August 25, 2000
Shoney's Inc.
0000 Xxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxx Xxxxxxxx
Captain D's, Inc.
-----------------
Ladies and Gentlemen:
Shoney's, Inc., a Tennessee corporation ("Shoney's") intends to consummate a
restructuring (the "Restructuring") of its business and a refinancing (the
"Refinancing") of substantially all of the debt of Xxxxxx's and its
subsidiaries. Initially, there will be two operating subsidiaries wholly-
owned by Shoney's (the "Operating Subsidiaries"). One of the Operating
subsidiaries ("Captain D's") will operate the Captain D's business and the
second Operating Subsidiary (the "Commissary") will operate Xxxxxx's food
distribution operations.
Shoney's and/or its subsidiaries anticipates that its operations will be
financed through a separate $99 million real estate financing (the "Real
Estate Financing"). Xxxxxx's further anticipates that the Commissary will be
financed through a separate revolving credit facility of up to $30 million
(the "Commissary Financing").
You have also advised Bank of America and BAS that you intend to finance the
ongoing working capital and other general corporate purposes of Captain D's
and its subsidiaries after consummation of the Restructuring from up to $135
million in senior secured credit facilities of Captain D's (the "Senior
Credit Facilities"), comprised of (i) a term loan facility aggregating up to
$115 million and (ii) a revolving credit facility of up to $20 million. In
this connection, you have requested that (a) Bank of America provide you with
its financing commitment for a portion of the up to $135 million Senior
Credit Facilities and (b) BAS provide you with its best efforts undertaking
to arrange a syndicate of lenders for the Senior Credit Facilities. The
Restructuring, the Refinancing, the Real Estate Financing, the Commissary
Financing, the entering into and funding of the Senior Credit Facilities and
all related transactions are hereinafter collectively referred to as the
"Transaction".
In connection with the foregoing, Bank of America is pleased to advise you of
its commitment to provide $25 million of principal amount of the Senior
Credit Facilities and to act as the sole and exclusive administrative agent
(in such capacity, the "Administrative Agent") for the Senior Credit
Facilities, all upon and subject to the terms and conditions set forth in
this letter and in the summary of terms attached as Annex I hereto (the
"Summary of Terms" and, together with this letter agreement, the "Commitment
Letter"). BAS is pleased to advise you of its willingness, as the sole and
exclusive lead arranger and sole book manager (the "Sole Lead Arranger and
Sole Book Manager") for the Senior Credit Facilities, to use its best efforts
to form a syndicate of financial institutions and institutional lenders
(collectively, the "Lenders") reasonably acceptable to you for the Senior
Credit Facilities. All capitalized terms used and not otherwise defined
herein shall have the same meanings as specified therefor in the Summary of
Terms.
The commitment of Bank of America hereunder and the undertaking of BAS to
provide the services described herein are subject to the satisfaction of each
of the following conditions precedent in a manner acceptable to Bank of
America and BAS: (a) compliance with all of the terms and conditions set
forth herein or in the Summary of Terms; (b) the completion of a due
diligence review of the assets, liabilities (including contingent
liabilities) and businesses of Captain D's and its subsidiaries in scope and
with results satisfactory to us in our sole discretion; (c) prior to and
during the syndication of the Senior Credit Facilities there shall be no
competing offering, placement or arrangement of any debt securities or bank
financing by or on behalf of Captain D's or any of its subsidiaries; (d) no
material adverse change in or material disruption of conditions in the market
for syndicated bank credit facilities or the financial, banking or capital
markets generally shall have occurred that, in the reasonable judgment of
Bank of America and BAS, would impair the syndication of the Senior Credit
Facilities; (e) no change, occurrence or development shall have occurred or
become known to Bank of America or BAS since October 31, 1999 that could
reasonably be expected to have a material adverse effect on the business,
assets, liabilities (actual or contingent), operations, condition (financial
or otherwise) or prospects of Captain D's and its subsidiaries, taken as a
whole; (f) neither Bank of America nor BAS becoming aware after the date
hereof of any information, or any event, development or change that, in our
reasonable judgment, is inconsistent in a material and adverse manner with
any information or other matter disclosed to us prior to the date hereof (in
which case Bank of America and BAS may, in our sole discretion, suggest
alternative financing amounts or structures that ensure adequate protection
for the Lenders or terminate our commitment and undertaking under this
Commitment Letter); and (g) receipt of commitments from other Lenders for the
balance of the Senior Credit Facilities on the terms and conditions referred
to in the attached Summary of Terms.
