-----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, UD27lnXdGC4370KJuSa3ZwAri94BanGGrB+Wepaiqfk3Wr+rP2i+1851o+g0jds9 sfKst020o4SdG3nl9sIgzg== 0000891082-98-000009.txt : 19980512 0000891082-98-000009.hdr.sgml : 19980512 ACCESSION NUMBER: 0000891082-98-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980329 FILED AS OF DATE: 19980511 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TACO CABANA INC CENTRAL INDEX KEY: 0000891082 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 742201241 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20716 FILM NUMBER: 98614863 BUSINESS ADDRESS: STREET 1: 8918 TESORO DRIVE STREET 2: SUITE 200 CITY: SAN ANTONIO STATE: TX ZIP: 78217-6219 BUSINESS PHONE: 2108040990 MAIL ADDRESS: STREET 1: 3309 SAN PEDRO AVE CITY: SAN ANTONIO STATE: TX ZIP: 78212 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 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 March 29, 1998 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-20716 TACO CABANA, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-2201241 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 8918 Tesoro Drive, Suite 200 San Antonio, Texas 78217 (Address of principal executive offices) Telephone Number (210) 804-0990 (Registrant's telephone number, including area code) 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 Indicate the number of shares of each of the issuer's classes of common stock as of the latest practicable date: Class Outstanding at May 1, 1998 Common Stock 14,855,600 shares TACO CABANA, INC. INDEX Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets at March 29, 1998 3 and December 28, 1997 Condensed Consolidated Statements of Income for the 4 Thirteen Weeks Ended March 29, 1998 and March 30, 1997 Condensed Consolidated Statements of Cash Flows for the 5 Thirteen Weeks Ended March 29, 1998 and March 30, 1997 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 8 Condition and Results of Operations PART II. OTHER INFORMATION Items 1 through 5 have been omitted since the registrant has no reportable events in relation to the items Item 6. Exhibits and Reports on Form 8-K 14 Signature 15 TACO CABANA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) December 28, March 29, 1997 1998 ------------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 339,000 $ 359,000 Receivables, net 502,000 469,000 Inventory 2,105,000 2,082,000 Prepaid expenses 1,704,000 1,803,000 Federal income taxes receivable 200,000 199,000 ------------ ---------- Total current assets 4,850,000 4,912,000 PROPERTY AND EQUIPMENT, net 59,540,000 61,807,000 NOTES RECEIVABLE, net 344,000 308,000 INTANGIBLE ASSETS, net 11,293,000 11,156,000 OTHER ASSETS 233,000 225,000 ------------ ----------- TOTAL $76,260,000 $78,408,000 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $4,430,000 $3,451,000 Accrued liabilities 6,266,000 6,759,000 Current maturities of long-term debt and capital leases 1,573,000 1,633,000 Line of credit 4,223,000 1,834,000 ------------ ---------- Total current liabilities 16,492,000 13,677,000 LONG-TERM OBLIGATIONS, net of current maturities: Capital leases 2,357,000 2,303,000 Long-term debt 11,170,000 15,481,000 ----------- ----------- Total long-term obligations 13,527,000 17,784,000 ACQUISITION AND CLOSED RESTAURANT LIABILITIES 9,126,000 7,843,000 DEFERRED LEASE PAYMENTS 702,000 725,000 STOCKHOLDERS' EQUITY: Common stock 157,000 157,000 Additional paid-in capital 97,095,000 97,248,000 Retained deficit (57,278,000) (55,421,000) Treasury stock, at cost (881,937 shares) (3,561,000) (3,605,000) ------------ ----------- Total stockholders' equity 36,413,000 38,379,000 ------------ ----------- TOTAL $76,260,000 $78,408,000 ============= =========== See Notes to Condensed Consolidated Financial Statements. TACO CABANA, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Thirteen Weeks Ended ---------------------------- March 30, March 29, 1997 1998 --------- --------- REVENUES: Restaurant sales $30,100,000 $32,322,000 Franchise fees and royalty income 86,000 85,000 ----------- ----------- Total revenues 30,186,000 32,407,000 ----------- ----------- COSTS AND EXPENSES: Restaurant cost of sales 9,162,000 9,792,000 Labor 8,086,000 8,672,000 Occupancy 2,047,000 1,907,000 Other restaurant operating costs 5,476,000 6,002,000 General and administrative 1,792,000 1,912,000 Depreciation, amortization and restaurant opening costs 2,490,000 1,868,000 ----------- ----------- Total costs and expenses 29,053,000 30,153,000 ----------- ----------- INCOME FROM OPERATIONS 1,133,000 2,254,000 ----------- ----------- INTEREST EXPENSE, NET (250,000) (397,000) ----------- ----------- INCOME BEFORE PROVISION FOR INCOME TAXES 883,000 1,857,000 ----------- ----------- PROVISION FOR INCOME TAXES (327,000) - ----------- ----------- NET INCOME $ 556,000 $1,857,000 =========== =========== BASIC EARNINGS PER SHARE $ 0.04 $ 0.13 =========== =========== BASIC WEIGHTED SHARES OUTSTANDING 15,706,537 14,826,138 =========== =========== DILUTED EARNINGS PER SHARE $ 0.04 $ 0.12 =========== =========== DILUTED WEIGHTED SHARES OUTSTANDING 15,840,405 15,028,731 =========== =========== See Notes to Condensed Consolidated Financial Statements. TACO CABANA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Thirteen Weeks Ended ---------------------------- March 30, March 29, 1997 1998 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $556,000 $1,857,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,490,000 1,668,000 Deferred income taxes 348,000 - Capitalized interest (21,000) (52,000) Changes in operating working capital items (1,521,000) (1,666,000) ---------- ---------- Net cash provided by operating activities 1,852,000 1,807,000 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,562,000) (5,075,000) Proceeds from sales of property and equipment - 1,251,000 ----------- ---------- Net cash used for investing activities (2,562,000) (3,824,000) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes payable and draws on line of credit 2,949,000 2,611,000 Principal payments under long-term debt (911,000) (639,000) Principal payments under capital leases (48,000) (44,000) Purchase of treasury stock - (44,000) Exercise of stock options - 153,000 ---------- ---------- Net cash provided by financing activities 1,990,000 2,037,000 ---------- ---------- NET INCREASE IN CASH 1,280,000 20,000 CASH AND CASH EQUIVALENTS, beginning of period 748,000 339,000 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $2,028,000 $359,000 ========== ========== See Notes to Condensed Consolidated Financial Statements. TACO CABANA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Principles of Consolidation - The consolidated financial statements include all accounts of Taco Cabana, Inc. and its wholly-owned subsidiaries (the Company). All significant intercompany balances and transactions have been eliminated. The unaudited Condensed Consolidated Financial Statements include all adjustments, consisting of normal, recurring adjustments and accruals, which the Company considers necessary for fair presentation of financial position and the results of operations for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 28, 1997. Recently Issued Accounting Pronouncements: In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities". The accounting standard requires entities to expense as incurred all start-up and preopening costs that are not otherwise capitalizable as long-lived assets. The accounting standard is effective for fiscal years beginning after December 15, 1998, with earlier application encouraged. The Company adopted the accounting standard during the first quarter of 1998. The cumulative effect of the change in the accounting principle is not material to the results of operations or financial position of the Company. 