-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NIt79g6Rs//PJdAvvzmAe5R+ybF8lzG7oanfL+9Xc+lAiCsbTOmgzuJKwzqqgXLU X7SFektDzcOA8lDaY+H5pQ== 0000703799-96-000007.txt : 19960318 0000703799-96-000007.hdr.sgml : 19960318 ACCESSION NUMBER: 0000703799-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960131 FILED AS OF DATE: 19960315 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VICORP RESTAURANTS INC CENTRAL INDEX KEY: 0000703799 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 840511072 STATE OF INCORPORATION: CO FISCAL YEAR END: 1026 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12343 FILM NUMBER: 96535424 BUSINESS ADDRESS: STREET 1: 400 W 48TH AVE CITY: DENVER STATE: CO ZIP: 80216 BUSINESS PHONE: 3032962121 10-Q 1 UNITED STATES SECURITIES & EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission file number 0-12343 VICORP Restaurants, Inc. (Exact name of registrant as specified in its charter) Colorado 84-0511072 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 West 48th Avenue, Denver, Colorado 80216 (Address of principal executive offices) (Zip Code) (303) 296-2121 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 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 registrant had 9,049,026 shares of its $.05 par value Common Stock outstanding as of March 9, 1996. PART I - FINANCIAL INFORMATION Item 1. Financial Statements VICORP Restaurants, Inc. CONSOLIDATED BALANCE SHEETS (in thousands) January 31, October 31, 1996 1995 ----------- ----------- (unaudited) ASSETS Current assets Cash $ 2,621 $ 3,988 Receivables 3,171 3,149 Inventories 6,049 8,597 Deferred income taxes 5,000 5,000 Prepaid expenses and other 1,853 2,003 -------- -------- Total current assets 18,694 22,737 -------- -------- Property and equipment, net 147,971 152,592 Deferred income taxes 39,932 39,375 Other assets 12,970 13,457 -------- -------- Total assets $219,567 $228,161 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 9,203 $ 4,480 Current maturities of capitalized lease obligations 1,546 1,636 Accounts payable, trade 11,322 16,526 Accrued compensation 5,040 5,542 Accrued taxes 7,615 7,998 Accrued insurance 5,650 5,656 Other accrued expenses 4,166 4,984 ------- ------- Total current liabilities 44,542 46,822 ------- ------- Long-term debt (Note 3) 27,546 31,094 Capitalized lease obligations 10,367 11,085 Non-current accrued insurance 5,758 6,092 Other non-current liabilities and credits 9,137 9,970 Commitments and contingencies Shareholders' equity Series A Junior Participating Preferred Stock, $.10 par value, 200,000 shares authorized, no shares issued -- -- Common stock, $.05 par value, 20,000,000 shares authorized, 9,049,026 and 9,044,026 shares issued and outstanding 452 452 Paid-in capital 84,367 84,332 Retained earnings 37,398 38,314 -------- -------- Total shareholders' equity 122,217 123,098 -------- -------- Total liabilities and shareholders' equity $219,567 $228,161 ======== ======== The accompanying notes are an integral part of the financial statements. VICORP Restaurants, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Three Sixteen Months Weeks Ended Ended ----------- ------------ January 31, February 19, 1996 1995 ------------ ------------ (unaudited) Revenues Restaurant operations $88,410 $123,041 Franchise operations 871 992 ------- -------- Total revenues 89,281 124,033 ------- -------- Costs and expenses Restaurant operations Food 31,928 39,651 Labor 28,923 37,877 Other operating 23,403 33,807 General and administrative 5,594 7,802 ------- -------- Operating profit (loss) (567) 4,896 Interest expense 1,130 1,168 Other (income) expense, net (232) (270) ------- -------- Income (loss) before income tax expense (benefit) (1,465) 3,998 Income tax expense (benefit) (549) 1,499 ------- -------- Net income (loss) $ (916) $ 2,499 ======= ======== Earnings (loss) per common and dilutive common equivalent share $ (.10) $ .26 ======= ======== Weighted average common shares and dilutive common share equivalents 9,045 9,656 ======= ======== The accompanying notes are an integral part of the financial statements. VICORP Restaurants, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Sixteen Months Weeks Ended Ended ----------- ------------ January 31, February 19, 1996 1995 ----------- ------------ (unaudited) Operations Net income (loss) $ (916) $ 2,499 Reconciliation to cash provided by operations Depreciation and amortization 5,415 7,067 Deferred income tax provision (557) 1,160 Loss on disposition of assets 28 247 Other, net (47) (21) -------- -------- 3,923 10,952 Change in assets and liabilities Trade receivables (131) 334 Inventories 2,548 2,612 Accounts