BAS intends to commence syndication of the Senior Credit Facilities promptly
after your acceptance of this Commitment Letter and the Fee Letter (as
hereinafter defined). Bank of America reserves the right, prior to or after
execution of the definitive credit documentation for the Senior Credit
Facilities, to syndicate all or part of its commitment for the Senior Credit
Facilities to one or more lending institutions that will become parties to
such definitive credit documentation pursuant to the syndication to be
managed by BAS, and the commitment of Bank of America hereunder shall be
reduced as and when commitments are received from the Lenders. You agree to
actively assist, and to cause Xxxxxx's to actively assist, BAS in achieving
a syndication of the Senior Credit Facilities that is satisfactory to BAS and
you. Such assistance shall include (a) your providing and causing your
advisors to provide Bank of America and BAS and the other Lenders upon
request with all information reasonably deemed necessary by Bank of America
and BAS to complete syndication, including, but not limited to, information
and evaluations prepared by you, Xxxxxx's, Captain D's and your and their
advisors, or on your or their behalf, relating to the Transaction, (b) your
assistance in the preparation of an Information Memorandum to be used in
connection with the syndication of the Senior Credit Facilities, (c) using
your commercially reasonable efforts to support successful syndication
efforts of BAS which will benefit materially from your existing lending
relationships and the existing lending relationships of Shoney's and (d)
otherwise assisting Bank of America and BAS in their syndication efforts,
including by making your officers and advisors and the officers and advisors
of Xxxxxx's, Captain D's and their respective subsidiaries available from
time to time to attend and make presentations regarding the business and
prospects of Xxxxxx's, Captain D's and their respective subsidiaries, as
appropriate, at one or more meetings of prospective Lenders.
It is understood and agreed that BAS will manage and control all aspects of
the syndication in consultation with you, including decisions as to the
selection of prospective Lenders and any titles offered to proposed Lenders,
when commitments will be accepted and the final allocations of the
commitments among the Lenders. It is understood that no Lender participating
in the Senior Credit Facilities will receive compensation from you in order
to obtain its commitment, except on the terms contained herein and in the
Summary of Terms. It is also understood and agreed that the amount and
distribution of the
2
fees among the Lenders will be at the sole discretion of Bank of America and
BAS and that any syndication prior to execution of the definitive
documentation for the Senior Credit Facilities will reduce the commitment of
Bank of America.
You hereby represent, warrant and covenant that (a) all information, other
than Projections (as defined below), which has been or is hereafter made
available to Bank of America, BAS or the Lenders by you or any of your
representatives (or on your or their behalf) or by Xxxxxx's, Captain D's or
any of their subsidiaries or representatives (or on their behalf) in
connection with any aspect of the Transaction (the "Information") is and will
be complete and correct in all material respects and does not and will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein not misleading and
(b) all financial projections concerning Captain D's and its subsidiaries
that have been or are hereafter made available to Bank of America, BAS or the
Lenders by you or any of your representatives (or on your or their behalf) or
by Shoney's, Captain D's or any of their subsidiaries or representatives (or
on their behalf) (the "Projections") have been or will be prepared in good
faith based upon reasonable assumptions. You agree to furnish us with such
Information and Projections as we may reasonably request and to supplement
the Information and the Projections from time to time until the date of the
initial borrowing under the Senior Credit Facilities (the "Closing Date") so
that the representation, warranty and covenant in the immediately preceding
sentence is correct on the Closing Date. In issuing this commitment and in
arranging and syndicating the Senior Credit Facilities, Bank of America and
BAS are and will be using and relying on the Information and the Projections
(collectively, the "Pre-Commitment Information") without independent
verification thereof.
By executing this Commitment Letter, you agree to reimburse Bank of America
and BAS from time to time on demand for all reasonable out-of-pocket fees and
expenses (including, but not limited to, the reasonable fees, disbursements
and other charges of Shearman & Sterling, as counsel to Bank of America, and
of special and local counsel to Bank of America and the Lenders and due
diligence expenses) incurred in connection with the Senior Credit Facilities,
the syndication thereof, the preparation of the definitive documentation
therefor and the other transactions contemplated hereby.
You agree to indemnify and hold harmless Bank of America, BAS, each Lender
and each of their affiliates and their officers, directors, employees,
agents, advisors and other representatives (each an "Indemnified Party") from
and against (and will reimburse each Indemnified Party as the same are
incurred for) any and all claims, damages, losses, liabilities and expenses
(including, without limitation, the reasonable fees, disbursements and other
charges of counsel) 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 a defense in
connection therewith) (a) any aspect of the Transaction or any similar
transaction and any of the other transactions contemplated thereby or (b) the
Senior Credit Facilities and any other financings, or any use made or
proposed to be made with the proceeds thereof, except to the extent such
claim, damage, loss, liability or expense is found in a final, nonappealable
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 proceeding to which the indemnity in this
paragraph applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by you, your equityholders
or creditors or an Indemnified Party, whether or not an Indemnified Party is
otherwise a party thereto and whether or not any aspect of the Transaction is
consummated. You also agree that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to
you or your subsidiaries or affiliates or to your or their respective equity
holders or creditors arising out of, related to or in connection with any
aspect of the Transaction, except for direct, as opposed to consequential,
damages determined in a final nonappealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence
or willful misconduct.
