20(a) is a list of all locations where any
tangible personal property of a Consolidated Party is located, including county
and state where located. Set forth on Schedule 6.20(b) is the chief executive
office and principal place of business of each Consolidated Party. Schedule
6.20(a) and 6.20(b) may be updated from time to time by the Borrower giving
written notice thereof to the Agent.
6.21 Disclosure.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Consolidated Party in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
6.22 No Burdensome Restrictions.
No Consolidated Party is a party to any agreement or instrument or
subject to any other obligation or any charter or corporate restriction or any
provision of any applicable law, rule or regulation which, individually or in
the aggregate, could have a Material Adverse Effect.
6.23 Brokers' Fees.
Except for investment banking and other related fees in connection with
the purchase by the Borrower of the Acquired Company, no Consolidated Party has
any obligation to any Person in respect of any finder's, broker's, investment
banking or other similar fee in connection with any of the transactions
contemplated under the Credit Documents.
6.24 Labor Matters.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of a Consolidated Party as of the Closing Date and none
of the Consolidated Parties has suffered any strikes, walkouts, work stoppages
or other material labor difficulty within the last five years.
6.25 Representations and Warranties from Merger Agreement.
As of the Closing Date, each of the representations and warranties made
in the Merger Agreement by each of the parties thereto is true and correct in
all material respects.
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SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 Information Covenants.
The Borrower will furnish, or cause to be furnished, to the Agent and
each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of each fiscal year of the
Consolidated Parties, a consolidated balance sheet and income statement
of the Consolidated Parties, as of the end of such fiscal year,
together with related consolidated statements of operations and
retained earnings and of cash flows for such fiscal year, setting forth
in comparative form consolidated figures for the preceding fiscal year,
all such financial information described above to be in reasonable form
and detail and audited by independent certified public accountants of
recognized national standing reasonably acceptable to the Agent and
whose opinion shall be to the effect that such financial statements
have been prepared in accordance with GAAP (except for changes with
which such accountants concur) and shall not be limited as to the scope
of the audit or qualified as to the status of the Consolidated Parties
as a going concern.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the close of each fiscal quarter of
the Consolidated Parties (other than the fourth fiscal quarter, in
which case 90 days after the end thereof) a consolidated balance sheet
and income statement of the Consolidated Parties, as of the end of such
fiscal quarter, together with related consolidated statements of
operations and retained earnings and of cash flows for such fiscal
quarter in each case setting forth in comparative form consolidated
figures for the corresponding period of the preceding fiscal year, all
such financial information described above to be in reasonable form and
detail and reasonably acceptable to the Agent, and accompanied by a
certificate of a Responsible Officer to the effect that such quarterly
financial statements fairly present in all material respects the
financial condition of the Consolidated Parties and have been prepared
in accordance with GAAP, subject to changes resulting from audit and
normal year-end audit adjustments.
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(c) Monthly Financial Statements. As soon as available, and in
any event within 30 days after the end of each month of the
Consolidated Parties, a consolidated balance sheet of the Consolidated
Parties as of the end of such month, together with related consolidated
statements of operations and retained earnings and of cash flows for
such month in each case setting forth in comparative form consolidated
figures for the corresponding period of the preceding fiscal year, all
such financial information described above to be in reasonable form and
detail and reasonably acceptable to the Agent, and accompanied by a
certificate of a Responsible Officer to the effect that (i) such
monthly financial statements fairly present in all material respects
the financial condition of the Consolidated Parties, (ii) have been
prepared in accordance with GAAP, and (iii) to the Responsible
Officer's knowledge, no Default or Event of Default exists, or if any
Default or Event of Default does exist specifying the nature and extent
thereof and what action the Credit Parties propose to take with respect
thereto.
(d) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of a Responsible Officer substantially in the form of
Exhibit 7.1(d), (i) demonstrating compliance with the financial
covenants contained in Section 7.11 by calculation thereof as of the
end of each such fiscal period and (ii) stating that no Default or
Event of Default exists, or if any Default or Event of Default does
exist, specifying the nature and extent thereof and what action the
Credit Parties propose to take with respect thereto.
(e) Annual Business Plan and Budgets. At least 30 days prior
to the end of each fiscal year of the Borrower, beginning with the
fiscal year ending March 29, 1998, an annual business plan and budget
of the Consolidated Parties containing, among other things, projected
financial statements for the next fiscal year.
(f) Compliance With Certain Provisions of the Credit
Agreement. Within 90 days after the end of each fiscal year of the
Borrower, a certificate containing information regarding the amount of
all Asset Dispositions and Equity Issuances that were made during the
prior fiscal year.
(g) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether,
in the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
specifying the nature and extent thereof.
(h) Auditor's Reports. Promptly upon receipt thereof, a copy
of any other report or "management letter" submitted by independent
accountants to any Consolidated Party in connection with any annual,
interim or special audit of the books of such Person.
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(i) Reports. Promptly upon transmission or receipt thereof,
(i) copies of any filings and registrations with, and reports to or
from, the Securities and Exchange Commission, or any successor agency,
and copies of all financial statements, proxy statements, notices and
reports as any Consolidated Party shall send to its shareholders or to
a holder of any Indebtedness owed by any Consolidated Party in its
capacity as such a holder and (ii) upon the request of the Agent, all
reports and written information to and from the United States
Environmental Protection Agency, or any state or local agency
responsible for environmental matters, the United States Occupational
Health and Safety Administration, or any state or local agency
responsible for health and safety matters, or any successor agencies or
authorities concerning environmental, health or safety matters.
(j) Notices. Upon obtaining knowledge thereof, the Borrower
will give written notice to the Agent immediately of (i) the occurrence
of an event or condition consisting of a Default or Event of Default,
specifying the nature and existence thereof and what action the Credit
Parties propose to take with respect thereto, and (ii) the occurrence
of any of the following with respect to any Consolidated Party (A) the
pendency or commencement of any litigation, arbitral or governmental
proceeding against such Person which if adversely determined is likely
to have a Material Adverse Effect, (B) the institution of any
proceedings against such Person with respect to, or the receipt of
notice by such Person of potential liability or responsibility for
violation, or alleged violation of any federal, state or local law,
rule or regulation, including but not limited to, Environmental Laws,
the violation of which could have a Material Adverse Effect, or (C) any
notice or determination concerning the imposition of any withdrawal
liability by a Multiemployer Plan against such Person or any ERISA
Affiliate, the determination that a Multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV of
ERISA or the termination of any Plan.