2. Earnings per Share Basic earnings per share was computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to the Statement of Financial Accounting Standards No. 128, Earnings per Share. The following table sets forth the computation of basic and diluted earnings per share: Thirteen Weeks Ended -------------------- March 30, 1997 March 29,1998 ------------- ------------- (Unaudited) (Unaudited) Numerator for basic and diluted earnings per share - net income $556,000 $1,857,000 Denominator: Denominator for basic earnings per share - weighted-average shares 15,706,537 14,826,138 Effect of dilutive securities - Employee stock options 133,868 202,593 ---------- ---------- Denominator for diluted earnings per share - adjusted weighted-average and assumed conversions 15,840,405 15,028,731 ========== ========== Basic earnings per share $ 0.04 $ 0.13 ========== ========== Diluted earnings per share $ 0.04 $ 0.12 ========== ========== 3. Supplemental Disclosure of Cash Flow Information Thirteen Weeks Ended -------------------- March 30, March 29, 1997 1998 --------- --------- (Unaudited) (Unaudited) Cash paid for interest $ 211,000 $ 385,000 Interest capitalized on construction costs 21,000 52,000 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The Company commenced operations in 1978 with the opening of the first Taco Cabana restaurant in San Antonio, Texas. As of May 1, 1998, the Company had 100 Company-owned restaurants and 11 franchised restaurants. The Company's revenues are derived primarily from sales by Company-owned restaurants, with franchise fees and royalty income currently contributing less than 1% of total revenues. The Company opened three, and closed two Company-owned restaurants during the first quarter of 1998 for a total of 99 company-owned and 11 franchised restaurants, including one joint venture owned, at March 29, 1998. Subsequent to March 29, 1998, one Company-owned restaurant was opened for a current systemwide total of 111 restaurants. The following table sets forth for the periods indicated the percentage relationship to total revenues, unless otherwise indicated, of certain income statement data. The table also sets forth certain restaurant data for the periods indicated. Thirteen Weeks Ended ---------------------- March 30, March 29, 1997 1998 ----------- ---------- Income Statement Data: REVENUES: Restaurant sales 99.7% 99.7% Franchise fees and royalty income 0.3 0.3 ------ ------ Total revenues 100.0% 100.0% ====== ====== COSTS AND EXPENSES: Restaurant cost of sales (1) 30.4 30.3 Labor (1) 26.9 26.8 Occupancy (1) 6.8 5.9 Other restaurant operating costs (1) 18.2 18.6 General and administrative costs 5.9 5.9 Depreciation, amortization and restaurant opening costs 8.2 5.8 ----- ----- INCOME FROM OPERATIONS 3.8 7.0 ----- ----- INTEREST EXPENSE (0.8) (1.2) ----- ----- INCOME BEFORE INCOME TAXES 2.9 5.7 PROVISION FOR INCOME TAXES (1.1) - ----- ----- NET INCOME 1.8% 5.7% ===== ===== Restaurant Data: COMPANY OWNED RESTAURANTS: Beginning of period 104 98 Opened 2 3 Closed - (2) --- --- End of period 106 99 FRANCHISED RESTAURANTS (2): 14 11 --- --- TOTAL RESTAURANTS: 120 110 === === (1) Percentage is calculated based upon restaurant sales. (2) Excludes Two Pesos licensed restaurants. The Thirteen Weeks Ended March 29, 1998 Compared to the Thirteen Weeks Ended March 30, 1997 Restaurant Sales. Restaurant sales increased by $2.2 million, or 7.4%, to $32.3 million for the first quarter of 1998 from $30.1 million for the first quarter in 1997. The increase is due primarily to an increase in sales at existing restaurants. Comparable store sales, defined as Taco Cabana restaurants that have been open 18 months or more at the beginning of the quarter, increased 6.7%. Management attributes the increase to several factors including a more consistent marketing program featuring a value meal message, a commitment to increased staffing levels at existing restaurants, the ongoing reimage program, favorable weather compared to the first quarter of 1997, and the closing of underperforming restaurants. Sales from restaurants opened after March 30, 1997 accounted for an increase of $2.5 million. This increase was offset by sales from restaurants which were closed after March 30, 1997 of $1.9 million. Restaurant Cost of Sales. Restaurant cost of sales, calculated as a percentage of restaurant sales, decreased to 30.3% in the first quarter of 1998 from 30.4% for the first quarter of 1997. The decrease was due primarily to continued improvements in the management of food costs through utilizing increased controls and improved purchasing programs, including the continued negotiation of favorable commodity pricing. In addition, food costs as a percentage of restaurant sales were favorably impacted by a menu price increase of approximately 2% which was implemented during the first quarter of 1998. Management expects the favorable cost of sales trends to continue during 1998. Labor. Labor costs calculated as a percentage of restaurant sales decreased to 26.8% during the first quarter of 1998 from 26.9% for the same period in 1997. Adjusting for restaurants closed after March 30, 1997, comparable labor as a percentage of restaurant sales in the first quarter of 1997 was 25.2%. The increase in comparable labor costs is due to an increase in the minimum wage in September 1997, management's continued commitment to increase staffing levels at the restaurant level in order to provide a consistent guest experience as well as higher than normal labor costs at newer restaurants. New restaurants generally have higher than normal labor costs for the first four to six months of operations. Management expects the trend in increased labor as a percentage of revenues to continue during the remainder of 1998. Occupancy. Occupancy costs decreased by $140,000 during the first quarter of 1998 compared to the first quarter of 1997. The decrease is primarily due to the closure of underperforming restaurants during 1997. As a percentage of restaurant sales, occupancy costs decreased to 5.9% in the first quarter of 1998 compared to 6.8% in the first quarter of 1997, due to increased sales at the restaurant level. Other Restaurant Operating Costs. Other restaurant operating costs increased to $6.0 million in the first quarter of 1998 compared to $5.5 million in the first quarter of 1997. As a percentage of restaurant sales, other restaurant operating costs increased to 18.6% for the first quarter of 1998 compared to 18.2% for the first quarter of 1997. The increase is due to increased marketing and promotional activities as well as increased bonuses at the restaurant level, offset by a decrease in utilities. Management expects favorable comparisons as a percentage of sales beginning in the second quarter of 1998. General and Administrative. General and administrative expenses increased to $1.9 million for the first quarter of 1998 from $1.8 million in the comparable period of 1997. As a percentage of sales, general and administrative expenses remained constant at 5.9% for the first quarter of 1998 and for the comparable period in 1997. Management expects this amount to increase slightly, as a dollar amount, throughout the remainder of 1998. The expected increase is due primarily to the expected filling of positions which are currently open. Depreciation, Amortization and Restaurant Opening Costs. Depreciation, amortization and restaurant opening costs consisted of the following: Thirteen Weeks Ended ---------------------- March 30, March 29, 1997 1998 --------- ---------- (Unaudited) (Unaudited) Depreciation of property and equipment $ 2,035,000 $ 1,531,000 Amortization of intangible assets 416,000 137,000 Restaurant opening costs 39,000 200,000 Depreciation expense decreased by approximately $504,000 for the quarter ended March 29, 1998 compared to the quarter ended March 30, 1997. The decrease was primarily due the closure of restaurants and the writedown of assets in conjunction with the special charge recorded in the fourth quarter of 1997 offset by new restaurants opened since March 30, 1997, as well as continued capital improvements to existing restaurants. Amortization of intangible assets decreased by $279,000 for the quarter ended March 29, 1998 compared to the quarter ended March 30, 1997. The decrease was primarily due to the writedown of intangible assets in conjunction with the special charge recorded in the fourth quarter of 1997. Restaurant opening costs increased by $161,000 during the first quarter of 1998 compared to the same period in 1997, primarily due to the opening of three Company owned restaurants during the first quarter of 1998. See footnote 1 to Condensed Consolidated Financial Statements regarding the treatment of restaurant opening costs. Interest Expense, net. Interest expense, net of interest capitalized on construction costs, increased to $397,000 in the first quarter of 1998 from $250,000 in the first quarter of 1997, primarily as a result of additional borrowings under the Company's debt facilities. In addition, the Company capitalized $52,000 of interest related to new restaurant construction in the most recent quarter compared to $21,000 during the first quarter of 1997. Income