<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------
FORM 10-Q
X QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT FOR THE QUARTER ENDED NOVEMBER 1, 1998.
- ---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934 FOR THE TRANSACTION PERIOD FROM _______ TO _______.
COMMISSION FILE NUMBER: 0-25858
-------------------
DAVE & BUSTER'S, INC.
(Exact Name of Registrant as Specified in Its Charter)
MISSOURI 43-1532756
(State of Incorporation) (I.R.S. Employer Identification No.)
2481 MANANA DRIVE
DALLAS, TEXAS 75220
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(214) 357-9588
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the Registrant's common stock, $.01 par value,
outstanding as of December 16, 1998 was 13,064,750 shares.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
-------------- --------------
November 1, November 2, November 1, November 2,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Food and beverage revenues $22,183 $15,458 $60,814 $44,891
Amusement and other revenues 23,226 15,382 64,203 44,252
- -------------------------------------------------------------------------------------------------------------------
Total revenues 45,409 30,840 125,017 89,143
Cost of revenues 9,071 6,109 24,666 17,402
Operating payroll and benefits 13,711 8,997 36,360 25,385
Other restaurant operating expenses 11,315 7,893 31,864 22,630
General and administrative expenses 2,690 2,115 7,597 5,948
Depreciation and amortization expense 3,134 2,238 8,377 6,103
Preopening cost amortization 1,100 833 3,067 2,328
- -------------------------------------------------------------------------------------------------------------------
Total costs and expenses 41,021 28,185 111,931 79,796
- -------------------------------------------------------------------------------------------------------------------
Operating income 4,388 2,655 13,086 9,347
Interest (income) expense, net (7) 138 (419) 618
- -------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 4,395 2,517 13,505 8,729
Provision for income taxes 1,661 982 5,104 3,404
- -------------------------------------------------------------------------------------------------------------------
Net income $ 2,734 $ 1,535 $ 8,401 $ 5,325
Basic net income per share $0.21 $0.14 $0.64 $0.48
Basic weighted average shares outstanding 13,062 11,300 13,048 11,037
Diluted net income per share $ 0.21 $ 0.13 $ 0.64 $ 0.48
Diluted weighted average shares outstanding 13,183 11,541 13,195 11,199
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
DAVE & BUSTER'S, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
November 1,
1998 February 1,
(unaudited) 1998
--------- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 106 $ 14,309
Short-term investments 0 8,507
Inventories 8,888 6,222
Prepaid expenses 1,773 1,234
Preopening costs 6,817 3,415
Other current assets 2,510 2,018
- --------------------------------------------------------------------------------------------------------------
Total current assets 20,094 35,705
Property and equipment, net 165,423 114,060
Goodwill, net of accumulated amortization of $1,407 and $1,121 8,301 8,587
Other assets 666 637
- --------------------------------------------------------------------------------------------------------------
Total assets $194,484 $158,989
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,860 $ 4,075
Accrued liabilities 5,010 3,255
Deferred income taxes 2,379 1,967
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 19,249 9,297
Deferred income taxes 3,735 3,530
Other liabilities 1,271 806
Long-term debt 30,000 12,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, 10,000,000 authorized; none issued 0 0
Common stock, $0.01 par value, 50,000,000 authorized;
13,064,750 and 13,019,050 shares issued and outstanding
as of November 1, 1998 and February 1, 1998, respectively 130 130
Paid in capital 114,526 116,054
Retained earnings 25,573 17,172
- --------------------------------------------------------------------------------------------------------------
Total stockholders' equity 140,229 133,356
- --------------------------------------------------------------------------------------------------------------
$194,484 $158,989
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common Stock
------------ Paid in Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance, February 1, 1998 13,019 $130 $116,054 $17,172 $133,356
Stock options exercised 46 0 515 0 515
Tax benefit related to
options exercised 0 0 201 0 201
Spin-off and related transactions 0 0 (2,244) 0 (2,244)
Net income 0 0 0 8,401 8,401
- --------------------------------------------------------------------------------------------------------------
Balance, November 1, 1998 13,065 $130 $114,526 $25,573 $140,229
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
39 Weeks Ended
--------------
November 1, November 2,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 8,401 $ 5,325
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 11,444 8,431
Provision for deferred income taxes 617 1,370
Changes in assets and liabilities
Inventories (2,666) (1,601)
Prepaid expenses (539) (670)
Preopening costs (6,468) (3,183)
Other assets (530) (1,385)
Accounts payable 7,785 1,310
Accrued liabilities 1,755 1,378
Income taxes payable 0 0
Other liabilities 465 (802)
- ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 20,264 10,173
Cash flows from investing activities
Capital expenditures (59,446) (27,796)
Sale of short-term investments 8,507 0
- --------------------------------------------------------------------------------------------------
Net cash used by investing activities (50,939) (27,796)
Cash flows from financing activities
Spin-off and related transactions (2,244) 0
Proceeds from issuance of common stock 0 48,885
Proceeds from options exercised 716 215
Purchase of fractional shares 0 (10)
Borrowings under long-term debt 19,000 36,411
Repayments of long-term debt (1,000) (32,661)
- ---------------------------------------------------------------------------------------------------
Net cash provided by financing activities 16,472 52,840
- --------------------------------------------------------------------------------------------------
Cash provided (used) (14,203) 35,217
Beginning cash and cash equivalents 14,309 358
- ---------------------------------------------------------------------------------------------------
Ending cash and cash equivalents $ 106 $ 35,575
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
DAVE & BUSTER'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 1, 1998
(UNAUDITED)
NOTE 1: RESULTS OF OPERATIONS
The results of operations for the interim periods reported are not
necessarily indicative of results to be expected for the year. The information
furnished herein reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary to present a
fair statement of the results for the interim periods.
NOTE 2: BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Dave &
Buster's, Inc. (the "Company") and all wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated balance sheet data presented herein for February 1, 1998 was
derived from the Company's audited consolidated financial statements for the
fiscal year then ended. The preparation of financial statements in accordance
with generally accepted accounting principles requires the Company's management
to make certain estimates and assumptions for the reporting periods covered by
the financial statements. These estimates and assumptions affect the reported
amounts of assets, liabilities, revenues and expenses. Actual amounts could
differ from these estimates. The primary business of the Company is the
ownership and operation of restaurant/entertainment Complexes (a "Complex")
under the name "Dave & Buster's".
NOTE 3: EARNINGS PER COMMON SHARE
Effective December 15, 1997, the Company adopted the provisions of SFAS No.