(k) ERISA. Upon obtaining knowledge thereof, the Borrower will
give written notice to the Agent promptly (and in any event within five
business days) of: (i) of any event or condition, including, but not
limited to, any Reportable Event, that constitutes, or might reasonably
lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan,
the receipt of notice as prescribed in ERISA or otherwise of any
withdrawal liability assessed against the Borrower or any of its ERISA
Affiliates, or of a determination that any Multiemployer Plan is in
reorganization or insolvent (both within the meaning of Title IV of
ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which any
Consolidated Party or any ERISA Affiliate is required to contribute to
each Plan pursuant to its terms and as required to meet the minimum
funding standard set forth in ERISA and the Code with respect thereto;
or (iv) any change in the funding status of any Plan that could have a
Material Adverse Effect, together with a description of any such event
or condition or a copy of any such notice and a statement by the chief
financial officer of the Borrower briefly setting forth the details
regarding such event, condition, or notice, and the action, if any,
which has been or is being taken or is proposed to be taken by the
Credit Parties with respect thereto. Promptly upon request, the Credit
Parties shall furnish the Agent and the Lenders with such additional
information concerning any Plan as may be reasonably requested,
including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto
required to be filed with the Department of Labor and/or the Internal
Revenue Service pursuant to ERISA and the Code, respectively, for each
"plan year" (within the meaning of Section 3(39) of ERISA).
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(l) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of any Consolidated Party as the Agent or the
Required Lenders may reasonably request.
7.2 Preservation of Existence and Franchises.
Except as a result of or in connection with a dissolution, merger or
disposition of a Subsidiary permitted under Section 8.4 or Section 8.5, each
Credit Party will, and will cause each of its Subsidiaries to, do all things
necessary to preserve and keep in full force and effect its existence, rights,
franchises and authority.
7.3 Books and Records.
Each Credit Party will, and will cause each of its Subsidiaries to,
keep complete and accurate books and records of its transactions in accordance
with good accounting practices on the basis of GAAP (including the establishment
and maintenance of appropriate reserves).
7.4 Compliance with Law.
Each Credit Party will, and will cause each of its Subsidiaries to,
comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
Property if noncompliance with any such law, rule, regulation, order or
restriction could have a Material Adverse Effect.
7.5 Payment of Taxes and Other Indebtedness.
Each Credit Party will, and will cause each of its Subsidiaries to, pay
and discharge (a) all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its properties,
before they shall become delinquent, (b) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien upon
any of its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that no Consolidated
Party shall be required to pay any such tax, assessment, charge, levy, claim or
Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves therefor have been established in accordance
with GAAP, unless the failure to make any such payment (i) could give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) could have
a Material Adverse Effect.
7.6 Insurance.
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Each Credit Party will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance
(including worker's compensation insurance, liability insurance, casualty
insurance and business interruption insurance) in such amounts, covering such
risks and liabilities and with such deductibles or self-insurance retentions as
are in accordance with normal industry practice (or as otherwise required by the
Collateral Documents). The Agent shall be named as loss payee or mortgagee, as
its interest may appear, and/or additional insured with respect to any such
insurance providing coverage in respect of any Collateral, and each provider of
any such insurance shall agree, by endorsement upon the policy or policies
issued by it or by independent instruments furnished to the Agent, that it will
give the Agent thirty (30) days prior written notice before any such policy or
policies shall be altered or canceled, and that no act or default of any
Consolidated Party or any other Person shall affect the rights of the Agent or
the Lenders under such policy or policies. The present insurance coverage of the
Consolidated Parties is outlined as to carrier, policy number, expiration date,
type and amount on Schedule 7.6.
7.7 Maintenance of Property.
Each Credit Party will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
and casualty and condemnation excepted, and will make, or cause to be made, in
such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as
may be needed or proper, to the extent and in the manner customary for
companies in similar businesses.
7.8 Performance of Obligations.
Each Credit Party will, and will cause each of its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound.
7.9 Use of Proceeds.
The Borrower will use the proceeds of the Loans and will use the
Letters of Credit solely for the purposes set forth in Section 6.15.
7.10 Audits/Inspections.
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Upon reasonable notice and during normal business hours, each Credit
Party will, and will cause each of its Subsidiaries to, permit representatives
appointed by the Agent, including, without limitation, independent accountants,
agents, attorneys, and appraisers to visit and inspect its property, including
its books and records, its accounts receivable and inventory, its facilities and
its other business assets, and to make photocopies or photographs thereof and to
write down and record any information such representative obtains and shall
permit the Agent or its representatives to investigate and verify the accuracy
of information provided to the Lenders and to discuss all such matters with the
officers, employees and representatives of such Person. The Credit Parties agree
that the Agent, and its representatives, may conduct an annual audit of the
Collateral, at the expense of the Borrower.
7.11 Financial Covenants.
(a) Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio, as of the last day of each fiscal quarter of the Consolidated
Parties for each date of determination occurring during each of the
periods listed below, shall be greater than or equal to:
Period Ratio
------ -----
Fiscal year 1999 1.00 to 1.0
Fiscal year 2000 1.10 to 1.0
Fiscal year 2001 1.15 to 1.0
Fiscal year 2002 1.20 to 1.0
and thereafter
(b) Leverage Ratio. The Leverage Ratio, as of the last day of
each fiscal quarter of the Consolidated Parties for each date of
determination occurring during each of the periods listed below, shall
be less than or equal to:
Period Ratio
------ -----
Fiscal year 1999 1.60 to 1.0
Fiscal year 2000 1.20 to 1.0
Fiscal year 2002 1.00 to 1.0
and thereafter
(c) Consolidated EBITDA. Consolidated EBITDA at the end of
each fiscal quarter of the Borrower for the immediately preceding four
consecutive fiscal quarters as shown on the financial statements of the
Borrower delivered pursuant to Section 7.1(b) for each date of
determination occurring during each of the periods listed below shall
not be less than:
Period Amount
------ ------
Fiscal year 1999 $13,440,000
Fiscal year 2000 $14,370,000
Fiscal year 2001 $15,140,000
Fiscal year 2002 $16,540,000
and thereafter
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(d) Capital Expenditures. Consolidated Capital Expenditures
for each fiscal year shall not exceed the amounts set forth below for
the periods set forth below:
Period Amount
------ ------
Fiscal year 1998 $8.500,000
Fiscal year 1999 $8,600,000
Fiscal year 2000 $8,000,000
Fiscal year 2001 $8,000,000
Fiscal year 2002 $8,000,000
and thereafter
provided, however (i) a Credit Party may use the Net Cash Proceeds from
an Equity Issuance to make additional capital expenditures to the
extent such Net Cash Proceeds are not required to be paid to the
Lenders pursuant to Section 3.3(b)(iii) and (ii) the Credit Parties
shall be permitted to carry forward (to the immediately succeeding year
only) the lesser of (A) the unused portion of the amount for the prior
year or (B) $2,000,000; provided, further that Consolidated Capital
Expenditures may be increased annually by 50% of Consolidated Excess
EBITDA for the immediately preceding fiscal year only.