3
This Commitment Letter and the fee letter among you, Bank of America and BAS
of even date herewith (the "Fee Letter") and the contents hereof and thereof
are confidential and, except for the disclosure hereof or thereof on a
confidential basis to your accountants, attorneys and other professional
advisors retained in connection with the Transaction or as otherwise required
by law, may not be disclosed in whole or in part to any person or entity
without our prior written consent; provided, however, it is understood and
agreed that you may disclose this Commitment Letter (including the Summary of
Terms) but not the Fee Letter, after your acceptance of this Commitment
Letter and the Fee Letter, in filings with the Securities and Exchange
Commission and other applicable regulatory authorities and stock exchanges.
The provisions of the immediately preceding three paragraphs shall remain in
full force and effect regardless of whether any definitive documentation for
the Senior Credit Facilities shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or any commitment
or undertaking of Bank of America or BAS hereunder.
In connection with the services and transactions contemplated hereby, you
agree that Bank of America and BAS are permitted to access, use and share
with any of their bank or non-bank affiliates, agents, advisors (legal or
otherwise) or representatives, any information concerning you, Xxxxxx's,
Captain D's or any of your or their respective affiliates that is or may come
into the possession of Bank of America, BAS or any of such affiliates. Bank
of America, BAS and their affiliates will treat confidential information
relating to you, Xxxxxx's, Captain D's and your and their respective
affiliates with the same degree of care as they treat their own confidential
information.
This Commitment Letter and the Fee Letter may be executed in counterparts
which, taken together, shall constitute an original. Delivery of an executed
counterpart of this Commitment Letter or the Fee Letter by telecopier shall
be effective as delivery of a manually executed counterpart thereof.
This Commitment Letter and the Fee Letter shall be governed by, and construed
in accordance with, the laws of the State of New York. Each of you, Bank of
America and BAS hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Commitment Letter (including,
without limitation, the Summary of Terms), the Fee Letter, the Transaction
and the other transactions contemplated hereby and thereby or the actions of
Bank of America and BAS in the negotiation, performance or enforcement
hereof. The commitments and undertakings of Bank of America and BAS may be
terminated by us if you fail to perform your obligations under this
Commitment Letter or the Fee Letter on a timely basis.
This Commitment Letter, together with the Summary of Terms and the Fee
Letter, embodies the entire agreement and understanding among Bank of
America, BAS, you, Shoney's and your and its affiliates with respect to the
Senior Credit Facilities and supersedes all prior agreements and
understandings relating to the specific matters hereof. However, please note
that the terms and conditions of the commitment and undertaking of BAS
hereunder are not limited to those set forth herein or in the Summary of
Terms. Those matters that are not covered or made clear herein or in the
Summary of Terms or the Fee Letter are subject to mutual agreement of the
parties. No party has been authorized by Bank of America or BAS to make any
oral or written statements that are inconsistent with this Commitment Letter.
This Commitment Letter is not assignable by you without our prior written
consent and is intended to be solely for the benefit of the parties hereto
and the Indemnified Parties.
This Commitment Letter and all commitments and undertakings of Bank of
America and BAS hereunder will expire at 5:00 p.m. (New York City time) on
August 25, 2000 unless you execute this Commitment Letter and the Fee Letter
and return them to us prior to that time. Thereafter, all commitments and
4
undertakings of Bank of America and BAS hereunder will expire on the earliest
of (a) September 30, 2000, unless the Closing Date occurs on or prior thereto
and (b) the closing of the Restructuring.
We are pleased to have the opportunity to work with you on this important
financing.
Very truly yours,
BANK OF AMERICA, N.A.
By /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Title: Vice President
BANC OF AMERICA SECURITIES LLC
By /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Title: Vice President
ACCEPTED AND AGREED TO
AS OF August 25, 2000
SHONEY'S, INC.
By /s/ Xxxxx X. Xxxxxxxx
------------------------------
Title: CFO
5
ANNEX I
CAPTAIN D'S, INC.
SENIOR CREDIT FACILITIES
SUMMARY OF TERMS AND CONDITIONS
Capitalized terms not otherwise defined herein have the same meanings
as specified therefor in the Commitment Letter to which this is attached
BORROWER: A newly created direct wholly-owned subsidiary
formed by Shoney's, Inc., ("Shoney's"). The
Borrower will operate the Captain D's business of
Xxxxxx's.
GUARANTORS: The Term Loan C Facility will be guaranteed by a
newly created wholly-owned special purpose
subsidiary of the Borrower (the "Leasehold SPV").
The Revolving Credit Facility and the Term Loan B
Facility will be guaranteed by SHN Properties, LLC
(whose name shall be changed to Captain D's
Properties, LLC as part of the Restructuring,
"Captain D's SPV"). The Senior Credit Facilities
will be guaranteed by each of the other existing
and future direct and indirect subsidiaries of the
Borrower that is not a "controlled foreign
corporation" (a "CFC") under Section 957 of the
Internal Revenue Code, if any. All guarantees will
be guarantees of payment and not of collection.
ADMINISTRATIVE AND
COLLATERAL AGENT: Bank of America, N.A. ("Bank of America") will act
as sole and exclusive administrative and collateral
agent (the "Administrative Agent").
XXXX LEAD ARRANGER
AND SOLE BOOK MANAGER: Banc of America Securities LLC ("BAS").