payable, trade (5,203) (6,389) Other current assets and liabilities (1,556) (4,361) Non-current accrued insurance (335) 157 -------- -------- Cash provided by (used for) operations (754) 3,305 -------- -------- Investing activities Purchase of property and equipment (1,743) (1,816) Purchase of other assets (1) (84) Disposition of property 44 (539) Collection of non-trade receivables 230 6,100 -------- -------- Cash provided by (used for) investing activities (1,470) 3,661 -------- -------- Financing activities Issuance of debt 10,000 12,500 Payment of debt and capitalized lease obligations (9,238) (21,114) Other, net 95 123 -------- -------- Cash provided by (used for) financing activities 857 (8,491) -------- -------- Decrease in cash (1,367) (1,525) Cash at beginning of period 3,988 6,123 -------- -------- Cash at end of period $ 2,621 $ 4,598 ======== ======== Supplemental information Cash paid during the period for Interest (net of amount capitalized) $ 1,055 $ 1,168 Income taxes 77 456 The accompanying notes are an integral part of the financial statements. VICORP Restaurants, Inc. NOTES TO FINANCIAL STATEMENTS (unaudited) 1. The consolidated financial statements should be read in conjunction with the annual report to shareholders for the year ended October 31, 1995. The unaudited financial statements for the three months ended January 31, 1996 and the sixteen weeks ended February 19, 1995 contain all adjustments which, in the opinion of management, were necessary for a fair statement of the results for the interim periods presented. All of the adjustments included were of a normal and recurring nature. 2. In fiscal 1995, the Company switched its fiscal year to the last day in October. Prior to that, the Company utilized a 52/53 week fiscal year which ended on the last Sunday in October. In conjunction with that change, fiscal quarters in 1996 and forward will consist of three months. Previously, the Company's first fiscal quarter consisted of sixteen weeks and all other quarters consisted of twelve weeks. Restaurant sales in 1995 restated to a comparable time frame basis as 1996 were as follows: Restated Reported Fiscal 1995 Fiscal 1995 ----------- ----------- 1st Quarter $103,133,000 $123,041,000 2nd Quarter 89,893,000 84,433,000 3rd Quarter 90,492,000 82,275,000 4th Quarter 86,598,000 80,367,000 ----------- ----------- $370,116,000 $370,116,000 =========== =========== The Company determined that a significant amount of estimation would be required to restate quarterly 1995 operating results to correspond with the three month quarterly reporting. Therefore, restatements of results were not made and the quarterly results for 1996 and 1995 are not comparable. The following table highlights the differences in time periods:
Fiscal 1996 Fiscal 1995 ----------------------------------- ----------------------------------- Time Period Days Time Period Days ----------- ---- ----------- ---- 1st Quarter Nov. 1, 1995 - Jan. 31, 1996 92 Oct. 31, 1994 - Feb. 19, 1995 112 2nd Quarter Feb. 1, 1996 - Apr. 30, 1996 90 Feb. 20, 1995 - May. 14, 1995 84 3rd Quarter May 1, 1996 - Jul. 31, 1996 92 May 15, 1995 - Aug. 6, 1995 84 4th Quarter Aug. 1, 1996 - Oct. 31, 1996 92 Aug. 7, 1995 - Oct. 31, 1995 86 --- --- 366 366 === ===
3. As of January 31, 1996, the Company had $36,500,000 of borrowings outstanding and $9,012,000 of letters of credit placed under its bank credit facility. The Company's bank credit agreement expires on June 30, 1996 when it converts to a term facility payable in eight equal quarterly installments through June 30, 1998. The Company is currently pursuing a new revolving credit facility with certain lenders. 4. In the fourth quarter of 1994, the Company adopted a plan to dispose of 50 restaurant locations in trade areas that are no longer considered appropriate for the Company's existing concepts. As part of the disposal plan, the carrying value of those restaurants' assets were written down to net realizable values. The Company also accrued for expected carrying costs pending disposition and sublease disposition losses. As of January 31, 1996, the Company had closed 48 of those locations, of which 30 stores had been disposed through sublease, lease termination or sale. Operating results for the 50 locations for the first quarters of fiscal 1996 and 1995 were as follows: Three months ended Sixteen weeks ended January 31, 1996 February 19, 1995 ---------------- ----------------- Sales $ 735,000 $ 10,218,000 Store operating profit (loss) ( 33,000) (76,000) During the first quarter of 1996, $620,000 of closure and carrying related costs were charged against the liability established for such costs. As of January 31, 1996, the Company had $10,721,000 of reserves remaining to provide for the disposal of 28 properties, including eight closed prior to 1994. The reserves consisted of $6,197,000 to reduce the disposal property to net realizable value and $4,524,000 to provide for expected carrying costs and sublease losses. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of VICORP Restaurants, Inc.: We have reviewed the accompanying condensed consolidated balance sheet of VICORP RESTAURANTS, INC. (a Colorado corporation) and subsidiary as of January 31, 1996, and the related condensed consolidated statements of operations for the 3-month period ended January 31, 1996 and the 16-week period ended February 19, 1995, and the condensed consolidated statements of cash flows for the 3-month period ended January 31, 1996 and the 16-week period ended February 19, 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of VICORP Restaurants, Inc. and subsidiary as of October 31, 1995, (not presented herein), and, in our report dated December 12, 1995, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of October 31, 1995, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ Arthur Andersen LLP ------------------- ARTHUR ANDERSEN LLP Denver, Colorado, February 21, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of operations - --------------------- The Company's quarterly financial information is subject to seasonal fluctuation. Also, the first quarters of 1996 and 1995 are not comparable because of differences in time periods presented (see Note 2 of Notes to the Financial Statements). The first quarter of 1996 consisted of three months, or 92 days, while the first quarter of 1995 consisted of sixteen weeks, or 112 days. Restaurant operations The following table sets forth certain operating information for the Company's operating concepts and the Company as a whole. Three months Sixteen weeks ended ended January 31, 1996 February 19, 1995 ---------------- ----------------- Bakers Square Restaurant sales $54,141,000 $77,230,000 Restaurant operating profit 54,000 6,014,000 Restaurant operating profit % .1% 7.8% Divisional administrative costs 854,000 1,748,000 Divisional operating profit (loss) (800,000) 4,266,000 Restaurants at quarter-end 158 182 Village Inn Restaurant sales $32,534,000 $41,895,000 Restaurant operating profit 4,392,000 5,795,000 Restaurant operating profit % 13.5% 13.8% Franchise income 871,000 992,000 Divisional administrative costs 593,000 1,004,000 Divisional operating profit 4,670,000 5,783,000 Restaurants at quarter-end 99 106 Angel's Restaurant sales $ 1,735,000 $ 3,916,000 Restaurant operating profit (loss) (290,000) (103,000) Restaurant operating profit % (16.7%) (2.6%) Divisional administrative costs 110,000 294,000 Divisional operating profit (loss) (400,000) (397,000) Restaurants at quarter-end 5 7 Consolidated Restaurant sales $88,410,000 $123,041,000 Food cost % 36.1% 32.2% Labor cost % 32.7% 30.8% Other operating cost % 26.5% 27.5% Restaurant operating profit % 4.7% 9.5% Restaurant operating profit 4,156,000 11,706,000 Franchise income 871,000 992,000 Divisional general and administrative costs 1,557,000 3,046,000 ---------- ---------- Divisional operating profit 3,470,000 9,652,000 ---------- ---------- Unallocated general and administrative costs 4,037,000 4,756,000 ---------- ---------- Operating profit (loss) $ (567,000) $ 4,896,000 ========== ========== Consolidated restaurant sales decreased $34.6 million, or 28%, in the first quarter of 1996 compared to the first quarter of 1995. Of this decrease, $19.9 million was attributable to 20 fewer operating days in 1996's first quarter versus 1995's first quarter. Also contributing to the sales decrease was the operation of approximately 37 fewer equivalent restaurants due to closures. Sales decreased 4.8% on a comparable same store basis. Same store sales for Village Inn were unchanged while Bakers Square's same store sales decreased 7.6% due primarily to lower prices. Comparable customer counts for Bakers Square increased .5%. In the middle of fiscal 1995, the Company reduced menu prices in its Bakers Square concept by approximately 10%. This action was taken to reverse the four-year customer count decline in that concept. In late 1995, Bakers Square further refined its menu to include a "Manager's Daily Specials" section for which restaurant managers choose six to eight menu items each day from among approximately 80 alternatives. Besides allowing for the ability to promote specific locality appeal, the specials generally have higher prices than other menu items. This change combined with a price increase on whole pies