7.12 Additional Credit Parties.
As soon as practicable and in any event within 30 days after any Person
becomes a Subsidiary of any Credit Party, the Borrower shall provide the Agent
with written notice thereof setting forth information in reasonable detail
describing all of the assets of such Person and shall (a) if such Person is a
Domestic Subsidiary of a Credit Party, cause such Person to execute a Joinder
Agreement in substantially the same form as Exhibit 7.12, (b) cause 100% (if
such Person is a Domestic Subsidiary of a Credit Party) or 65% (if such Person
is a direct Foreign Subsidiary of a Credit Party) of the Capital Stock of such
Person to be delivered to the Agent (together with undated stock powers signed
in blank (unless, with respect to a Foreign Subsidiary, such stock powers are
deemed unnecessary by the Agent in its reasonable discretion under the law of
the jurisdiction of incorporation of such Person)) and pledged to the Agent
pursuant to an appropriate pledge agreement(s) in substantially the form of the
Pledge Agreement and otherwise in form acceptable to the Agent and (c) cause
such Person to provide certified resolutions and other organizational and
authorizing documents of such Person, favorable opinions of counsel to such
Person (which shall cover, among other things, the legality, validity, binding
effect and enforceability of the documentation referred to above and the
perfection of the Agent's liens thereunder) and other items of the types
required to be delivered pursuant to Section 5.1(e), all in form, content and
scope reasonably satisfactory to the Agent.
7.13 Pledged Assets.
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Each Credit Party will, and will cause each of its Subsidiaries to,
cause (a) all of its owned personal property located in the United States and
(b) to the extent deemed to be material by the Agent or the Required Lenders in
its or their sole reasonable discretion, all of its other owned personal
property, to be subject at all times to first priority, perfected Liens in favor
of the Agent pursuant to the terms and conditions of the Collateral Documents
or, with respect to any such property acquired subsequent to the Closing Date,
such other additional security documents as the Agent shall reasonably request.
In furtherance of the foregoing terms of this Section 7.13, the Borrower agrees
to promptly provide the Agent with written notice of the acquisition by, or the
entering into a leasing by, any Credit Party of any asset(s) having a market
value greater than $500,000, setting forth in reasonable detail the location and
a description of the asset(s) so acquired. Without limiting the generality of
the above, the Credit Parties will cause 100% of the Capital Stock or other
equity interest in each of their direct or indirect Domestic Subsidiaries and
65% of the Capital Stock or other equity interest in each of their direct
Foreign Subsidiaries to be subject at all times to a first priority, perfected
Lien in favor of the Agent pursuant to the terms and conditions of the
Collateral Documents or such other security documents as the Agent shall
reasonably request.
If, subsequent to the Closing Date, a Credit Party shall acquire any
intellectual property, securities, instruments, chattel paper or other personal
property required to be delivered to the Agent as Collateral hereunder or under
any of the Collateral Documents, the Borrower shall promptly (and in any event
within three (3) Business Days) after any responsible officer of a Credit Party
acquires knowledge of same notify the Agent of same.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
8.1 Indebtedness.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
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(b) Indebtedness of the Borrower and its Subsidiaries set
forth in Schedule 8.1 (and renewals, refinancings and extensions
thereof on terms and conditions no less favorable to such Person than
such existing Indebtedness);
(c) purchase money Indebtedness consisting of Capital Leases
as permitted under Section 8.13;
(d) obligations of the Borrower or any of its Subsidiaries in
respect of Hedging Agreements entered into in order to manage existing
or anticipated interest rate or exchange rate risks and not for
speculative purposes;
(e) ntercompany Indebtedness arising out of loans and
advances permitted under Section 8.6;
(f) in addition to the Indebtedness otherwise permitted by
this Section 8.1, other Indebtedness hereafter incurred by the Borrower
or any of its Subsidiaries in an aggregate amount not to exceed
$300,000 at any time outstanding.
8.2 Liens.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
Property, whether now owned or after acquired, except for Permitted Liens.
8.3 Nature of Business.
The Credit Parties will not permit any Consolidated Party to
substantively alter the character or conduct of the business conducted by such
Person as of the Closing Date.
8.4 Consolidation, Merger, Dissolution, etc.
Except in connection with an Asset Disposition permitted by the terms
of Section 8.5, the Credit Parties will not permit any Consolidated Party to (a)
dissolve, liquidate or wind up their affairs or enter into any transaction of
merger or consolidation; provided, however that the Borrower may merge or
consolidate with any Subsidiary so long as the Borrower shall be the continuing
or surviving corporation or (b) acquire all or substantially all of the assets,
property and/or operations of any Person which is not a Subsidiary in an
aggregate amount in excess of $1,000,000 in any fiscal year; provided, however,
that with respect to the 1999 fiscal year only, no Acquisitions shall be made by
any Consolidated Party.
8.5 Asset Dispositions.
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The Credit Parties will not permit any Consolidated Party to make any
Asset Disposition (including, without limitation, any Sale and Leaseback
Transaction) other than Excluded Asset Dispositions unless (a) the consideration
paid in connection therewith is cash or Cash Equivalents, (b) if such
transaction is a Sale and Leaseback Transaction, such transaction is permitted
by the terms of Section 8.12, (c) the aggregate net book value of all of the
assets sold or otherwise disposed of by the Consolidated Parties in all such
transactions after the Closing Date shall not exceed $500,000, and (d) no later
than 30 days prior to such Asset Disposition, the Agent and the Lenders shall
have received a certificate of an officer of the Borrower specifying the
anticipated or actual date of such Asset Disposition, briefly describing the
assets to be sold or otherwise disposed of and setting forth the net book value
of such assets, the aggregate consideration and the Net Cash Proceeds to be
received for such assets in connection with such Asset Disposition, and
thereafter the Borrower shall, within the period of 30 days following the
consummation of such Asset Disposition (with respect to any such Asset
Disposition, the "Application Period"), apply (or cause to be applied) an amount
equal to the Net Cash Proceeds of such Asset Disposition to the prepayment of
the Loans in accordance with the terms of Section 3.3(b)(iii).