128, "Accounting for Earnings Per Share." SFAS No. 128 requires companies to
present basic earnings per share (EPS) and diluted EPS, instead of the primary
and fully diluted EPS presentations that were formerly required by Accounting
Principles Board Opinion No. 15, "Earnings Per Share." Basic EPS is computed by
dividing net income available to common stockholders by the weighted average
number of common shares outstanding during the period. For the Company, diluted
EPS includes the dilutive effect of potential stock option exercises, calculated
using the treasury stock method. EPS amounts for all periods presented reflect
the provisions of SFAS No. 128, including amounts presented for prior periods
which have been restated to conform with SFAS No. 128.
NOTE 4: CONTINGENCIES
In April 1998, a litigation limited liability corporation owned by the
creditors of Edison Brothers filed a lawsuit against the Company and related
parties, seeking recovery in connection with the June 1995 spin-off and certain
related transactions. In August 1998, the Company settled the litigation with
the limited liability litigation corporation. The Company paid $2,244,000 in
full and final settlement of all claims against the Company.
NOTE 5: LONG TERM DEBT
See Management Discussion and Analysis
<PAGE> 7
The Company is subject to certain legal proceedings and claims that arise
in the ordinary course of its business. In the opinion of management, based on
discussions with and advice of legal counsel, the amount of ultimate liability
with respect to these actions will not materially affect the consolidated
results of operations or financial condition of the Company.
Management's Discussion and Analysis
Results of Operations - 13 Weeks Ended November 1, 1998 Compared to 13 Weeks
Ended November 2, 1997
Total revenues for the 13 weeks ended November 1, 1998 increased by 47%
over the 13 weeks ended November 2, 1997. The increase in revenues was primarily
attributable to revenues from new complexes and a 3% increase in comparable
complex revenues. New complexes opened in the comparable period are Denver,
Colorado in the fourth quarter of fiscal 1997 and Utica, Michigan, Irvine,
California and Rockland County, New York which opened in the second and third
quarters of fiscal 1998, respectively. Total revenues also increased due to the
opening of the second complex under the Bass licensing agreement. Total revenues
for the second quarter of fiscal 1998 from the Bass agreement were $76,000.
Cost of revenues, as a percentage of revenues, increased to 20.0% from
19.8% in the prior comparable period. The increase in cost of revenues was
primarily a result of higher costs associated with food and amusement revenues
offset by lower costs associated with beverage revenues. The increase in food
costs were a function of higher produce, dairy and grocery costs. Amusement
costs were higher due to increased redemption and merchandise costs while the
decrease in beverage costs was primarily associated with lower wine, liquor and
beer costs.
Operating payroll and benefits increased to 30.2% from 29.2% in the prior
comparable period due to higher variable labor and benefits costs. The increase
in variable labor is partially due to a higher head count associated with
retaining people for the fourth quarter and preparing for three new store
openings. Benefit costs increased due to higher medical and dental insurance
costs.
Other operating expenses decreased to 24.9% compared to 25.6% in the prior
comparable period. Other operating expenses as a percentage of revenue were
lower due to utilities, repairs and maintenance and fixed expenses at the
complexes.
General and administrative costs increased $575,000 over the prior
comparable period as a result of increased administrative payroll and related
costs for new personnel and additional costs associated with the Company's
future growth plans. As a percentage of revenues, general and administrative
expenses decreased to 5.9% compared to 6.9% for the comparable prior period due
to increased leverage from revenues.
Depreciation and amortization expense increased $896,000 over the prior
comparable period as a result of the opening of the Cincinatti, Ohio, Denver,
Colorado, Utica, Michigan, Irvine, California and Rockland County, New York
locations. As a percentage of revenues, depreciation and amortization decreased
to 6.9% from 7.2% for the comparable prior period.
Preopening cost amortization increased $267,000 over the prior comparable
period as a result of five additional complex months of amortization. As a
percentage of revenue, preopening costs decreased to 2.4% from 2.7% in the
comparable period.
<PAGE> 8
The effective tax rate for the third quarter of 1998 was 37.8% as compared
to 39.0% for the comparable period last year and was the result of a lower
effective state tax rate.
Results of Operations - 39 Weeks Ended November 1, 1998 Compared to 39 Weeks
Ended November 2, 1997
Total revenues for the 39 weeks ended November 1, 1998 increased by 40%
over the 39 weeks ended November 2, 1997. The increase in revenues was primarily
attributable to revenues from new complexes and a 7% increase in comparable
complex revenues. New complexes opened in the comparable period are Cincinnati,
Ohio and Denver, Colorado which opened in the third and fourth quarters of
fiscal 1997, respectively, and Utica, Michigan, Irvine, California and Rockland
County, New York which opened in the second and third quarters of fiscal 1998,
respectively. Total revenues also increased due to the opening of the second
complex under the Bass licensing agreement. Total revenues for the first 39
weeks of fiscal 1998 from the Bass agreement were $279,000.
Cost of revenues, as a percentage of revenues, increased to 19.7% from
19.5% in the prior comparable period. The increase in cost of revenues was
primarily a result of higher costs associated with food and amusement revenues
offset by lower costs associated with beverage revenues. The increase in food
costs were a function of higher produce, dairy and grocery costs. Amusement
costs were higher due to increased redemption and merchandise costs while the
decrease in beverage costs was primarily associated with lower wine, liquor and
beer costs.
Operating payroll and benefits increased to 29.1% from 28.5% in the prior
comparable period due to higher variable labor and benefits costs. The increase
in variable labor is partially due to the second increment of the Federal
minimum wage increase implemented in September 1997 as well as a higher head
count associated with preparing for three new store openings. Benefit costs
increased due to higher medical and dental insurance costs.
Other operating expenses increased to 25.5% compared to 25.4% in the prior
comparable period. Other operating expenses were higher due to increased
occupancy costs associated with the addition of the Cincinnati, Ohio, Denver,
Colorado, Utica, Michigan, Irvine, California and Rockland County, New York
locations. The increase was also a function of higher restaurant supplies and
advertising costs at the complexes.
General and administrative costs increased $1,649,000 over the prior
comparable period as a result of increased administrative payroll and related
costs for new personnel and additional costs associated with the Company's
future growth plans. As a percentage of revenues, general and administrative
expenses decreased to 6.1% compared to 6.7% for the comparable prior period due
to increased leverage from revenues.
Depreciation and amortization expense increased $2,274,000 over the prior
comparable period as a result of the opening of the Cincinnati, Ohio, Denver,
Colorado, Utica, Michigan, Irvine, California and Rockland County, New York
locations. As a percentage of revenues, depreciation and amortization decreased
to 6.7% from 6.8% in prior comparable period.
