Exhibit 10.29
CREDIT AGREEMENT
Dated as of April 12, 2002
Between
RED ▇▇▇▇▇ INTERNATIONAL, INC.,
as Borrower
and
U.S. BANK NATIONAL ASSOCIATION,
as Lender
CONTENTS
ARTICLE 1. DEFINITIONS, ETC.......................................................................1
1.1 Terms Defined..........................................................................1
1.2 Accounting Terms......................................................................14
1.3 Rules of Construction.................................................................14
1.4 Incorporation of Recitals and Exhibits................................................14
ARTICLE 2. REVOLVING CREDIT FACILITY.............................................................15
2.1 Revolving Credit Commitment...........................................................15
2.2 Use of Proceeds.......................................................................15
2.3 Revolving Credit Note.................................................................15
2.4 Rate of Interest......................................................................15
2.5 Payment of Interest...................................................................16
2.6 Repayment of Principal and Termination of Revolving Credit Commitment.................16
2.7 Revolving Credit Commitment Fee.......................................................16
2.8 Cleanup Period........................................................................17
ARTICLE 3. [RESERVED]............................................................................17
ARTICLE 4. GENERAL PROVISIONS APPLICABLE TO THE LOANS............................................17
4.1 Borrowing Mechanics...................................................................17
4.2 Disbursement of Funds.................................................................17
4.3 [Reserved]............................................................................18
4.4 Manner of Payment.....................................................................18
4.5 Statements............................................................................18
4.6 Computations of Interest and Fees.....................................................18
4.7 Default Interest......................................................................18
4.8 Late Charge...........................................................................19
4.9 Maximum Interest Rate.................................................................19
4.10 Prepayments...........................................................................19
4.11 Increased Costs, Etc..................................................................19
4.12 Taxes.................................................................................19
4.13 Collateral............................................................................20
4.14 Application of Payments...............................................................22
ARTICLE 5. CONDITIONS PRECEDENT..................................................................22
5.1 Conditions Precedent for Initial Loans................................................22
5.2 Conditions Precedent to All Loans, Etc................................................25
5.3 Conditions for Removal of Limitation on Revolving Credit Loans........................26
ARTICLE 6. AFFIRMATIVE COVENANTS.................................................................27
6.1 Financial Information, etc............................................................27
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6.2 Licenses and Permits..................................................................29
6.3 Maintenance of Properties.............................................................29
6.4 Payment of Charges....................................................................29
6.5 Insurance.............................................................................30
6.6 Maintenance of Records................................................................30
6.7 Inspection............................................................................30
6.8 Environmental Disclosure and Inspection...............................................31
6.9 Borrower's Remedial Action Regarding Hazardous Materials..............................31
6.10 Further Assurances; Financing Statements; Appraisals..................................32
6.11 Corporate Existence...................................................................32
6.12 Notice of Disputes and Other Matters..................................................32
6.13 Exchange of Notes.....................................................................33
6.14 Maintenance of Liens..................................................................34
6.15 Other Agreements......................................................................34
6.16 Access Law Disclosure and Inspection..................................................34
6.17 Borrower's Remedial Action Regarding Access Law Compliance............................34
6.18 Inactive Subsidiaries.................................................................35
ARTICLE 7. NEGATIVE COVENANTS....................................................................35
7.1 Restricted Payments Etc...............................................................35
7.2 Transactions With Affiliates..........................................................36
7.3 Other Indebtedness....................................................................36
7.4 Liens.................................................................................36
7.5 Advances and Loans....................................................................36
7.6 Investments...........................................................................37
7.7 Liquidation and Sale of Assets........................................................37
7.8 Consolidation and Merger..............................................................37
7.9 Subsidiaries..........................................................................38
7.10 Type of Business......................................................................38
7.11 Change of Chief Executive Office or Name..............................................38
7.12 Change in Documents...................................................................38
7.13 Control...............................................................................38
7.14 Pension Plan..........................................................................38
7.15 Maximum Cash Flow Leverage Ratio......................................................39
7.16 Minimum Fixed Charge Coverage Ratio...................................................39
7.17 Minimum Tangible Net Worth............................................................39
7.18 Contingent Obligations................................................................39
7.19 Sale or Discount of Receivables.......................................................40
7.20 Amendments of Documents Relating to Subordinated Debt.................................40
7.21 Disposal of Subsidiary Stock..........................................................40
7.22 Fiscal Year...........................................................................40
7.23 Negative Pledges, Restrictive Agreements, etc.........................................40
7.24 Liquidity.............................................................................41
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ARTICLE 8. REPRESENTATIONS AND WARRANTIES........................................................41
8.1 Corporate Status......................................................................41
8.2 Power and Authority...................................................................41
8.3 No Violation of Agreements............................................................42
8.4 Recording and Enforceability..........................................................42
8.5 Litigation............................................................................42
8.6 Good Title to Properties..............................................................43
8.7 Licenses and Permits..................................................................43
8.8 [Reserved]............................................................................43
8.9 Properties in Good Condition..........................................................43
8.10 Financial Statements..................................................................43
8.11 Outstanding Indebtedness..............................................................44
8.12 Taxes.................................................................................44
8.13 License Fees..........................................................................44
8.14 Trademarks, Patents, Etc..............................................................44
8.15 Disclosure............................................................................44
8.16 Regulations T, U and X................................................................44
8.17 Names.................................................................................45
8.18 Condition of Property.................................................................45
8.19 Pension Plans.........................................................................45
8.20 Borrower and Subsidiaries.............................................................45
ARTICLE 9. EVENTS OF DEFAULT; REMEDIES...........................................................46
9.1 Events of Default.....................................................................46
9.2 Acceleration; Remedies................................................................48
ARTICLE 10. MISCELLANEOUS.........................................................................49
10.1 Notices...............................................................................49
10.2 Payment of Expenses and Taxes.........................................................49
10.3 Assignments and Participations in Loans...............................................50
10.4 Setoff................................................................................50
10.5 Waiver of Setoff......................................................................50
10.6 Fees and Commissions..................................................................50
10.7 Entire Agreement; Amendments and Waivers..............................................51
10.8 Severability..........................................................................51
10.9 Descriptive Headings..................................................................51
10.10 Governing Law.........................................................................51
10.11 Consent to Jurisdiction, Service, and Venue...........................................51
10.12 Successors and Assigns................................................................52
10.13 Waiver of Jury Trial..................................................................52
10.14 Counterparts..........................................................................52
10.15 Statutory Notice......................................................................53
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SCHEDULES
Schedule 1.1 - Locations of Inventory
Schedule 4.13 - Legal Description of Fee Property
Schedule 5.1(m) - Existing Indebtedness
Schedule 7.2 - Permitted Affiliate Transactions
Schedule 7.4 - Existing Liens
Schedule 7.7 - Planned Asset Sales
Schedule 7.10 - States in Which Collateral is Located
Schedule 7.18 - Contingent Obligations
Schedule 8.3 - Violation of Agreements
Schedule 8.5 - Litigation
Schedule 8.17 - Fictitious Names
Schedule 8.20 - Subsidiaries of Borrower
EXHIBITS
Exhibit A - Form of Revolving Credit Note; Section 2.3
Exhibit B - Form of Notice of Borrowing; Section 4.1(a)
Exhibit C - Security Agreement; Section 5.1(c)
Exhibit D - Guaranty of Parent; Section 5.1(d)
Exhibit D-1 - Form of Subsidiary Guaranty; Section 5.1(e)
Exhibit E - Form of Subsidiary Security Agreement
Exhibit F - Opinion of Counsel for Borrower; Section 5.1(h)
CREDIT AGREEMENT PAGE iv
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CREDIT AGREEMENT
This credit agreement is made and entered into as of this 12th day of
April, 2002, by and between RED ▇▇▇▇▇ INTERNATIONAL, INC., a Nevada corporation
("Borrower"), and U.S. BANK NATIONAL ASSOCIATION ("Lender"). Capitalized terms
have the meanings assigned in Section 1 hereof.
RECITALS:
WHEREAS Borrower desires that Lender extend certain credit facilities to
Borrower which will be used to provide for the working capital requirements of
Borrower;
WHEREAS Borrower is willing to grant to Lender a security interest in
certain real property and in certain personal property located at or arising
from the operation of certain of its restaurants in order to secure the credit
facilities;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as follows:
ARTICLE 1. DEFINITIONS, ETC.
1.1 Terms Defined
As used herein, the following terms have the meanings set forth below:
"Access Laws" means the Americans with Disabilities Act of 1990, all state
and local laws relating to handicapped access, or any statute, rule, regulation,
ordinance, or order of any Governmental Body adopted or enacted with respect
thereto.
"Affiliate" means, with respect to any Person, a Person that now or
hereafter, directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with such Person. A Person shall be
deemed to control a corporation or partnership if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management of such corporation or partnership, whether through the ownership of
voting securities, by contract, or otherwise.
"Agreement" means this credit agreement as it may be amended, supplemented,
or otherwise modified from time to time.
"Applicable Law" means all applicable provisions and requirements of all
(a) constitutions, statutes, ordinances, rules, regulations, standards, orders,
and directives of any Governmental Bodies, (b) Governmental Approvals, and (c)
orders, decisions, decrees, judgments, injunctions, and writs of all courts and
arbitrators, whether such Applicable Laws presently exist, or are modified,
promulgated, or implemented after the date hereof.
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"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
"Borrower" means Red ▇▇▇▇▇ International, Inc., a Nevada corporation, and
its successors and its permitted assigns under Section 10.3.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of Washington or is a day on
which banking institutions located in such state are authorized or required by
law or other governmental action to close.
"Capital Lease" means, as applied to any Person, any lease of any property
(whether real, personal, or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash Flow Leverage Ratio" means of the end of any Fiscal Quarter, the
ratio computed for the period of four consecutive Fiscal Quarters ending on the
close of such Fiscal Quarter of (a) Funded Debt plus 6 times total rent and
lease expense for such period to (b) EBITDAR for such period.
"Change in Control" means:
(a) at any time prior to an initial or secondary public offering of any
class of capital stock of the Parent, the failure of the Investor Group, to own
and exercise voting control over a sufficient number of the issued and
outstanding shares of capital stock of the Parent together with freely
exercisable warrants, options and securities convertible into capital stock of
Parent which such shareholders have the financial capability (including
borrowing capability) to reasonably exercise which collectively constitute
(assuming that such warrants, options and other convertible securities have been
exercised) 50% of the capital stock of the Parent on a fully diluted basis; or
(b) after a Qualifying IPO, any person or group of persons (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended),
other than the Investor Group, shall have acquired direct or indirect beneficial
ownership (within the meaning of Rule 13D-3 promulgated by the Securities and
Exchange Commission under said Act) of a percentage of the outstanding voting
shares of common stock of the Parent equal to or greater than the lesser of (i)
twenty-five percent (25%) and (ii) the percentage of such outstanding shares of
the Parent then beneficially owned by the Investor Group; or
(c) at any time, a majority of the individuals who constitute the board of
directors of the Parent shall not have been elected and approved by the Investor
Group.
"Closing Date" means the date on or before April 30, 2002, on which Lender
makes its initial Loan.
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"Collateral" means all the property, real or personal, tangible or
intangible, now owned or hereafter acquired, in which Lender has been or is to
be granted a Lien by Borrower or any other Person, to secure the Obligations.
"Commitments" means the commitment of Lender to make Loans as set forth in
Sections 2.1.
"Compliance Certificate" has the meaning set forth in subsection 6.1(d)
herein.
"Consolidated" means, as applied to any financial or accounting term with
respect to any Person, such term determined on a consolidated basis in
accordance with GAAP for the Person and all consolidated Subsidiaries of such
Person.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (a) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (b)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, (c)
under Interest Rate Agreements, or (d) under any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap, or
other similar agreement or arrangement designed to protect such Person against
fluctuations in currency values. Contingent Obligations shall include, without
limitation, (a) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of nonperformance by any other party or parties to any
agreement, and (c) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) (i) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise) or (ii) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclause
(i) or (ii) of this sentence, the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if less, the amount to which such Contingent Obligation is
specifically limited.
"Deed of Trust" means any deed of trust or mortgage granted by Borrower or
any of its Subsidiaries in any interest in real property to secure the
Obligations or such deed of trust or mortgage may be amended, supplemented, or
otherwise modified from time to time.
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"Default" means any condition or event that constitutes an Event of Default
or with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Dollars" or "$" shall mean lawful money of the United States of America.
"EBITDAR" means, for a given period, net income, plus interest expense,
plus income tax expense, plus depreciation expense plus amortization expense
plus rent and lease expense, plus to the extent deducted from net income the
amount of any prepayment penalties incurred as a result of extraordinary debt
extinguishment concurrently with or after a Qualifying IPO, all of the foregoing
determined on a Consolidated basis for Parent.
"Environmental Claim" means any written accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any Governmental Body or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Borrower, any of
its Subsidiaries, any of their respective Affiliates or any Facility which in
any case could reasonably be expected to have a Material Adverse Effect.
"Environmental Laws" means all statutes, ordinances, orders, rules,
regulations, plans, policies or decrees and the like relating to (a)
environmental matters, including without limitation, those relating to fines,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of Hazardous
Materials, (b) the generation, use, storage, transportation or disposal of
Hazardous Materials, or (c) occupational safety and health, industrial hygiene
or protection of wetlands, in any manner applicable to Borrower or any of its
Subsidiaries or any of their respective properties, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
------
Transportation Act (49 U.S.C. Section 5101 et seq.), the Resource Conservation
------
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
------
Control Act (33 U.S.C. Section 125 et seq.), the Clean Air Act (42 U.S.C.Section
------
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et
------ --
seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section
---
136 et seq.), the Occupational Safety and Health Act (29 U.S.C. 65 et seq.) and
------
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001
et seq.), each as amended or supplemented, and any analogous future or present
------
local, state and federal statutes and regulations promulgated pursuant thereto,
each as in effect as of the date of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (a) any corporation,
which is, or was at any time, a member of a controlled group of corporations
within the meaning of
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Section 414(b) of the Internal Revenue Code of which that Person is, or was at
any time, a member; (b) any trade or business (whether or not incorporated)
which is, or was at any time, a member of a group of trades or businesses under
common control within the meaning of Section 414(c) of the Internal Revenue Code
for which that Person is, or was at any time, a member; and (c) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the
Internal Revenue Code of which that Person, any corporation described in clause
(a) above or any trade or business described in clause (b) above is, or was at
any time, a member.
"Event of Default" has the meaning set forth in Section 9.1 herein.