Upon a sale of assets or the sale of Capital Stock of a Consolidated
Party permitted by this Section 8.5, the Agent shall (to the extent applicable)
deliver to the Borrower, upon the Borrower's request and at the Borrower's
expense, such documentation as is reasonably necessary to evidence the release
of the Agent's security interest, if any, in such assets or Capital Stock,
including, without limitation, amendments or terminations of UCC financing
statements, if any, the return of stock certificates, if any, and the release of
such Subsidiary from all of its obligations, if any, under the Credit Documents.
8.6 Investments.
The Credit Parties will not permit any Consolidated Party to make
Investments in or to any Person, except for Permitted Investments.
8.7 Restricted Payments.
The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment, except (a) to make dividends payable solely in the same
class of Capital Stock of such Person (b) to make dividends or other
distributions payable to the Borrower (directly or indirectly through
Subsidiaries) (c) to pay cash dividends with respect to preferred stock of the
Borrower issued and outstanding as of the Closing Date in an amount not to
exceed $120,000 annually and (d) to repurchase preferred stock of the Borrower
in an aggregate amount not to exceed $1,000,000 in each of the fiscal years 1998
and 1999 only.
8.8 Transactions with Affiliates.
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Except for the transactions referenced on Schedule 8.8, the Credit
Parties will not permit any Consolidated Party to enter into or permit to exist
any transaction or series of transactions with any officer, director,
shareholder, Subsidiary or Affiliate of such Person other than (a) advances of
working capital to any Credit Party, (b) transfers of cash and assets to any
Credit Party, (c) transactions permitted by Section 8.1, Section 8.4, Section
8.5, Section 8.6, or Section 8.7, (d) normal compensation and reimbursement of
expenses of officers and directors and (e) except as otherwise specifically
limited in this Credit Agreement, other transactions which are entered into in
the ordinary course of such Person's business on terms and conditions
substantially as favorable to such Person as would be obtainable by it in a
comparable arms-length transaction with a Person other than an officer,
director, shareholder, Subsidiary or Affiliate.
8.9 Fiscal Year; Organizational Documents.
The Credit Parties will not permit any Consolidated Party to change its
fiscal year or amend, modify or change its articles of incorporation (or
corporate charter or other similar organizational document) or bylaws (or other
similar document) without the prior written consent of the Required Lenders.
8.10 Limitation on Restricted Actions.
The Credit Parties will not permit any Consolidated Party to
(a) directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on
the ability of any such Person to (i) pay dividends or make any other
distributions to any Credit Party on its Capital Stock or with respect
to any other interest or participation in, or measured by, its profits,
(ii) pay any Indebtedness or other obligation owed to any Credit Party,
(iii) make loans or advances to any Credit Party, (iv) sell, lease or
transfer any of its properties or assets to any Credit Party, or (v)
act as a Guarantor and pledge its assets pursuant to the Credit
Documents or any renewals, refinancings, exchanges, refundings or
extension thereof, except (in respect of any of the matters referred to
in clauses (i)-(v) above) for such encumbrances or restrictions
existing under or by reason of (A) this Credit Agreement and the other
Credit Documents, (B) applicable law or (C) any document or instrument
governing Indebtedness incurred pursuant to Section 8.1(c), provided,
however, that any such restriction contained therein relates only to
the asset or assets constructed or acquired in connection therewith; or
(b) enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter
acquired, or requiring the grant of any security for such obligation if
security is given for some other obligation, except (i) pursuant to
this Credit Agreement and the other Credit Documents, and (ii) pursuant
to any document or instrument governing Indebtedness incurred pursuant
to Section 8.1(c), provided, however, that any such restriction
contained therein relates only to the asset or assets constructed or
acquired in connection therewith.
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8.11 Ownership of Subsidiaries.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, the Credit Parties will not permit any Consolidated Party to (a)
permit any Person (other than the Borrower or any Wholly-Owned Subsidiary of the
Borrower) to own any Capital Stock of any Subsidiary of the Borrower, (b) permit
any Subsidiary of the Borrower to issue Capital Stock (except to the Borrower or
to a Wholly-Owned Subsidiary of the Borrower), (c) permit, create, incur, assume
or suffer to exist any Lien thereon, in each case except (i) except to qualify
directors where required by applicable law or to satisfy other requirements of
applicable law with respect to the ownership of Capital Stock of Foreign
Subsidiaries, (ii) except as a result of or in connection with a dissolution,
merger or disposition of a Subsidiary permitted under Section 8.4 or Section 8.5
or (iii) except for Permitted Liens and (d) notwithstanding anything to the
contrary contained in clause (b) above, permit any Subsidiary of the Borrower to
issue any shares of preferred Capital Stock.
8.12 Sale Leasebacks.
The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real, personal or mixed), whether now owned or hereafter
acquired, (a) which such Consolidated Party has sold or transferred or is to
sell or transfer to a Person which is not a Consolidated Party or (b) which such
Consolidated Party intends to use for substantially the same purpose as any
other Property which has been sold or is to be sold or transferred by such
Consolidated Party to another Person which is not a Consolidated Party in
connection with such lease.
8.13 Lease Obligations.
The Credit Parties will not permit any Consolidated Party to enter
into, assume or permit to exist any obligations with respect to Capital Leases
or for the payment of rent under Operating Leases which in the aggregate for all
such Persons in any fiscal year would be in excess of $1,250,000 greater than
the amount existing as of the end of the immediately preceding fiscal year.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
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(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal
of any of the Loans or of any reimbursement obligations
arising from drawings under Letters of Credit, or
(ii) default, and such default shall continue for
five (5) or more Business Days, in the payment when due of any
interest on the Loans or on any reimbursement obligations
arising from drawings under Letters of Credit, or of any Fees
or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith or therewith; or
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was deemed to have
been made; or
(c) Covenants. Any Credit Party shall
(i) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.2,
7.9, 7.11, 7.12, 7.13 or 8.1 through 8.13, inclusive;
(ii) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.1(a),
(b), (c) or (d) and such default shall continue unremedied for
a period of at least 10 days after the earlier of a
responsible officer of a Credit Party becoming aware of such
default or notice thereof by the Agent; or
(iii) default in the due performance or observance by
it of any term, covenant or agreement (other than those
referred to in subsections (a), (b), (c)(i) or (c)(ii) of this
Section 9.1) contained in this Credit Agreement and such
default shall continue unremedied for a period of at least 30
days after the earlier of a responsible officer of a Credit
Party becoming aware of such default or notice thereof by the
Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall default
in the due performance or observance of any term, covenant or agreement
in any of the other Credit Documents (subject to applicable grace or
cure periods, if any), or (ii) except as a result of or in connection
with a dissolution, merger or disposition of a Subsidiary permitted
under Section 8.4 or Section 8.5, any Credit Document shall fail to be
in full force and effect or to give the Agent and/or the Lenders the
Liens, rights, powers and privileges purported to be created thereby,
or any Credit Party shall so state in writing; or
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(e) Guaranties. Except as the result of or in connection with
a dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4 or Section 8.5, the guaranty given by any Guarantor
hereunder (including any Additional Credit Party) or any provision
thereof shall cease to be in full force and effect, or any Guarantor
(including any Additional Credit Party) hereunder or any Person acting
by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor's obligations under such guaranty, or any Guarantor shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any
guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with
respect to any Consolidated Party; or
(g) Defaults under Other Agreements.