Preopening cost amortization increased $739,000 over the prior comparable
period as a result of eight additional complex months of amortization. As a
percentage of revenue, preopening costs decreased to 2.4% compared to 2.6% in
the prior comparable period. The percentage decrease is attributable to the
leverage from increased revenues.
<PAGE> 9
The Company defers its restaurant preopening costs and amortizes them over
the twelve-month period following the opening of each respective complex. In
April 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires entities to expense as incurred all start-up and
preopening costs that are not otherwise capitalizable as long-lived assets. SOP
98-5 is effective for fiscal years beginning after December 15, 1998, although
earlier adoption is encouraged. Restatement of previously issued financial
statements is not permitted by SOP 98-5, and entities are not required to report
the pro forma effects of the retroactive application of the new accounting
standard. The Company's adoption of the expense-as-incurred accounting principle
required by SOP 98-5 will involve the recognition of the cumulative effect of
the change in accounting principle required by SOP 98-5 as a one-time charge
against earnings, net of any related income tax effect, retroactive to the
beginning of the fiscal year of adoption. Total deferred preopening costs were
$6.8 million at November 1, 1998 and $3.4 million at February 1, 1998.
As has been the case with the Company's current deferred method for
accounting for preopening costs, preopening expense comparisons under the new
expense-as-incurred standard will continue to vary from period to period,
depending on the number and timing of complex openings and the specific
preopening expenses incurred for each complex during each period being compared.
Based on the Company's current expansion plans, the Company believes total
preopening expenses for fiscal 1998 and 1999 under either accounting principle
(deferred or expense-as-incurred) will likely exceed the respective amount for
each immediate prior year. However, the new expense-as-incurred accounting
principle required by SOP 98-5 will, by definition, cause an accelerated
recognition of preopening expenses. The impact of this accelerated recognition
on the Company's results of operaions for any given period could be significant,
depending on the number of complexes opened during that period.
The effective tax rate for the first 39 weeks of fiscal 1998 was 37.8% as
compared to 39.0% for the comparable period last year and was the result of a
lower effective state tax rate.
Liquidity and Capital Resources
Cash flows from operations increased from $10.2 million in the first 39
weeks of fiscal 1997 to $20.3 million in the first 39 weeks of fiscal 1998. The
increase was a result of the Cincinnati, Ohio and Denver, Colorado locations
which, opened in the third and fourth quarters of fiscal 1997, respectively, and
the Utica, Michigan, Irvine, California and Rockland County, New York locations
which opened in the second and third quarters of fiscal 1998.
The Company has a senior revolving credit facility which permits
borrowing up to a maximum of $50,000,000 at a floating rate based on the London
Interbank Offered Rate ("LIBOR") or, at the Company's option, the bank's prime
rate plus in each case a margin based upon financial performance (8.0% at
November 1, 1998). The facility, which matures in May 2000, has certain
financial covenants including a minimum consolidated tangible net worth level, a
maximum leverage ratio, minimum fixed charge coverage and maximum level of
capital expenditures on new stores. At November 1, 1998, $20,000,000 was
available under the senior revolving credit facility.
On November 5, 1998 the Company expanded its current senior revolving
credit facility. The expanded facility permits borrowing up to $100,000,000
million at a floating rate based on the London Interbank Offered Rate ("LIBOR")
or, at the Company's option, the bank's prime rate plus in each case a margin
based upon financial performance. The facility, which matures in May 2001, has
certain financial covenants including a minimum consolidated tangible net worth
level, a maximum leverage ratio, minimum fixed charge coverage and maximum level
of capital expenditures on new stores.
On December 7,1998 the Company entered into an interest rate swap
agreement whereby the Company traded its floating rate debt for fixed rate
debt. The notional amount was for $35,000,000 and was for a period of one year.
<PAGE> 10
The Company's plan is to open four large format complexes in fiscal 1998.
The first three complexes opened in Utica (Suburban Detroit), Michigan and
Irvine, California and Rockland County, New York during the second and third
quarters on May 7, 1998, July 16, 1998 and September 17, 1998, respectively. The
Company opened an additional large format complex in Orange, California on
November 5, 1998. The Company also plans on opening a small format complex in
the fourth quarter of 1998 in Columbus, Ohio. In fiscal 1999, the Company's goal
is to open four large format and two small format complexes. The Company
estimates that its capital expenditures will be approximately $71.4 million and
$74.9 million for 1998 and 1999, respectively. The Company intends to finance
this development with cash flow from operations and the senior revolving credit
facility.
Impact of the Year 2000 Issues
The Company's comprehensive Year 2000 initiative is designed to ensure
that there is no adverse effect on the Company's core business operations and
that transactions with customers, suppliers and financial institutions are fully
supported. The Company is well under way with these efforts, which are scheduled
to be completed in early 1999. The Company currently estimates that it will
spend approximately $2.4 million on new software which will replace existing
software that may not be year 2000 compliant. Such costs are being capitalized.
While the Company believes its planning efforts are adequate to address its Year
2000 concerns, there can be no guarantee that the systems of other companies on
which the Company's systems and operations rely will be converted on a timely
basis and will not have a material effect on the Company.
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Second Amendment to Credit Agreement, dated November 5,
1998, among the Company, Chase Bank of Texas National
Association (as agent) and the banks named therein.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the 39 weeks ended
November 1, 1998.
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAVE & BUSTER'S, INC.
Dated: December 16, 1998 by /s/ David O. Corriveau
----------------- ----------------------------
David O. Corriveau
Co-Chairman of the Board, Co-
Chief Executive Officer and
President
Dated: December 16, 1998 by /s/ Charles Michel
----------------- ------------------------
Charles Michel
Vice President,
Chief Financial Officer
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<S> <C>
10.1 Second Amendment to Credit Agreement.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as
of November 5, 1998 (the "Effective Date"), is among DAVE & BUSTER'S, INC., a
corporation duly organized and validly existing under the laws of the State of
Missouri (the "Borrower"), each of the banks or other lending institutions which
is a signatory hereto (individually, a "Bank" and, collectively, the "Banks")
and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, formerly known as Texas Commerce
Bank National Association, individually as a Bank and as agent for itself and
the other Banks (in its capacity as agent, together with its successors in such
capacity, the "Agent").