"Executive Officer" means, as to any corporation, its chairman of the
board, chief executive officer, president, chief operating officer, chief
financial officer, and treasurer, and any of them.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by Borrower or any of
its Subsidiaries (but only as to portions of buildings actually leased or used).
"Fee Property" has the meaning set forth in subsection 4.13(a)(ii) herein.
"Finova Debt" means that certain Indebtedness of Borrower under the loan
agreement among Borrower, Finova Capital Corporation ("Finova"), and certain
Subsidiaries of Borrower dated as of September 6, 2000, as amended ("Finova Loan
Agreement").
"Fiscal Period" means each four-week fiscal accounting period of Borrower
identified on the calendar delivered to Lender pursuant to subsection 6.1(j)
herein.
"Fiscal Quarter" means with respect to the Fiscal Period ending on (i) the
last Sunday of the 16th week in each year, the four Fiscal Periods then ending,
(ii) the last Sunday of the 28th week in each year, the three Fiscal Periods
then ending, (iii) the last Sunday of the 40th week in each year, the three
Fiscal Periods then ending, and (iv) closest to the last Sunday of each year,
the three Fiscal Periods then ending.
"Fiscal Year" means each fiscal accounting year of Borrower consisting of
13 Fiscal Periods and ending closest to the last Sunday of each year.
"Fixed Charge Coverage" means (a) EBITDAR minus cash taxes, cash dividends
and Unfunded Capital Expenditures for the previous four rolling Fiscal Quarters
divided by (b) the sum of all required principal payments (on short and long
term Indebtedness and Capital Leases), Interest Expense and rental or lease
expense over the last four rolling Fiscal Quarters all of the foregoing as
determined on a Consolidated basis for Parent.
"Funded Debt" means, at the time of calculation thereof on a Consolidated
Basis: (a) all obligations of Parent and its Subsidiaries for borrowed money or
for the deferred
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purchase price of property or services and all obligations of Parent and/or any
of its Subsidiaries evidenced by bonds, debentures, notes or other similar
instruments, including, without limitation, (i) all Indebtedness under this
Agreement and (ii) all Subordinated Debt; (b) the face amount of all letters of
credit, whether or not drawn, issued for the account of Parent and its
Subsidiaries; (c) the capitalized amount of all Capital Leases of Parent and its
Subsidiaries; and (d) all Contingent Obligations of Borrower and its
Subsidiaries in respect of any of the foregoing.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means generally accepted accounting principles set forth in opinions
and pronouncements of the accounting principles board of the American Institute
of Certified Public Accountants in statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by significant segment of the accounting profession,
in each case as the same are applicable to the circumstances as of the date of
determination.
"Governmental Approval" means any authorization, consent, approval,
certificate of compliance, license, permit, or exemption from, contract with,
registration or filing with, or report or notice to, any Governmental Body
required or permitted by Applicable Law.
"Governmental Body" means the government of the United States, any state,
or any governmental or regulatory official, body, department, bureau,
subdivision, agency, commission, court, arbitrator, or authority, or any
instrumentality thereof, whether federal, state, or local.
"Guarantors" means Parent, all of Borrower's Subsidiaries (other than
Inactive Subsidiaries and Liquor License Subsidiaries), and any Person who now
or hereafter executes and delivers to Lender a Guaranty.
"Guaranties" means those certain guaranties made by Parent and each
Subsidiary of Borrower (other than Inactive Subsidiaries and Liquor License
Subsidiaries) dated as of the date hereof and delivered to Lender pursuant to
subsection 5.1(d) hereof and all guaranties now or hereafter delivered by any
Person to Lender to guaranty all or any portion of the Obligations, as each such
guaranty may be amended, restated, supplemented or otherwise modified from time
to time.
"Hazardous Materials" means (a) any chemical, material or substance at any
time defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "infectious waste," "toxic substances," or any
other formulations intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity," or words of similar import under any applicable Environmental Laws or
regulations promulgated pursuant thereto; (b) any oil, petroleum, petroleum
fraction or petroleum derived substance; (c) any drilling fluids, produced
waters and other wastes associated with
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the exploration, development or production of crude oil, natural gas or
geothermal resources; (d) any flammable substances or explosives; (e) any
radioactive materials; (f) asbestos in any regulated quantity; (g) urea
formaldehyde foam insulation; (h) electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million; (i) pesticides; and (j) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
Governmental Body.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of Borrower or any of its Subsidiaries, any qualification or exception to such
opinion or certification (a) which is of a "going concern" or similar nature,
(b) which relates to the limited scope of examination of matters relevant to
such financial statement or (c) which relates to the treatment or classification
of any item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which would be
to cause Borrower or any of its Subsidiaries to be in default of any of its
obligations under any of Sections 7.3, 7.15, 7.16 or 7.17.
"Inactive Subsidiaries" means Borrower's Subsidiaries listed as "inactive"
on Schedule 8.20.
"Indebtedness" means, as applied to any Person, (a) all indebtedness for
borrowed money, (b) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (c) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money (other than accounts
payable incurred in the ordinary course of business and accrued expenses
incurred in the ordinary course of business), (d) any obligation owed for all or
any part of the deferred purchase price of property or services (excluding any
such obligations incurred under ERISA), which purchase price is (i) due more
than six months from the date of incurrence of the obligation in respect thereof
or (ii) evidenced by a note or similar written instrument, (e) all indebtedness
for borrowed money secured by any Lien on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person and
(f) all Contingent Obligations; except in any of the foregoing cases for any
indebtedness or obligations between a Subsidiary and Borrower or another
Subsidiary.
"Indemnified Liabilities" has the meaning set forth in Section 10.2 herein.
"Indemnified Persons" has the meaning set forth in Section 10.2 herein.
"Interest Expense" means, for any period, total consolidated interest
expense (both cash and noncash and determined without regard to original issue
discount) of Borrower and its Subsidiaries for such period, as determined in
accordance with GAAP.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Borrower or any of its Subsidiaries against
fluctuations in interest rates.
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
"Investment" means (a) any direct or indirect purchase or other acquisition
by Borrower or any of its Subsidiaries of, or of a beneficial interest in, stock
or other Securities of any other Person, or (b) any direct or indirect loan,
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Borrower or any of its Subsidiaries to any
other Person other than a wholly owned Subsidiary of Borrower including all
indebtedness and accounts receivable acquired from that other Person that are
not current assets or did not arise from sales to that other Person in the
ordinary course of business; provided, however, that the term "Investment" shall
not include, without limitation (i) trade and customer accounts receivable for
goods furnished or services rendered in the ordinary course of business and
payable in accordance with customary trade terms, (ii) advances and prepayments
to suppliers for goods and services in the ordinary course of business, (iii)
stock or other securities acquired in connection with the satisfaction or
enforcement of Indebtedness or claims due or owing to Borrower or any of its
Subsidiaries or as security for any such Indebtedness or claims, (iv) cash held
in any deposit account with Lender and (v) shares in a mutual fund that invests
solely in the investments permitted in the exceptions set forth in Section 7.6.
"Investor Group" means the Management Group and the Sponsor Group.
"Lender" means U.S. Bank National Association, together with its successors
and assigns.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge, or any encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any agreement to
give any security interest) and any option, trust, or other preferential
arrangement having the practical effect of any of the foregoing.
"Liquor License Subsidiaries" means Subsidiaries of Borrower that were
formed to hold a liquor license and whose sole asset is a liquor license and
include the following: Red ▇▇▇▇▇ of Baltimore County, Inc., a Maryland
corporation, Red ▇▇▇▇▇ of ▇▇▇▇ Arundel County, Inc., a Maryland corporation, and
Red ▇▇▇▇▇ of ▇▇▇▇▇▇▇▇▇▇ County, Inc. a Maryland corporation.
"Loan" or "Loans" means one or more of the Revolving Credit Loans and any
other loan made by Lender to Borrower under or pursuant to this Agreement or any
combination thereof.
"Loan Documents" means this Agreement, the Notes, the Security Agreement,
the Subsidiary Security Agreement, the Deeds of Trust, the Guaranties, any
Interest Rate Agreements entered into between Borrower or any Loan Party and
Lender and all other
CREDIT AGREEMENT PAGE 8
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agreements, instruments, and documents arising out of this Agreement, or the
Loans, as the same may be amended, restated, supplemented or otherwise modified
from time to time.
"Loan Parties" means Parent, Borrower, and each Subsidiary of Borrower
(other than Inactive Subsidiaries and Liquor License Subsidiaries).
"Management Group" means the Management Holder and their Related Parties.
"Management Holder" means ▇▇▇▇▇▇ or any Person over which ▇▇▇▇▇▇, directly
or indirectly, exercises voting control, including, without limitation, the
right to direct the management and policies of such Person and the right to
elect a majority of the Board of Directors or similar governing authority for
such Person.
"Material Adverse Effect" means (i) a material adverse effect upon the
business operations, properties, assets, or condition (financial or otherwise)
of Borrower and its Subsidiaries, taken as a whole, (ii) the material impairment
of the ability of the Borrower to perform the Obligations, or (iii) the material
impairment of the material rights or remedies of, or benefits to Lender under
any Loan Document.
"Notes" means one or more of the Revolving Credit Note or any other
promissory note evidencing a Loan or any combination thereof.
"Notice of Borrowing" means a notice delivered by Borrower to Lender
pursuant to Section 4.1 with respect to a proposed borrowing.
"Obligations" means all obligations of every nature of Borrower from time
to time owed to Lender under this Agreement, the Notes, and the other Loan
Documents, whether for principal, interest, reimbursement of fees, expenses,
indemnification or otherwise.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"Parent" means Red ▇▇▇▇▇ Gourmet Burgers, Inc., a Delaware corporation.
"PBGC" means the Pension Benefit Guaranty Corporation (or any successor
thereto).
"Permitted Encumbrances" means the following types of Liens:
(a) liens for taxes, assessments or governmental charges or claims payment
of which is not, at the time, required by Section 6.4;
(b) statutory liens of carriers, warehousemen mechanics and materialmen and
other liens imposed by law (other than any Lien imposed pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA) incurred in the
ordinary course of
CREDIT AGREEMENT PAGE 9
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business for sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor;
(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, trade contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(d) any attachment or judgment Lien not constituting an Event of Default
under subsection 9.1(i);
(e) leases or subleases granted to others not interfering in any material
respect with the ordinary conduct of the business of Borrower or any of its
Subsidiaries;
(f) easements, rights-of-way, restrictions, minor defects, encroachments or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
Borrower or any of its Subsidiaries;
(g) any (i) interest or title of a lessor or sublessor under any Capital
Lease or any Operating Lease not prohibited by this Agreement, (ii) restriction
or encumbrance that the interest or title of such lessor or sublessor may be
subject to, or (iii) subordination of the interest of the lessee or sublessee
under such lease to any restriction or encumbrance referred to in the preceding
clause (ii);
(h) Liens arising from Capital Leases and purchase money security interests
permitted by this Agreement; provided such liens attach only to the property
purchased or leased in connection with such purchase money financing or Capital
Lease transaction;
(i) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the importation of
goods;
(j) deposits in the ordinary course of business to secure liabilities to
insurance carriers, lessors, utilities and other service providers;
(k) Liens granted pursuant to this Agreement or the other Loan Documents;
(l) Statutory liens of landlords incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor;
(m) Liens listed on Schedule 7.4 attached hereto; and
(n) Liens required to be granted under the Finova Loan Agreement; provided
that such Liens do not encumber any of the Collateral.
CREDIT AGREEMENT PAGE 10
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"Permitted Prior Liens" means the Liens described in clauses (a), (b), (c),
(f), (g), (h), (i), and (j) of the definition of Permitted Encumbrances subject
to the limitations or requirements set forth therein.
"Person" means any individual, partnership, joint venture, firm,
corporation, association, trust, or other enterprise or any Governmental Body.
"Plan" means an employee pension benefit plan that is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 302 of ERISA
or Section 412 of the Internal Revenue Code and is either (a) maintained by
Borrower or any ERISA Affiliate for employees of Borrower or any ERISA Affiliate
or (b) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
Borrower or any ERISA Affiliate is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions.
"Qualifying IPO" means an underwritten primary public offering (other than
a public offering pursuant to the registration statement on Form S-8 (or any
successor form)) of the common capital stock of Parent pursuant to an effective
registration statement filed with the United States Securities & Exchange
Commission in accordance with the Securities Act of 1933, as amended from time
to time, and any successor statute (whether alone or in conjunction with a
secondary public offering).
"RR Investors" means RR Investors, LLC, a Virginia limited liability
company.
"RR Investors II" means RR Investors II, LLC, a Virginia limited liability
company.
"Related Parties means (i) any spouse or immediate family member of ▇▇▇▇▇▇,
(ii) any trust set up for the benefit of ▇▇▇▇▇▇ or any of the Persons specified
in clause (i), or (iii) any corporation or limited liability company wholly
owned by a Management Holder and/or the Persons specified in clause (i) and
(ii).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
into or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Restaurants" means the restaurants and properties listed on Schedule 1.1.
"Revolving Credit Commitment" means the commitment of the Lender to make
Revolving Credit Loans to Borrower in the aggregate amount of up to $10,000,000
pursuant to Section 2.1.
CREDIT AGREEMENT PAGE 11
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"Revolving Credit Commitment Period" means the period from and including
the Closing Date to, but not including, the Revolving Credit Commitment
Termination Date.
"Revolving Credit Commitment Termination Date" means March 31, 2003, or
such earlier date as the Revolving Credit Commitment terminates.
"Revolving Credit Loans" means the Loans made by Lender pursuant to Section
2.1.
"Revolving Credit Note" means the promissory note of Borrower issued
pursuant to Section 2.3 on the Closing Date, in substantially in the form
described in Section 2.3, as it may be amended, supplemented, or otherwise
modified from time to time.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Security Agreement" means that certain security agreement by and between
Borrower and Lender dated as of the date hereof and delivered to Lender pursuant
to subsection 5.1(c) hereof, as such security agreement may be amended,
restated, supplemented or otherwise modified from time to time.
"Shareholders Agreement" means that certain amended and restated
shareholders agreement dated as of August 9, 2001 by and among Parent, Borrower,
Skylark Company, Ltd., a Japan corporation, RR Investors, RR Investors II,
▇▇▇▇▇▇ and certain other shareholders.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual.
"Solvent" means, with respect to any Person, that as of the date of
determination both (a)(i) the then fair value of the property of such Person is
(y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (b) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
CREDIT AGREEMENT PAGE 12
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"Sponsor Group" means RR Investors, RR Investors II and any of their
respective Affiliates.