(i) Any Consolidated Party shall default in the
performance or observance (beyond the applicable grace period
with respect thereto, if any) or any material obligation or
condition of any contract or lease material to the
Consolidated Parties; or
(ii) With respect to any Indebtedness (other than
Indebtedness outstanding under this Credit Agreement) in
excess of $100,000 in the aggregate for the Consolidated
Parties taken as a whole, (A) any Consolidated Party shall (1)
default in any payment (beyond the applicable grace period
with respect thereto, if any) with respect to any such
Indebtedness, or (2) the occurrence and continuance of a
default in the observance or performance relating to such
Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event
or condition shall occur or condition exist, the effect of
which default or other event or condition is to cause, or
permit, the holder or holders of such Indebtedness (or trustee
or agent on behalf of such holders) to cause (determined
without regard to whether any notice or lapse of time is
required), any such Indebtedness to become due prior to its
stated maturity; or (B) any such Indebtedness shall be
declared due and payable, or required to be prepaid other than
by a regularly scheduled required prepayment, prior to the
stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be
entered against one or more of the Consolidated Parties involving a
liability of $100,000 or more in the aggregate (to the extent not paid
or fully covered by insurance provided by a carrier who has
acknowledged coverage and has the ability to perform) and any such
judgments or decrees shall not have been vacated, discharged or stayed
or bonded pending appeal within 30 days from the entry thereof; or
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(i) ERISA. Any of the following events or conditions, if such
event or condition could have a Material Adverse Effect: (i) any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets
of any Consolidated Party or any ERISA Affiliate in favor of the PBGC
or a Plan; (ii) an ERISA Event shall occur with respect to a Single
Employer Plan, which is, in the reasonable opinion of the Agent, likely
to result in the termination of such Plan for purposes of Title IV of
ERISA; (iii) an ERISA Event shall occur with respect to a Multiemployer
Plan or Multiple Employer Plan, which is, in the reasonable opinion of
the Agent, likely to result in (A) the termination of such Plan for
purposes of Title IV of ERISA, or (B) any Consolidated Party or any
ERISA Affiliate incurring any liability in connection with a withdrawal
from, reorganization of (within the meaning of Section 4241 of ERISA),
or insolvency or (within the meaning of Section 4245 of ERISA) such
Plan; or (iv) any prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which may subject any Consolidated Party or
any ERISA Affiliate to any liability under Sections 406, 409, 502(i),
or 502(l) of ERISA or Section 4975 of the Code, or under any agreement
or other instrument pursuant to which any Consolidated Party or any
ERISA Affiliate has agreed or is required to indemnify any person
against any such liability; or
(j) Ownership. There shall occur a Change of Control.
(k) Responsible Officer. Either of the following events or
conditions shall occur: (i) Joel A. Schwartz or Michael Burris shall
cease to be a Responsible Officer of the Borrower or (ii) Joel A.
Schwartz or Michael Burris shall cease to be actively engaged in the
daily management and/or operations of the Borrower.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the requisite Lenders
(pursuant to the voting requirements of Section 11.6) or cured to the
satisfaction of the requisite Lenders (pursuant to the voting procedures in
Section 11.6), the Agent shall, upon the request and direction of the Required
Lenders, by written notice to the Credit Parties take any of the following
actions:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
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(b) Acceleration. Declare the unpaid principal of and any
accrued interest in respect of all Loans, any reimbursement obligations
arising from drawings under Letters of Credit and any and all other
indebtedness or obligations of any and every kind owing by the Borrower
to the Agent and/or any of the Lenders hereunder to be due whereupon
the same shall be immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby
waived by the Borrower.
(c) Cash Collateral. Direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), it will
immediately pay) to the Agent additional cash, to be held by the Agent,
for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount
equal to the maximum aggregate amount which may be drawn under all
Letters of Credits then outstanding.
(d) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against a Guarantor and
all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in
Section 9.1(f) shall occur, then the Commitments shall automatically terminate
and all Loans, all reimbursement obligations arising from drawings under Letters
of Credit, all accrued interest in respect thereof, all accrued and unpaid Fees
and other indebtedness or obligations owing to the Agent and/or any of the
Lenders hereunder automatically shall immediately become due and payable without
the giving of any notice or other action by the Agent or the Lenders.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment, Powers and Immunities.
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Each Lender hereby irrevocably appoints and authorizes the Agent to act
as its agent under this Credit Agreement and the other Credit Documents with
such powers and discretion as are specifically delegated to the Agent by the
terms of this Credit Agreement and the other Credit Documents, together with
such other powers as are reasonably incidental thereto. The Agent (which term as
used in this sentence and in Section 10.5 and the first sentence of Section 10.6
hereof shall include its Affiliates and its own and its Affiliates' officers,
directors, employees, and agents): (a) shall not have any duties or
responsibilities except those expressly set forth in this Credit Agreement and
shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible
to the Lenders for any recital, statement, representation, or warranty (whether
written or oral) made in or in connection with any Credit Document or any
certificate or other document referred to or provided for in, or received by any
of them under, any Credit Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Credit Document, or any other
document referred to or provided for therein or for any failure by any Credit
Party or any other Person to perform any of its obligations thereunder; (c)
shall not be responsible for or have any duty to ascertain, inquire into, or
verify the performance or observance of any covenants or agreements by any
Credit Party or the satisfaction of any condition or to inspect the property
(including the books and records) of any Credit Party or any of its Subsidiaries
or Affiliates; (d) shall not be required to initiate or conduct any litigation
or collection proceedings under any Credit Document; and (e) shall not be
responsible for any action taken or omitted to be taken by it under or in
connection with any Credit Document, except for its own gross negligence or
willful misconduct. The Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
10.2 Reliance by Agent.
The Agent shall be entitled to rely upon any certification, notice,
instrument, writing, or other printed communication (including, without
limitation, any thereof by telecopy) believed by it to be genuine and correct
and to have been signed, sent or made by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel (including counsel for
any Credit Party), independent accountants, and other experts selected by the
Agent. The Agent may deem and treat the payee of any Note as the holder thereof
for all purposes hereof unless and until the Agent receives and accepts an
Assignment and Acceptance executed in accordance with Section 11.3(b) hereof. As
to any matters not expressly provided for by this Credit Agreement, the Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding on all of the Lenders; provided, however,
that the Agent shall not be required to take any action that exposes the Agent
to personal liability or that is contrary to any Credit Document or applicable
law or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
10.3 Defaults.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or Event of Default unless the Agent has received
written notice from a Lender or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall (subject to Section 10.2 hereof) take such action with respect to such
Default or Event of Default as shall reasonably be directed by the Required
Lenders.
