EX-10.8
Exhibit 10.8
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
CAXTON-ISEMAN 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, Ryans Restaurant Group, Inc. (Ryans) 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 Ryans pursuant to a merger of Merger Sub with and into
Ryans, with Ryans 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 Companys 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 Companys 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 Companys
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 Goldman Sachs 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 Companys 12
1/
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