Taxes. Provision for income taxes decreased to zero for the first quarter of 1998 compared to $327,000, or 37% of income before taxes, for the first quarter of 1997. The decrease in income taxes is due to the recognition of previously reserved deferred tax assets. Net Income and Earnings Per Share. Net income increased to $1.9 million for the first quarter of 1998 from $556,000 for the same period in 1997. Net income was 5.7% of total revenues for the first quarter in 1998 compared to 1.8% in the first quarter of 1997. Diluted earnings per share was $0.12 for the first quarter of 1998 compared to $0.04 in the same period of 1997. The increase in net income recorded during the first quarter of fiscal 1998 compared to the same quarter last year is due to higher sales at existing restaurants, the opening of six new restaurants during 1997, continued strong cost controls, the closing of underperforming restaurants, a reduction in depreciation and amortization expense and the lack of a provision for income taxes in the current quarter. Liquidity and Capital Resources Historically, the Company has financed business and expansion activities by using funds generated from operating activities, build-to-suit leases, equity financing, short and long-term debt and capital leases. The Company maintains credit facilities totaling $30.0 million, including a $5.0 million unsecured revolving line of credit. As of May 1, 1998, $16.8 million had been used under these commitments. Net cash provided by operating activities was $1.8 million for the thirteen weeks ended March 29, 1998, and $1.9 million for the thirteen weeks ended March 30, 1997. Net cash used in investing activities was $3.8 million for the thirteen weeks ended March 29, 1998, representing primarily capital expenditures of $5.1 million for the construction of new restaurants and improvements to existing restaurants. This was offset by the sale of assets generating $1.3 million in proceeds. This compares to $2.6 million in net cash used in investing activities for the thirteen weeks ended March 30, 1997, representing primarily capital expenditures for the construction of new restaurants and improvements to existing restaurants. On April 16, 1997, the Company's Board of Directors approved a plan to repurchase up to 1,500,000 shares of the Company's Common Stock. As of March 29, 1998 the Company had repurchased 881,937 shares at an average cost of $4.09 per share. The timing, price, quantity and manner of remaining purchases, if any, will be made at the discretion of management and will be dependent upon market conditions. The Company has funded the repurchases through available bank credit facilities, as well as the liquidation of the Company's short term investment portfolio. Remaining purchases, if any, will be funded through a combination of cash provided by operations and available bank credit facilities. The special charges recorded in 1997 and 1995 included accruals of approximately $10.2 million to record the estimated monthly lease payments, net of expected sublease receipts, associated with certain restaurants which have been closed. Cash requirements for this accrual were approximately $713,000 during the first quarter of 1998. During the first quarter of 1998, the Company sold properties relating to the special charges which resulted in proceeds of $1.3 million, which approximated the carrying value of the assets sold. Subsequent to March 29, 1998, the company sold properties relating to the special charges which resulted in proceeds of $700,000, which approximated the carrying value of the assets sold. The Company currently has several closed restaurant properties for sale which were covered by the special charges. Although there can be no assurance of the particular price at which such property will be sold, the Company expects to receive funds equal to or in excess of the carrying value upon the actual disposition of this property. In addition, certain acquisition and accrued liabilities related to the Two Pesos acquisition were reduced by payments of approximately $71,000 during the first quarter of 1998. The Company believes that existing cash balances, funds generated from operations, its ability to borrow, and the possible use of lease financing will be sufficient to meet the Company's capital requirements through 1998, including the planned opening of eight to ten restaurants and the reimaging of 20 to 25 restaurants. Total capital expenditures related to new restaurants are estimated to be $12.0 to $15.0 million. The total for other capital expenditures, including the cost of the reimagings, is estimated to be $7.5 to $8.5 million. Total capital expenditures for 1998 are expected to approximate $19.5 to $23.5 million. Impact of Inflation Although increases in labor, food or other operating costs could adversely affect the Company's operations, management does not believe that inflation has had a material adverse effect on the Company's operations to date. Seasonality and Quarterly Results The Company's sales fluctuate seasonally. Historically, the Company's highest sales and earnings occur in the second and third quarters. In addition, quarterly results are affected by the timing of the opening and closing of stores. Therefore, quarterly results cannot be used to indicate the results for the entire year. Forward-Looking Statements Statements in this quarterly report, including those contained in the foregoing discussion and other items herein concerning the Company which are (a) projections of revenues, costs, capital expenditures or other financial items, (b) statements of plans and objectives for future operations, (c) statements of future economic performance, or (d) statements of assumptions or estimates underlying or supporting the foregoing are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. The ultimate accuracy of forward-looking statements is subject to a wide range of business risks and changes in circumstances, and actual results and outcomes often differ from expectations. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements herein, including the following: the timing and extent of changes in prices; actions of our customers and competitors; state and federal environmental, economic, safety and other policies and regulations, any changes therein, and any legal or regulatory delays or other factors beyond the Company's control; execution of planned capital projects; weather conditions affecting the Company's operations or the areas in which the Company's products are marketed; natural disasters affecting operations; and adverse rulings, judgments, or settlements in litigations or other legal matters. The Company undertakes no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The Company has filed the following exhibits with this report: 10.17 Third amended loan agreement with International Bank of Commerce. 27. Financial Data Schedules No reports on Form 8-K were filed during the period covered by this report. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: May 11, 1998 Taco Cabana, Inc. David G. Lloyd Senior Vice President, Chief Financial Officer, Secretary and Treasurer Signing on behalf of the registrant and as the principal financial and accounting officer EX-99 2 12 0177790.01 THIRD AMENDED LOAN AGREEMENT This Third Amended Loan Agreement (this "Agreement"), dated as of the _______ day of December, 1997, is entered into by and among TACO CABANA, INC., a Delaware corporation, TEXAS TACO CABANA, L.P., a Texas limited partnership, TP ACQUISITION CORP., a Texas corporation, T.C. MANAGEMENT, INC., a Delaware corporation, TACO CABANA MANAGEMENT, INC., a Texas corporation, COLORADO CABANA, INC., a Colorado corporation and TACO CABANA MULTISTATE, INC., a Delaware corporation (collectively the "Borrower"), and INTERNATIONAL BANK OF COMMERCE, a state banking association (the "Lender"). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: SECTION 1. THE LOANS. 1.1 Loan Commitment. Subject to the terms and conditions hereof, the Lender agrees to lend and advance to Borrower, from time to the time until December 31, 1999 (the "Loan Commitment Period"), such sums as the Borrower may request, but which shall not exceed, in the aggregate principal amount at any one time outstanding, the amount of $25,000,000.00 ("Loan Commitment"). 