10.4 Rights as a Lender.
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With respect to its Commitment and the Loans made by it, First Union
National Bank (and any successor acting as Agent) in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. First Union National Bank (and any
successor acting as Agent) and its Affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, make investments
in, provide services to, and generally engage in any kind of lending, trust, or
other business with any Credit Party or any of its Subsidiaries or Affiliates as
if it were not acting as Agent, and First Union National Bank (and any successor
acting as Agent) and its Affiliates may accept fees and other consideration from
any Credit Party or any of its Subsidiaries or Affiliates for services in
connection with this Credit Agreement or otherwise without having to account for
the same to the Lenders.
10.5 Indemnification.
The Lenders agree to indemnify the Agent (to the extent not reimbursed
under Section 11.5 hereof, but without limiting the obligations of the Borrower
under such Section) ratably in accordance with their respective Commitments, for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including attorneys' fees), or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Agent (including by any Lender) in any way relating to or
arising out of any Credit Document or the transactions contemplated thereby or
any action taken or omitted by the Agent under any Credit Document; provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Person to be indemnified.
Without limitation of the foregoing, each Lender agrees to reimburse the Agent
promptly upon demand for its ratable share of any costs or expenses payable by
the Borrower under Section 11.5, to the extent that the Agent is not promptly
reimbursed for such costs and expenses by the Borrower. The agreements in this
Section 10.5 shall survive the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder.
10.6 Non-Reliance on Agent and Other Lenders.
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Each Lender agrees that it has, independently and without reliance on
the Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Credit Parties and
their Subsidiaries and decision to enter into this Credit Agreement and that it
will, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under the Credit Documents. Except for notices, reports, and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition, or business of any Credit Party or any of its Subsidiaries
or Affiliates that may come into the possession of the Agent or any of its
Affiliates.
10.7 Successor Agent.
The Agent may resign at any time by giving notice thereof to the
Lenders and the Borrower. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent which shall be a commercial bank organized under the laws of the
United States of America having combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor shall thereupon succeed to and become vested with all
the rights, powers, discretion, privileges, and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Section 10 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address, in the case of the Borrower, Guarantors and
the Agent, set forth below, and, in the case of the Lenders, set forth on
Schedule 2.1(a), or at such other address as such party may specify by written
notice to the other parties hereto:
if to the Borrower or the Guarantors:
BENIHANA INC.
8685 N.W. 53rd Terrace
Miami, Florida 33166-4591
Attn: Mr. Joel A. Schwartz
Telephone: (305) 593-0770
Telecopy: (305) 594-9492
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if to the Agent:
First Union National Bank
301 South College Street, DC-5
5th Floor
Charlotte, North Carolina 28288-0737
Attn: Mr. Jorge Gonzalez
Telephone: (704) 383-8461
Telecopy: (704) 374-3300
with a copy to:
First Union National Bank
First Union Financial Center - FL 6208
200 South Biscayne Blvd., 15th Floor
Miami, Florida 33131
Attn: Ms. Carol F. Fine
Telephone: (305) 789-4640
Telecopy: (305) 789-4902
11.2 Right of Set-Off; Adjustments.
Upon the occurrence and during the continuance of any Event of Default,
each Lender (and each of its Affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender (or any
of its Affiliates) to or for the credit or the account of any Credit Party
against any and all of the obligations of such Person now or hereafter existing
under this Credit Agreement, under the Notes, under any other Credit Document or
otherwise, irrespective of whether such Lender shall have made any demand under
hereunder or thereunder and although such obligations may be unmatured. Each
Lender agrees promptly to notify any affected Credit Party after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 11.2 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
11.3 Benefit of Agreement.
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(a) This Credit Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that none of the Credit Parties
may assign or transfer any of its interests and obligations without
prior written consent of the Lenders; provided further that the rights
of each Lender to transfer, assign or grant participations in its
rights and/or obligations hereunder shall be limited as set forth in
this Section 11.3.
(b) Each Lender may assign to one or more Eligible Assignees
all or a portion of its rights and obligations under this Credit
Agreement (including, without limitation, all or a portion of its
Loans, its Notes, and its Commitment); provided, however, that
(i) Each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to another
Lender or an assignment of all of a Lender's rights and
obligations under this Credit Agreement, any such partial
assignment shall be in an amount at least equal to $5,000,000
(or, if less, the remaining amount of the Commitment being
assigned by such Lender) or an integral multiple of $1,000,000
in excess thereof;
(iii) each such assignment by a Lender shall be of a
constant, and not varying, percentage of its Revolving
Commitment and its Term Loan Commitment and all other rights
and obligations under this Credit Agreement and the Notes; and
(iv) the parties to such assignment shall execute and
deliver to the Agent for its acceptance an Assignment and
Acceptance in the form of Exhibit 11.3(b) hereto, together
with any Note subject to such assignment and a processing fee
of $3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits
of a Lender hereunder and the assigning Lender shall, to the extent of
such assignment, relinquish its rights and be released from its
obligations under this Credit Agreement. Upon the consummation of any
assignment pursuant to this Section 11.3(b), the assignor, the Agent
and the Borrower shall make appropriate arrangements so that, if
required, new Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall deliver to the Borrower and the
Agent certification as to exemption from deduction or withholding of
Taxes in accordance with Section 3.11.
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(c) The Agent shall maintain at its address referred to in
Section 11.1 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of
the Loans owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agent and the
Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Credit Agreement. The
Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by the parties thereto, together with any Note subject to such
assignment and payment of the processing fee, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially
the form of Exhibit 11.3(b) hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the parties thereto.
(e) Each Lender may sell participations to one or more Persons
in all or a portion of its rights and obligations under this Credit
Agreement (including all or a portion of its Commitment and its Loans);
provided, however, that (i) such Lender's obligations under this Credit
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the participant shall be entitled to the benefit of
the yield protection provisions contained in Sections 3.7 through 3.12,
inclusive, and the right of set-off contained in Section 11.2, and (iv)
the Borrower shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under
this Credit Agreement, and such Lender shall retain the sole right to
enforce the obligations of the Borrower relating to its Loans and its
Notes and to approve any amendment, modification, or waiver of any
provision of this Credit Agreement (other than amendments,
modifications, or waivers decreasing the amount of principal of or the
rate at which interest is payable on such Loans or Notes, extending any
scheduled principal payment date or date fixed for the payment of
interest on such Loans or Notes, or extending its Commitment).