LENDERS: Bank of America and other banks, financial
institutions and institutional lenders acceptable
to BAS and the Administrative Agent.
SENIOR CREDIT
FACILITIES: An aggregate principal amount of up to $135 million
will be available through the following facilities:
Term Loan B Facility: an $85 million three-year
term loan facility, all of which will be drawn on
the Closing Date (the "Term Loan B Facility").
Term Loan C Facility: a $30 million eighteen-month
term loan facility, all of which will be drawn on
the Closing Date (the "Term Loan C Facility", and
together with the Term Loan B Facility, the "Term
Facilities").
Revolving Credit Facility: a $20 million revolving
credit facility, available from time to time until
the third anniversary of the Closing Date, and to
include a $10 million sublimit for the issuance of
standby and commercial letters of credit (each a
"Letter of Credit") and a $5 million sublimit for a
swingline subfacility. Letters of Credit will be
initially issued by Bank of America (in such
capacity, the "Issuing
Bank"), Bank of America will be the initial Swing
Line Bank (in such capacity, the "Swing Line Bank")
and each of the Lenders under the Revolving Credit
Facility will purchase an irrevocable and
unconditional participation in each Letter of
Credit and Swing Line Loan.
PURPOSE: The proceeds of the Senior Credit Facilities shall
be used (i) to finance in part the Restructuring
and the Refinancing; (ii) to pay fees and expenses
incurred in connection with the Transaction; and
(iii) to provide ongoing working capital and for
other general corporate purposes of the Borrower
and its subsidiaries.
CLOSING DATE: On or before August 31, 2000.
INTEREST RATES: The interest rates per annum (calculated on a 360-
day basis) applicable to the Senior Credit
Facilities will be LIBOR plus the Applicable Margin
(as hereinafter defined) or, at the option of the
Borrower, the Alternate Base Rate (to be defined as
the higher of (x) the Bank of America prime rate
and (y) the Federal Funds rate plus 0.50%) plus the
Applicable Margin.
The Applicable Margin means, (i) in the case of the
Revolving Credit Facility, for the period from the
Closing Date until the delivery of the financial
statements for the fiscal year ended October 29,
2000, 3.75% per annum, in the case of LIBOR rate
advances, and 2.75% per annum, in the case of Base
Rate advances, and thereafter, the rate per annum
set forth below under the caption "LIBOR Advances"
or "Base Rate Advances" based upon the following
performance-based grid using the Leverage Ratio
(defined as total funded debt to adjusted EBITDA):
Leverage Ratio LIBOR Advances Base Rate Advances
----------------------------------------------------
Greater than or
equal to
3.25:1.00 4.00% 3.00%
Greater than or
equal to
2.75:1.00 but less
than 3.25:1.00 3.75% 2.75%
Greater than or
equal to
2.25:1.00 but less
than 2.75:1.00 3.50% 2.50%
Greater than or
equal to
1.75:1.00 but less
-2-
than 2.25:1.00 3.25% 2.25%
Less than
1.75:1.00 3.00% 2.00%
and (ii) in the case of the Term Loan B Facility,
4.00% per annum, in the case of LIBOR rate
advances, and 3.00% per annum, in the case of Base
Rate advances, and (iii) in the case of the Term
Loan C Facility, 4.00% per annum, in the case of
LIBOR rate advances, and 3.00% per annum, in the
case of Base Rate advances, increasing by 50 basis
points on January 1, 2001, and increasing by an
additional 50 basis points at the completion of
each calendar quarter thereafter.
The Borrower may select interest periods of one,
two, three or six months for LIBOR rate advances,
subject to availability. Interest shall be payable
at the end of the selected interest period, but no
less frequently than quarterly.
During the continuance of any default under the
loan documentation, the Applicable Margin on all
obligations owing under the loan documentation
shall increase by 2% per annum.
COMMITMENT FEE: (i) For the period from the Closing Date until the
delivery of the financial statements for the fiscal
year ended October 29, 2000, a commitment fee of
0.50% and (ii) thereafter, the percentage per annum
set forth in the following performance-based grid
based on the Leverage Ratio:
Leverage Ratio Commitment Fee
--------------------------------------
Greater than or
equal to
2.75:1.00 0.50%
Greater than or
equal to
2.25:1.00 but less
than 2.75:1.00 0.375%
Less than
2.25:1.00 0.25%
in each case calculated on a 360-day basis and
payable on the unused portions of the Senior Credit
Facilities. Such fee shall be payable quarterly in
arrears and on the date of termination or
expiration of the commitments.
-3-
LETTER OF CREDIT FEES: Letter of Credit fees equal to the Applicable
Margin from time to time on Revolving Credit LIBOR
rate advances on a per annum basis will be payable
quarterly in arrears and shared proportionately by
the Lenders under the Revolving Credit Facility.
In addition, a fronting fee of 0.25% per annum will
be payable to the Issuing Bank for its own account.
Both the Letter of Credit fees and the fronting
fees will be calculated on the amount available to
be drawn under each outstanding Letter of Credit.