taken in late December 1995 partially mitigated the price decrease taken in the middle of 1995. Consolidated restaurant operating profit decreased $7.6 million, or 65%, and decreased as a percentage of restaurant sales from 9.5% to 4.7% in the first quarter of 1996 versus the first quarter of 1995. Bakers Square recorded the majority of the decrease which resulted partially from the affect of reduced comparable sales on fixed occupancy and labor costs. Also contributing to the decrease was the costs of programs at Bakers Square to attract more customers, namely higher hourly labor and food costs. These costs were most strongly felt in the third and fourth quarters of 1995 with the startup of the programs. While certain of these costs continued in the first quarter of 1996, they were partially offset by certain additional programs started to control waste and gain efficiencies without compromising the experience to the customer as well as reduced advertising costs. Restaurant operating profits were impacted by the reduced number of operating days in 1996's first quarter. This was particularly seen in Village Inn whose store operating profit decreased $1.4 million while its store margin only decreased 30 basis points. Angel's, the Company's experimental concept, had a widening store operating loss in the first quarter of 1996 versus 1995 despite closing its two most unprofitable restaurants in late 1995. That concept continues to struggle with developing a profitable program and the Company will make a decision later in the year on whether Angel's is a viable concept for expansion. The following presents select quarterly trend data related to the operations of Bakers Square and Village Inn:
Bakers Square Village Inn ------------- ----------- Comparable Comparable Store Comparable Comparable Store Store Customer Operating Store Customer Operating Sales Counts Margin Sales Counts * Margin --------------------------------- ------------------------------------ 1995: 1st Qtr -5.4% -8.5% 7.8% 0.3% -4.0% 13.8% 2nd Qtr -11.2% -7.5% 1.9% -2.4% -6.7% 16.6% 3rd Qtr -10.1% -1.0% -8.7% -2.1% -5.3% 12.7% 4th Qtr -8.6% -0.8% -5.5% -1.4% -3.9% 11.0% 1996: 1st Qtr -7.6% 0.5% 0.1% 0.0% -2.6% 13.5%
* The Company believes that the reduced customer counts for Village Inn in 1995 were largely due to increased specialty coffee shop competition, which did not overly affect sales but reduced customer counts and increased average customer expenditures. As of January 31, 1996, the Company had closed 48 of the 50 restaurants scheduled for disposition under a plan adopted in fiscal 1994. The following table details sales and operating results for the 50 restaurants for the first quarters of fiscal 1996 and 1995: Three months Sixteen Weeks 1996 1995 ---- ---- Operating Operating Sales Profit (Loss) Sales Profit (Loss) Bakers Square $522,000 $(42,000) $7,186,000 $ 1,000 Village Inn 213,000 9,000 2,175,000 (20,000) Angel's -- -- 857,000 (57,000) - ------------------------------------------------------------------------------- Total $735,000 $(33,000) $10,218,000 $(76,000) =============================================================================== Other revenues and expense - -------------------------- Franchise revenue decreased in 1996's first quarter due to fewer operating days. Average daily franchise income increased 6.9%. General and administrative expense decreased largely due to the fewer operating days in 1996's first quarter. As a percent of revenues, general and administrative expense in both the first quarters of 1996 and 1995 were 6.3%. This occurred despite the lower relative revenues in 1996 because of fewer managers-in-training and field support personnel in 1996. Interest expense was essentially flat for the first quarter of 1996 compared to 1995's first quarter. However, on an average daily basis, interest expense increased 17.8% due to increased borrowing levels. Liquidity and capital resources - ------------------------------- Operating cash flows decreased $4.1 million in the first quarter of 1996 versus 1995's first quarter. The decrease resulted primarily from reduced operating results. Overall, the Company had a deficit of $754,000 in operating cash flows in the first quarter of 1996, but expects to reverse this situation in later quarters through improved operating results. As of January 31, 1996, $36,500,000 of advances were outstanding under the Company's bank credit facility and approximately $9,500,000 was available for additional direct advances, subject to limitations on combined direct advances and letters of credit. In the first quarter of 1996, the Company borrowed an additional $1.3 million