(f) Notwithstanding any other provision set forth in this
Credit Agreement, any Lender may at any time assign and pledge all or
any portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
(g) Any Lender may furnish any information concerning the
Borrower or any of its Subsidiaries in the possession of such Lender
from time to time to assignees and participants (including prospective
assignees and participants), subject, however, to the provisions of
Section 11.14 hereof.
11.4 No Waiver; Remedies Cumulative.
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No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Agent or any Lender and any of the
Credit Parties shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle the Borrower or any other
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Lenders
to any other or further action in any circumstances without notice or demand.
11.5 Expenses; Indemnification.
(a) The Borrower agrees to pay on demand all costs and expenses of the
Agent in connection with the syndication, preparation, execution, delivery,
administration, modification, and amendment of this Credit Agreement, the other
Credit Documents, and the other documents to be delivered hereunder, including,
without limitation, the reasonable fees and expenses of counsel for the Agent
(including the cost of internal counsel) with respect thereto and with respect
to advising the Agent as to its rights and responsibilities under the Credit
Documents. The Borrower further agrees to pay on demand all costs and expenses
of the Agent and the Lenders, if any (including, without limitation, reasonable
attorneys' fees and expenses and the cost of internal counsel), in connection
with the enforcement (whether through negotiations, legal proceedings, or
otherwise) of the Credit Documents and the other documents to be delivered
hereunder.
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(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their respective officers,
directors, employees, agents, and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities, costs, and
expenses (including, without limitation, reasonable attorneys' fees) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation, or proceeding or
preparation of defense in connection therewith) the Credit Documents, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Loans, except to the extent such claim, damage, loss, liability, cost, or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. In the case of an investigation, litigation or other
proceeding to which the indemnity in this Section 11.5 applies, such indemnity
shall be effective whether or not such investigation, litigation or proceeding
is brought by the Borrower, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated. The Borrower agrees not to assert any claim against the Agent, any
Lender, any of their Affiliates, or any of their respective directors, officers,
employees, attorneys, agents, and advisers, on any theory of liability, for
special, indirect, consequential, or punitive damages arising out of or
otherwise relating to the Credit Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Loans.
(c) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 11.5 shall survive the repayment of the Loans, LOC Obligations and
other obligations under the Credit Documents and the termination of the
Commitments hereunder.
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
(a) without the consent of each Lender affected thereby,
(i) extend the final maturity of any Loan or the time of
payment of any reimbursement obligation, or any portion
thereof, arising from drawings under Letters of Credit, or
extend or waive any Principal Amortization Payment of any
Loan, or any portion thereof,
(ii) reduce the rate or extend the time of payment of
interest (other than as a result of waiving the applicability
of any post-default increase in interest rates) thereon or
Fees hereunder,
(iii) reduce or waive the principal amount of any Loan or
of any reimbursement obligation, or any portion thereof,
arising from drawings under Letters of Credit,
(iv) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a
waiver of any Default or Event of Default or mandatory
reduction in the Commitments shall not constitute a change in
the terms of any Commitment of any Lender),
(v) except as the result of or in connection with an
Asset Disposition permitted by Section 8.5, release all or
substantially all of the Collateral,
(vi) except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted
under Section 8.4, release the Borrower or substantially all
of the other Credit Parties from its or their obligations
under the Credit Documents,
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(vii) except amend, modify or waive any provision of this
Section 11.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12,
3.13, 3.14, 9.1(a), 11.2, 11.3, 11.5 or 11.9,
(viii) reduce any percentage specified in, or otherwise
modify, the definition of
Required Lenders, or
(ix) consent to the assignment or transfer by the
Borrower or all or substantially all of the other Credit
Parties of any of its or their rights and obligations under
(or in respect of) the Credit Documents except as permitted
thereby;
(b) without the consent of the Agent, no provision of Section
10 may be amended;
(c) without the consent of the Issuing Lender, no provision
of Section 2.2 may be amended.
Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender
is entitled to vote as such Lender sees fit on any bankruptcy
reorganization plan that affects the Loans, and each Lender
acknowledges that the provisions of Section 1126(c) of the Bankruptcy
Code supersedes the unanimous consent provisions set forth herein and
(y) the Required Lenders may consent to allow a Credit Party to use
cash collateral in the context of a bankruptcy or insolvency
proceeding.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Survival.
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All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and
delivery of this Credit Agreement, the making of the Loans, the issuance of the
Letters of Credit, the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF [NORTH CAROLINA]. Any legal action or
proceeding with respect to this Credit Agreement or any other Credit
Document may be brought in the courts of the State of North Carolina in
Mecklenburg County, or of the United States for the Western District of
North Carolina, and, by execution and delivery of this Credit
Agreement, each of the Credit Parties hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally,
the nonexclusive jurisdiction of such courts. Each of the Credit
Parties further irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address set out for notices pursuant to Section
11.1, such service to become effective three (3) days after such
mailing. Nothing herein shall affect the right of the Agent or any
Lender to serve process in any other manner permitted by law or to
commence legal proceedings or to otherwise proceed against any Credit
Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Credit Agreement or any other Credit Document
brought in the courts referred to in subsection (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE
LENDERS, THE BORROWER AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.11 Severability.
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If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 Binding Effect; Termination.
(a) This Credit Agreement shall become effective at such time
on or after the Closing Date when it shall have been executed by the
Borrower, the Guarantors and the Agent, and the Agent shall have
received copies hereof (telefaxed or otherwise) which, when taken
together, bear the signatures of each Lender, and thereafter this
Credit Agreement shall be binding upon and inure to the benefit of the
Borrower, the Guarantors, the Agent and each Lender and their
respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans,
LOC Obligations or any other amounts payable hereunder or under any of
the other Credit Documents shall remain outstanding, no Letters of
Credit shall be outstanding, all of the Credit Party Obligations have
been irrevocably satisfied in full and all of the Commitments hereunder
shall have expired or been terminated.