MATURITY: The Term Loan B Facility shall be subject to
repayment according to the Scheduled Amortization,
with the final payment of all amounts outstanding,
plus accrued interest, being due three years after
the Closing Date.
The Term Loan C Facility shall terminate and all
amounts outstanding thereunder shall be due and
payable in full eighteen months after the Closing
Date.
The Revolving Credit Facility shall terminate and
all amounts outstanding thereunder shall be due and
payable in full three years after the Closing Date.
SCHEDULED
AMORTIZATION: Term Loan B Facility: The Term Loan B Facility
will be subject to yearly amortization of principal
(in equal quarterly installments) in the aggregate
amount set forth below for each year (the
"Scheduled Amortization"):
Year Amount
---- ------
1 $ 5.0 million
2 $ 5.0 million
3 $ 75.0 million
Revolving Credit Facility: Advances under the
Revolving Credit Facility may be made, and Letters
of Credit may be issued, on a revolving basis up to
the full amount of the Revolving Credit Facility.
MANDATORY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: In addition to the amortization set forth above,
(a) all net cash proceeds (i) from sales of
property and assets of the Borrower and its
subsidiaries (excluding sales of inventory in the
ordinary course of business and other exceptions to
be agreed in the loan documentation, and subject to
a reinvestment provision to be agreed (including
with respect to refranchising proceeds)) and (ii)
of Extraordinary Receipts (to be
-4-
defined in the loan documentation and to exclude
cash receipts in the ordinary course of business,
and subject to a reinvestment provision to be
agreed) and (b) 50% of Excess Cash Flow (to be
defined in the loan documentation) of the Borrower
and its subsidiaries shall be applied to the
prepayment of (and permanent reduction of the
commitments under) the Senior Credit Facilities in
the following manner with exceptions to be agreed
in the loan documentation: first, ratably to the
principal repayment installments of the Term
Facilities on a pro rata basis, and second, to the
Revolving Credit Facility; and
All net cash proceeds from the issuance or
incurrence after the Closing Date of additional
equity interests in or debt of the Borrower or any
of its subsidiaries otherwise permitted under the
loan documentation, shall be applied to the
prepayment of (and permanent reduction of the
commitments under) the Senior Credit Facilities in
the following manner: first, to the principal
repayment of the Term Loan C Facility, second,
ratably to the principal repayment installments of
the Term Loan B Facility on a pro rata basis, and
third, to the Revolving Credit Facility.
OPTIONAL PREPAYMENTS
AND COMMITMENT
REDUCTIONS: Senior Credit Facilities may be prepaid at any time
in whole or in part without premium or penalty,
except that any prepayment of LIBOR rate advances
other than at the end of the applicable interest
periods there for shall be made with reimbursement
for any funding losses and redeployment costs of
the Lenders resulting therefrom. Each such
prepayment of the Term Loan B Facility shall be
applied first in direct order of maturity for the
amortization payments occurring in the 12 month
period following the date of such prepayment and
second on a pro rata basis. The unutilized portion
of any commitment under the Senior Credit
Facilities may be reduced or terminated by the
Borrower at any time without penalty (and the
obligation to pay the Commitment Fee on the portion
of the Senior Credit Facilities so reduced shall be
terminated).
SECURITY: Revolving Credit Facility and Term Loan B Facility:
The Borrower and each of the Guarantors (other than
the Leasehold SPV) shall grant the Administrative
Agent and the Lenders to the Revolving Credit
Facility and the Term Loan B Facility a valid and
perfected first priority (subject to certain
exceptions to be set forth in the loan
documentation) liens and security interests in all
of the following:
(a) All present and future shares of capital
stock of (or other ownership or profit
interests in) each of its present and
future subsidiaries (limited, in the case
of each entity that is a CFC, to 65% of the
voting stock of each such entity) other
than the Leasehold SPV;
-5-
(b) All present and future intercompany debt of
the Borrower and each other Guarantor other
than the Leasehold SPV;
(c) All of the present and future property and
assets, real and personal, of the Borrower
and each other Guarantor other than the
Leasehold SPV, including, but not limited
to, machinery and equipment, inventory and
other goods, accounts receivable, owned
real estate, leaseholds, fixtures, bank
accounts, general intangibles, franchise
rights, royalties, license rights, patents,
trademarks, tradenames, copyrights, chattel
paper, insurance proceeds, contract rights,
hedge agreements, documents, instruments,
indemnification rights, tax refunds and
cash (excluding the 117 leasehold
improvement properties held by the
Leasehold SPV and no more than $10 million
in collateral value in the fee-simple real
estate that is specifically pledged on a
first priority basis to the Term Loan C
Lenders); and
(d) All proceeds and products of the property
and assets described in clauses (a), (b)
and (c) above.
The Security shall ratably secure the relevant
party's obligations in respect of the Revolving
Credit Facility and the Term Loan B Facility and
any interest rate swap or similar agreements with a
Lender under the Revolving Credit Facility and the
Term Loan B Facility.