"Subordinated Debt" means all Indebtedness of the Borrower that is
subordinate and junior in right of payment to all of the Obligations pursuant to
a subordination agreement in form and substance acceptable to Lender.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than fifty percent (50%) of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"Subsidiary Security Agreement" means all security agreements now or
hereafter executed by a Subsidiary of Borrower in accordance with the terms
hereof, as each such security agreement may be amended, restate or otherwise
supplemented from time to time.
"Tangible Net Worth" means Parent's Consolidated net worth determined in
accordance with GAAP, plus, to the extent deducted from total assets in
determining Consolidated net worth, deferred rent liability, less the sum of (a)
the amount of all deferred charges, deferred loan fees, and net deferred tax
assets; (b) all intangible assets, including, but not limited to, goodwill,
licenses, franchises, work force intangibles, trademarks, trade names, service
marks, patents and copyrights; (c) unamortized debt discount and expense; (d)
the cost of capital stock of an Affiliate; (e) any Indebtedness owing to Parent
or any Subsidiary by an Affiliate thereof, unless such Indebtedness arose in
connection with the sale or lease of goods or property in the ordinary course of
business or the performance of services in the ordinary course of business and
would otherwise constitute current assets in accordance with generally accepted
accounting principles; and (f) the amount of any write-up in book value of the
assets of Parent and/or its Subsidiaries resulting from any revaluation of
assets.
"Tax" means for any Person, any tax, assessment, duty, levy, or other
charge imposed by any Governmental Body on such Person or on any property,
revenue, income, or franchise of such Person and any interest or penalty with
respect to any of the foregoing.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the state of Washington.
"Unfunded Capital Expenditures" means the sum of all purchases of capital
assets or acquisitions of other companies, including goodwill, less (a) the sum
of all new financing amounts received or assumed to acquire capital assets or
acquisitions of other companies for the period specified, including Revolving
Credit Loans, (b) for purposes of measuring the Fixed Charge Coverage for the
Fiscal Quarters ending in calendar year 2002, the sum of
CREDIT AGREEMENT PAGE 13
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$18,500,000, which represents Borrower's cash balances at its Fiscal Year ending
December 30, 2001, and (c) net cash proceeds received by Borrower from the sale
of assets permitted under Section 7.7 herein.
1.2 Accounting Terms
Except as otherwise expressly provided in this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP. Financial statements and other information required to be
delivered by Borrower to Lender pursuant to subsections (a), (b) and (c) of
Section 6.1 shall be prepared in accordance with GAAP (except, with respect to
interim financial statements, normal year-end audit adjustments and the absence
of explanatory footnotes) as in effect at the time of such preparation.
Calculations in connection with the definitions, covenants, and other provisions
of this Agreement shall utilize accounting principles and policies in
conformance with those used to prepare the financial statements referred to in
Section 8.10.
1.3 Rules of Construction
Unless the context otherwise requires, the following rules of construction
apply to the Loan Documents:
(a) Words in the singular include the plural and in the plural include the
singular.
(b) Provisions of the Loan Documents apply to successive events and
transactions.
(c) In the event of any inconsistency between the provisions of this
Agreement and the provisions of any of the other Loan Documents, the provisions
of this Agreement govern.
(d) References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided.
1.4 Incorporation of Recitals and Exhibits
The foregoing recitals are incorporated into this Agreement by reference.
All references to "Exhibits" contained herein are references to exhibits
attached hereto, the terms and conditions of which are made a part hereof for
all purposes.
ARTICLE 2. REVOLVING CREDIT FACILITY
2.1 Revolving Credit Commitment
(a) Subject to and upon the terms and conditions set forth herein, and in
reliance upon the representations, warranties and covenants of Borrower
contained herein or made pursuant hereto, Lender agrees to make loans
(individually, a "Revolving Credit Loan"; collectively, the "Revolving Credit
Loans") to Borrower from time to time during the
CREDIT AGREEMENT PAGE 14
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Revolving Credit Commitment Period, in an aggregate amount not exceeding its
Revolving Credit Commitment to be used for the purposes identified in Section
2.2. Lender's Revolving Credit Commitment shall expire on the Revolving Credit
Commitment Termination Date and all Revolving Credit Loans and all other amounts
owed hereunder with respect to the Revolving Credit Loans and the Revolving
Credit Commitment shall be paid in full no later than that date. Amounts
borrowed under Section 2.1 may be repaid and reborrowed until but excluding the
Revolving Credit Commitment Termination Date.
(b) During the Revolving Credit Commitment Period Borrower may use the
Revolving Credit Commitment by borrowing, prepaying the Revolving Credit Loans
in whole or in part, and reborrowing all in accordance to the terms and
conditions hereof.
(c) Notwithstanding the foregoing, unless and until the conditions set
forth in Section 5.3 herein are satisfied in Lender's discretion, no more than
$7,800,000 in Revolving Credit Loans shall be outstanding at any time.
2.2 Use of Proceeds
Borrower may use the proceeds of the Revolving Credit Loans for
construction and or acquisition of new restaurants and for its general corporate
purposes, including working capital.
2.3 Revolving Credit Note
The Revolving Credit Loans to be made by Lender pursuant to its Revolving
Loan Commitment shall be evidenced by and repayable with interest in accordance
with a promissory note in the form of Exhibit A hereto, payable to the order of
Lender dated as of the date hereof and in the principal amount of Lender's
Revolving Credit Commitment (the "Revolving Credit Note").
2.4 Rate of Interest
Interest on each Revolving Credit Loan shall accrue at an annual rate equal
to 3.0% plus the one-month LIBOR rate quoted by Lender from Telerate Page 3750
or any successor thereto, which shall be that one-month LIBOR rate in effect and
reset each New York banking day. Lender's internal records of applicable
interest rates shall be determinative in the absence of manifest error. For
determining payment dates for LIBOR rate loans, the New York banking day shall
be the standard convention. In the event after the date of initial funding any
governmental authority subjects Lender to any new or additional charge, fee,
withholding or tax of any kind with respect to any Revolving Credit Loans
hereunder or changes the method of taxation of such Revolving Credit Loans or
changes the reserve or deposit requirements applicable to such Revolving Credit
Loans, Borrower shall pay to Lender such additional amounts as will compensate
the Lender for such costs or lost income resulting therefrom as reasonably
determined by Lender.
CREDIT AGREEMENT PAGE 15
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2.5 Payment of Interest
Until the Revolving Credit Loans shall have been paid in full, Borrower
shall pay monthly in arrears to Lender an amount equal to all accrued interest
on the Revolving Credit Loans (a) on the 15th day of each calendar month,
commencing on the 15th day of the first month following the making of the
Revolving Credit Loan, and on the 15th day of each month thereafter, and (b) on
the Revolving Credit Commitment Termination Date.
2.6 Repayment of Principal and Termination of Revolving Credit Commitment
(a) Borrower shall pay Lender all outstanding principal, accrued interest,
and other charges with respect to the Revolving Credit Loans on the Revolving
Credit Commitment Termination Date. The Revolving Credit Commitment of Lender
shall automatically and permanently terminate on the Revolving Credit Commitment
Termination Date.
(b) Borrower shall, on each date when any reduction in the Revolving Credit
Commitment (as reduced from time to time) shall become effective, including
pursuant to Section 9.2, make a mandatory prepayment of all Revolving Credit
Loans equal to the excess, if any, of the aggregate outstanding principal amount
of all Revolving Credit Loans over the Revolving Credit Commitment as so
reduced.
(c) If, at any time, the aggregate outstanding principal amount of all
Revolving Credit Loans exceeds the aggregate amount of the Revolving Credit
Commitment then in effect, the Borrower shall immediately make a mandatory
prepayment of all Revolving Credit Loans equal to the amount of such excess.
(d) Borrower may from time to time on any Business Day voluntarily reduce
the amount of the Revolving Credit Commitment; provided, however, that (i) all
such reductions shall require at least five Business Days' notice to Lender and
be permanent and irrevocable (ii) there may not be more than one reduction in
any calendar quarter, and (iii) any partial reduction of the Revolving Credit
Commitment shall be in the minimum amount of $1,000,000 and in an integral
multiple of $1,000,000 thereafter.
2.7 Revolving Credit Commitment Fee
Borrower shall pay Lender a nonrefundable fee for the Revolving Credit
Commitment in the amount of $150,000, concurrently with the execution of this
Agreement.
2.8 Cleanup Period
In the event a Qualifying IPO occurs, Borrower shall reduce the outstanding
principal balance of the Revolving Credit Loans to $0 for a period of 60
consecutive days, such 60-day period to commence no later than 30 days after the
date the Qualifying IPO occurs.
CREDIT AGREEMENT PAGE 16
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ARTICLE 3. [RESERVED]
ARTICLE 4. GENERAL PROVISIONS APPLICABLE TO THE LOANS
4.1 Borrowing Mechanics
(a) Whenever Borrower desires that Lender make a Loan it shall deliver to
Lender a Notice of Borrowing in the form of Exhibit B annexed hereto no later
than 2:00 p.m. (Seattle time) on the proposed Funding Date. The Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), and (ii) the amount of Loans requested. In lieu of delivering the
above-described Notice of Borrowing, Borrower may give Lender telephonic notice
by the required time of any proposed borrowing under this Section 4.1; provided,
that such notice shall be promptly confirmed in writing by delivery of a Notice
of Borrowing to Lender on or before the applicable Funding Date; provided
further, that if Borrower maintains a loan sweep service connected to an account
of Lender that provides for advances under the Revolving Credit Commitment, then
a Notice of Borrowing is not required for Revolving Credit Loans.
(b) Lender shall not incur any liability to Borrower in acting upon any
telephonic notice referred to above that Lender believes in good faith to have
been given by a duly authorized officer or other person authorized to borrow on
behalf of Borrower or for otherwise acting in good faith under this Section 4.1,
and upon funding of Loans by Lender in accordance with this Agreement pursuant
to any such telephonic notice, Borrower shall have effected Loans hereunder.
(c) Borrower shall notify Lender prior to the funding of any Loans in the
event that any of the matters to which Borrower is required to certify in the
applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Borrower of the proceeds of any
Loans shall constitute a re-certification by Borrower, as of the applicable
Funding Date, as to the matters to which Borrower is required to certify in the
applicable Notice of Borrowing.
4.2 Disbursement of Funds
Upon satisfaction or waiver of the conditions precedent specified in
Sections 5.1 (in the case of Loans made on the Closing Date) and 5.2 (in the
case of all Loans), Lender shall make the proceeds of such Loans available to
Borrower on the applicable Funding Date by causing an amount of same day funds
equal to the proceeds of all such Loans to be credited to the account of
Borrower at the office of Lender located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; provided that Borrower hereby authorizes Lender to
disburse Loan proceeds directly to Lawyers Title of Arizona, Inc. in Phoenix,
Arizona in escrow for acquisition of two of the Fee Properties.
CREDIT AGREEMENT PAGE 17
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4.3 [Reserved]
4.4 Manner of Payment
All sums payable to Lender pursuant to this Agreement shall be paid
directly to Lender in immediately available United States funds. Borrower
authorizes Lender to debit any of Borrower's accounts maintained at Lender to
make all payments due under this Agreement, the Notes, and the other Loan
Documents. Whenever any payment to be made hereunder or on any of the Notes
becomes due and payable on a day other than a Business Day, such payment may be
made on the next succeeding Business Day and such extension of time shall in
such case be included in computing interest on such payment. For determining
payment dates for LIBOR rate loans, the New York banking day shall be the
standard convention.
4.5 Statements
Lender shall send Borrower statements of all amounts due hereunder; the
statements shall be considered presumptively correct, absent manifest error,
unless Borrower notifies Lender to the contrary within thirty (30) days of
receipt of any statement that Borrower claims to be incorrect. Borrower agrees
that accounting entries made by Lender with respect to Borrower's loan accounts
shall constitute evidence of all disbursements of Loan proceeds and payments
made on the Loans. Without limiting the methods by which Lender may otherwise be
entitled by Applicable Law to make demand for payment of the Loans upon
Borrower, Borrower agrees that any statement, invoice, or payment notice from
Lender to Borrower with respect to any Obligation shall be deemed to be a demand
for payment in accordance with the terms of such statement, invoice, or payment
notice. Under no circumstances shall a demand by Lender for partial payment of
principal or interest or both be construed as a waiver by Lender of its right
thereafter to demand and receive payment (in part or in full) of any remaining
principal or interest obligation.
4.6 Computations of Interest and Fees
Except as otherwise expressly provided herein, all computations of interest
and fees shall be based on a 360-day year for the actual number of days elapsed.
4.7 Default Interest
Upon the occurrence and during the continuance of any Event of Default,
Lender may, in its sole discretion, increase the interest rate charged on all
Loans to a rate of interest equal to four percent (4%) per annum in excess of
the interest rate then applicable to such Loan from the date of such Event of
Default until such Event of Default is cured, if curable, or waived by Lender or
until the Loans are paid in full and the Commitments have terminated.
CREDIT AGREEMENT PAGE 18
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4.8 Late Charge
If any payment of principal or interest required under any Loan is fifteen
(15) days or more past due, Borrower will be charged a late charge of five
percent (5%) of the delinquent payment for each such late payment. The 15-day
period provided for herein shall not be construed as a waiver of any Default or
Event of Default resulting from any late payment under any Loan.
4.9 Maximum Interest Rate
Notwithstanding any provision contained herein or in the Notes, the total
liability of Borrower for payment of interest pursuant hereto, including late
charges, shall not exceed the maximum amount of interest permitted by Applicable
Law to be charged, collected, or received from Borrower; and if any payments by
Borrower include interest in excess of that maximum amount, Lender shall apply
the excess first to reduce the unpaid balance of the Loans, then the excess, if
any, shall be returned to Borrower.
4.10 Prepayments
Borrower may prepay all or any portion of the Revolving Credit Loans
without penalty or premium.
4.11 Increased Costs, Etc.
In the event after the date of initial funding of any Loan any Governmental
Body subjects Bank to any new or additional charge, fee, withholding or tax of
any kind with respect to any Loans hereunder or changes the method of taxation
of such Loans or changes the reserve or deposit requirements applicable to such
loans, Borrower shall pay to Lender such additional amounts as will compensate
Lender for such cost or lost income resulting therefrom as reasonably determined
by Lender.