11.14 Source of Funds.
Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any
separate account maintained by such Lender in which any employee
benefit plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes
assets allocated to any separate account maintained by such Lender,
such Lender has disclosed to the Borrower the name of each employee
benefit plan whose assets in such account exceed 10% of the total
assets of such account as of the date of such purchase (and, for
purposes of this subsection (b), all employee benefit plans maintained
by the same employer or employee organization are deemed to be a single
plan);
134
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(c) to the extent that any part of such funds constitutes
assets of an insurance company's general account, such insurance
company has complied with all of the requirements of the regulations
issued under Section 401(c)(1)(A) of ERISA; or
(d) such funds constitute assets of one or more specific
benefit plans which such Lender has identified in writing to the
Borrower.
As used in this Section 11.14, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
11.15 Conflict.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
11.16 Arbitration; Consent to Jurisdiction and Service of Process.
(a) Upon demand of any party hereto, whether made before or after
institution of any judicial action, any dispute, claim or controversy arising
out of or connected herewith or with the Credit Documents ("Disputes") shall be
resolved by binding arbitration as provided herein. Disputes may include,
without limitation, tort claims, counterclaims, claims brought as class actions
and claims arising herefrom or from Credit Documents executed in the future.
Arbitration shall be conducted under the Commercial Financial Disputes
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association and Title 9 of the U.S. Code. All arbitration hearings shall be
conducted in Charlotte, Mecklenburg County, North Carolina, or such other place
as agreed to in writing by the parties. A judgment upon the award may be entered
in any court having jurisdiction, and all decisions shall be in writing. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys having at least ten years' experience representing parties in secured
lending transactions. Notwithstanding the foregoing, this arbitration provision
does not apply to disputes under or related to interest protection agreements.
135
<PAGE>
(b) Notwithstanding the preceding binding arbitration provision, the
Agent, on behalf of the Lenders, preserves certain remedies that may be
exercised during a Dispute. The Agent, on behalf of the Lenders, shall have the
right to proceed in any court of proper jurisdiction or by self help to exercise
or prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale granted in the Credit Documents or under applicable law, (ii) all rights of
self help including peaceful occupation of real property and collection of
rents, set-off and peaceful possession of personal property, (iii) obtaining
provisional or ancillary remedies including injunctive relief, sequestration,
garnishment, attachment and appointment of receiver, (iv) when applicable, a
judgment by confession of judgment and (v) other remedies. Preservation of these
remedies does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute.
(c) By execution and delivery of this Credit Agreement, each of the
parties hereto accepts, for itself and in connection with its properties,
generally and unconditionally, the non-exclusive jurisdiction relating to any
arbitration proceedings conducted under the Arbitration Rules in Charlotte,
Mecklenburg County, North Carolina and irrevocably agrees to be bound by any
final judgment rendered thereby in connection with this Credit Agreement from
which no appeal has been taken or is available. Each of the parties hereto
irrevocably agrees that all process in any such arbitration proceedings or
otherwise may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to it at its
address set forth in Section 11.1 or at such other address of which such party
shall have been notified pursuant thereto, such service being hereby
acknowledged by each party hereto to be effective and binding service in every
respect. Each party hereto irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens which it may now or hereafter have to the bringing of any
such action or proceeding in any such jurisdiction. Nothing herein shall affect
the right to serve process in any other manner permitted by law or shall limit
the right of any party to bring proceedings against the Borrower or any party
hereto in any court or pursuant to arbitration proceedings in any other
jurisdiction.
136
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: BENIHANA INC.,
a Delaware corporation
By:----------------------
Joel A. Schwartz
President
SUBSIDIARY
GUARANTORS: BENIHANA NATIONAL CORP.,
a Delaware corporation
BENIHANA ENCINO CORP.,
a California corporation
BENIHANA MARINA CORP.,
a California corporation
TEPPAN RESTAURANTS LTD.,
a California corporation
BENIHANA BETHESDA CORP.,
a New York corporation
BENIHANA INTERNATIONAL INC.,
a Delaware corporation
NOODLE TIME INC.,
a Florida corporation
BENIHANA NEW YORK CORP.,
a Delaware corporation
BENIHANA LOMBARD CORP.,
a Illinois corporation
BIG SPLASH KENDALL CORP.,
a Delaware corporation
BENIHANA OF PUENTE HILLS CORP.,
a Delaware corporation
137
<PAGE>
BENIHANA ORLANDO CORP.,
a Delaware corporation
BENIHANA SCHAUMBURG CORP.,
a Delaware corporation
BENIHANA SUNRISE CORPORATION,
a Delaware corporation
BENIHANA BRICKELL STATION CORP.,
a Delaware corporation
BENIHANA STATE & ELM CORP.,
a Delaware corporation
BENIHANA ONTARIO CORP.,
a Delaware corporation
BENIHANA DEVELOPMENT CORP.,
a Delaware corporation
RUDY'S RESTAURANT GROUP, INC.,
a Nevada corporation
THE SAMURAI, INC.,
a New York corporation
MAXWELL'S INTERNATIONAL INC.,
a Delaware corporation
RUDY'S SIRLOIN STEAKBURGERS, INC.,
a Delaware corporation
By:
Joel A. Schwartz
Executive Vice President
BENIHANA NATIONAL OF FLORIDA
CORP., a Delaware corporation
By:--------------------------
Joel A. Schwartz
President
138
<PAGE>
BENIHANA OF TEXAS, INC.,
a Texas corporation
By:--------------------------
Joel A. Schwartz
Authorized Agent
139
<PAGE>
LENDERS: FIRST NATIONAL BANK,
individually in its capacity as a Lender
and in its capacity as Agent
By:-----------------------------
Jorge A. Gonzalez
Senior Vice President
140
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
consolidated financial statements of the Corporation for the year ended March
28, 1999 and is qualified in its entirety by reference to the Form 10-KSB for
fiscal 1999.
</LEGEND>
<CIK> 0000935226
<NAME> BENIHANA INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> MAR-28-1999
<EXCHANGE-RATE> 1
<CASH> 1,684
<SECURITIES> 0
<RECEIVABLES> 269
<ALLOWANCES> 0
<INVENTORY> 3,106
<CURRENT-ASSETS> 5,694
<PP&E> 37,128
<DEPRECIATION> 39,648
<TOTAL-ASSETS> 60,868
<CURRENT-LIABILITIES> 12,795
<BONDS> 0
0
1
<COMMON> 613
<OTHER-SE> 14,604
<TOTAL-LIABILITY-AND-EQUITY> 60,868
<SALES> 118,351
<TOTAL-REVENUES> 119,149
<CGS> 30,964
<TOTAL-COSTS> 70,399
<OTHER-EXPENSES> 6,144
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,644
<INCOME-PRETAX> 9,998
<INCOME-TAX> 3,480
<INCOME-CONTINUING> 6,518
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,518
<EPS-BASIC> 1.06
<EPS-DILUTED> 1.02
</TABLE>