under its bank facility to cover the operating cash shortage and fund $1.7 million of capital expenditures. The Company's bank credit agreement expires on June 30, 1996 when it converts to a term facility payable in eight equal installments through June 30, 1998. The Company is currently pursuing a new revolving credit facility with certain lenders and is optimistic that a new facility will be in place prior to the current revolving facility's expiration. The Company is also exploring other debt financing sources. During the first quarter of 1996, the Company disposed of nine properties, one through sale, seven through lease termination and one through sublease. Also in that quarter, closure and carrying costs of $620,000 were charged against the liability established for such and cash proceeds of $664,000 were realized from the disposition of properties. At January 31, 1996, the Company had 28 properties remaining which it was trying to dispose of. Six of those properties were owned in fee and the rest were leased. The Company hopes to sell the fee properties over the next year and $3.5 million of proceeds are expected to be realized from their sale. The Company does not anticipate significant proceeds from the disposition of the leased properties. It is expected that the majority of the leased properties will be disposed of through sublease over the next eighteen months. Cash carrying costs of approximately $2.6 million are expected to be incurred over that period. The Company expects to sublease eight of the properties at rentals lower than the Company's obligations under the prime leases. Those sublease losses will be incurred over the remaining years of the leases and the Company does not anticipate that the losses will materially affect the Company's liquidity. As of January 31, 1996, authorizations granted by the Board for the purchase of 300,500 common shares of the Company's common stock remained available. No shares were purchased in the first quarter of 1996. Future purchases with respect to the authorizations may be made from time to time in the open market or through privately negotiated transactions and will be dependent upon various business and financial considerations. Capital expenditures approximating $10,000,000 are expected during the remainder of the fiscal year. The level of planned expenditures may be reduced if expected operating improvements do not occur. Cash provided by operations, the unused portion of the Company's bank credit facility and other financing sources are expected to be adequate to fund these expenditures and any cash outlays for the purchase of the Company's common stock as authorized by the Board. Outlook - ------- Except for the historical information contained herein, the matters discussed in this discussion are forward looking statements that involve risks and uncertainties. Such factors that could influence future performance include, but are not limited to, the effect of economic conditions, government initiatives, food commodity prices and availability, competition, labor availability and the weather. PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K. (a) Exhibits (10) Amendment No. 4 dated as of January 31, 1996 to Second Amendment and Restated Credit Agreement dated as of June 18, 1993. (15) Letter regarding unaudited interim financial information. (27) Financial data schedule. (b) Reports on Form 8-K. None. SIGNATURES 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. March 14, 1996 VICORP Restaurants, Inc. ------------------------ (Registrant) March 14, 1996 By: s/s J. Michael Jenkins ------------------- J. Michael Jenkins, President and Co-Chief Executive Officer March 14, 1996 By: s/s David D. Womack --------------- David D. Womack, Controller EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VICORP RESTAURANTS, INC. CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS AS OF JANUARY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS OCT-31-1996 JAN-31-1996 2,621 0 3,171 0 6,049 18,694 281,759 133,788 219,567 44,542 37,913 0 0 452 121,765 219,567 88,410 89,281 31,928 31,928 52,326 0 1,130 (1,465) (549) (916) 0 0 0 (916) (.10) (.10)