RECITALS:
Borrower, certain of the Banks and Agent have entered into that certain
Credit Agreement dated as of May 21, 1997 (as amended by that certain First
Amendment to Credit Agreement dated as of February 4, 1998, the "Agreement").
The Borrower has requested an increase in the commitments provided
under the Agreement. To accommodate such request and subject to the terms
hereof, (i) certain of the Banks that are parties to the Agreement prior to the
Effective Date will assign to NationsBank, N.A. and Bank One, Texas, N.A.
(together the "New Banks") a portion of their respective interests in the rights
and obligations under the Agreement making the New Banks parties to, and "Banks"
under, the Agreement; (ii) the Revolving Commitments will be increased; and
(iii) the Agreement will otherwise be amended as provided herein.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II
Amendments
Effective as of the Effective Date, the Agreement is amended as follows:
Section 2.1 Amendment to "Revolving Commitment". The definition of
"Revolving Commitment" in Section 1.1 is amended to read in its entirety as
follows:
<PAGE> 2
"Revolving Commitment" means, as to each Bank, the obligation of such
Bank to make advances of funds and purchase participation interests in
(or with respect to the Agent as a Bank, hold other interests in)
Letters of Credit in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set forth opposite the
name of such Bank on Schedule 15, or, if applicable, the amount
determined in accordance with the most recent Assignment and Acceptance
executed by the Bank, as the same may be reduced or terminated pursuant
to Section 2.6 or 11.2. The aggregate amount of the Revolving
Commitments of all Banks equals the total set forth on Schedule 15.
Section 2.2 Amendment to "Revolving Termination Date". The definition
of "Revolving Termination Date" in Section 1.1 is amended to read in its
entirety as follows:
"Revolving Termination Date" means May 29, 2001, or such earlier or
later date on which the Revolving Commitments terminate as provided in
this Agreement.
Section 2.3 Amendment to Section 3.2. The chart in Section 3.2 is
amended to read in its entirety as follows:
<TABLE>
<CAPTION>
============================================= ================= ================== =================
Leverage Ratio Base Margin Commitment Fee Eurodollar Margin
============================================= ================= ================== =================
<S> <C> <C> <C>
Greater than or equal to 2.50 0.50% 0.375% 2.00%
- --------------------------------------------- ----------------- ------------------ -----------------
Greater than or equal to 2.00 but less than 2.50 0.25% 0.375% 1.75%
- --------------------------------------------- ----------------- ------------------ -----------------
Greater than or equal to 1.50 but less than 2.00 0.00% 0.25% 1.50%
- --------------------------------------------- ----------------- ------------------ -----------------
Less than 1.50 0.00% 0.25% 1.25%
============================================= ================= ================== =================
</TABLE>
Section 2.4 Amendment to Article 7. Article 7 is amended to add
Section 7.24 to read in its entirety as follows:
7.24 Year 2000. Any reprogramming required to permit the proper
functioning without Material Adverse Effect, in and following the year
2000, of (i) the Borrower's and the Subsidiaries' computer systems and
(ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which Borrower's or any
Subsidiary's systems interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by June 30, 1999. The
cost to the Borrower of such reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 to the Borrower and
the Subsidiaries (including, without limitation, reprogramming errors
and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems of the
Borrower and the Subsidiaries are and, with ordinary course upgrading
and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrower to conduct its business without
Material Adverse Effect.
Section 2.5 Amendment to Section 9.4. Section 9.4 is amended to read
in its entirety as follows:
Section 9.4 Restrictions on Dividends and other Distributions. The
Borrower will not directly or indirectly declare, order, pay, make or
set apart any sum for any dividend or other distribution, direct or
indirect, on account of any shares of any class of stock or other
equity interest of the Borrower now or hereafter
<PAGE> 3
outstanding. The Borrower will not and will not permit any Subsidiary
to directly or indirectly declare, order, pay, make or set apart any
sum for (a) any redemption, conversion, exchange, retirement, sinking
fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock or other equity
interest of the Borrower or any Subsidiary now or hereafter
outstanding; or (b) 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 stock or other equity interest of the
Borrower or any Subsidiaries now or hereafter outstanding; except that
if no Default exists or would result therefrom, Borrower may repurchase
its capital stock, provided that the aggregate amount of consideration
paid to repurchase such capital stock during the entire term of this
Agreement shall not exceed Two Million Five Hundred Thousand Dollars
($2,500,000).
Section 2.6 Amendment to Section 9.11. Section 9.11 of the Agreement
is amended to read in its entirety as follows:
Section 9.11 New Business Locations. No more than the Authorized Number
of new retail business locations shall be opened by Borrower and the
Subsidiaries during any four (4) Fiscal Quarter period as determined as
of the end of each Fiscal Quarter. The "Authorized Number" for any four
(4) Fiscal Quarter period shall be equal to the number set forth below
opposite the applicable four (4) Fiscal Quarters:
<TABLE>
<CAPTION>
Any Four (4) Fiscal Quarters Number
Ending During the Periods Set Forth Below
=================================================== ======================
<S> <C>
January 31, 1998 through January 31, 1999 5
- --------------------------------------------------- ----------------------
February 1, 1999 through January 30, 2000 6
- --------------------------------------------------- ----------------------
January 31, 2000 through August 1, 2001 8
- --------------------------------------------------- ----------------------
</TABLE>
Section 2.7 Amendment to Section 10.2. Section 10.2 is amended as
follows:
(i) The first sentence of Section 10.2 is amended to read in its
entirety as follows:
As of the end of each Fiscal Quarter during the periods set forth
below, the Borrower shall not permit the ratio of Adjusted Debt to
Adjusted EBITDA to exceed the ratio set forth below opposite the
applicable period:
<TABLE>
<CAPTION>
Period Ratio
=============================================== ================================
<S> <C>
Closing Date through January 31, 1999 2.50 to 1.00
- ----------------------------------------------- --------------------------------
February 1, 1999 and thereafter 2.85 to 1.00
- ----------------------------------------------- --------------------------------
</TABLE>
(ii) The definition of "Adjusted EBITDA" in Section 10.2 is amended to
read in its entirety as follows:
"Adjusted EBITDA" means, as of the end of any Fiscal Quarter, the sum
of (a) the EBITDA calculated for the four (4) Fiscal Quarters ending on
<PAGE> 4
the date of determination, plus (b) the Operating Lease Expenses for
the four (4) Fiscal Quarters ending on the date of determination, plus
(c) pre- opening expenses incurred on or after February 1, 1999 that
are attributable to establishing new retail business locations and that
were subtracted in calculating Adjusted Net Income in accordance with
GAAP for the four (4) Fiscal Quarters ending on the date of
determination; provided, however, that the maximum aggregate amount of
such pre-opening expenses that may be added to EBITDA pursuant to this
clause (c) during the entire term of this Agreement for any one retail
business location is One Million Two Hundred Thousand Dollars
($1,200,000), plus (d) for measurement periods that include the Fiscal
Quarter ending on January 31, 1999, the amount of the one-time,
non-cash expense that was subtracted in calculating Adjusted Net Income
during such Fiscal Quarter in recognition of the cumulative effect of
the change in accounting principles required under the American
Institute of Certified Public Accountants Statement of Position
referred to as "SOP 98-5".
