SECOND AMENDED AND RESTATED MANAGEMENT AND FEE AGREEMENT
Exhibit 10.8
EXECUTION COPY
EXECUTION COPY
SECOND AMENDED AND RESTATED MANAGEMENT AND FEE AGREEMENT
SECOND AMENDED AND RESTATED MANAGEMENT AND FEE AGREEMENT (this “Agreement”), dated as
of November 1, 2006, between BUFFETS, INC., a Minnesota corporation (the “Company”) and
XXXXXX-XXXXXX CAPITAL, INC., a Delaware corporation (“CIC”).
WHEREAS, the parties hereto have entered into a management and fee agreement, dated as of
October 2, 2000, and an amended and restated management and fee agreement, dated as of February 20,
2004 (collectively, the “Prior Agreement”), pursuant to which CIC agreed to provide certain
ongoing advisory and management services;
WHEREAS, the parties desire to amend and restate the Prior Agreement in its entirety on the
terms and conditions set forth in this Agreement;
WHEREAS, pursuant to an Agreement and Plan of Merger, dated July 24, 2006 (the “Merger
Agreement”), among the Company, Ryan’s Restaurant Group, Inc. (“Ryan’s”) and Buffets
Southeast, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), the Company has
agreed, upon the terms and subject to the conditions set forth therein, to acquire all of the
outstanding shares of common stock of Ryan’s pursuant to a merger of Merger Sub with and into
Ryan’s, with Ryan’s as the surviving corporation (the “Acquisition”); and
WHEREAS, simultaneously with the execution and delivery of this Agreement, the Company,
through Merger Sub is consummating the Acquisition; and
WHEREAS, all capitalized terms used in this Agreement but not otherwise defined herein shall
have the meaning ascribed to them in the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. Services. During the term of this Agreement, CIC shall provide such acquisition and
financial advisory services (the “Services”) to the Company and its subsidiaries as the
Board of Directors of the Company shall reasonably request, including without limitation: general
executive and management services; assistance with the identification, support, negotiation and
analysis of acquisitions and dispositions; assistance with the support, negotiation and analysis of
financial alternatives; and human resource functions.
Section 2. Compensation.
(a) In consideration of the services to be provided in accordance with Section 1, but subject
to Sections 2(d), the Company shall pay to CIC,
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for each fiscal year of the Company, an advisory fee (the “Annual Fee”) equal to 2% of
the Company’s Consolidated EBITDA (as defined below) for such fiscal year. The Annual Fee shall be
pro rated for partial years. The Company shall pay the Annual Fee to CIC in arrears thirteen times
a year within two weeks of the end of each of the Company’s thirteen fiscal periods, subject to the
2% limit described above. Notwithstanding the foregoing, at the election of either CIC or the
Company, the Annual Fee for such fiscal year may be paid in one installment on December 31 of a
given year in advance of the next succeeding calendar year in an amount equal to 95% of the
estimated Annual Fee for such fiscal year (the “Estimated Discounted Annual Fee”);
provided, however, that if it is determined after the calculation of the Company’s
Consolidated EBITDA for such fiscal year that the amount of such payment is less than or greater
than 95% of the actual Annual Fee for such fiscal year (the “Actual Discounted Annual
Fee”), then (i) if the Actual Discounted Annual Fee is greater than the Estimated Discounted
Annual Fee, the Company shall pay to CIC an amount equal to such difference, and (ii) if the
Estimated Discounted Annual Fee is greater than the Actual Discounted Annual Fee, CIC shall return
to the Company an amount equal to such difference, in each case, not later than March 31 of the
next succeeding calendar year.
(b) Upon the acquisition by the Company of any business or entity, or similar transactions
with respect to which CIC provides services, the Company shall pay to CIC a transaction fee equal
to 2% of the purchase or sale price, as applicable. Upon the divestiture by the Company of any
business or entity, or similar transactions with respect to which CIC provides services, the
Company shall pay to CIC a transaction fee equal to 1% of the purchase or sale price, as
applicable. Upon completion of the Acquisition, the Company shall pay to CIC, a transaction fee in
the aggregate amount of $16,800,000.
(c) Upon the completion of a merger, consolidation or other business combination of the
Company with and into a third party, or a sale of all or substantially all of the stock of the
Company or any of its direct or indirect parent companies to a third party, or a sale of all or
substantially all of the assets of the Company and its subsidiaries on a consolidated basis, the
Company shall pay to CIC a transaction fee equal to 1% of the sale price. No fee shall be payable
under Section 2(c) with respect to any transaction in which a fee is paid under Section 2(b).