4.12 Taxes
(a) All payments by Borrower of principal of, and interest on, the Loans
and all other amounts payable hereunder shall be made free and clear of and
without deduction for any present or future income, stamp or other taxes, fees,
duties, deductions, withholdings or other charges of any nature whatsoever
imposed by any taxing authority, but excluding franchise taxes and taxes imposed
on or measured by Lender's net income or receipts, such as the business and
occupation tax, if any, imposed by the State of Washington (such nonexcluded
items being called "Taxes"). In the event that any withholding or deduction from
any payment to be made by Borrower hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then the Borrower will
(i) pay directly to the relevant authority the full amount required to
be so withheld or deducted,
CREDIT AGREEMENT PAGE 19
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(ii) promptly forward to the Lender an official receipt, a true and
complete copy thereof or other documentation satisfactory to the Lender
evidencing such payment to such authority, and
(iii) pay to the Lender or the holders of the Notes such additional
amount or amounts as is necessary to ensure that the net amount actually
received by Lender or holder of each Note will equal the full amount Lender
or such holder would have received had no such withholding or deduction
been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
Borrower will promptly pay such additional amounts (including any penalties,
interest or expenses (collectively, "Penalties"); provided, however, that
Borrower shall not be responsible for the payment or reimbursement of any such
item to the extent such item is due to the action or inaction of the Lender) as
is necessary in order that the net amount received by such Person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had not such Taxes been
asserted. Lender agrees that in the event any refunds or rebates of any Taxes
paid by Borrower for the account of such Lender are received by such Lender
(collectively "Refunds") or Borrower shall pay any amount as Taxes for the
account of Lender which is later determined not to constitute Taxes
(collectively "Overpayments"), the Lender shall promptly pay all Refunds and
Overpayments to Borrower. Further, Lender agrees to notify Borrower promptly of
any Refunds or Overpayments of which it becomes aware. Lender shall cooperate
reasonably with Borrower's inquiries regarding possible Refunds and Overpayments
(but in no event shall Lender be required to take any action which is
inconsistent with its internal policies or which would otherwise be adverse to
Lender).
(b) If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes or Penalties that may become payable by Lender as a result of
any such failure.
4.13 Collateral
(a) As security for repayment of all of the Loans and all other
Obligations, Borrower shall grant to Lender a first and exclusive Lien, subject
only to the Permitted Prior Liens (i) in all of its equipment, fixtures,
furnishings and wares now owned or hereafter located at the Restaurants, and
proceeds thereof; and (ii) on its fee interest in the real property legally
described on Schedule 4.13 ("Fee Property"), together with all improvements and
fixtures now owned or hereafter used or acquired by Borrower in the ownership,
operation or maintenance of the Fee Property and the restaurant located or to be
located thereon.
(b) In the event a Qualifying IPO does not occur by June 30, 2002, Borrower
shall grant to Lender a first and exclusive lien on its fee or leasehold
interest, as the case may
CREDIT AGREEMENT PAGE 20
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be, subject only to the Permitted Prior Liens in the various parcels of real
property on which the Restaurants are located and, in connection therewith:
(i) Lender shall review and approve title to the Restaurant's premises
and approve any lease of said premises. As to each lease of the
Restaurant's premises, Lender may require in its discretion, without
limitation, that:
(1) Borrower shall be the owner and holder of the lessee's
interest, free and clear of any Liens, except for the Permitted Prior
Liens.
(2) The landlord shall own the fee interest in the leased
premises free and clear of any Liens, provided, that if any Liens
exist the holder or holders thereof shall execute and deliver to
Lender such consent and estoppel instruments as Lender may reasonably
require; and further provided, that any underlying leases be approved
by Lender in its reasonable discretion and the holder or holders of
the lessor's interest in any such lease shall execute and deliver to
Lender such consent and estoppel instruments as Lender may require in
its discretion;
(ii) Lender shall receive a Deed of Trust encumbering Borrower's
interest in the Restaurant's premises and such Deed of Trust, shall be
recorded or perfected in the manner required by state and local law to
establish a valid first priority Lien, superior to the rights of any third
party or any subsequent lienholder, except for the Permitted Prior Liens;
(iii) Each such Deed of Trust against a Restaurant shall be insured by
a title insurance policy acceptable in form and substance to Lender issued
by a title insurance company of Lender's choice in an amount and with such
endorsements as Lender deems appropriate in its sole discretion;
(iv) Lender shall be granted, by instruments satisfactory to Lender, a
perfected first priority security interest (except for the Permitted Prior
Liens) in all furniture, furnishings, equipment, and leasehold improvements
located at the Restaurant;
(v) Borrower shall execute such other documents as Lender may
reasonably require, such as an agreement supplementing this Agreement with
terms and conditions with specific application to the Restaurant.
(vi) Lender may require in its discretion that it receive a legal
opinion of Borrower's counsel with respect to each Deed of Trust covering a
Restaurant addressing such matters as Lender may require;
(vii) Lender shall have received insurance certificates and lender
loss payable endorsements in forms satisfactory to Lender to the effect set
forth in Section 6.5 with respect to the Restaurant;
CREDIT AGREEMENT PAGE 21
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(viii) Lender shall have received an environmental questionnaire
satisfactory to Lender, together with the results of any additional
environmental testing required by Lender satisfactory to Lender with
respect to such Restaurant, and a certificate and indemnity regarding
hazardous substances in form and substance satisfactory to Lender with
respect to each such Restaurant; and
(ix) Lender shall have received a questionnaire and disclosure
statement regarding compliance by such Restaurant with the Americans with
Disabilities Act of 1990, all state and local laws or ordinances relating
to handicapped access or any statute, law, regulation, ordinances, or order
of Governmental Bodies or order of decree of any court adopted or enacted
with respect thereto in a form satisfactory to Lender, together with a
certificate of compliance and indemnity regarding access laws in form and
substance satisfactory to Lender with respect to each such Restaurant.
(c) Lender acknowledges that, with respect to taking leasehold mortgages
against Borrower's leasehold interests in certain of the real property on which
Restaurants are located ("Leased Sites"), the lease with respect to such a
Leased Site may require the consent of the landlord to a leasehold mortgage and
that the landlord may not be obligated to give such consent under the terms of
the lease. In such a case, Borrower shall exercise its reasonable best efforts
to obtain the requisite landlord consent and shall inform Lender in writing of
its efforts to obtain such consent and the landlord's responses. If, after
consultation with Borrower, Lender determines, in its sole discretion, that
Borrower has exercised its best efforts to obtain such consent and that such
consent is not obtainable from such landlord, then a leasehold mortgage on such
Leased Site shall not be required. In the event seven or more leasehold
mortgages on Leased Sites are not obtained by October 31, 2002 and a Qualifying
IPO has not occurred, then Lender may declare an Event of Default hereunder.
4.14 Application of Payments
All payments (other than voluntary prepayments) made by Borrower hereunder
shall be credited, to the extent of the amount thereof, in the following manner:
(i) first, against fees, expenses, and indemnities due hereunder; (ii) second,
against accrued interest on all amounts in default; (iii) third, against accrued
interest on the Loans not in default; and (iv) fourth, against principal of
Loans; provided, however, that if an Event of Default has occurred and is
continuing at the time of such payment, then Lender shall be entitled to apply
the payment in the manner it shall deem appropriate.
ARTICLE 5. CONDITIONS PRECEDENT
5.1 Conditions Precedent for Initial Loans
The obligation of Lender to make a Loan hereunder on the Closing Date is
subject to the satisfaction, or waiver by Lender, immediately prior to or
concurrently with the making of such Loan, of the following conditions
precedent:
CREDIT AGREEMENT PAGE 22
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(a) The Lender shall have received counterparts of this Agreement, duly
executed by the respective parties hereto.
(b) Lender shall have received the Revolving Credit Note, duly executed and
delivered by Borrower.
(c) Lender shall have received, duly executed and delivered by Borrower, a
security agreement ("Security Agreement") in the form attached hereto as Exhibit
C, granting to Lender a first priority security interest in all of Borrower's
equipment, fixtures, furnishings, wares, and fixtures, located at, the
Restaurants, now owned or hereafter acquired, together with the proceeds
thereof.
(d) Lender shall have received, duly executed and delivered by Parent and
each Subsidiary (other than Inactive Subsidiaries and the Liquor License
Subsidiaries), an unconditional guaranty in the form attached hereto as Exhibit
D (for Parent) and in the form attached hereto as Exhibit D-1 (for each such
Subsidiary), whereby Parent and each such Subsidiary jointly, severally, and
unconditionally guarantees payment of the Obligations.
(e) Lender shall have received, duly executed and delivered by Western
Franchise Development, Inc., a subsidiary security agreement in the form
attached hereto as Exhibit E, granting to Lender a first priority security
interest in all of such Loan Party's equipment, fixtures, furnishings, wares,
fixtures, located at the Restaurants, now owned or hereafter acquired, together
with the proceeds thereof.
(f) Lender shall have received a landlord waiver from each landlord of each
leased Restaurant in form and substance reasonably acceptable to Lender.
(g) Lender shall have received, duly executed and delivered by Borrower,
such financing statements and other documents reasonably deemed necessary by
Lender to perfect the security interests granted to Lender.
(h) Lender shall have received from counsel for Borrower, opinions
addressed to Lender and each dated as of the Closing Date, substantially in the
form attached hereto as Exhibit F.
(i) No Default or Event of Default hereunder shall exist, and after having
given effect to the requested Loan, no Default or Event of Default shall exist.
(j) All representations and warranties of any of the Loan Parties contained
in any of the Loan Documents or otherwise made in writing to Lender in
connection herewith shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on and
as of the date of the initial Loan.
(k) All corporate proceedings of each Loan Party shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of all corporate proceedings, that
Lender has requested in
CREDIT AGREEMENT PAGE 23
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connection therewith, such documents where appropriate to be certified by proper
corporate authorities or Governmental Bodies. Borrower shall provide Lender with
the following documents prior to or upon the execution of this Agreement:
(i) Copies of the articles of incorporation and bylaws of each Loan
Party, together with all amendments thereto, certified by an officer of
such Loan Party to be true and complete;
(ii) Certificates of authority for each Loan Party in the state of its
formation and in each state where any of the Collateral owned by such Loan
Party is located dated within thirty (30) days of the date of the execution
of this Agreement; and
(iii) Certified resolutions of the directors of each Loan Party and
incumbency certificates in the form and substance acceptable to Lender.
(l) Lender shall have received such evidence reasonably deemed necessary by
Lender that Lender's security interests in the Collateral constitute first
priority and exclusive security interests, except for the Permitted Prior Liens.
(m) All Indebtedness of Borrower (other than the existing Indebtedness
identified in Schedule 5.1(m) annexed hereto) shall have been paid in full,
redeemed or defeased, or purchased by Lender, any commitments to lend thereunder
shall have been terminated, all security interests created to secure the
obligations arising in connection therewith shall have been terminated or
effectively assigned to Lender, and Borrower shall have delivered to Lender
UCC-3 termination statements or assignments (or comparable forms) and any and
all other instruments of release, satisfaction, assignment and/or reconveyance
(or evidence of the filing thereof) as reasonably may be necessary or advisable
to terminate or assign to Lender all of such security interests and all other
security interests in the Collateral.
(n) Borrower shall obtain all consents deemed by Lender to be necessary or
advisable in connection with the transactions contemplated by the Loan Documents
and in the continued operation of the business conducted by Borrower, including
without limitation consent from the lenders with respect to the Finova Debt, and
each consent shall be in full force and effect and in form and substance
reasonably satisfactory to Lender.
(o) Lender shall have received a Notice of Borrowing from Borrower for the
initial Loan.
(p) Lender shall have received insurance certificates and lender loss
payable endorsements on casualty/property loss insurance in forms reasonably
satisfactory to Lender to the effect set forth in Section 6.5 hereof.
(q) There shall have been no material adverse change in the financial
condition of Borrower subsequent to December 30, 2001.
CREDIT AGREEMENT PAGE 24
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(r) Lender shall have received the loan fees as provided in Section 2.7.
(s) Lender shall have received payment of all fees and expenses in
accordance with Section 10.2
(t) Lender shall have received a Deed of Trust encumbering Borrower's
interest in the Fee Property located in Prescott, Arizona and such Deed of Trust
shall have been recorded or perfected in the manner required by state and local
law to establish a valid first priority Lien, superior to the rights of any
third party or any subsequent lienholder except for the Liens described in
clauses (a) and (f) of the definition of Permitted Encumbrances and except as
otherwise approved by Lender in writing.
(u) The Deed of Trust against the Fee Property located in Prescott, Arizona
shall be insured by a title insurance policy acceptable in form and substance to
Lender issued by a title insurance company of Lender's choice in an amount and
with such endorsements as Lender deems appropriate in its sole discretion.
(v) Lender shall have received a certificate and indemnity regarding
hazardous substances in form and substance satisfactory to Lender with respect
to the Fee Property located in Prescott, Arizona.
(w) Lender shall have received copies of all permits required for
construction of the Restaurant on the Fee Property located in Prescott, Arizona.
5.2 Conditions Precedent to All Loans, Etc.
The obligation of Lender to make any Loan, is subject to the fulfillment,
to the satisfaction of Lender, of the following conditions precedent on the date
such Loan is made:
(a) The conditions set forth in Section 5.1 shall have been previously
satisfied or waived in writing by Lender, and Lender shall have received
evidence reasonably satisfactory to Lender of satisfaction thereof.
(b) Lender shall have received for each requested Loan, a Notice of
Borrowing in form and substance reasonably satisfactory to Lender.
(c) There shall be executed and delivered to Lender such further
instruments, agreements, opinions, and documents, as may be reasonably necessary
or proper in the reasonable opinion of Lender to confirm the obligations of
Borrower to Lender hereunder, the grant of security therefor, and the proper use
of the proceeds of all Loans.
(d) The representations and warranties contained herein and in the other
Loan Documents shall be true, correct and complete in all material respects on
and as of the Funding Date to the same extent as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and warranties
shall have been true, correct and complete in all material respects on and as of
such earlier date.
CREDIT AGREEMENT PAGE 25
[EXECUTION COPY]
(e) No Default or Event of Default shall have occurred and be continuing
and after having given effect to the requested Loan, no Default or Event of
Default shall exist.
(f) To the extent not previously delivered, all other documents,
agreements, and instruments from or with respect to Borrower or any other Person
that may be called for hereunder shall be duly executed and delivered to Lender,
including but not limited to all documents, agreements, and instruments
reasonably deemed necessary by Lender to perfect its security interest in
Collateral acquired after the date of this Agreement. For the purposes of this
Agreement, the waiver of delivery of any document, agreement, or instrument from
or with respect to Borrower or any other Person does not constitute a continuing
waiver with respect to the obligation to fulfill the conditions precedent to the
making or renewal of each Loan hereunder.