The Revolving Credit Facility and the Term Loan B
Facility shall also be secured by a valid and
perfected first priority (subject to certain
exceptions to be set forth in the loan
documentation) liens and security interest in all
of the equity interests in the Borrower.
Term Loan C Facility: The Borrower and the
Leasehold SPV shall grant the Administrative Agent
and the Lenders to the Term Loan C Facility a valid
and perfected first priority (subject to certain
exceptions to be set forth in the loan
documentation) liens and security interests in the
following:
(i) The 117 leasehold improvement properties
held by the Leasehold SPV and no more than
$10 million in collateral value in the fee-
simple real estate;
(ii) All present and future shares of capital
stock of (or other ownership or profit
interests in) the Leasehold SPV;
(iii) All present and future intercompany debt of
the Leasehold SPV; and
(iv) All proceeds and products of the property
and assets described in clauses (i), (ii)
and (iii) above; and
-6-
The Borrower and the other Guarantors (other than
the Leasehold SPV) shall grant to the Lenders to
the Term Loan C Facility, a perfected second
priority lien and security interest in all of the
following:
(a) All present and future shares of capital
stock of (or other ownership or profit
interests in) each of its present and
future subsidiaries (limited, in the case
of each entity that is a CFC, to 65% of the
voting stock of each such entity) other
than the Leasehold SPV;
(b) All present and future intercompany debt of
the Borrower and each other Guarantor other
than the Leasehold SPV; and
(c) All of the present and future property and
assets, real and personal, of the Borrower
and each other Guarantor other than the
Leasehold SPV, including, but not limited
to, machinery and equipment, inventory and
other goods, accounts receivable, owned
real estate, leaseholds, fixtures, bank
accounts, general intangibles, franchise
rights, royalties, license rights, patents,
trademarks, tradenames, copyrights, chattel
paper, insurance proceeds, contract rights,
hedge agreements, documents, instruments,
indemnification rights, tax refunds and
cash; and
(d) All proceeds and products of the property
and assets described in clauses (a), (b)
and (c) above.
The Security shall ratably secure the relevant
party's obligations in respect of the Term Loan C
Facility and any interest rate swap or similar
agreements with a Lender under the Term Loan C
Facility.
The Term Loan C Facility shall also be secured by a
valid and perfected second priority (subject to
certain exceptions to be set forth in the loan
documentation) liens and security interest in all
of the equity interests in the Borrower.
CONDITIONS PRECEDENT
TO CLOSING: The closing and the initial extension of credit
under the Senior Credit Facilities will be subject
to satisfaction of the conditions precedent deemed
appropriate by the Administrative Agent for
leveraged acquisition financings generally and for
this transaction in particular, including but not
limited to the following: (i) satisfactory
completion of the Administrative Agent's due
diligence review with respect to the business,
operations, assets and liabilities of Shoney's and
its subsidiaries, including tax and ERISA matters;
and satisfaction with any changes or developments,
or any new or additional information discovered by
the Administrative Agent or the Lenders regarding
Shoney's or any of its subsidiaries or any aspect
of the Transaction that (A) either individually or
in the aggregate, could reasonably be expected to
have a material adverse effect on the business,
assets, liabilities (actual or contingent),
operations, condition (financial or otherwise) or
prospects of Borrower and its subsidiaries, taken
as a whole, or (B) adversely
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affects the Senior Credit Facilities or the
Transaction; (ii) satisfactory loan documentation;
(iii) consummation of the Transaction on terms
consistent with those described herein and
otherwise satisfactory to the Lenders and
satisfactory review of all documentation relating
to the Transaction; (iv) satisfactory
capitalization, shareholders' arrangements and
corporate structure of and documentation for the
Borrower and its subsidiaries (including, without
limitation, a voting trust or other satisfactory
arrangement in respect of the common stock of the
Borrower); (v) (A) the termination and payment in
full of the existing senior bank credit facility of
Shoney's and (B) the successful tender of the
existing TPI convertible debentures and the
Shoney's XXXXX on terms and conditions acceptable
to the Lenders; (vi) absence of material pending or
threatened litigation, investigations or
proceedings; (vii) absence of any existing or
potential material tax, ERISA or environmental
liabilities, or other existing or potential
material direct or contingent liabilities, that are
not disclosed on the most recently completed
audited financial statements of Shoney's and its
subsidiaries; (viii) receipt of (A) the audited
financial statements of the Borrower and its
subsidiaries for the fiscal years ended October 25,
1998 and October 31, 1999, (B) unaudited year to
date financial statements of the Borrower and its
subsidiaries for the twenty-eight week period ended
May 14, 2000 and (C) a pro forma balance sheet and
income statement of the Borrower and its
subsidiaries as of the Closing Date which gives
effect to all of the elements of the Transaction to
be effected on or before the Closing Date; (ix)
satisfaction of the Administrative Agent with (A)
all arrangements between the Borrower and its
subsidiaries, on the one hand, and Shoney's and its
other subsidiaries, on the other hand and (B) the
tax sharing arrangements and administrative service
agreements among Shoney's and its subsidiaries,
including the Borrower; (x) satisfactory solvency
certification and opinion; (xi) evidence of
perfection of liens and security interests,
together with (A) endorsements on the appropriate
insurance policies of the Borrower and its
subsidiaries naming the Administrative Agent as the
loss payee or additional insured thereunder and (B)
such title policies, surveys, and access letters as
the Administrative Agent shall have requested;
(xii) receipt of requisite governmental and third
party approvals and consents (and expiration,
without the imposition of conditions, of all
applicable waiting periods); (xiii) satisfactory
legal opinions, corporate certificates and other
customary closing documentation; (xiv) Shoney's
Properties, LLC shall have obtained the Real Estate
Financing which shall be on terms and conditions
acceptable to the Administrative Agent; (xv) the
Commissary shall have obtained the Commissary
Financing which shall be on terms and conditions
acceptable to the Administrative Agent; (xvi) the
Lenders shall be satisfied that minimum pro forma
Adjusted EBITDA of the Borrower and its
subsidiaries (defined to exclude one-time charges
and extraordinary items to be agreed) for the
twelve-month period ended October 31, 1999 is at
least $39 million; and (xvii) payment of all
accrued fees and expenses (including fees and
expenses of counsel to the Administrative Agent).