1.2 The Loans. Each borrowing under the Loan Commitment shall be referred to herein as a "Loan", shall be deemed a separate and independent loan and shall be evidenced and secured as set forth below. The loans (the "Existing Loans") evidenced by the following described promissory notes (each a "Note" as such term is used and defined herein) are Loans governed by this Agreement: (i) that certain real estate lien note in the original principal amount of Ten Million and No/100 Dollars ($10,000,000.00) dated May 15, 1995, executed by Borrower and being payable to the order of Lender; and (ii) that certain real estate lien note in the original principal amount of Three Million Seven Hundred Thousand and No/100 Dollars ($3,700,000.00) dated August 8, 1997, executed by Borrower and being payable to the order of Lender. Each Loan shall bear interest at the lesser of (i) the maximum rate allowed by law, or (ii) the floating per annum rate equal to the New York Prime Rate. The "New York Prime Rate" shall mean the annual lending rate of interest announced from time to time by the Chase Manhattan Bank, N.A., New York, New York, as its prime rate; if a prime rate is not announced by Chase Manhattan Bank, N.A., then the Loans shall bear interest at the annual lending rate of interest announced from time to time by Lender less one percent (1%) as its prime rate. Borrower acknowledges that Lender makes no warranty or representation that either of the prime rates charged by Chase Manhattan Bank, N.A. or Lender is more favorable than another rate or index, or that rates on other loans or credit facilities may not be based on other indices, or that rates on loans to other may not be made below such prime rate. Installments of principal and interest under each Loan shall be payable quarterly and amortized under a ten (10) year period, and have a term specified by Lender which shall not exceed seven (7) years from the date of such Loan. 1.3 Commitment Fee. During the Loan Commitment Period, Borrower agrees to pay to Lender a commitment fee computed at the rate of one-quarter of one percent (0.25%) per annum on the daily average unused amount of the Loan Commitment during each Quarterly Cycle (as hereinafter defined). Such commitment fee shall be payable quarterly, in arrears, on the last day of each March, June, September and December during the Loan Commitment Period, commencing December 30, 1997 and continuing in consecutive quarterly payments thereafter until the date of expiration of the Loan Commitment Period, on which date any accrued and unpaid fee computed in accordance with the provisions of this Section shall be due and payable. For purposes of this Section 1.3, the term "Quarterly Cycle" shall refer to each calendar quarter during the Loan Commitment Period. 1.4 Replaces Prior Commitment. This Third Amended Loan Agreement replaces entirely that certain Second Amended Loan Agreement dated January 31, 1997 (the "Prior Loan Agreement") which governed the terms of a $15,000,000.00 loan commitment from Lender to Borrower ("Prior Commitment"). The Borrower and Lender acknowledge that the Prior Commitment is null and void and of no further force or effect. 1.5 Revolving Loan Agreement. The Borrower and Lender have entered into a Second Amended Revolving Loan Agreement of even date herewith ("Revolving Loan Agreement"). The term "Revolving Loan Documents" as used in this Third Amended Loan Agreement shall have the meaning provided in Section 3.2 of the Revolving Loan Agreement. SECTION 2. SECURITY AND COLLATERAL. 2.1 Composition of the Collateral. The Loans shall be secured primarily with first liens and security interests upon those tracts of Borrower's real property which are agreed upon between Borrower and Lender ("Security Tracts"), together with the improvements, furniture, fixtures, equipment, accounts and inventory located on, attributable to or used in connection with the Security Tracts, as specifically set out in, and together with such other mortgages, liens and security interests as set out in the Loan Documents set forth in Section 3.2 below. The security granted by the Loan Documents shall constitute collateral for the indebtedness established by the Loans and as otherwise established and set out in the Loan Documents (cumulatively the "Secured Indebtedness"). All of the mortgages, liens, security interests, and rights granted to Lender by the Loan Documents shall secure any and all Secured Indebtedness. Lender shall not be required to release any of the liens, security interests, and rights granted or given to Lender by any of the Loan Documents unless and until all of the Secured Indebtedness has been paid in full. The Loan Documents shall provide, and Borrower hereby agrees, that a default under any Loan Document shall constitute a default under the Loan Documents for all Loans and under each of the Revolving Loan Documents, and a default under any of the Revolving Loan Documents shall constitute a default under each of the Loan Documents. 2.2 Priority of Liens. The liens, security interests, and rights granted to Lender to secure the Secured Indebtedness shall be first and prior except for (i) liens for ad valorem taxes not yet delinquent, and (ii) those matters expressly approved by Lender, in advance and in writing, which approval Lender is under no obligation to provide. 2.3 Perfection and Preservation of Liens. Borrower will (i) execute and deliver to Lender from time to time at the request of Lender such documents or instruments as Lender shall deem necessary or appropriate, and will take such other and further actions as Lender may from time to time request, in order to perfect, continue, protect and preserve the liens, security interests and rights granted to Lender by the Loan Documents; and (ii) pay or reimburse the Lender for all costs and taxes of filing or recording the same in such public offices as the Lender may designate. SECTION 3. CONDITIONS PRECEDENT. The obligation of the Lender to make a Loan hereunder is subject to the following conditions precedent: 3.1 Certain Events. The following conditions precedent must be fully satisfied as of the date of any Loan: a. No Event of Default (as defined below) under this Agreement or any Loan Document, as defined below, shall have occurred, and no event shall have occurred and be continuing that, with the giving of notice or passage of time, or both, would be such an Event of Default. b. Lender shall have received an appraisal of the fair market value of the real property and improvements thereon to be granted as security for the Loan, in a form, and prepared by an appraiser, approved by Lender, which indicates that the amount of the proposed Loan is no greater than seventy-five percent (75%) of the lesser of (i) the appraised fair market value of such property, or (ii) the purchase price paid by Borrower for such property. 3.2 Documents Required for the Closing. Prior to any disbursement of any Loan (the "Closing"), the following documents ("Loan Documents", such term including all loan documents, other than the Prior Loan Agreement, executed and/or delivered in connection with the Existing Loans) shall have been delivered to Lender, fully executed and acknowledged where required and all in form and substance acceptable to Lender: a. This Agreement. b. A Real Estate Lien (Promissory) Note ("Note"). c. A Security Agreement between Borrower and Lender, granting to Lender a security interest in, among other property, all of Borrower's right, title and interest, whether now or hereafter acquired, in all accounts, inventory and equipment, and all proceeds thereof, located on, attributable to or used in connection with the Security Tracts. d. A Deed of Trust, Assignment of Rents, Security Agreement and Financing Statement from Borrower to Thomas L. Travis, Trustee for the benefit of Lender, granting a first lien upon the real property and improvements thereon to secure the respective Loan. e. Financing Statements as Lender shall deem necessary to file from time to time in order to perfect and preserve the security interests granted by the Loan Documents. f. A Commitment and Policy for Mortgagee Title Insurance issued by a title company acceptable to Lender and for the aggregate amount of the respective Loan. g. A survey of the real property and improvement thereon prepared by a surveyor acceptable to Lender. h. Engineering and other information evidencing the absence of pollution or contamination on the property being acquired and the suitability of such property for Borrower's intended restaurant operation. i. Tax Certificates evidencing that there are no ad valorem taxes or assessments which are past due or