(g) There shall have been no material adverse change in the financial
condition of Borrower and its Subsidiaries subsequent to December 30, 2001.
(h) Borrower and each Loan Party is Solvent.
5.3 Conditions for Removal of Limitation on Revolving Credit Loans.
The limitation on Revolving Credit Loans set forth in subsection 2.1(c)
herein shall be of no further force or effect upon written notice from Lender to
Borrower that the following conditions precedent have been satisfied in Lender's
sole discretion:
(a) The conditions set forth in Sections 5.1 and 5.2 shall have been
previously satisfied or waived in writing by Lender, and Lender shall have
received evidence reasonably satisfactory to Lender of satisfaction thereof.
(b) Lender shall have received a Deed of Trust encumbering Borrower's
interest in the Fee Property located in Peoria, Arizona and such Deed of Trust
shall have been recorded or perfected in the manner required by state and local
law to establish a valid first priority Lien, superior to the rights of any
third party or any subsequent lienholder except for the Liens described in
clauses (a) and (f) of the definition of Permitted Encumbrances and except as
otherwise approved by Lender in writing.
(c) The Deed of Trust against the Fee Property located in Peoria, Arizona
shall be insured by a title insurance policy acceptable in form and substance to
Lender issued by a title insurance company of Lender's choice in an amount and
with such endorsements as Lender deems appropriate in its sole discretion.
(d) Lender shall have received a certificate and indemnity regarding
hazardous substances in form and substance satisfactory to Lender with respect
to the Fee Property located in Peoria, Arizona.
(e) Lender shall have received copies of all permits required for
construction of the Restaurant on the Fee Property located in Peoria, Arizona.
CREDIT AGREEMENT PAGE 26
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ARTICLE 6. AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that so long as this Agreement is in
effect, any Note remains outstanding and unpaid, or any Obligation remains
outstanding, unless Lender shall otherwise give prior written consent, Borrower
shall perform and shall cause each of its Subsidiaries to perform all covenants
in this Article 6.
6.1 Financial Information, etc.
Borrower will furnish, or cause to be furnished, to the Lender, copies of
the following financial statements, reports, notices and other information:
(a) as soon as available and in any event within thirty (30) days after the
end of each Fiscal Period, Consolidated balance sheets of the Parent and its
Subsidiaries as of the end of such Fiscal Period and Consolidated statements of
income and cash flow of the Parent and its Subsidiaries for such Fiscal Period
and for the period commencing at the end of the previous Fiscal Year and ending
with the end of such Fiscal Period, in each case certified by the chief
financial officer or treasurer of the Parent;
(b) as soon as available and in any event within one hundred twenty (120)
days after the end of each Fiscal Year of the Parent, a copy of the annual audit
report for such Fiscal Year for the Parent and its Subsidiaries, including
therein consolidated balance sheets of the Parent and its Subsidiaries as of the
end of such Fiscal Year and consolidated statements of income and cash flow of
the Parent and its Subsidiaries for such Fiscal Year certified, in the case of
each consolidated balance sheet and consolidated statement of income and cash
flow, without any Impermissible Qualification, in a manner reasonably acceptable
to the Lender by independent public accountants of nationally recognized
standing, together with a certificate from such accountants containing a
computation of, and showing compliance with, each of the financial ratios and
restrictions contained in Sections 7.3, 7.15, 7.16, 7.17 and 7.18, and to the
effect that, in making the examination necessary for the signing of such annual
report by such accountants, they have not become aware of any Default or Event
of Default that has occurred and is continuing, or, if they have become aware of
such Default or Event of Default, describing such Default or Event of Default
and the steps, if any, being taken to cure it;
(c) as soon as available and in any event within forty-five (45) days after
the end of each Fiscal Quarter, Consolidated balance sheets of the Parent and
its Subsidiaries as of the end of such Fiscal Quarter and Consolidated
statements of income and cash flow of the Parent and its Subsidiaries for such
Fiscal Quarter and for the period commencing at the end of the previous Fiscal
Year and ending with the end of such Fiscal Quarter, in each case certified by
the chief financial officer or treasurer of the Parent;
(d) as soon as available and in any event within forty-five (45) days after
the end of each Fiscal Quarter (including the last Fiscal Quarter of each Fiscal
Year), a certificate in form and substance acceptable to Lender ("Compliance
Certificate"), executed by the chief financial officer or treasurer of the
Borrower, showing (in reasonable detail and with
CREDIT AGREEMENT PAGE 27
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appropriate calculations and computations in all respects reasonably
satisfactory to the Lender) compliance (or noncompliance) with the covenants set
forth in Sections 7.3, 7.15, 7.16, 7.17 and 7.18;
(e) as soon as available and in any event within forty-five (45) days after
the end of each Fiscal Quarter, a statement of income and cash flow for each
Restaurant for such Fiscal Quarter, in each case certified by the chief
financial officer or treasurer of the Borrower;
(f) as soon as possible and in any event within three (3) Business Days
after the occurrence of each Default, a statement of the chief financial officer
or treasurer of the Borrower setting forth details of such Default and the
action which the Borrower has taken and proposes to take with respect thereto;
(g) as soon as possible and in any event within three (3) Business Days
after (x) the occurrence of any material adverse development with respect to any
litigation, action, proceeding, or labor controversy described in Section 8.5 or
(y) the commencement of any labor controversy, litigation, action or proceeding
of the type described in Section 8.5, notice thereof and copies of all
documentation relating thereto;
(h) promptly after the sending or filing thereof, copies of all reports
which the Parent, Borrower or any of its Subsidiaries sends to its security
holders generally and (i) all reports and registration statements which the
Parent, Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange and (ii) copies of all
notices and documents sent to any holder of Indebtedness for borrowed money
owing by the Parent, Borrower or any of its Subsidiaries (other than routine
notices sent in the ordinary course of business such as borrowing requests,
conversion notices and the like);
(i) immediately upon becoming aware of the institution of any steps by the
Borrower or any other Person to terminate any Plan, or the failure to make a
required contribution to any Plan if such failure is sufficient to give rise to
a Lien under Section 302(f) of ERISA, or the taking of any action with respect
to a Plan which could result in the requirement that the Borrower furnish a bond
or other security to the PBGC or such Plan, or the occurrence of any event with
respect to any Plan which could result in the incurrence by the Borrower of any
material liability, fine or penalty, or any material increase in the contingent
liability of the Borrower with respect to any post-retirement welfare plan
benefit, notice thereof and copies of all documentation relating thereto;
(j) as soon as reasonably practicable after the Borrower obtains knowledge
of any treatment, storage, processing, discharge, spill or other disposition by
the Borrower or any Subsidiary of the Borrower of any substance defined as
Hazardous Materials, at any Facility in violation of any applicable
Environmental Law; the making of a claim or demand against the Borrower or any
Subsidiary of the Borrower based on alleged damage to health caused by any
Hazardous Materials; or any charge brought by any Governmental Body accusing the
Borrower or any Subsidiary of the Borrower with improperly using, handling,
CREDIT AGREEMENT PAGE 28
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storing discharging or disposing of any such Hazardous Materials or with causing
or permitting any pollution of any body of water; in any such case which has a
reasonable possibility of giving rise to a Material Adverse Effect, the Borrower
will inform the Lender, of the nature of such violation, claim, demand or charge
and will provide such additional information as may be reasonably requested by
the Lender;
(k) as soon as available, a calendar identifying each Fiscal Period of each
Fiscal Year;
(l) as soon as possible and in any event within three (3) Business Days
after Borrower distributes funds to Parent to cover expenses incurred in
connection with a Qualified IPO, a written summary of the nature and amount of
such expenses;
(m) such other information respecting the condition or operations,
financial or otherwise, including, without limitation, consolidating financial
information, of the Parent, Borrower or any of the Borrower's Subsidiaries, as
the Lender may from time to time reasonably request.
6.2 Licenses and Permits
Borrower will, and will cause each of its Subsidiaries to, maintain all
Governmental Approvals and all related or other material agreements necessary
for it to operate its business, and at all times comply with all Applicable Laws
relating to the operations, facilities, or activities of Borrower or its
Subsidiaries, except where the failure to do any of the foregoing could not
reasonably be expected to result in a Material Adverse Effect.
6.3 Maintenance of Properties
Borrower will, and will cause each of its Subsidiaries to, keep its
properties in good repair and in good working order and condition, in a manner
consistent with past practices and comparable to industry standards, ordinary
wear and tear excepted; from time to time make all appropriate and proper
repairs, renewals, replacements, additions, and improvements thereto; and keep
all equipment that may now or in the future be subject to compliance with any
Applicable Laws in material compliance with such Applicable Laws.
6.4 Payment of Charges
Borrower will, and will cause each of its Subsidiaries to, duly pay and
discharge all material (a) Taxes imposed on or against it or its property or
assets, or upon any property leased by it, prior to the date on which penalties
attached thereto, unless and to the extent only that such Taxes, after written
notice having been given to Lender, are being contested in good faith and by
appropriate proceedings; (b) claims allowed by Applicable Laws, whether for
labor, materials, rentals, or anything else, which could, if unpaid, become a
Lien upon its property or assets or its outstanding capital stock or adversely
affect its facilities or operations, (unless and to the extent only that the
validity thereof is being contested in good faith and by appropriate
proceedings, after written notice having been given to Lender);
CREDIT AGREEMENT PAGE 29
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(c) trade bills in accordance with the terms thereof or generally prevailing
industry standards; and (d) other Indebtedness heretofore or hereafter incurred
or assumed by it, unless such Indebtedness be renewed or extended. In the event
any charge is being contested by Borrower or its Subsidiaries as allowed above,
Borrower shall establish adequate reserves against possible liability therefor.
6.5 Insurance
(a) Borrower will, and will cause each of its Subsidiaries to, maintain
insurance upon its properties and business insuring against such risks as Lender
shall reasonably determine from time to time. Borrower and its Subsidiaries
shall cause each insurance policy issued in connection with the Restaurants to
provide and shall cause the insurer issuing such policy to certify to Lender
that (i) if such insurance is proposed to be canceled or materially changed for
any reason whatsoever, such insurer will promptly notify Lender, and such
cancellation or change shall not be effective as to Lender for thirty (30) days
after receipt by Lender of such notice, unless the effect of the change is to
extend or increase coverage under the policy; and (ii) Lender will have the
right at its election to remedy any default in the payment of premiums within
thirty (30) days of notice from the insurer of the default. Each such policy of
casualty insurance covering damage to or loss of property with respect to the
Restaurants shall name Lender as the loss payee thereunder for all losses.
(b) From time to time upon request by Lender, Borrower will promptly
furnish or cause to be furnished to Lender evidence, in form and substance
reasonably satisfactory to Lender, of the maintenance of all insurance,
indemnities, or bonds required by this Section 6.5 or by any license, lease, or
other agreement to be maintained, including but not limited to such originals or
copies as Lender may request of policies, certificates of insurance, riders,
assignments, and endorsements relating to the insurance and proof of premium
payments.
6.6 Maintenance of Records
Borrower will, and will cause each of its Subsidiaries to, keep at all
times books of account and other records in which full, true, and correct
entries will be made of all dealings or transactions in relation to its business
and affairs to the extent required on a consolidated basis by GAAP.
6.7 Inspection
Upon reasonable advance notice by Lender, Borrower will, and will cause
each of its Subsidiaries to, allow any representative of Lender to visit and
inspect any of its properties, to examine its books of account and other records
and files, to make copies thereof and to discuss the affairs, business,
finances, and accounts of Borrower and its Subsidiaries with their officers,
employees, and accountants, all at such reasonable times and as often as Lender
may reasonably desire; provided that no advance notice is required if a Default
or Event of Default has occurred and is continuing.
CREDIT AGREEMENT PAGE 30
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6.8 Environmental Disclosure and Inspection
(a) Borrower shall, and shall cause each of its Subsidiaries to, (i)
exercise reasonable due diligence in order to comply with all material
Environmental Laws applicable to them and (ii) use all reasonable efforts to
cause all tenants under any leases or occupancy agreements affecting any portion
of the Facilities.
(b) Borrower shall promptly advise Lender in writing and in reasonable
detail of (i) any Release of any Hazardous Materials required to be reported to
any Governmental Body under any applicable Environmental Laws, (ii) any and all
written communications with respect to any Environmental Claims that have a
reasonable possibility of giving rise to a Material Adverse Effect or with
respect to any Release of Hazardous Materials required to be reported to any
Governmental Body, and (iii) any remedial action taken by Borrower or any other
Person in response to (x) any Hazardous Materials on, under or about any
Facility, the existence of which has a reasonable possibility of resulting in an
Environmental Claim having a Material Adverse Effect, or (y) any Environmental
Claim that could have a Material Adverse Effect.
(c) Borrower shall promptly notify Lender of (i) any proposed acquisition
of stock, assets, or property by Borrower or any of its Subsidiaries and (ii)
any proposed action to be taken by Borrower or any of its Subsidiaries to
commence manufacturing, industrial or other similar operations other than those
operations in which Borrower and its Subsidiaries currently engage that could in
either such case reasonably be expected to expose Borrower or any of its
Subsidiaries to, or result in, Environmental Claims that could reasonably be
expected to have a Material Adverse Effect.
(d) Borrower shall, at its own expense, provide copies of such documents or
information as Lender may reasonably request in relation to any matters
disclosed pursuant to this Section 6.8.
6.9 Borrower's Remedial Action Regarding Hazardous Materials
Borrower shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on or under any Facility required by any applicable Environmental Laws
and Governmental Approvals unless the failure to so comply could not reasonably
be expected to have a Material Adverse Effect. In the event Borrower or any of
its Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on or under any Facility, Borrower or such Subsidiary, shall conduct
and complete such remedial action in material compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local Governmental Bodies except when, and only to the
extent that, Borrower's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation or discharge of any Hazardous Materials,
or the legal authority for any such policies, orders, and directives, is being
contested in good faith by Borrower or such Subsidiary.