EX-15 3 EXHIBIT 15: LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION March 14, 1996 To VICORP Restaurants, Inc.: We are aware that VICORP Restaurants, Inc. has incorporated by reference into the Company's previously filed Registration Statement File Nos. 33-26650, 33-32608, 33-34447, 33-48205 and 33-49166, its Form 10-Q for the quarter ended January 31, 1996, which includes our report dated February 21, 1996, covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, s/s Arthur Andersen LLP ------------------- ARTHUR ANDERSEN LLP EX-10 4 Amendment No. 4 Dated as of January 31, 1996 to Second Amendment and Restated Credit Agreement Dated as of June 18, 1993 This AMENDMENT No. 4 ("Amendment") dated as of January 31, 1996 is entered into by and among VICORP Restaurants, Inc., a Colorado corporation (the "Borrower"), Citibank, N.A. and NationsBank of Texas, N.A., as lenders (the "Lenders"), and Citibank, N.A., as agent for the Lenders (in such capacity, the "Agent"). RECITALS A. The Borrower, the Lenders and the Agent are parties to that certain Second Amended and Restated Credit Agreement dated as of June 18, 1993 (as amended, the "Loan Agreement"). Terms defined in the Loan Agreement and not otherwise defined herein are used herein as defined in the Loan Agreement. B. The Borrower has requested that the Lenders and the Agent amend, and the Lenders and the Agent have agreed to amend, certain provisions of the Loan Agreement as set forth below. NOW, THEREFORE, the Borrower, the Lenders and the Agent agree as follows: SECTION 1. Amendment. Subject to the conditions set forth in Section 2 herein, the Borrower, the Lenders and the Agent hereby amend the Loan Agreement as follows: (a) Section 7.03(c) of the Loan Agreement is amended to provide that clause (i) will be "$124,000,000" for the fiscal quarter ended January 31, 1996, and that clause (i) will be "$125,000,000" for each fiscal quarter thereafter; and (b) Section 7.03(e) of the Loan Agreement is amended to provide that the Borrower is required to maintain a fixed charge coverage ratio (as set forth in such Section 7.03(e)) greater than or equal to .63 to 1 for the fiscal quarter ending on January 31, 1996; and to maintain a fixed charge coverage ratio greater than or equal to 1.75 to 1 as of the last day of each fiscal quarter thereafter. SECTION 2. Conditions Precedent to Amendment. This Amendment shall be deemed to be effective as of January 31, 1996 upon the satisfaction of each of the following conditions precedent: (a) the receipt by the Agent of four (4) original copies of this Amendment duly executed and delivered by a duly authorized officer of the Borrower and of each Lender; and (b) the absence of any Default or Event of Default under the Loan Agreement. SECTION 3. Representations and Warranties of the Borrower. (a) Upon the effectiveness of this Amendment, the Borrower hereby reaffirms all covenants, representations and warranties made in the Loan Agreement and agrees that all such covenants, representations and warranties shall be deemed to have been re-made as of the effective date of this Amendment. (b) The Borrower hereby represents and warrants that this Amendment constitutes the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, and general principles of equity which may limit the availability of equitable remedies. SECTION 4. Reference to and Effect on the Loan Agreement. (a) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Lenders and the Agent under the Loan Agreement or any other document, instrument or agreement executed in connection therewith, nor constitute a wavier of any provision contained therein, except as specifically set forth herein. (b) Upon the effectiveness of this Amendment, each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like import shall mean and be a reference to the Loan Agreement as amended hereby, and each reference to the Loan Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Loan Agreement shall mean and be a reference to the Loan Agreement as amended hereby. (c) Except as specifically amended hereby, the Loan Agreement and any other document, instrument or agreement executed in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. SECTION 5. Governing Law. This Amendment shall be governed by and construed in accordance with the other remaining terms of the Loan Agreement and the internal laws (as opposed to conflict of law provisions) of the State of New York. SECTION 6. Section Titles. The section titles contained in this Amendment are and shall be without substance, meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. SECTION 7. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. VICORP RESTAURANTS, INC. By: s/s Charles R. Frederickson ----------------------- Name: Charles R. Frederickson Title: Chairman By: s/s Jack A. Baldwin --------------- Name: Jack A. Baldwin Title: Assistant Treasurer CITIBANK, N.A. By: s/s David L. Harris --------------- Vice President NATIONSBANK OF TEXAS, N.A. By: s/s Gloria Holland -------------- Vice President CITIBANK, N.A., as Agent By: s/s David L. Harris --------------- Vice President -----END PRIVACY-ENHANCED MESSAGE-----