payable. j. Liability and casualty insurance coverage in an amount and issued by carriers approved by Lender. k. For the first Loan made hereunder, certified (as of the date of Closing) copies of (i) resolutions of the Borrower's board of directors (for each Borrower which is a corporation) or a consent of all general partners (for each Borrower which is a partnership) authorizing the execution, delivery, and performance of this Agreement and the Loan Documents, and each other document to be delivered pursuant hereto including a certification (dated the date of the Closing) of the Borrower's secretary or its managing or general partner, as the case may be, as to the incumbency and signatures of the officers of the Borrower signing the Loan Documents, and each other document to be delivered pursuant hereto; (ii) Borrower's bylaws, or partnership agreement, including all amendments thereto; (iii) Borrower's articles of incorporation, including any and all amendments thereto; and (iv) certificates of existence and certificates as to the good standing of Borrower from applicable governmental authorities. For each Loan after the first Loan, Borrower shall deliver to Lender and the applicable title insurer (i) a current written statement of the Borrower's corporate secretary or managing partner, as the case may be, stating that each of the documents listed in this Section 3.2(k) delivered in conjunction with the first Loan remains valid, unamended and effective and applicable to the particular Loan to be made (or, if such statement cannot truthfully be given then a current written statement of Borrower's corporate secretary stating the particular reasons why such statement cannot be truthfully given, together with any amended documents), and (ii) any of the documents listed in this Section 3.2(k) which are required by the title insurer for a particular Loan, in order to issue the required mortgagees title insurance policy. l. Any and all other documents or instruments as may be required by Lender. m. Prior to the first Loan, and thereafter at the request of Lender, a true and complete list of all legal actions, claims, proceedings, investigations and notices thereof, against or affecting Borrower. SECTION 4. REPRESENTATIONS AND WARRANTIES. 4.1 Original. To induce the Lender to enter into this Agreement, and to fund the Loans to be made hereunder, each Borrower represents and warrants to the Lender as follows: a. Borrower is a corporation or general partnership or limited partnership, as applicable, duly organized, validly existing, and in good standing under the laws of the state under which it was organized; Borrower has the lawful power to own its properties and to engage in the business it conducts, and is duly qualified and in good standing as a foreign corporation or foreign partnership in the jurisdictions wherein the nature of the business transacted by it or property owned by it makes such qualification necessary. b. Borrower is not in default with respect to any of its existing indebtedness, and the making and performance of the Loan Documents will not immediately or with the passage of time, or the giving of notice, or both: (i) violate the charter or bylaw or partnership provisions of Borrower, or (ii) violate any laws or result in a default under any contract, agreement, or instrument to which Borrower is a party or by which Borrower or its property is bound. c. Borrower has the power and authority to enter into and perform each of the Loan Documents to which it is a party, and to incur the obligations herein and therein provided for, and has taken all corporate or partnership action necessary to authorize the execution, delivery, and performance of this Agreement and such other Loan Documents. d. The Loan Documents are, and each Note when delivered will be, valid, binding, and enforceable in accordance with their respective terms. e. There is no pending order, notice, claim, litigation, proceeding, or investigation against or affecting Borrower, whether or not covered by insurance, that would materially and adversely affect the business of Borrower if adversely determined. f. All financial information given to Lender, including any schedules and notes pertaining thereto, have been prepared in accordance with generally accepted accounting principles consistently applied, fully and fairly present the financial condition of Borrower at the dates thereof and the results of' operations for the periods covered thereby, and there have been no material adverse changes in the consolidated financial condition or business of Borrower set forth therein, to the date hereof. g. Except as otherwise permitted herein, Borrower has filed and paid all federal, state, and local tax returns and other required reports and all taxes, assessments, and other governmental charges that are due and payable prior to the date hereof. h. Except to the extent that the failure to comply would not materially interfere with the conduct of the business of the Borrower, Borrower has complied, and shall comply, with all applicable laws and regulations. i. No representation or warranty by the Borrower contained herein or in any Loan Document or certificate or other document furnished by the Borrower contains any untrue or misleading statement of material fact or omits to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made. j. Each consent, approval or authorization of, or filing, registration, or qualification required to be obtained by Borrower in connection with the execution and delivery of this Agreement, the Loan Documents, or the undertaking or performance of any obligation hereunder or thereunder, has been duly obtained. 4.2 Survival. All of the representations and warranties set forth in Section 4.1 shall survive until all Secured Indebtedness is satisfied in full. SECTION 5. COVENANTS OF BORROWER. Borrower does hereby covenant and agree with the Lender that, so long as any of the Secured Indebtedness remains unpaid, Borrower will comply with the following covenants: 5.1 Affirmative Covenants. a. Taco Cabana, Inc. will furnish to Lender within one hundred twenty (120) days after the close of each fiscal year (or, in the event an extension of the deadline for filing such information with the Securities and Exchange Commission ("SEC") is required or authorized by the SEC, then within one hundred eighty (180) days after the close of each fiscal year), for such fiscal year, the following independently audited and prepared financial information for itself and its subsidiaries prepared on a consolidated basis: (i) a statement of stockholders' or partners' equity and a statement of changes of cash flows; (ii) income statements; and (iii) balance sheets; all in reasonable detail, including all supporting schedules and comments, and certified by an independent certified public accountant auditor, approved by Lender, to have been prepared in accordance with generally accepted accounting principles consistently applied. b. Taco Cabana, Inc. will furnish to Lender within fifty (50) days after the close of each quarterly accounting period in each fiscal year of each Borrower and its subsidiaries, for such quarter, prepared on a consolidated basis: (i) a statement of stockholders' or partners' equity and a statement of changes in financial position; (ii) income statements; and (iii) balance sheets as of the end of such quarterly period, all in reasonable detail, Subject to year-end audit adjustments, and certified by Taco Cabana Inc.'s secretary to have been prepared in accordance with generally accepted accounting principles consistently applied. c. Borrower will furnish to Lender such other financial statements or reports as Lender may reasonably and periodically require, including without limitation balance sheets and income statements for each Borrower on an individual basis. d. Borrower will maintain its inventory, equipment, real estate, and other properties in good condition and repair (normal wear and tear excepted); will pay and discharge, or cause to be paid and discharged when due, the cost of repairs to or maintenance of the same; and will pay or cause to be paid all rental or mortgage payments due on such real estate. The Borrower hereby agrees that, in the event Borrower fails to pay or cause to be paid any such payment, the Lender may do so and on demand be reimbursed therefor by the Borrower. e. In addition to any requirements in the Loan Documents, Borrower will maintain, or cause to be maintained, public