CREDIT AGREEMENT PAGE 31
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6.10 Further Assurances; Financing Statements; Appraisals
(a) At any time or from time to time upon the request of Lender, Borrower
will, and will cause each of its Subsidiaries to, at its expense, promptly
execute, acknowledge and deliver such further documents and do such other acts
and things as Lender may reasonably request in order to effect fully the
purposes of the Loan Documents and to provide for payment of the Obligations in
accordance with the terms of this Agreement, the Notes and the other Loan
Documents. In furtherance and not in limitation of the foregoing, Borrower shall
take, and cause each of its Subsidiaries to take, such actions as Lender may
reasonably request from time to time (including, without limitation, the
execution and delivery of guaranties by Parent and Subsidiaries of Parent,
security agreements, pledge agreements, mortgages, deeds of trust, stock powers,
financing statements and other documents, the filing or recording of any of the
foregoing, the obtaining of title insurance (in the event a Qualifying IPO does
not occur by June 30, 2002 and leasehold deeds of trust are required pursuant to
subsection 4.13(b)) with respect to any of the foregoing that relates to an
interest in real property, and the delivery of stock certificates and other
collateral with respect to which perfection is obtained by possession) to ensure
that the Obligations are secured by substantially all of the assets of Borrower
and its Subsidiaries consisting of equipment, fixtures, furnishings, wares and
leasehold improvements located at or arising from the operation of the
Restaurants and the Fee Property and guarantied by Parent and each Subsidiary of
Borrower (other than Inactive Subsidiaries and the Liquor License Subsidiaries).
(b) Borrower hereby authorizes Lender to file one or more financing
statements or continuation statements thereto covering all Collateral.
(c) In the event a Qualifying IPO does not occur by June 30, 2002, Lender,
at Borrower's sole cost and expense, may order and obtain appraisals of the Fee
Property by an appraiser acceptable to Lender.
6.11 Corporate Existence
Borrower will, and will cause each of its Subsidiaries to, maintain and
preserve its corporate existence, except that (a) any Subsidiary of Borrower may
merge or consolidate with any other Subsidiary of Borrower or may merge into
Borrower and (b) the Inactive Subsidiaries may be liquidated and dissolved in
accordance with the terms of Section 6.18 herein.
6.12 Notice of Disputes and Other Matters
Borrower will, and will cause each of its Subsidiaries to, promptly give
written notice to Lender of:
(a) Any citation, order to show cause or other legal process or order that
could reasonably be expected to have a Material Adverse Effect, directing it to
become a party to or to appear at any proceeding or hearing by or before any
Governmental Body that has
CREDIT AGREEMENT PAGE 32
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granted to it any Governmental Approval, and include with such notice a copy of
any such citation, order to show cause, or other legal process or order;
(b) Any (i) refusal, denial, threatened denial, or failure by any
Governmental Body to grant, issue, renew, or extend any material Governmental
Approval; (ii) proposed or actual revocation, termination, or modification
(whether favorable or adverse) of any material Governmental Approval by any
Governmental Body; (iii) dispute or other action which could reasonably be
expected to have a Material Adverse Effect with regard to any Governmental
Approval by any Governmental Body; (iv) notice from any Governmental Body of the
imposition of any material fines or penalties or forfeitures; or (v) threats or
notice with respect to any of the foregoing or with respect to any proceeding or
hearing that might result in any of the foregoing;
(c) Any dispute involving more than $100,000 concerning, or any threatened
nonrenewal or termination of, any lease for any Restaurant;
(d) Any actions, proceedings, or unasserted possible claims of which it may
have notice that are probable of assertion in which (i) the amount involved is
$100,000 or more, or (ii) the claim is not solely a claim for monetary damages,
and could, if adversely determined, reasonably be expected to have a Material
Adverse Effect;
(e) Any notices of default or demands for payment or like notices served or
sent by any holder of any Indebtedness or Subordinated Debt to or upon Borrower;
(f) Any change in the positions of any Executive Officer of Borrower;
(g) All matters materially and adversely affecting the value,
enforceability or collectability of any material portion of its property subject
to any Lien granted to Lender, or any of its other assets, if such matters could
reasonably be expected to have a Material Adverse Effect; or
(h) Any material adverse change in the relationship between any of Borrower
and its Subsidiaries and any of its suppliers or customers which could
reasonably be expected to have a Material Adverse Effect.
6.13 Exchange of Notes
Subject to receiving appropriate indemnity from Lender, Borrower will upon
receipt of a written notice of loss, theft, destruction, or mutilation of any of
the Notes, and upon surrendering such Notes for cancellation if mutilated,
execute and deliver a new Note or a Note of like tenor in lieu of such lost,
stolen, destroyed, or mutilated Note. Any Notes issued pursuant to this Section
6.13 shall be dated so that neither gain nor loss of interest shall result
therefrom.
CREDIT AGREEMENT PAGE 33
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>
6.14 Maintenance of Liens
Except for Permitted Encumbrances, Borrower will, and will cause each of
its Subsidiaries to, at all times maintain the liens and security interests
provided under or pursuant to this Agreement and the other Loan Documents as
valid and perfected first Liens on the property and assets intended to be
covered thereby. Except as contemplated under Section 7.4, Borrower shall take
all action reasonably requested by Lender necessary to assure that Lender has
valid and exclusive Liens on all Collateral.
6.15 Other Agreements
Borrower will, and will cause each of its Subsidiaries to, comply with all
covenants and agreements set forth in or required pursuant to any of the other
Loan Documents to which it is a party.
6.16 Access Law Disclosure and Inspection
(a) Borrower shall, and shall cause each of its Subsidiaries to, exercise
all due diligence in order to comply and use reasonable efforts to cause all
tenants under any leases or occupancy agreements affecting any portion of the
Facilities.
(b) Borrower shall promptly advise Lender in writing and in reasonable
detail of (i) any claim by any Person required to be reported to any federal,
state or local governmental or regulatory agency under any applicable Access
Laws known to any Executive Officer, (ii) any and all written communications
with respect to any such claims that could reasonably be expected to have
Material Adverse Effect, (iii) any remedial action taken by Borrower or any
other Person in response to claim that could reasonably be expected to have a
Material Adverse Effect, and (iv) any request for information from any
Governmental Body that states that such Governmental Body is investigating
whether Borrower or any of its Subsidiaries may not be in compliance with Access
Laws known to any Executive Officer.
(c) Borrower shall, at its own expense, provide copies of such documents or
information as Lender may reasonably request in relation to any matters
disclosed pursuant to this Section 6.16.
6.17 Borrower's Remedial Action Regarding Access Law Compliance
Borrower shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in order to comply with
all applicable Access Laws and Governmental Approvals unless the failure to so
comply could not reasonably be expected to have a Material Adverse Effect. In
the event Borrower or any of its Subsidiaries undertakes any remedial action
with respect to any Facility, Borrower, or such Subsidiary, shall conduct and
complete such remedial action in material compliance with all applicable Access
Laws, and in accordance with the policies, orders and directives of all
Governmental
CREDIT AGREEMENT PAGE 34
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Bodies except when, and only to the extent that, Borrower's or such Subsidiary's
liability for such noncompliance is being contested in good faith by Borrower or
such Subsidiary.
6.18 Inactive Subsidiaries
On or prior to December 31, 2002, Borrower shall (i) cause each Inactive
Subsidiary to be liquidated and dissolved in accordance with Applicable Laws and
(ii) deliver to Lender evidence reasonably satisfactory to Lender of each such
liquidation and dissolution, including without limitation, copies, certified by
the applicable Governmental Body, of all documents filed with such Governmental
Body, to effect each such liquidation and dissolution.
ARTICLE 7. NEGATIVE COVENANTS
Borrower hereby covenants and agrees that so long as this Agreement is in
effect, any Note remain outstanding or unpaid, or any Obligation remains
outstanding, unless Lender shall otherwise give prior written consent, Borrower
shall perform and shall cause each of its Subsidiaries to perform, all covenants
in this Article 7.
7.1 Restricted Payments Etc.
On and at all times after the Closing Date:
(a) Borrower will not declare, pay or make any dividend or distribution (in
cash, property or obligations) on any Securities (now or hereafter outstanding)
of the Borrower (other than dividends or distributions payable in its common
stock or warrants to purchase its common stock or split-ups or reclassifications
of its stock into additional or other shares of its common stock) or apply, or
permit any of its Subsidiaries to apply, any of its funds, property or assets to
the purchase, redemption, sinking fund or other retirement of, or agree or
permit any of its Subsidiaries to purchase or redeem, any shares of any
Securities (now or hereafter outstanding) of Borrower; except (i) as necessary
to fund the operating expenses of Parent in an aggregate amount not to exceed
$100,000 in any Fiscal Year; (ii) prior to December 31, 2002, expenses incurred
in connection with the consummation of a Qualified IPO; and (iii) up to $325,000
in the aggregate to fund the cash requirements associated with the Parent's
loans to management in conjunction with the exercise stock options in Parent
prior to a Qualified IPO.
(b) Borrower will not, and will not permit any of its Subsidiaries to, (i)
make any payment of interest on any Subordinated Debt which would violate the
subordination provisions of the Subordination Agreement entered into with Lender
with respect to such Subordinated Debt or (ii) make any payment or voluntary or
mandatory prepayment of principal of, or redeem, purchase or defease, any
Subordinated Debt;
(c) Borrower will not, and will not permit any Subsidiary to, make any
deposit for any of the foregoing purposes set forth in clauses (a) and (b); and
CREDIT AGREEMENT PAGE 35
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(d) If any payment of principal, interest or any other amount is required
to be paid or is paid on the same day with respect to any Subordinated Debt, on
the one hand, and with respect to this Agreement or any other Loan Document, on
the other hand, then all such amounts paid or required to be paid with respect
to this Agreement or such other Loan Documents shall be paid in full in cash
before any payments are made with respect to the Subordinated Debt.
7.2 Transactions With Affiliates
Except for the transactions listed on Schedule 7.2, Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, except on
arm's length terms: (a) enter into any transaction in which an Affiliate shall
have any interest; (b) make any payment or agree to make any payment to any such
Affiliate; or (c) transfer or agree to transfer ownership or possession of any
of its business or assets, tangible or intangible, real, personal, or mixed, to
any Affiliate.
7.3 Other Indebtedness
Borrower shall not, and shall not permit any of its Subsidiaries to,
create, incur, assume, or suffer to exist, contingently or otherwise, any
Indebtedness except (a) Indebtedness represented by the Loan Documents; (b)
Subordinated Debt; (c) Indebtedness and Capital Leases disclosed on Schedule
5.1(m); (d) Indebtedness secured by purchase money security interests incurred
in connection with the purchase of capital assets and capitalized leases in each
case subject to compliance with Section 7.16; (e) trade accounts and other
current payables arising from the ordinary course of business, deferred income
taxes and judgments or orders for the payment of money to the extent such
judgments or orders do not result in an Event of Default pursuant to Section 9.1
or result in any Liens prohibited by Section 7.4; (f) Contingent Obligations
permitted by Section 7.18; and (g) other Indebtedness not to exceed $100,000 in
the aggregate outstanding at any time. Except as allowed in Section 7.4 herein,
none of the Indebtedness described in this Section 7.3 shall be secured by any
of the assets or rights of Borrower or its Subsidiaries.
7.4 Liens
Borrower shall not, and shall not permit any of its Subsidiaries to,
contract, create, incur, assume, or suffer to exist any Lien upon or grant any
interest in any of its property or assets whether now owned or hereafter
acquired, except for the Permitted Encumbrances.
7.5 Advances and Loans
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, except by Borrower or its Subsidiaries (other than
Inactive Subsidiaries and the Liquor License Subsidiaries) to or for the benefit
of Borrower or its Subsidiaries (other than Inactive Subsidiaries and the Liquor
License Subsidiaries): (a) lend money, make credit available (other than in the
ordinary course of business for such matters as advances to employees for
moving, travel and entertainment expenses, drawing accounts, and similar
CREDIT AGREEMENT PAGE 36
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expenditures), or lend property or the use thereof to any Person; (b) purchase
or repurchase the stock or Indebtedness or all or a substantial part of the
assets or properties of any Person; (c) except as to Indebtedness permitted by
Sections 7.3 or 7.18, guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly or by any instrument having the effect
of assuring any Person's payment, performance, or capability) the Indebtedness,
performance, obligations, stock, or dividends of any Person; or (d) agree to do
any of the foregoing. Notwithstanding the foregoing, Borrower and its
Subsidiaries may endorse negotiable instruments for deposit or collection in the
ordinary course of business.
7.6 Investments
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, except (a)
marketable securities issued or directly and unconditionally guaranteed by the
United States federal government or issued by any agency thereof and backed by
the full faith and credit of the United States, in each case maturing within one
year from the date of acquisition thereof; (b) marketable direct obligations
issued by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and, at the time of acquisition, having the
highest rating obtainable from either Standard & Poor's Corporation ("S&P") or
▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's"); (c) commercial paper maturing no
more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; and (d) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's, issued by
Lender or any commercial bank organized under the laws of the United States of
America or any state thereof or the District of Columbia having unimpaired
capital and surplus of not less than $100,000,000.
7.7 Liquidation and Sale of Assets
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, wind up, liquidate, or dissolve Borrower's or any of its
Subsidiaries' affairs; convey, sell, lease, or otherwise dispose of (or agree to
do any of the foregoing at any time) any of its material licenses, contracts, or
permits; sell all or a substantial part of its property or assets or sell any
part of its property or assets necessary for the conduct of its business as now
generally conducted or as proposed to be conducted, except (a) sales of
inventory in the ordinary course of business, (b) planned asset sales set forth
in Schedule 7.7, and (c) liquidation and dissolution of Inactive Subsidiaries in
accordance with Section 6.18 herein.
7.8 Consolidation and Merger
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction of merger or consolidation
with any Person or purchase, lease, or otherwise acquire all or a substantial
part of the property or assets of any other
CREDIT AGREEMENT PAGE 37
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Person, except that any Subsidiary of Borrower may merge or consolidate with any
other Subsidiary of Borrower or may merge into Borrower
7.9 Subsidiaries
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, form or acquire any Person or any portion thereof;
provided, however, Borrower may form or acquire any Person as a new wholly owned
Subsidiary provided that such new Subsidiary and deliver to Lender a Guaranty in
the form attached hereto as Exhibit D-1.
7.10 Type of Business
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, engage in any material line of business which is
substantially different from and not incidental or reasonably related to the
business in which Borrower and its Subsidiaries are presently engaged.
7.11 Change of Chief Executive Office or Name
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, change (a) its state of incorporation, (b) the location
of its chief executive office, (c) its name, or (d) the location of any of the
Collateral; without, in each case, (x) prior written notice to Lender and (y)
the execution, delivery, and filing (and payment of filing fees and taxes) of
all such documents as may reasonably be necessary or advisable in the opinion of
Lender to continue to perfect and protect the liens and security interests in
the Collateral.