Section 2.8 Amendment to Exhibit E. Exhibit E is amended in its
entirety to read as set forth on Exhibit E attached hereto.
Section 2.9 Schedule 15 added. Schedule 15, as set forth on Annex A
hereto, is added to the Agreement immediately after Schedule 9.5.
ARTICLE III
Assignment and Acceptance
Section 3.1 Assignment. Subject to the satisfaction of the conditions
set forth herein and effective on the Effective Date but immediately before the
effectiveness of the amendment to the definition of "Revolving Commitment"
provided for herein, each Existing Bank sells and assigns to the New Bank
identified opposite its name on Annex B hereto without recourse, representation
or warranty except as specifically set forth herein, and each New Bank purchases
and assumes from the Existing Bank identified opposite its name on Annex B
hereto an interest in the applicable Existing Bank's rights and obligations
under the Agreement and the other Loan Documents equal to the Assigned
Percentage (each such assignment herein an "Assignment"). The term "Assigned
Percentage" means with respect to any Existing Bank, the percentage interest
identified opposite the applicable Existing Bank in Annex B hereto under the
meaning "Assigned Percentage" with the Assigned Percentage being calculated not
as a percentage of the Existing Bank's Revolving Commitment but as a percentage
of the aggregate Revolving Commitments before giving effect to this Amendment.
The rights and obligations assigned pursuant to each Assignment include, without
limitation, the Assigned Percentage of the Revolving Commitment on the Effective
Date and the Assigned Percentage of the Revolving Loans and Letter of Credit
Liabilities outstanding on the Effective Date. On the Effective Date, each New
Bank shall make available to the Agent for the benefit of each Existing Bank
that has made an assignment to it hereunder (each such Existing Bank applicable
to a New Bank herein an "Assignor Bank") in immediately available funds an
amount equal to the sum of the Assigned Percentages of such New Bank set forth
on Annex B hereto multiplied by the aggregate amount of the Revolving Loans
outstanding on the Effective Date (the "Purchase Price"). A New Bank's payment
of its Purchase Price is a condition to the effectiveness of the Assignment
relating
<PAGE> 5
thereto. Each such payment by a New Bank shall a Base Rate Account, unless a New
Bank is advised otherwise in accordance with the notice provisions in the
Agreement on the Effective Date. On the Effective Date the Agent shall transfer
to each of the Assignor Banks the Purchase Price due to them to the extent
received by the Agent.
Section 3.2 Assignor Bank Representations and Disclosures. Each
Assignor Bank (i) represents to each New Bank to which it is making an
Assignment that as of the Effective Date and before giving effect to this
Amendment, its Commitment Percentage equals the percentage set forth opposite
its name on Annex B hereto under the heading "Existing Commitment Percentage"
and the aggregate amount of the Revolving Commitments is Fifty Million Dollars
($50,000,000.00);(ii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Agreement or any other Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Agreement or any other Loan Document, other than that it is legally
authorized to enter in this Amendment, it is the legal and beneficial owner of
the interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any Obligated Party or the performance or observance by the Borrower
or any Obligated Party of any of their obligations under the Agreement or any
other Loan Document.
Section 3.3 New Bank Representations and Agreements. Each Bank (i)
represents and warrants to each of its Assignor Banks and to Agent that it is
legally authorized to enter into this Amendment; (ii) confirms that it has
received a copy of the Agreement and the other Loan Documents, together with
copies of the most recent financial statements delivered pursuant to Section 8.1
thereof, and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Amendment; (iii)
agrees that it will, independently and without reliance upon the Agent or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Agreement and the other Loan Documents; (iv)
appoints and authorizes the Agent to take such action on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto; and (v) agrees that it will perform in accordance with their terms all
obligations which by the terms of the Agreement and the other Loan Documents are
required to be performed by it as a Bank.
Section 3.4 Effectiveness. The Assignments are consented to and
accepted by the Borrower, the Obligated Parties and the Agent for purposes of
Section 13.8 of the Agreement and are effective in accordance with the terms
hereof. From and after the Effective Date, (i) each New Bank shall be a party to
the Agreement and shall have the rights and obligations of a Bank thereunder and
under the other Loan Documents, (ii) each Existing Bank shall, to the extent of
the Assignments provided in this Article 3, relinquish its rights and be
released from its obligations under the Agreement and the other Loan Documents,
and (iii) the Agent shall make all payments in respect of the interest assigned
hereby (including payments of principal, interest, fees, and other amounts) to
the applicable New Bank.
Section 3.5 Exchange of Notes; New Commitments. Borrower agrees to
exchange the Assignor Banks' existing Revolving Notes for new Revolving Notes
payable to the order of each Bank in amounts equal to the Revolving Commitments
of each such Bank after giving effect to this Amendment.
<PAGE> 6
Section 3.6 Address for Notices. For purposes of Section 13.13 of the
Agreement, the "Address for Notices" and "Applicable Lending Office" for each
New Bank is as set forth on the signature pages hereto.
Section 3.7 Outstandings. The Agent agrees to advise each Bank on the
Effective Date of the Revolving Loans and Letters of Credit outstanding on the
Effective Date as reflected in its records and the Purchase Price due from each
New Bank.