liability insurance and fire and extended coverage insurance on all assets owned by them, all in such form and amounts, and with such insurers, as are reasonable satisfactory to Lender. Such policies shall contain a provision whereby they cannot be canceled except after thirty (30) days' written notice to the Lender, and shall name Lender as an additional insured. Borrower will furnish to the Lender such evidence of insurance as the Lender may require. Borrower hereby agrees that, in the event any Borrower fails to pay or cause to be paid the premium on any such insurance, the Lender may do so and on demand be reimbursed therefor by the Borrower. f. Borrower will pay or cause to be paid when due all taxes, assessments or fees imposed upon it or on any of its property or that it is required to withhold and pay over, except when, prior to impending foreclosure, such taxes, assessments or fees are contested in good faith by appropriate proceedings, with adequate reserves therefor having been set aside on its books. g. Borrower will, when requested so to do, make available for inspection by duly authorized representatives of the Lender any of their books and records, and will furnish the Lender any information regarding their business affairs and financial condition within a reasonable time after written request therefor. h. Borrower will take all necessary steps to preserve its corporate or partnership existence and franchises and will comply with all present and future laws applicable to them in the operation of their respective businesses and all material agreements to which they are subject. i. Within ten (10) days after the Lender's request therefor, Borrower will furnish the Lender with copies of federal income tax returns filed by the Borrower. j. Borrower will pay when due (or within applicable grace periods) all indebtedness due third parties. If any Borrower defaults in the payment of any principal (or installment thereof) of, or interest on, any such indebtedness, the Lender shall have the right, but not the obligation, to pay such interest or principal for the account of Borrower and be reimbursed by Borrower therefor on demand. k. Borrower will notify the Lender immediately if it becomes aware of the occurrence of any Event of Default, as defined below, or of any fact, condition, or event that, with the giving of notice or passage of time, or both, could become an Event of Default hereunder, or of the failure of Borrower to observe any of its undertakings hereunder. l. The Borrower's shareholders' or partners' equity (as determined in accordance with generally accepted accounting principals consistently applied) less the value of any intangible assets (as determined in accordance with generally accepted accounting principles consistently applied) shall at all times equal or exceed 90% of Tangible Net Worth of Borrower and Borrower's Subsidiaries. m. All cash, cash equivalents and funds derived from operations of the Borrower shall be the property of the Borrower at the close of each business day, unless such cash, cash equivalents and funds are utilized by other entities for the payment of obligations in compliance with applicable law. This provision is not intended to restrict Borrower's use of funds or usual and regular course of business. n. Borrower will maintain Quarterly Cash Flow (as defined) in an amount equal to, or in excess of, $2,750,000.00. 5.2 Negative Covenants. a. For so long as any Indebtedness under the Loans remains outstanding, Borrower shall not without the prior written consent of the holder of the Notes: (1) Permit the ratio of Consolidated Cash Flow to Consolidated Fixed Charges for (i) Borrower's fiscal quarter ending March, 1998 to be less than 2.0:1.0; (ii) Borrower's fiscal quarter ending June, 1998 and the preceding fiscal quarter of Borrower to be less than 2.0:1.0; (iii) Borrower's fiscal quarter ending September, 1998, and the two preceding fiscal quarters of Borrower to be less than 2.0:1.0; (iv) Borrower's fiscal quarter ending December, 1998, and the three preceding fiscal quarters of Borrower to be less than 2.0:1.0; and (v) thereafter, the immediately preceding four fiscal quarters of Borrower to be less than 2.0:1.0. (2) Permit Consolidated Net Worth at any time to be less than the Minimum Consolidated Net Worth (as defined below) then in effect; (3) Permit the ratio of Debt to Tangible Net Worth to be greater than 0.1.0:1.00 at any time; or (4) Permit the ratio of Intangible Assets to Consolidated Net Worth to be greater than 0.55: 1.0 at any time; or (5) Incur Capital Expenditures: (i) in excess of $20,000,000.00 during the 1997 fiscal year of Borrower; (ii) in excess of $25,000,000.00 during the 1998 fiscal year of Borrower; or (iii) in excess of $30,000,000.00 during the 1999 fiscal year of Borrower. For purposes of subsections 5.1(l) and (n), and this subsection 5.2(a), the following terms shall have the following meanings: "Capital Expenditures" as to Borrower shall mean the aggregate amount paid or accrued by Borrower and its Subsidiaries for the rental, lease, purchase (including by way of the acquisition of securities of another person or entity), construction or use of any property the value or cost of which, in accordance with generally accepted accounting principles consistently applied would appear on Borrower's balance sheet in the category of property, plant or equipment. "Consolidated Cash Flow" for any period shall mean the consolidated net income of the Borrower and all Subsidiaries for such period (after having taken into account the effects of income tax), plus (without duplication) interest expense, depreciation, amortization and all other non-cash charges, all as determined in accordance with generally accepted accounting principles consistently applied. "Consolidated Fixed Charges" for any period shall mean (i) consolidated interest expense, and obligations under capitalized leases for such period, plus (ii) matured debt and any additional debt maturing within one year of the date of determination, plus (iii) dividends and distributions to partners in respect of their partnership interest, for the Borrower and all Subsidiaries, all as determined in accordance with generally accepted accounting principles consistently applied. "Consolidated Net Worth" shall mean consolidated shareholders' or partners' equity of the Borrower and all Subsidiaries as determined in accordance with generally accepted accounting principles consistently applied. "Debt" means, with respect to the Borrower and its Subsidiaries, on a consolidated basis: (i) indebtedness for borrowed money or for the deferred purchase price of property or services, (ii) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (iii) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (i) or (ii) above, and (iv) liabilities in respect of unfunded vested benefits under plans covered by Title IV of the Employee Retirement Income Security Act of 1974, as amended. "Intangible Assets" means, with respect to the Borrower and its Subsidiaries, on a consolidated basis, goodwill, organizational expenses, trademarks, tradenames, and any other items which are treated as intangibles in conformity with generally accepted accounting principles consistently applied. "Minimum Consolidated Net Worth" means, during any calendar year, $38,000,000.00 minus the amount paid by Borrower in any allowed purchase of capital stock consummated pursuant to Section 5.25b,plus 50% of the consolidated net income of Borrower (as determined in accordance with generally accepted accounting principles, consistently applied) for the period commencing January 1, 1997, to December 31 of the calendar year immediately prior to the calendar year in which the determination of Minimum Tangible Net Worth is being made. "Quarterly Cash Flow" shall mean for any fiscal quarter of Borrower the consolidated net income of Borrower and its Subsidiaries for such period (after having taken into account the effects of income tax) plus (without duplication) interest expense, depreciation, amortization and all other non-cash charges, all as determined in accordance with generally accepted accounting principles consistently applied. "Subsidiaries" means all corporations or partnerships of which at least 99% of the partnership interests, or of the shares of stock of every class of which, outstanding at the time as of which any determination is being made, is owned by the Borrower, either directly or through a Subsidiary. "Subsidiary" means