7.12 Change in Documents
Borrower shall not, and shall not permit any of its Subsidiaries (other
than Inactive Subsidiaries) to, directly or indirectly, materially amend,
supplement, terminate or otherwise modify in any material way its articles of
incorporation delivered to Lender or executed in connection herewith.
7.13 Control
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into any agreement (other than management
agreements with existing Affiliates set forth on Schedule 7.2, employment
contracts, or the Shareholders Agreement) with any Person that confers upon such
Person the right or authority to control or direct a portion of the business or
assets of Borrower or any of its Subsidiaries.
7.14 Pension Plan
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, terminate or partially terminate any Plan now existing
or hereafter established for Borrower or any of its ERISA Affiliates or withdraw
from participation therein under
CREDIT AGREEMENT PAGE 38
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circumstances that result or could reasonably be expected to result in liability
in excess of $100,000 to the PBGC, to the fund by which the Plan is funded, or
to the employees (or their beneficiaries) for whom the Plan is or shall be
maintained; or permit any other event or circumstance to occur that results or
could result in liability to the PBGC in excess of $100,000 or a violation of
Section 302 of ERISA with respect to a Plan.
7.15 Maximum Cash Flow Leverage Ratio
Borrower shall not permit its Cash Flow Leverage Ratio for any Fiscal
Quarter ending on or after the Closing Date to exceed 4.0:1.0; provided,
however, that if a Qualifying IPO occurs, then the maximum Cash Flow Leverage
Ratio shall be 3.0:1.0 for each Fiscal Quarter ending after the Qualifying IPO.
7.16 Minimum Fixed Charge Coverage Ratio
Borrower shall not permit the Fixed Charge Coverage (a) for any Fiscal
Quarter ending on or after the Closing Date to be less than 1.15:1.00; provided
that in the event a Qualified IPO occurs, then for the Fiscal Quarter ending
December 29, 2002 and for each Fiscal Quarter thereafter, the Fixed Charge
Coverage shall not be less than 1.25:1.00.
7.17 Minimum Tangible Net Worth
Borrower shall not permits its Tangible Net Worth to be less than (a)
$5,000,000 at its Fiscal Quarter ending ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) $7,000,000 at its
Fiscal Quarter ending July 14, 2002, (c) $8,000,000 at its Fiscal Quarter ending
October 6, 2002 and (d) $9,000,000 at its Fiscal Quarter ending December 29,
2002 and at the end of each Fiscal Quarter thereafter; provided that each of the
foregoing amounts shall be increased by an amount equal to 90 percent of the net
proceeds of the Qualifying IPO and any follow-on offering or secondary offering.
7.18 Contingent Obligations
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or remain liable with respect to any Contingent
Obligation, except:
(i) Borrower and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.18 annexed
hereto; and
(ii) Borrower may become and remain liable with respect to Contingent
Obligations under guaranties in the ordinary course of business of the
obligations to landlords of Borrower's Subsidiaries (other than Inactive
Subsidiaries) and bonding requirements in connection with the development
and operation of restaurants; and
(iii) Interest Rate Agreements required to be maintained by Borrower
under the Finova Loan Agreement;
CREDIT AGREEMENT PAGE 39
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(iv) In addition to clauses (i), (ii) and (iii) above, Borrower and
its Subsidiaries may become and remain liable with respect to Contingent
Obligations under guaranties in the ordinary course of business of the
obligations to suppliers, , customers and licensees of Borrower and its
Subsidiaries in an aggregate amount not to exceed at any time $100,000.
7.19 Sale or Discount of Receivables
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable,
except neither Borrower nor any of its Subsidiaries shall be precluded from
compromising disputed or potentially uncollectible notes or accounts receivable.
7.20 Amendments of Documents Relating to Subordinated Debt
Borrower will not consent to any amendment, supplement or other
modification of any of the terms or provisions contained in, or applicable to,
any document or instrument evidencing or applicable to any Subordinated Debt.
7.21 Disposal of Subsidiary Stock
Neither Borrower nor Parent shall:
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity securities of any
of its Subsidiaries, except to qualify directors if required by Applicable
Law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity securities of any of its Subsidiaries (including such
Subsidiary), except to Borrower, another wholly owned Subsidiary of
Borrower, or to qualify directors if required by Applicable Law.
7.22 Fiscal Year
Borrower shall not change its Fiscal Year end from the last Sunday of
December of each calendar year.
7.23 Negative Pledges, Restrictive Agreements, etc.
Borrower will not, and will not permit any of its Subsidiaries to, enter
into any agreement (excluding this Agreement, any other Loan Document and the
Finova Loan Agreement as presently in effect) prohibiting (a) the creation or
assumption of any Lien for the benefit of the Lender upon its properties,
revenues or assets, whether now owned or hereafter acquired, or the ability of
Borrower or any Subsidiary to amend or otherwise modify this Agreement or any
other Loan Document or (b) the ability of any Subsidiary to
CREDIT AGREEMENT PAGE 40
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make any payments, directly or indirectly, to Borrower by way of dividends,
advances, repayments of loans or advances, reimbursements of management and
other intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the ability
of any such Subsidiary to make any payment, directly or indirectly, to Borrower.
7.24 Liquidity
Borrower shall not permit the sum of its cash and cash equivalents plus the
amount available to borrow under the Revolving Credit Commitment to be less than
$5,000,000 at the end of each Fiscal Quarter ending on or after the Closing
Date.
ARTICLE 8. REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to make the
Loans as herein provided, Borrower hereby makes the following representations,
covenants, and warranties to Lender, all of which shall survive the execution
and delivery of this Agreement and shall not be affected or waived by any
inspection or examination made by or on behalf of Lender:
8.1 Corporate Status
Borrower is a corporation organized and validly existing under the laws of
the state of Nevada. Each Loan Party is a corporation organized and validly
existing under the laws of the state of its incorporation. Borrower and each of
the Loan Parties has the corporate power and authority to own its property and
assets and to transact the business in which it is engaged or presently proposes
to engage. Borrower and each of the Loan Parties is qualified to do business in
all states in which it is doing business, except where the failure to so qualify
could not reasonably be expected to result in a Material Adverse Effect.
Borrower and each of the Loan Parties is not a "holding company" or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" as such terms are defined in the Public Utility Holding Company Act of
1935; nor is it an "investment company," or an "affiliated company," or a
"principal underwriter" of an "investment company," as such terms are defined in
the Investment Company Act of 1940.
8.2 Power and Authority
Borrower and each of the Loan Parties has the corporate power to execute,
deliver, and carry out the terms and provisions of this Agreement and each of
the Loan Documents to which it is a party and has taken all necessary corporate
action to authorize the execution, delivery, and performance of this Agreement
and the other Loan Documents, the borrowings hereunder, and the making and
delivery of the Notes and all Loan Documents delivered hereunder, in each case
as applicable to such Loan Party. This Agreement constitutes and the Notes and
other Loan Documents and instruments issued or to be issued hereunder, when
executed and delivered pursuant hereto, constitute or will constitute the
authorized, valid,
CREDIT AGREEMENT PAGE 41
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and legally binding obligations of the Loan Parties enforceable in accordance
with their respective terms.
8.3 No Violation of Agreements
Except as set forth in Schedule 8.3, Borrower and each of its Subsidiaries
is not in default under any material provision of any agreement to which it is a
party or in violation of any material provision of any Applicable Laws except,
in each case, where no Material Adverse Effect could reasonably be expected to
result therefrom. The execution and delivery of this Agreement, the Notes, the
other Loan Documents, and the instruments incidental hereto; the consummation of
the transactions herein or therein contemplated; and compliance with the terms
and provisions hereof or thereof (a) to Borrower's knowledge, will not violate
any material provision of any Applicable Law; (b) will not conflict with or
violate; result in any breach of any of the terms, covenants, conditions, or
provisions of; constitute a default under; or result in the creation or
imposition of (or the obligation to impose) any lien, charge, or encumbrance
upon any of the property or assets of Borrower or any of its Subsidiaries
pursuant to the terms of any material Governmental Approval, mortgage, deed of
trust, lease, agreement, or other instrument to which Borrower or any of its
Subsidiaries is a party, by which Borrower or any of its Subsidiaries may be
bound, or to which Borrower or any of its Subsidiaries may be subject where such
conflict, violation, default or lien could reasonably be expected to have a
Material Adverse Effect; and (c) will not violate any of the provisions of the
articles of incorporation of Borrower or any of its Subsidiaries. Except as
referenced in Section 8.4, no Governmental Approval is necessary (x) for the
execution of this Agreement, the making of the Notes, or the assumption and
performance of this Agreement or the Notes by Borrower or (y) for the
consummation by Borrower and its Subsidiaries of the transactions contemplated
by this Agreement including but not limited to the grant of the security
interests to Lender.
8.4 Recording and Enforceability
Neither the articles of incorporation, bylaws, nor other applicable
corporate documents of Borrower or any of its Subsidiaries require recording,
filing, registration, notice, or other similar action in order to insure the
legality, validity, binding effect, or enforceability against all Persons of
this Agreement, the Notes, or other Loan Documents executed or to be executed
hereunder, other than filings or recordings that may be required under the
Uniform Commercial Code, the applicable real property recording statutes with
respect to the Deeds of Trust.
8.5 Litigation
Except as set forth on Schedule 8.5 hereto, there are no actions, suits, or
proceedings pending or, to Borrower's knowledge, threatened against or affecting
Borrower or any of its Subsidiaries before any Governmental Body, which could
reasonably be expected to have a Material Adverse Effect. To Borrower's
knowledge, Borrower and its Subsidiaries, or any of them, are not in default
under any material provision of any Applicable Law or
CREDIT AGREEMENT PAGE 42
[EXECUTION COPY]
Governmental Approval of any Governmental Body, which could reasonably be
expected to have a Material Adverse Effect.
8.6 Good Title to Properties
Borrower and its Subsidiaries each has good and marketable title to, or a
valid leasehold interest in, its property and assets, subject to no Liens,
except those permitted under the provisions of Section 7.4 of this Agreement.
8.7 Licenses and Permits
All material Governmental Approvals with respect to the business of
Borrower and its Subsidiaries are, to Borrower's knowledge (a) duly and validly
issued by the respective Governmental Bodies, (b) in full force and effect, and
(c) valid. With regard to such Governmental Approvals, to Borrower's knowledge
no fact or circumstance exists that constitutes or, with the passage of time or
the giving of notice or both, would constitute a material default under any
thereof, or permit the grantor thereof to cancel or terminate the rights
thereunder, except upon the expiration of the full term thereof. Borrower and
its Subsidiaries presently hold all material Governmental Approvals as are
necessary or advisable in connection with the conduct of its business.
8.8 [Reserved]
8.9 Properties in Good Condition
All the material properties of Borrower and its Subsidiaries are in good
repair and good working order and condition ordinary wear and tear excepted in a
manner consistent with past practices of Borrower and its Subsidiaries and
comparable to industry standards and to Borrower's knowledge, are in substantial
compliance with all Applicable Laws.
8.10 Financial Statements
The audited and unaudited financial statements of Borrower that have
heretofore been delivered to Lender are true and correct in all material
respects and present fairly (i) the financial position of Borrower and its
Subsidiaries as of the date of said statements and (ii) the results of
operations of Borrower and its Subsidiaries for the periods covered thereby; and
there are not any material liabilities that should have been reflected in the
financial statements or the notes thereto under GAAP, contingent or otherwise,
including liabilities for Taxes or any unusual forward or long-term commitments,
that are not disclosed or reserved against in the statements referred to above
or in the notes thereto or that are not disclosed herein. All such financial
statements have been prepared in accordance with GAAP subject, in the case of
unaudited statements, to changes resulting in audit and normal year-end
adjustments, and the absence of footnotes. There has been no material adverse
change (including but not limited to any such change occasioned by accident, act
of God, war, fire, flood, explosion, strike or other labor dispute, or orders or
action by any Governmental Body
CREDIT AGREEMENT PAGE 43
[EXECUTION COPY]
or public utility) in the operations, business, property, assets, or condition
(financial or otherwise) of Borrower and its Subsidiaries taken as a whole since
December 30, 2001.
8.11 Outstanding Indebtedness
Other than current trade payables, other operating liabilities incurred in
the ordinary course of business, Indebtedness permitted under Section 7.3, as of
the date hereof Borrower and its Subsidiaries have no Indebtedness, including
but not limited to Indebtedness to its Affiliates, that is not listed on
Borrower's unaudited financial statements dated December 30, 2001.
8.12 Taxes
Except to the extent permitted in Section 6.4, Borrower and its
Subsidiaries have duly filed all tax returns and reports required by Applicable
Law to be filed, and all Taxes upon Borrower and its Subsidiaries or upon its
assets that are due and payable have been paid, except to the extent any such
Taxes are being contested in good faith and by appropriate proceedings and could
not reasonably be expected to have a Material Adverse Effect.
8.13 License Fees
Except to the extent permitted in Section 6.4, Borrower and its
Subsidiaries have paid all fees and charges that have become due for any
Governmental Approval or have made adequate provisions for any such fees and
charges that have accrued, except where the failure to do any of the foregoing
could not reasonably be expected to result in a Material Adverse Effect.
8.14 Trademarks, Patents, Etc.
Borrower and each of its Subsidiaries possesses all necessary material
trademarks, trade names, service marks, copyrights, patents, patent rights, and
licenses to conduct its businesses as now and as proposed to be conducted, and
to Borrower's knowledge, without conflict with the rights or claimed rights of
others.
8.15 Disclosure
To the best of Borrower's knowledge, the exhibits hereto, the financial
information and statements referred to in Section 8.10 herein, any certificate,
statement, report or other document furnished to Lender by Borrower or any other
Person in connection herewith or in connection with any transaction contemplated
hereby, and this Agreement taken as a whole, do not, on the date hereof, contain
any untrue statements of material fact or omit to state any material fact
necessary in order to make the statements contained therein or herein not
misleading.
CREDIT AGREEMENT PAGE 44
[EXECUTION COPY]
8.16 Regulations T, U and X
Borrower and its Subsidiaries do not own and no part of the proceeds hereof
will be used to purchase or carry any margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. Borrower and its Subsidiaries are not engaged principally or as one of
its important activities in the business of extending credit for the purpose of
purchasing or carrying any margin stock. If requested by Lender, Borrower will,
and will cause its Subsidiaries to, furnish to Lender a statement in conformity
with the requirements of Federal Reserve Form U-1 referred to in said
Regulation. No part of the proceeds of the Loans will be used for any purpose
that violates or is inconsistent with the provisions of Regulations T, U and X
of said Board of Governors.