ARTICLE IV
Conditions Precedent
Section 4.1 Conditions. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent on or before November
5, 1998:
(a) Agent shall have received all of the following, each dated
(unless otherwise indicated) the date of this Amendment, in form and substance
satisfactory to Agent and in sufficient numbers for each of the Banks:
(i) Resolutions. Resolutions of the duly authorized Board of
Directors of each of the Borrower and each Obligated Party certified by their
respective duly authorized officers, which authorize such company's execution,
delivery, and performance of this Amendment, the Revolving Notes executed
pursuant hereto and all other documents related to the Amendment (collectively,
the "Amendment Documents") to which such company is a party;
(ii) Incumbency Certificate. A certificate of incumbency certified by
a duly authorized officer of each of the Borrower and each Obligated Party
certifying to the name of each of such company's respective officers who are
authorized to sign the Amendment Documents together with specimen signatures of
each such officers;
(iii) Articles of Incorporation. The articles of incorporation (or
similar governing document) of the Borrower and each Obligated Party, certified
by the Secretary of State of the state of such company's incorporation (or the
other appropriate governmental officials of such company's jurisdiction of
organization) and dated a current date;
(iv) Bylaws. The bylaws of the Borrower and each Obligated Party,
certified, respectively, by such company's duly authorized officer;
(v) Governmental Certificates. Certificates of the appropriate
government officials of the respective states of organization of the Borrower
and each Obligated Party as to such company's existence and good standing;
(vi) Notes. The Revolving Notes in the amount of the new Revolving
Commitments executed by the Borrower;
(vii) Opinion of Counsel. A favorable opinion of legal counsel to the
Borrower and each Obligated Party as to such matters relating to the Amendment
Documents as the Agent may reasonably request; and
(viii) Additional Information. Such additional documents, instruments
and information as Agent may request; and
(b) The Banks shall have received (i) the fees payable under that
certain fee letter from Agent to Borrower dated October 9, 1998, and (ii) all
unpaid interest, commitment and letter of credit fees that have accrued as of
the Effective Date;
<PAGE> 7
(c) The representations and warranties contained herein and in all
other Loan Documents, as amended hereby, shall be true and correct as of the
date hereof as if made on the date hereof;
(d) No Default shall have occurred and be continuing; and
(e) All proceedings taken in connection with the transactions
contemplated by the Amendment Documents and other legal matters incident thereto
shall be satisfactory to Agent.
ARTICLE V
Ratifications, Representations and Warranties
5.1 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect. Borrower, Agent and the Banks agree that the Agreement as amended hereby
and the other Loan Documents shall continue to be legal, valid, binding and
enforceable in accordance with their respective terms. Borrower acknowledges
that the Revolving Notes executed pursuant to this amendment are "Revolving
Notes" under the Agreement and that the Debt evidenced thereby is included
within the "Obligations" secured by the Borrower Pledge Agreement.
5.2 Representations and Warranties. Borrower hereby represents and
warrants to Agent and the Banks that (i) the execution, delivery and performance
of this Amendment, the Revolving Notes, and the other Amendment Documents are
within Borrower's and the Obligated Parties' power and authority, have been
authorized by all requisite action on the part of Borrower and the Obligated
Parties and will not violate the articles of incorporation or similar governing
documents of Borrower or any of the Obligated Parties nor violate or conflict
with, or result in a breach of, or require any consent under any applicable law,
rule, or regulation or any order, writ, injunction, or decree of any
Governmental Authority or arbitrator or any material agreement or instrument to
which Borrower or any Obligated Party is a party or by which the Borrower or any
Obligated Party or any of their respective property is bound or subject, nor
constitute a default under any such agreement or instrument, nor result in the
creation or imposition of any Lien (except as provided herein) upon any of the
revenues or assets of the Borrower or any Obligated Party; (ii) the
representations and warranties contained in the Agreement, as amended hereby and
by any other Loan Document are true and correct on and as of the date hereof as
though made on and as of the date hereof; (iii) no Default has occurred and is
continuing; (iv) Borrower is in full compliance with all covenants and
agreements contained in the Agreement, as amended hereby and in the other Loan
Documents.
ARTICLE VI
Miscellaneous
Section 6.1 Reference to Agreement. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents, or
instruments now or hereafter
<PAGE> 8
executed and delivered pursuant to the terms hereof or pursuant to the terms of
the Agreement as amended hereby, are hereby amended so that any reference in
such Loan Documents to the Agreement shall mean a reference to the Agreement as
amended hereby.
Section 6.2 Fees and Expenses. As provided in the Agreement, Borrower
agrees to pay all reasonable costs and expenses incurred by Agent in connection
with the preparation, negotiation, and execution of this Amendment and the other
Amendment Documents, including without limitation the reasonable costs and fees
of Agent's legal counsel.
Section 6.3 Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 6.4 Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 6.5 Successors and Assigns. This Amendment is binding upon
and shall inure to the benefit of Borrower, the Banks, the Agent and their
respective successors and assigns, except Borrower may not assign or transfer
any of its rights or obligations hereunder without the prior written consent of
the Banks.
Section 6.6 Counterparts. This Amendment may be executed in one or
more counterparts and on telecopy counterparts, each of which when so executed
shall be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.
Section 6.7 Effect of Waiver. No consent or waiver, express or
implied, by Agent or any Bank to or for any breach of or deviation from any
covenant, condition or duty by Borrower or any Obligated Party shall be deemed a
consent or waiver to or of any other breach of the same or any other covenant,
condition or duty.
Section 6.8 Headings. The headings, captions, and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
Section 6.9 ENTIRE AGREEMENT. THIS AMENDMENT EMBODIES THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
<PAGE> 9
Executed as of the date first written above.
BORROWER:
DAVE & BUSTER'S, INC.
By:
-------------------------------------
Charles Michel
Chief Financial Officer
EXISTING BANKS:
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, formerly known as Texas
Commerce Bank National Association,
individually as a Bank and as the Agent
By:
-------------------------------------
David L. Howard, Vice President
COMERICA BANK-TEXAS
By:
-------------------------------------
William J. Rolley
Vice President
GUARANTY FEDERAL BANK, F.S.B.
By:
-------------------------------------
Name: Robert S. Hays
Title:
BANKBOSTON, N.A.
By:
-------------------------------------
Name:
Title:
NEW BANKS
BANK ONE, TEXAS, N.A.
By:
-------------------------------------
Name:
Title:
<PAGE> 10
Address for Notices and Lending Office
for Base Rate Accounts and Eurodollar
Accounts
1717 Main Street, 3rd Floor
Dallas, Texas 75201
Attn: Chris W. Holder
Phone: 214-290-4146
Fax: 214-290-2305
NATIONSBANK, N.A.