each of the Subsidiaries. "Tangible Net Worth" means, with respect to the Borrower and its Subsidiaries, on a consolidated basis, Consolidated Net Worth less the value of any intangible assets as determined in accordance with generally accepted accounting principles consistently applied. b. No Borrower shall change its name, enter into any merger, consolidation, reorganizations or recapitalization, or reclassify its capital stock without the prior written consent of Lender, which consent shall not be unreasonably withheld, except that Borrower shall be permitted to purchase common stock of Borrower in an aggregate amount not to exceed $3,000,000.00 during the term of this Agreement. c. No Borrower shall sell, transfer, lease, or otherwise dispose of all, or (except in the ordinary course of business) any material part of, its assets, without the prior written consent of Lender, which consent shall not be unreasonably withheld. d. No Borrower shall mortgage, pledge, grant, or permit to exist a security interest in or lien upon any of the security given for the Loans, other than pursuant to the Loan Documents and Revolving Loan Documents and statutory liens in the ordinary course of its business. e. Borrower shall not furnish the Lender with any certificate or other document that will contain any untrue statement of material fact or that will omit to state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished. f. No Borrower shall transfer, alienate, sell, assign, or encumber any of its capital stock or partnership interests in any Subsidiary. g. No Borrower shall incur, create, assume, or permit any indebtedness other than (i) under the Revolving Loan Documents and the Loan Documents; (ii) obligations under leases for real or personal property used in Borrower's business; (iii) loans between Borrowers; (iv) loans between Borrowers and nonborrower Subsidiaries not exceeding the aggregate principal amount of $100,000.00 without the consent of the Lender, which consent shall not be unreasonably withheld; (v) normal accruals and trade accounts payable incurred in the ordinary course of business, or otherwise become liable, directly or indirectly, as guarantor or otherwise for any obligation (other than the endorsement of commercial paper for deposit or collection in the ordinary course of business and guaranties of affiliate transactions made in the ordinary course of business). h. Borrower shall not make any loans or advances to any officer, shareholder, director, or employee of Borrower or of any Subsidiary which, at any time, exceed the outstanding aggregate principal amount of $300,000.00. SECTION 6. DEFAULT. 6.1 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder: a. Any installment of principal and/or interest on the Loans or any other sums due by Borrower under the Loan Documents shall not be paid when due and payable. b. Any Borrower shall breach any of the affirmative or negative covenants contained herein and the breach is not cured within five days after written notice of the breach is given by the Lender to the Borrower. c. Any Borrower shall fail to perform, keep or otherwise observe any other obligation, term, provision, covenant, warranty or representation contained herein or in any of the Loan Documents and such failure is not cured within five days after written notice of the breach is given by the Lender to the Borrower. d. Any financial statement or report, representation, warranty, or certificate made or furnished by any Borrower to the Lender hereunder or in connection with this Agreement, any Loan or any Loan Documents, or in any separate statement or document to be delivered under the Loan Documents to the Lender, shall be materially false, incorrect, or incomplete when made or furnished. e. Any Borrower shall admit its inability to pay its debts as they mature, or shall make an assignment for the benefit of its or any of its creditors. f. Proceedings in bankruptcy, or for the dissolution, full or partial liquidation or reorganization of any Borrower, or for the readjustment of any of their respective debts, under the Bankruptcy Code, as amended, or any part thereof, or under any other laws, whether state or federal, for the relief of debtors, now or hereafter existing, shall be commenced by Borrower. g. If an application is made by any Borrower for the appointment of a receiver, trustee, or custodian for Borrower or for any substantial part of their respective assets, or any Borrower shall discontinue business or materially change the nature of its business. h. If a receiver, trustee, or custodian shall be appointed for any Borrower or for any part of their respective assets, and shall not be discharged within 30 days of such appointment. i. If all or any of any borrower's assets are attached, seized, subjected to a writ, or are levied upon, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors. j. If any Borrower is permanently enjoined, restrained or in any way prevented by court order from conducting any material part of its business affairs. k. If a notice of lien, levy or assessment is filed of record with respect to all or any of Borrower's assets by the United States or any department, agency or instrumentality thereof, or by any state, county, municipality or other governmental agency, or if any taxes or debts owing at any time or times hereafter to any one or more of them becomes a lien, upon all or any material portion of Borrower's assets. l. A judgment creditor of any Borrower shall obtain possession of any of the collateral securing repayment of the Loans by any means, including, but without limitation, levy, distraint, replevin, or self-help. m. Any Event of Default occurs under the terms of any of the Loan Documents or under the terms of any of the Revolving Loan Documents. n. Any Borrower shall dissolve, liquidate, or otherwise terminate its existence, or take any action to effect such termination. o. Any Borrower shall suffer a final judgment in excess of $250,000.00, and shall not discharge the same within thirty (30) days. p. Any Borrower furnishes the Lender with any certificate or other document that contains any untrue statement of material fact or that omits to state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished. q Any material nonborrower Subsidiary shall have failed to pay when due all taxes, assessments or fees imposed upon it or on any of its property or that it is required to withhold and pay over, except when, prior to impending foreclosure, such taxes, assessments or fees are contested in good faith by appropriate proceedings, with adequate reserves therefor having been set aside on its books. r. Any material nonborrower Subsidiary fails to take all necessary steps to preserve its corporate or partnership existence and franchises, or fails to comply with all present and future laws applicable to it in the operation of its business and all material agreements to which it is subject. s. Lender, at its discretion and after five days written notice given to Borrower, deems itself to be adversely affected and/or insecure by reason of any material change in any of Borrower's (including any endorsers and/or guarantors) net worth, or by reason of any other material change of condition whether or not described herein. 6.2 Remedies. Upon the occurrence of an Event of Default, Lender, at its option, may: a. Terminate any obligation to make any further Loans and declare the entire principal balance of the Secured Indebtedness and all interest, unpaid accrued and earned thereon to be immediately due and payable without demand for payment, presentment for payment, notices of intention to accelerate maturity, notices of election to accelerate maturity, protest and notice of protest or any other notice whatsoever, all of which are hereby expressly waived. b. Enforce or avail itself of any and all rights and remedies given to it by any or all of the Loan Documents. c. Enforce or avail itself of all rights and remedies allowed by all applicable laws. SECTION 7. INTEREST LIMITATION. 