(d) The Annual Fee payable in any fiscal year shall not exceed the amounts permitted under the
Credit Agreement, dated as of November 1, 2006, among the Company, the Parent, the lenders party
thereto, Credit Suisse, as Administrative Agent, Credit Suisse Securities (USA) LLC and UBS
Securities LLC as Joint Bookrunners and Co-Lead Arrangers, UBS Loan Finance LLC, as Syndication
Agent and Xxxxxxx Xxxxx Credit Partners L.P., as Documentation Agent (the “Credit
Agreement”) or under the Indenture, dated as of November 1, 2006 (as supplemented on November
1, 2006), among the Company, the Guarantors and U.S. Bank National Association, as Trustee,
governing the Company’s 121/2 Senior Notes due 2014 (the “Indenture”). If at any time an
Event of Default has occurred and is continuing under either the Credit Agreement or the Indenture
and the Estimated Discounted Annual Fee has been paid for the fiscal year in which such Event of
Default has occurred, CIC shall
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promptly return to the Company an amount equal to the product of (x) the amount of such
Estimated Discounted Annual Fee and (y) a fraction, the numerator of which is the number of months
remaining in such fiscal year (including the month in which such Event of Default has occurred) and
the denominator of which is 12. Notwithstanding anything to the contrary set forth in this Section
2(d), on the first day in any year upon which the full amount of the Annual Fee payable with
respect to such year shall be permitted to be paid, such full amount shall be paid, and upon the
first day upon which any partial amount of the Annual Fee that would have been payable with respect
to any prior year except for the provisions of this Section 2(d), such partial amount shall be
paid.
(e) As used in this Section 2, the following terms shall have the following meanings:
(i) “Consolidated EBITDA” for a specified fiscal period shall mean Consolidated Net
Income of such person and its subsidiaries for such period plus, without duplication and to the
extent reflected as a charge in the statement of such Consolidated Net Income for such period, (a)
the sum of (i) income tax expense, (ii) Consolidated Interest Expense of such person and its
subsidiaries, amortization or write-off of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with Indebtedness (including, the Loans and Letters
of Credit), (iii) depreciation and amortization expense, (iv) amortization of intangibles
(including goodwill) and organization costs, (v) any extraordinary, unusual or non-recurring
expenses or losses determined in accordance with GAAP (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income for such period,
losses on sales of assets outside of the ordinary course of business), (vi) any other non-cash
charges (other than the writedown of current assets), (vii) management fees and expenses, (viii)
business interruption insurance proceeds to the extent not included in Consolidated Net Income,
(ix) fees and expenses paid in connection with the Transactions and (x) to the extent the related
obligation is included as Indebtedness under this Agreement, the amount of any earnout payments
made during such period, and minus, without duplication, to the extent included in the statement of
such Consolidated Net Income for such period, (b) the sum of (i) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise includable as a separate item in
the statement of such Consolidated Net Income for such period, gains on the sales of assets outside
of the ordinary course of business) and (ii) any other non-cash income, all as determined on a
consolidated basis. For the periods ended on or around April 5, 2006 and June 28, 2006,
Consolidated EBITDA will be deemed to be equal to (i) for the fiscal quarter ended on or around
April 5, 2006, $51,500,000 and (ii) for the fiscal quarter ended on or around June 28, 2006,
$55,400,000. In addition, if Consolidated EBITDA is being determined for the purpose of
calculating the Estimated Discounted Annual Fee, then for each fiscal quarter ended after November
1, 2006 and on or prior to June 25, 2008, the Consolidated EBITDA shall be increased by the Initial
Pro Forma Adjustment. In all other cases in which Consolidated EBITDA is being determined, the
Consolidated EBITDA shall not be increased by the Initial Pro Forma Adjustment but shall be
increased by pro forma annualized banked synergies arising as a result of the Acquisition less
captured synergies included in Consolidated EBITDA for the period being determined, the adjustment
to be made under this sentence to be as
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certified by the Company’s chief executive officer and determined in a manner consistent with
the reporting of such items to the Company’s board of directors. All capitalized terms used in
this definition of “Consolidated EBITDA” shall have the meaning ascribed to them in the Credit
Agreement.
(ii) “GAAP” means United States generally accepted accounting principles.
Section 3. Term. The initial term of this Agreement shall expire on October 2, 2010 (the
“Initial Term”), subject to Section 4. Upon the expiration of the Initial Term, the term
of this Agreement shall be automatically renewed for consecutive one-year extensions unless the
Company or CIC provides written notice of termination no fewer than 30 days prior to the end of the
current term.