By:
-------------------------------------
Name:
Title:
Address for Notices and Lending Office
for Base Rate Accounts and Eurodollar
Accounts
901 Main Street, 7th Floor
Dallas, Texas 75202-3140
Attn: Dan H. Ellinor
Phone: 214-508-0138
Fax: 214-508-3140
Each Obligated Party consents and agrees to this Amendment, including the
increase in the aggregate Revolving Commitments of the Banks, and agrees that
the Loan Documents to which it is a party remain in full force and effect and
continue to be its legal, valid and binding obligations enforceable against it
in accordance with their respective terms. By its execution below, each
Obligated Party acknowledges (a) that each guaranty executed by it and securing
the payment or performance of the Borrower's obligations under the Agreement
secures, among other things, the payment of the outstanding Revolving Loans as
such may be increased in accordance with the terms of this Amendment and (b)
that each pledge agreement or other security agreement executed by it and
securing the payment or performance of its obligations under any such guaranty
secures, among other things, such obligations as they may be increased, directly
or indirectly, by this Amendment and the new Revolving Notes.
<PAGE> 11
OBLIGATED PARTIES:
DANB TEXAS, INC.
DAVE & BUSTER'S OF PENNSYLVANIA, INC.
DAVE & BUSTER'S OF ILLINOIS, INC.
DAVE & BUSTER'S OF COLORADO, INC.
DAVE & BUSTERS OF FLORIDA, INC.
DAVE & BUSTER'S OF GEORGIA, INC.
DAVE & BUSTER'S OF MARYLAND, INC.
DAVE & BUSTERS OF NEW YORK, INC.
D&B REALTY HOLDING, INC
By:
-------------------------------------
Charles Michel, Chief Financial
Officer of each of the foregoing
Obligated Parties
DAVE & BUSTER'S OF CALIFORNIA, INC.
By:
-------------------------------------
Alan L. Murray, Treasurer
DAVE & BUSTER'S I, L.P.
By: Dave & Buster's, Inc., its general
partner
By:
-------------------------------------
Charles Michel,
Chief Financial Officer
<PAGE> 12
ANNEX A
to
DAVE & BUSTER'S, INC.
SECOND AMENDMENT TO CREDIT AGREEMENT
Schedule 15
<PAGE> 13
SCHEDULE 15
TO
DAVE & BUSTER'S, INC.
CREDIT AGREEMENT
Revolving Commitments
<TABLE>
<CAPTION>
Revolving
Bank Commitment
---- ----------
<S> <C>
Chase Bank of Texas, National Association $ 20,000,000
Comerica Bank - Texas $ 15,000,000
Guaranty Federal Bank, F.S.B. $ 15,000,000
BankBoston, N.A. $ 15,000,000
NationsBank, N.A. $ 20,000,000
Bank One, Texas, N.A. $ 15,000,000
------------
TOTAL $100,000,000
============
</TABLE>
<PAGE> 14
ANNEX B
to
DAVE & BUSTER'S, INC.
SECOND AMENDMENT TO CREDIT AGREEMENT
<TABLE>
<CAPTION>
EXISTING
COMMITMENT ASSIGNED
EXISTING BANK NEW BANK PERCENTAGE PERCENTAGE
- -------------------- --------------------- ---------- ----------
<S> <C> <C> <C>
1. BankBoston, N.A. NationsBank, N.A. 20% 5%
2 Guaranty Federal Bank, FSB NationsBank, N.A. 20% 5%
3. Chase Bank of Texas, NationsBank, N.A. 30% 10%
National Association
4. Comerica Bank-Texas Bank One, Texas, N.A. 30% 15%
</TABLE>
<PAGE> 15
EXHIBIT "E"
to
DAVE & BUSTER'S, INC.
SECOND AMENDMENT
TO
CREDIT AGREEMENT
Compliance Certificate
<PAGE> 16
COMPLIANCE CERTIFICATE
for the
quarter ending ________ __, ____
NOTE: THIS COMPLIANCE CERTIFICATE
REQUIRES A CHANGE IN THE MARGIN AND FEES AS
SET OUT IN SECTION 11
__ YES __ NO
To: Chase Bank of Texas,
National Association, as agent
1111 Fannin, 9th Floor MS46
Houston, Texas 77002
with a copy to
12875 Josey Lane
Dallas, Texas 75234
and each Bank
Ladies and Gentlemen:
This Compliance Certificate (the "Certificate") is being delivered
pursuant to Section 8.1(c) of that certain Credit Agreement (as amended, the
"Agreement") dated as of May 21, 1997 among DAVE & BUSTER'S, INC. (the
"Borrower"), CHASE BANK OF TEXAS, NATIONAL ASSOCIATION (formerly known as Texas
Commerce Bank National Association), as agent, and the Banks named therein. All
capitalized terms, unless otherwise defined herein, shall have the same meanings
as in the Agreement. All the calculations set forth below shall be made pursuant
to the terms of the Agreement.
The undersigned, an authorized financial officer of the Borrower in his
capacity as such financial officer and not in his individual capacity, does
hereby certify to the Agent and the Banks that:
1. DEFAULT.
No Default has occurred and is continuing or, if a Default has occurred and is
continuing, I have described on the attached Exhibit "A" the nature thereof and
the steps taken or proposed to remedy such Default.
<TABLE>
<CAPTION>
Compliance
----------
<S> <C> <C> <C>
2. SECTION 8.1 - FINANCIAL STATEMENTS AND RECORDS
(a) Annual audited financial statements of Borrower on a Yes No N/A
consolidated basis within 90 days after the end of each Fiscal Year end
(together with Compliance Certificate).
(b) Quarterly unaudited financial statements of Borrower on a Yes No N/A
consolidated basis within 45 days after each Fiscal Quarter end (together with
Compliance Certificate).
</TABLE>
COMPLIANCE CERTIFICATE - Page 2
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
3. SECTION 9.1 - DEBT
No Additional Debt except:
(a) Purchase money not to exceed: $750,000
Actual Outstanding: $_______ Yes No
(d) Other Debt not to exceed: $250,000
Actual Outstanding: $_______ Yes No
4. SECTION 9.5 - INVESTMENTS
(a) Basket of other permitted investments, loans, etc. not to exceed: $250,000
(b) Actual book value: $_______ Yes No
5. SECTION 9.8 - ASSET DISPOSITIONS
(a) Asset dispositions (other than dispositions of obsolete, worn-out
etc., assets) not to exceed $250,000 in any four (4) consecutive Fiscal Quarters
(based on the book value of the assets sold).
(b) Actual book value of assets disposed of in the last four (4) $_______ Yes No
Fiscal Quarters.
6. SECTION 9.11 - NEW BUSINESS LOCATIONS
(a) No more than the Authorized Number of new retail locations opened
in any four (4) Fiscal Quarters.