7.1 Limitation. Interest on the debt evidenced by the Notes or otherwise in connection with the Loans shall not exceed the maximum amount of nonusurious interest that may be contracted for, taken, reserved, charged, or received under law; any interest in excess of that maximum amount shall be credited on the principal of the debt or, if that has been paid, refunded. On any acceleration or required or permitted prepayment, any such excess shall be canceled automatically as of the acceleration or prepayment or, if already paid, credited on the principal of the debt or, if the principal of the debt has been paid, refunded. This provision overrides other provisions in this and all other instruments concerning the debt. All sums paid or agreed to be paid for the use, forbearance or detention of the indebtedness of Borrower to Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full stated term of such indebtedness until payment in full so that the rate or amount of interest on account of such indebtedness does not exceed the maximum rate of interest allowed by law for so long as such indebtedness is outstanding, and to the extent that TEX. REV. CIV. STAT. Ann. Art. 5069-1.04, as amended, is applicable to such indebtedness, the quarterly rate ceiling from time to time in effect under such article shall be the applicable ceiling. This provision overrides other provisions in this and all other instruments concerning the debt. SECTION 8. MISCELLANEOUS. 8.1 No Permanent Waivers. No waiver at any time of the provisions or conditions of this Agreement or of any of the other Loan Documents shall be construed as a waiver of any of the other provisions or conditions hereof or thereof nor be construed as a right to a subsequent waiver or any other provisions or conditions. 8.2 Severability. Unenforceability for any reason against any person or persons of any provision of this Loan Agreement, or of any of the other Loan Documents or other Agreements between Borrower and the Lender, shall not limit or impair the operation or validity of any other provisions of this Agreement or any of the other Loan Documents. 8.3 Descriptive Headings and Defined Terms. The descriptive headings of the various sections and subsection of this Agreement and the Loan Documents and any schedule, agreement or other instrument, executed with reference hereto are inserted for convenience of reference only, do not constitute a part of any such document and no inference is to be drawn from such headings. Whenever the context shall require, words of any gender shall be deemed to include the other gender and either the singular or the plural shall include the other, including with respect to terms defined herein. 8.4 Further Assurance. From time to time, Borrower will execute and deliver to the Lender such additional documents and will provide such additional information as the Lender may reasonably require to carry out the terms of this Agreement and be informed of the Borrower's status and affairs. 8.5 Enforcement and Waiver by the Lender. All rights and remedies of the Lender are cumulative and concurrent, and the exercise of one right or remedy shall not be deemed a waiver or release of any other right or remedy. The Lender shall have the right at all times to enforce the provisions of this Agreement and the Loan Documents in strict accordance with the terms hereof and thereof, notwithstanding any conduct or custom on the part of the Lender in refraining from so doing at any time or times. The failure of the Lender at any time or times to enforce its rights under such provisions, strictly in accordance with the same, shall not be construed as having created a custom in any way or manner contrary to specific provisions of this Agreement or such Loan Documents or as having in any way or manner modified or waived the same. 8.6 Expenses of the Lender. The Borrower will, on demand, pay, or reimburse the lender, for all reasonable expenses, including the reasonable fees and expenses of legal counsel for the Lender, incurred by the Lender in connection with the preparation, administration, amendment, modification, or enforcement of this Agreement and the Loan Documents, and the collection or attempted collection of any and all Notes. All reasonable costs, including but not limited to reasonable attorney's fees of Borrower, Lender, or other interested parties, other professional fees, appraiser's and surveyor's fees, taxes and all expenses of all kinds incurred in connection with the Loans, shall be borne by Borrower, and Borrower agrees to indemnify the Lender and save it harmless from the payment, defense and/or expense of any claim or demand for such fees, costs, taxes and expenses. 8.7 Notices. Any notices or consents required or permitted by this Agreement shall be in writing and shall be deemed given when delivered in person, or upon deposit in the U.S. Mail, if sent by certified mail, postage prepaid, return receipt requested, as follows, unless such address is changed by written notice hereunder: a. If to Borrower: Taco Cabana, Inc. Texas Taco Cabana, L.P. TP Acquisition Corp. T.C. Management, Inc. Taco Cabana Management, Inc. Taco Cabana Multistate, Inc. Colorado Cabana, Inc. 8918 Tesoro Drive, Suite 200 San Antonio, Texas 78217 b. If to the Lender: International Bank of Commerce 130 East Travis San Antonio, Texas 78205 Attention: Mr. Steve E. Edlund 8.8 RELEASE BY THE BORROWER. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAWS, BORROWER RELEASES THE LENDER AND ITS DIRECTORS, OFFICERS, ATTORNEYS, AGENTS, AND EMPLOYEES FROM ALL CLAIMS, CAUSES, DAMAGES, LIABILITY AND RELATED EXPENSES ARISING OUT OF ANY ACT OR OMISSION ON THE PART OF ANY OF THEM, WITH REGARD TO THIS AGREEMENT, WHICH DOES NOT INVOLVE FRAUD, BAD FAITH OR NEGLIGENCE BY LENDER OR ITS DIRECTORS, OFFICERS, ATTORNEYS, AGENTS OR EMPLOYEES. 8.9 Governing Law. This Agreement is made and accepted, and the obligations of the parties set forth herein shall be performable, in the County of Bexar and State of Texas, and this Agreement and all the Loan Documents shall be governed by, and construed in accordance with the laws of the State of Texas except to the extent that such laws may be preempted by laws of the United States of America. The parties hereby agree that this Agreement and the Loans to be made pursuant hereto shall not be subject to the provisions of Chapter 15 of the Texas Credit Code. 8.10 Lender's Relationship to Other. Lender is not a partner or joint venturer in any manner whatsoever with any Borrower. 8.11 Waiver, Modification. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 8.12 Cumulative Remedies. The right and remedies of the Lender under the Loan Documents shall be cumulative and the exercise, or partial exercise, of any such right or remedy shall not preclude the exercise of any other right or remedy. 8.13 Binding Effect. This Loan Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, provided that no Borrower may assign its rights or obligations hereunder. If more than one party executes this Agreement a Borrower, the term "Borrower" shall mean and refer to each such party, jointly and severally. 8.14 Survival of Agreement. The provisions thereof shall survive the execution of all instruments herein mentioned, and shall continue in full force until the Secured Indebtedness is paid in full and shall prevail and control over any conflicting provision contained elsewhere in the Loan Documents. 8.15 Entire Agreement. The Loan Documents embody the entire agreement between the parties and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof. There are no oral agreements or understandings between the parties which are not evidenced by the Loan Documents. 8.16 Subsidiaries. Except where otherwise specified herein, the term "Subsidiary" shall mean every entity of which more than fifty percent (50%) of the outstanding voting stock or other ownership interests shall, at the time of determination, be owned directly or indirectly by the named Borrower or through one or more intermediaries of Borrower. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. WITNESS: BORROWER: TACO CABANA, INC. By: Name: Name: Title: TEXAS TACO CABANA, L.P., a Texas limited partnership By: Taco Cabana Management, Inc., a Texas Corporation, General Partner By: Name: Name: Title: TP ACQUISITION CORP. By: Name: Name: Title: T.C. MANAGEMENT, INC. By: Name: Name: Title: TACO CABANA MANAGEMENT, INC. By: Name: Name: Title: TACO CABANA MULTISTATE, INC. By: Name: Name: Title: COLORADO CABANA, INC. By: Name: Name: Title: LENDER: INTERNATIONAL BANK OF COMMERCE By: Name: Steve E. Edlund, Executive Vice President EX-27 3
5 3-MOS JAN-3-1999 MAR-29-1998 359,000 0 469,000 96,000 2,082,000 4,912,000 61,807,000 26,872,000 78,408,000 13,677,000 0 0 0 157,000 38,222,000 78,408,000 32,322,000 32,407,000 9,792,000 18,464,000 9,777,000 0 397,000 1,857,000 0 1,857,000 0 0 0 1,857,000 .13 .12
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