CONDITIONS PRECEDENT
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TO EACH BORROWING
UNDER THE SENIOR
CREDIT FACILITIES: Each borrowing or issuance or renewal of a Letter
of Credit under the Senior Credit Facilities will
be subject to satisfaction of the following
conditions precedent: (i) all of the
representations and warranties in the loan
documentation shall be materially correct; and (ii)
no defaults or Events of Default shall have
occurred and be continuing.
REPRESENTATIONS AND
WARRANTIES: Usual and customary for transactions of this type,
including, without limitation: (i) corporate
status; (ii) corporate power and authority,
enforceability; (iii) no violation of law,
contracts or organizational documents; (iv) no
material litigation; (v) accuracy and completeness
of specified financial statements and other
information and no material adverse change; (vi) no
required governmental or third party approvals or
consents; (vii) use of proceeds/compliance with
margin regulations; (viii) valid title to property
and assets (including, intellectual property and
licenses), which must be free and clear of liens,
charges and other encumbrances (other than
permitted exceptions); (ix) status under Investment
Company Act; (x) ERISA matters; (xi) environmental
matters; (xii) perfected liens, security interests
and charges; (xiii) solvency; and (xiv) tax status
and payment of taxes.
COVENANTS: Those affirmative, negative and financial covenants
(applicable to the Borrower and its subsidiaries)
customarily found in transactions of this type,
including, without limitation, the following:
(a) Affirmative Covenants - (i) Compliance with
laws and regulations (including, without
limitation, ERISA and environmental laws);
(ii) payment of taxes and other
obligations; (iii) maintenance of
appropriate and adequate insurance; (iv)
preservation of corporate existence, rights
(charter and statutory), franchises,
permits, licenses and approvals; (v)
visitation and inspection rights; (vi)
keeping of proper books in accordance with
generally accepted accounting principles;
(vii) maintenance of properties; (viii)
performance of leases, related documents
and other material agreements; (ix)
conducting transactions with affiliates on
terms equivalent to those obtainable on an
arm's-length basis; (x) further assurances
as to perfection and priority of security
interests; (xi) grant of security on
additional property and assets upon the
occurrence and continuance of an Event of
Default; and (xii) customary financial and
other reporting requirements (including,
without limitation, audited annual
financial statements and monthly and
quarterly unaudited financial statements,
notices of defaults, compliance
certificates, annual business plans and
forecasts, notices of material litigation
and proceedings, material environmental
actions and liabilities and material ERISA
and tax events and liabilities, reports to
shareholders and other creditors, and other
business and financial information as any
Lender shall reasonably request).
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(b) Negative Covenants - Restrictions on (i)
liens; (ii) debt, guarantees or other
contingent obligations (including, without
limitation, the subordination of all
intercompany indebtedness on terms
satisfactory to the Lenders); (iii) mergers
and consolidations; (iv) sales, transfers
and other dispositions of property and
assets (other than sales of inventory in
the ordinary course of business); (v)
loans, acquisitions, joint ventures and
other investments; (vi) dividends and other
distributions to, and redemptions and
repurchases from, equityholders; (vii)
creating new subsidiaries; (viii) becoming
a general partner in any partnership; (ix)
prepaying, redeeming or repurchasing debt;
(x) capital expenditures; (xi) granting
negative pledges other than to the
Administrative Agent and the Lenders; (xii)
changes in the nature of business; (xiii)
amending organizational documents, or
amending or otherwise modifying any debt,
any related document or any other material
agreement; and (xiv) changes in accounting
policies or reporting practices; in each of
the foregoing cases, with such exceptions
as may be agreed upon in the loan
documentation.