(i) Authorized Number ________
(b) Current retail locations opened within past 4 Fiscal Quarters:
1. __________________
2. __________________
3. __________________
4. __________________
5. __________________
6. __________________
7. __________________
8. __________________
Total ________ Yes No
7. SECTION 10.1 - CONSOLIDATED NET WORTH
(a) Consolidated Tangible Net Worth as of ________________ $_______
(b) Positive consolidated net income for current Fiscal Quarter (if
positive) $_______
(c) Aggregate positive consolidated net income (for each) Fiscal
Quarter since February 2, 1997 (excluding current Fiscal Quarter) $_______
(d) 7(b) + 7(c) = $_______
(e) 50% of 7(d) = $_______
(f) Net proceeds of the sale of all capital stock of Borrower received
since February 4, 1997 $_______
(g) Required Consolidated Tangible Net Worth: 7(a) + 7(e) + 7(f) $_______
</TABLE>
COMPLIANCE CERTIFICATE - Page 3
<PAGE> 18
<TABLE>
<S> <C> <C> <C>
(h) Actual Consolidated Net Worth
(i) Consolidated stockholders equity $_______
(ii) Stock of Borrower on Balance Sheet $_______
(iii) Goodwill $_______
(iv) Intellectual Property $_______
(v) Deferred expenses $_______
(vi) Loans and advances to stockholders, officers, etc. $_______
(vii) Other intangible assets $_______
(viii) sum of (ii) through (vii) = $_______
(ix) Consolidated Tangible Net Worth:
(h)(i) minus (h)(viii) = $_______ Yes No
8. SECTION 10.2 -LEVERAGE RATIO
(a) Total Debt as of Fiscal Quarter end
(i) borrowed money $_______
(ii) evidenced by notes, etc. $_______
(iii) deferred purchase price $_______
(iv) Capital Lease Obligations $_______
(v) total $_______
(b) Operating Lease Expense for previous 4 Fiscal Quarters $_______
(c) 8(b) x 8 = $_______
(d) 8(a)(v) + 8(c) = $_______
(e) Consolidated net income as of Fiscal Quarter end for last 4 Fiscal
Quarters $_______
(i) Net Income $_______
(ii) Income of Person not received in a cash distribution
(iii) Extraordinary, non-cash, nonrecurring or nonoperating $_______
increase or gains
(iv) Sum of (ii) and (iii) $_______
(v) Total (i) minus (iv) $_______
(f) provisions for tax $_______
(g) benefit from tax $_______
(h) Interest Expense $_______
(i) amortization $_______
(j) depreciation $_______
(k) Total Pre-Opening Expenses (limited to $1,200,000 per location) $_______
(l) SOP 98-5 one time charge (added only if Fiscal Quarter ending on
January 31, 1999 included) $_______
(m) EBITDA: 8(e)(v) + 8(f) - 8(g) + 8(h) + 8(i) + 8(j)+ 8(k) + 8(l) $_______
(n) Adjusted EBITDA: 8(m) + 8(b) =
(o) Adjusted Debt to Adjusted EBITDA ratio (8(d) a 8(n)) $_______
(p) Maximum Adjusted Debt to Adjusted EBITDA ratio $_______
____ : 1.00
2.50 : 1.00 Yes No
9. SECTION 10.3 - FIXED CHARGE COVERAGE
(a) Cash Flow for last 4 Fiscal Quarters
(i) EBITDA (from 8(m)) $_______
(ii) 8(i) + 8(j) $_______
(iii) Operating Lease Expenses for the last 4 Fiscal Quarters
(iv) Cash Flow: (9(a)(i) - 9(a)(ii) + 9(a)(iii)) = $_______
(b) Fixed Charges for last 4 Fiscal Quarters
(i) Interest Expense paid in cash $_______
</TABLE>
COMPLIANCE CERTIFICATE - Page 4
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
(ii) Operating Lease Expense (9(a)(iii)) $_______
(iii) Total 9(b)(i) + 9(b)(ii) $_______
(c) Actual Fixed Charge Coverage: 9(a)(iv) a 9(b)(iii)= ________
(d) Minimum Fixed Charge Coverage :1.00 Yes No
2.25:1.00
10. SECTION 10.4 - CAPITAL EXPENDITURES
(a) Per location Capital Expenditure Limit $15,000,000
(b) Current new retail locations under development:
Location Capital Expenditures
-------- --------------------
(i) ___________ $________________ Yes No
(ii) ___________ $________________ Yes No
(iii)___________ $________________ Yes No
(iv) ___________ $________________ Yes No
11. DETERMINATION OF MARGIN AND FEES
(a) Adjusted Debt to Adjusted EBITDA Ratio (from 8(o))
(b) Adjustment to margin and fees required by Section 3.2? :1.00 Yes No
(c) If adjustment required, set forth below new margins and fees in
accordance with Section 3.2:
(i) Base Margin
(ii) Commitment Fee Rate _______%
(iii) Libor Rate Margin _______%
_______%
12. SECTION 8.10(d) - PLEDGE OF EQUIPMENT PARTNERSHIPS
(a) Gross revenue from Equipment Partnerships for trailing 4 quarters $_________
(b) Borrower gross revenue for trailing 4 quarters $_________
(c) 12(a) a 12(b) = ._______
(d) Pledge required (?) (i.e., if greater than .15) Yes No
</TABLE>
13. ATTACHED SCHEDULES
Attached hereto as schedules are the calculations supporting the computation set
forth above in this Certificate. All information contained herein and on the
attached schedules is true and correct.
14. FINANCIAL STATEMENTS
The financial statements attached hereto were prepared in accordance with GAAP
(or the generally accepted accounting principles of the jurisdiction of
organization of the applicable Person) and fairly present (subject to year end
audit adjustments) the financial conditions and the results of the operations of
the Persons reflected thereon, at the date and for the periods indicated
therein.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
effective this _______ day of _____________, _______.
DAVE & BUSTER'S, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
COMPLIANCE CERTIFICATE - Page 5
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> NOV-01-1998
<CASH> 106
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 8,888
<CURRENT-ASSETS> 20,094
<PP&E> 196,242
<DEPRECIATION> 30,819
<TOTAL-ASSETS> 194,484
<CURRENT-LIABILITIES> 19,249
<BONDS> 30,000
0
0
<COMMON> 130
<OTHER-SE> 140,099
<TOTAL-LIABILITY-AND-EQUITY> 194,484
<SALES> 125,017
<TOTAL-REVENUES> 125,017
<CGS> 24,666
<TOTAL-COSTS> 111,931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (419)
<INCOME-PRETAX> 13,505
<INCOME-TAX> 5,104
<INCOME-CONTINUING> 8,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,401
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