Section 4. Termination. This Agreement shall terminate:
(a) thirty (30) days after the delivery of a written notice by CIC;
(b) upon the completion of a merger, consolidation or other business combination of the
Company with and into a third party, or a sale of all or substantially all of the stock of the
Company or any of its direct or indirect parent companies to a third party, or a sale of all or
substantially all of the assets of the Company and its subsidiaries on a consolidated basis; or
(c) upon the closing of the initial underwritten public offering of equity securities of the
Company or any of its direct or indirect parent companies pursuant to an effective registration
statement fled under the Securities Act of 1933, as amended.
Section 5. Fees Upon Termination. If this Agreement is terminated pursuant to Section 4(c) prior
to the expiration of the Initial Term, the Company shall pay to CIC, concurrently with such
termination, an amount equal to the present value of the advisory fee that would otherwise have
been payable to CIC in accordance with Section 2(a) through the end of the Initial Term, based on
the Company’s cost of funds to borrow amounts under the revolving credit facility under the Credit
Agreement.
Section 6. Reimbursement. Upon the request of CIC and/or its Affiliates, and in any event, prior
to the termination of this Agreement, the Company shall promptly reimburse CIC and/or its
Affiliates for all reasonable out-of-pocket expenses (including, without limitation, legal,
accounting, consulting and travel fees and expenses) incurred in connection with the performance of
this Agreement (other than salary expenses and associated overhead charges).
Section 7. Indemnity and Exculpation.
(a) None of CIC, any of its Affiliates or any of their respective partners, members, officers,
directors, stockholders, Affiliates, agents or employees
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(each, an “Indemnified Party”) shall have any liability to the Company for any
services provided pursuant to this Agreement, except as may result from such Indemnified Party’s
gross negligence or willful misconduct.
(b) The Company hereby agrees to indemnify each Indemnified Party from and against all losses,
liabilities, damages, deficiencies, demands, claims, actions, judgments or causes of action,
assessments, costs or expenses (including, without limitation, interest, penalties and reasonable
fees, expenses and disbursements of attorneys, experts, personnel and consultants reasonably
incurred by such Indemnified Party in any action or proceeding between the Company and such
Indemnified Party or between such Indemnified Party and any third party, or otherwise) based upon,
arising out of, or otherwise in respect of, this Agreement or any Indemnified Party’s equity
interest (whether direct or indirect) in the Company. To the extent that the foregoing
indemnification is not permitted by law, each of the Indemnified Parties and the Company shall be
subject and entitled to contribution based upon the relative benefits (not to exceed in any event
the amount of fees paid to CIC hereunder) received by each and, if legally required, based upon the
relative fault of each of the Indemnified Parties and the Company.
Section 8. Assignment. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party; provided, that the Company shall be entitled to
assign this Agreement to any Person that is an Affiliate of the Company or that otherwise assumed
or is a successor to substantially all of the assets and the liabilities of the Company.
Section 9. Modification. This Agreement may not be modified or amended in any manner other than
by an instrument in writing signed by both parties hereto, or their respective successors or
assigns.
Section 10. Entire Agreement. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes any prior agreement or understanding among
them with respect to such subject matter.
Section 11. Notices. Any notice or other communication required or permitted hereunder shall be
in writing and shall be delivered personally, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid and return receipt requested. Any such notice shall be
deemed given when so delivered
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personally or sent by facsimile transmission or, if mailed, five days after the date of deposit in
the United States mails, as follows:
(a) if to CIC, to:
Xxxxxx-Xxxxxx Capital, Inc.
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Company, to:
Buffets, Inc.
0000 Xxxxxx Xxx
Xxxxx, Xxxxxxxxx 00000
Attention: H. Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
0000 Xxxxxx Xxx
Xxxxx, Xxxxxxxxx 00000
Attention: H. Xxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may, by notice given in accordance with this Section to the other parties, designate
another address or person for receipt of notices hereunder.
Section 12. Governing Law; Submission to Jurisdiction. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by and construed in accordance with
the internal law (and not the law of conflicts) of the State of New York.
Section 13. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed shall be deemed to be an original all of which taken together shall
constitute one and the same instrument.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written
above.
| BUFFETS, INC. |
||||
| By: | /s/ R. Xxxxxxx Xxxxxxx, Jr. | |||
| Name: | R. Xxxxxxx Xxxxxxx, Jr. | |||
| Title: | Chief Executive Officer | |||
| XXXXXX-XXXXXX CAPITAL, INC. |
||||
| By: | /s/ Xxxxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxxxx X. Xxxxxx | |||
| Title: | Chairman and Managing Partner | |||