(c) Financial Covenants - To include the
following:
- Maintenance of a minimum Interest
Coverage Ratio (adjusted EBITDA/total
interest expense);
- Maintenance of a maximum Leverage
Ratio (total funded debt/adjusted EBITDA);
- Maintenance of a minimum Fixed
Charge Coverage Ratio (adjusted EBITDA less
Maintenance Capital Expenditures (to be
defined in the loan documentation) less
cash taxes/total interest expense plus
scheduled principal payments); and
- Maintenance of minimum adjusted
EBITDA.
All of the financial covenants will be calculated
on a consolidated basis for the Borrower and its
subsidiaries and for each consecutive four fiscal
quarter period, except that during the first year
following the Closing Date such measurements shall
be made for the period of time since the Closing
Date and, where appropriate, annualized.
-10-
INTEREST RATE
PROTECTION: The Borrower shall obtain interest rate protection
in form and with parties acceptable to the Lenders
for a notional amount and otherwise on terms to be
agreed in the loan documentation.
EVENTS OF DEFAULT: Usual and customary in transactions of this nature,
including, without limitation, (i) nonpayment of
principal, interest, fees or other amounts, (ii)
any representation or warranty proving to have been
materially incorrect when made or confirmed; (iii)
failure to perform or observe covenants set forth
in the loan documentation within a specified period
of time, where customary and appropriate, after
notice or knowledge of such failure; (iv) cross-
defaults to other indebtedness of Shoney's (until
the consummation of the corporate restructuring on
terms and conditions as may be mutually agreed),
the Borrower and its subsidiaries in an amount to
be agreed; (v) bankruptcy and insolvency defaults
(with grace period for involuntary proceedings);
(vi) monetary judgment defaults in an amount to be
agreed and material nonmonetary judgment defaults;
(vii) actual or asserted impairment of loan
documentation or security; (viii) change of control
(subject to certain exceptions for corporate
restructuring transactions as may be mutually
agreed); and (ix) customary ERISA defaults.
ASSIGNMENTS AND
PARTICIPATIONS: Each Lender will be permitted to make assignments
in minimum amounts to be agreed to other financial
institutions approved by the Borrower (at any time
that an Event of Default has not occurred and is
continuing) and the Administrative Agent, which
approval shall not be unreasonably withheld or
delayed; provided, however, that neither the
approval of the Borrower nor the Administrative
Agent shall be required in connection with
assignments to other Lenders or any of their
affiliates. Each Lender will also have the right,
without consent of the Borrower or the
Administrative Agent, to assign (i) as security all
or part of its rights under the loan documentation
to any Federal Reserve Bank and (ii) all or part of
its rights or obligations under the loan
documentation to any of its affiliates. Lenders
will be permitted to sell participations with
voting rights limited to significant matters such
as changes in amount, rate and maturity date.
WAIVERS AND
AMENDMENTS: Amendments and waivers of the provisions of the
loan documentation will require the approval of
Lenders holding advances and commitments
representing more than 50% of the aggregate
advances and commitments under the Senior Credit
Facilities, except that the consent of all of the
Lenders be required with respect to (i) increases
in commitment amounts, (ii) reductions of
principal, interest, or fees, (iii) extensions of
scheduled maturities or times for payment, and (iv)
releases of all or substantially all of the
collateral or guarantees.
INDEMNIFICATION: The Borrower will indemnify and hold harmless the
Administrative Agent, the Sole Lead Arranger and
Sole Book Manager, each Lender and each of their
affiliates and their officers, directors,
employees, agents and
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advisors from and against all losses, liabilities,
claims, damages or expenses arising out of or
relating to the Transaction, the Senior Credit
Facilities, the Borrower's use of loan proceeds or
the commitments, including, but not limited to,
reasonable attorneys' fees and settlement costs.
This indemnification shall survive and continue for
the benefit of all such persons or entities,
notwithstanding any failure of the Senior Credit
Facilities to close.
GOVERNING LAW: New York.
EXPENSES: The Borrower will pay all reasonable costs and
expenses associated with the preparation, due
diligence, administration, syndication and
enforcement of all loan documentation, including,
without limitation, the legal fees of the
Administrative Agent's counsel, regardless of
whether or not the Senior Credit Facilities are
closed. The Borrower will also pay the expenses of
each Lender in connection with the enforcement of
any of the loan documentation.
COUNSEL TO THE
ADMINISTRATIVE
AGENT: Xxxxxxxx & Sterling.
MISCELLANEOUS: This term sheet is intended as an outline only and
does not purport to summarize all the conditions,
covenants, representations, warranties and other
provisions which would be contained in loan
documentation. Each of the parties shall (i) waive
its right to a trial by jury and (ii) submit to New
York jurisdiction. The loan documentation will
contain customary increased cost, withholding tax,
capital adequacy and yield protection provisions.
SOURCES AND USES:
Sources of Funds
($ in Millions) Uses of Funds
--------------------------------------------------------------------------
Proposed Facilities: Dividend to the Parent $116.2
Revolving Credit Facility $ 5.0 Transaction Costs 3.8
Term Loan B Facility 85.0 ------
Term Loan C Facility 30.0
-----
Total Senior Facilities 120.0
Total Sources of Funds $120.0 Total Uses of Funds $120.0
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