8.17 Names
Borrower, its Subsidiaries and any of their respective predecessors do not
operate or do business or to Borrower's knowledge during the past five (5) years
have not operated or done business under a fictitious, trade, or assumed name,
except as set forth on Schedule 8.17 or as hereafter disclosed to Lender
pursuant to Section 7.1.
8.18 Condition of Property
Except as otherwise disclosed to Lender, Borrower hereby represents and
warrants to Lender that, to its knowledge, as of the date hereof and continuing
hereafter, the property of Borrower and its Subsidiaries (both owned and leased)
and each portion thereof (a) are not and have not been a site for the use,
generation, manufacture, storage, disposal, or transportation of any Hazardous
Material other than in the ordinary course of its business in compliance with
Applicable Laws; (b) are presently in compliance with or are being and promptly
shall be brought into compliance with all Environmental Laws; and (c) are not
being used and have not been used in any manner that has resulted in or will
result in Hazardous Materials being spilled or disposed of on any adjacent or
other property.
8.19 Pension Plans
To Borrower's knowledge, no "reportable event" as defined in Section
4043(b) of Title IV of ERISA has occurred and is continuing with respect to any
Plan. In addition, each of the Plans is in compliance with the requirements of
ERISA, including the minimum funding requirements.
8.20 Borrower and Subsidiaries
(a) Except as disclosed on Schedule 8.20, Borrower and its Subsidiaries are
engaged only in the business of operating restaurants and franchising others to
operate restaurants.
CREDIT AGREEMENT PAGE 45
[EXECUTION COPY]
(b) All of the Subsidiaries of Borrower as of the Closing Date are
identified in Schedule 8.20 annexed hereto. The capital stock of each of the
Subsidiaries of Borrower identified in Schedule 8.20 annexed hereto is duly
authorized, validly issued, fully paid, and nonassessable and none of such
capital stock constitutes margin stock. Schedule 8.20 annexed hereto correctly
sets forth the ownership interest of Borrower in each of its Subsidiaries
identified therein.
(c) The Inactive Subsidiaries do not have any ongoing operations and are
not operating any business. The assets of each Inactive Subsidiary have a
liquidation value of less than $50,000.
ARTICLE 9. EVENTS OF DEFAULT; REMEDIES
9.1 Events of Default
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for the Event of Default, whether it shall relate to
one or more of the parties hereto, and whether it shall be voluntary or
involuntary or be pursuant to or effected by operation of Applicable Law):
(a) If Borrower shall fail to (i) pay any principal of the Notes when due
in accordance with the terms hereof or thereof, (ii) pay any interest on the
Notes when due in accordance with the terms thereof or hereof, or (iii) pay any
other amount payable hereunder within ten (10) days after Lender makes a demand
for such other amount; or
(b) If Borrower or any of its Subsidiaries shall (i) default in payment of
principal of or interest on any Indebtedness for money borrowed or Capital Lease
obligations (other than as set forth in subsection 9.1(a) above), if the
outstanding principal (or capitalized) amount of such Indebtedness or Capital
Lease obligation is $100,000 or more, after any applicable grace period provided
in the instrument or agreement under which such Indebtedness or Capital Lease
obligation was created; or (ii) default in the observance or performance of any
other material provisions of any agreement or condition relating to any such
Indebtedness or Capital Lease obligation or contained in any instrument or
agreement evidencing, securing, or relating thereto beyond any applicable grace
period, or any other event shall occur or condition exist, the effect of which
default, event or condition is to cause or to permit the holder or holders of
such Indebtedness or Capital Lease obligation to cause, with the giving of
notice if required, such Indebtedness to become due prior to the date of
maturity, any applicable grace period having expired; or
(c) If any representation or warranty (i) made by Borrower in this
Agreement or (ii) made by Borrower in any document, certificate, or statement
furnished pursuant to this Agreement or in any Loan Document, is false or
misleading in any material respect as of the date when made; or
(d) If Borrower fails to observe or perform, or to cause any Subsidiary to
observe or perform, any term, covenant, or agreement to be performed or observed
pursuant to
CREDIT AGREEMENT PAGE 46
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Sections 6.1, 6.5, 6.7, 6.10, 6.12, 6.14, 6.15 (subject to any cure or grace
periods set forth in the applicable Loan Document), and Article 7 herein; or
(e) If Borrower fails to observe or perform, or to cause any Subsidiary to
observe or perform, any term, covenant, or agreement to be performed or observed
pursuant to the provisions of this Agreement, the other Loan Documents, or any
other agreement incidental hereto not otherwise specified in this Section 9.1
and such default is not cured within thirty (30) days after notice of default is
given; or
(f) If Borrower or any Loan Party fails to perform any of its obligations
under any of the Loan Documents not otherwise specified in this Section 9.1, or
if the validity of any of such documents has been disaffirmed by or on behalf of
any of the parties thereto other than Lender and such default is not cured
within thirty (30) days after notice of such default is given; or
(g) If (i) Borrower or any Loan Party shall commence any case, proceeding,
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition, or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, or other similar official for it or for all or any
substantial part of its assets, or Borrower or any Loan Party shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against Borrower or any Loan Party any case, proceeding, or other
action of a nature referred to in clause (i) above which (X) results in the
entry of an order for relief or any such adjudication or appointment or (Y)
remains undismissed, undischarged, unstayed, or unbonded for a period of sixty
(60) days; or (iii) there shall be commenced against Borrower or any Loan Party
any case, proceeding, or other action seeking issuance of a warrant of
attachment, execution, distraint, or similar process against all or any
substantial part of its assets that results in the entry of an order for any
such relief which shall not have been vacated, discharged, stayed, or bonded
pending appeal within sixty (60) days from the entry thereof; or (iv) Borrower
or any Loan Party shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in any of the acts set forth in clauses
(i), (ii), or (iii) above; or (v) Borrower or any Loan Party shall admit in
writing its inability to pay its debts as they become due or shall, within the
meaning of the Bankruptcy Code, generally not pay its debts (other than debts
that are the subject of a bona fide dispute) as they become due; or (vi)
Borrower or any Loan Party suspends or discontinues its business; or
(h) If (i) any Plan shall be terminated pursuant to Subtitle C of Title IV
ERISA, (ii) a trustee shall be appointed by the appropriate U.S. District Court
to administer such Plan, (iii) the PBGC shall institute proceedings to terminate
any such Plan, or (iv) any such Plan fails to satisfy the minimum funding
standards for such Plan for a Plan year as established in Section 412 of the
Internal Revenue Code; or
CREDIT AGREEMENT PAGE 47
[EXECUTION COPY]
(i) One or more judgments or decrees shall be entered against any Loan
Party involving in the aggregate liability of $100,000 or more not covered by
insurance, which judgment or decree shall not have been vacated, discharged,
stayed, or bonded pending appeal within thirty (30) days from entry thereof; or
(j) If Parent shall cease to directly own and control 100 percent of the
issued and outstanding capital stock of Borrower or if any Change in Control
shall occur; or
(k) If there shall occur or exist any event of default under the
Subordinated Notes, and such event of default is not cured or waived in writing
by the holders of the Subordinated Notes; or
(l) If there shall occur any event that has a Material Adverse Effect.
9.2 Acceleration; Remedies
(a) If any Event of Default described in subsections 9.1(g)(i) or (ii)
shall occur then immediately and automatically the Commitments shall immediately
terminate and the Loans (with accrued interest thereon) and all other amounts
owing under this Agreement and the Notes shall immediately become due and
payable and Lender's obligations to make any Loan shall immediately terminate.
(b) If any other Event of Default other than described in subsections
9.1(g)(i) or 9.1(g)(ii) shall occur and be continuing, Lender may (i) by notice
to Borrower, declare the Commitments to be terminated forthwith, whereupon such
obligations shall immediately terminate; and (ii) by notice of default to
Borrower, declare all or a portion of the Loans hereunder, with accrued interest
thereon, and all other amounts owing under this Agreement and the Notes to be
due and payable forthwith, whereupon the same shall immediately become due and
payable.
(c) Except as expressly provided above in this Section 9.2, presentment,
demand, purchase, and all other notices of any kind are hereby expressly waived.
Lender may proceed to protect and enforce their rights hereunder or realize on
any or all security granted pursuant hereto in any manner or order Lender deems
expedient without regard to any equitable principles of marshaling or otherwise.
No failure or delay on the part of Lender, or the holder of any of the Notes in
exercising any right, power, or privilege hereunder and no course of dealing
between Borrower and Lender, or the holder of any of the Notes shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power,
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power, or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies
that Lender or any subsequent holder of any of the Notes would otherwise have.
No notice to or demand on Borrower in any case shall entitle Borrower to any
other or further notice or demand in similar or other circumstances or shall
constitute a waiver of the right of Lender to any other or further action in any
circumstances without notice or demand.
CREDIT AGREEMENT PAGE 48
[EXECUTION COPY]
ARTICLE 10. MISCELLANEOUS
10.1 Notices
All notices, requests, consents, demands, approvals, and other
communications hereunder shall be deemed to have been duly given, made, or
served if made in writing and delivered personally, sent via facsimile, or
mailed by first class mail, postage prepaid, to the respective parties to this
Agreement. For purposes of this Agreement, the address of each party hereto
shall be as set forth under such party's name on the signature pages hereof. The
designation of the persons to be so notified or the address of such persons for
the purposes of such notice may be changed from time to time by similar notice
in writing, except that any communication with respect to a change of address
shall be deemed to be given or made when received by the party to whom such
communication was sent.
10.2 Payment of Expenses and Taxes
Borrower agrees (a) to pay or reimburse Lender for all of its reasonable
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
the Loan Documents and any other documents prepared in connection therewith, and
the consummation of the transactions contemplated hereby and thereby, including,
without limitation, the fees and disbursements of counsel to Lender, (b) to pay
or reimburse Lender for all their respective reasonable costs and expenses
incurred in connection with, and to pay, indemnify, and hold Lender, and its
officers, directors, employees, and agents and attorneys (the "Indemnified
Persons") harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind or nature whatsoever arising out of or in connection
with, the enforcement or preservation of any rights under the Loan Documents and
any such other documents prepared in connection therewith, including without
limitation, the reasonable fees and disbursements of counsel to Lender, (c) to
pay, indemnify, and to hold Lender harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other Taxes (other than income and gross
revenue taxes), if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, any Loan Document and any such
other documents including, without limitation, the reasonable fees and
disbursements of counsel to Lender in connection with the foregoing and in
connection with advising Lender with respect to its rights and responsibility
under any Loan Document and (d) to pay, indemnify, and hold the Indemnified
Persons harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable fees and disbursements of counsel) which may be incurred by or
asserted against any Indemnified Person arising out of or in connection with any
investigation, litigation or proceeding related to the Loan Documents or the use
of the proceeds of the Loans, whether or not any of the Indemnified Persons is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities"),
provided, that Borrower shall have
CREDIT AGREEMENT PAGE 49
[EXECUTION COPY]
no obligation hereunder with respect to Indemnified Liabilities of any
Indemnified Person arising from (i) the gross negligence or willful misconduct
of such Indemnified Person, (ii) legal proceedings commenced against Lender by
any security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as such,
and (iii) legal proceedings which are resolved in favor of Borrower. The
agreements in this Section 10.2 shall survive repayment of the Notes and all
other amounts payable hereunder.
10.3 Assignments and Participations in Loans
This Agreement is binding upon and inures to the benefit of Borrower and
Lender and their successors and assigns and all subsequent holders of the Notes
or any portion thereof. Borrower expressly acknowledges that Lender is not
prohibited or restricted from assigning rights or participation hereunder or any
portion thereof to another Person. Borrower, however, is precluded from
assigning any of its respective rights or delegating any of its obligations
hereunder or under any of the Loan Documents without the prior written consent
of Lender. Lender may furnish any information concerning Borrower and its
Subsidiaries in the possession of that Lender from time to time to assignees and
participants (including prospective assignees and participants).
10.4 Setoff
As additional security for the payment of the Obligations, Borrower hereby
grants to Lender a security interest in, a lien on and an express contractual
right to set off against all depository account balances, cash and any other
property of Borrower now or hereafter in the possession of Lender and the right
to refuse to allow withdrawals from any account (collectively "Setoff"). Lender
may, at any time upon the occurrence and continuance of a Default or an Event of
Default (notwithstanding any notice requirements or grace/cure periods under
this Agreement or any of the other Loan Documents) Setoff against the
Obligations whether or not the Obligations (including future installments) are
then due or have been accelerated, all without any advance or contemporaneous
notice or demand of any kind to Borrower, such notice and demand being expressly
waived.
10.5 Waiver of Setoff
In the event that Lender sells all or any portion of the Loans to any
participant, Borrower hereby waives the right to interpose any setoff,
counterclaim, or cross-claim against such participant (other than compulsory
counterclaims or cross-claims) in connection with any litigation or dispute
under this Agreement, regardless of the nature of such setoff, counterclaim, or
cross-claim.
10.6 Fees and Commissions
Borrower agrees to indemnify Lender and hold it harmless with regard to any
commissions, fees, judgments, or expenses of any nature and kind that Lender may
become liable to pay by reason of any claims by or on behalf of brokers,
finders, or agents in
CREDIT AGREEMENT PAGE 50
[EXECUTION COPY]
connection with any act or failure to act by Borrower or any litigation or
similar proceeding arising from such claims. Borrower states that it is aware of
no valid basis for any such claims.
10.7 Entire Agreement; Amendments and Waivers
This Agreement represents the entire agreement between the parties hereto
with respect to the Loans and transactions contemplated hereunder and, except as
expressly provided herein, shall not be affected by reference to any other
documents. This Agreement, or any provision hereof, cannot 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. Any extensions, renewals and modifications of the Loan
shall be governed by the terms and conditions of this Agreement and the other
Loan Documents.
10.8 Severability
If any provision of this Agreement or any of the Loan Documents is held
invalid under any Applicable Laws, such invalidity shall not affect any other
provision of this Agreement that can be given an effect without the invalid
provision, and, to this end, the provisions hereof are severable.
10.9 Descriptive Headings
The descriptive headings of the several sections of this Agreement are
inserted for convenience only and do not affect the meaning or construction of
any of the provisions hereof.
10.10 Governing Law
This Agreement and the rights and obligations of the parties hereunder and
under the other Loan Documents shall be construed in accordance with and shall
be governed by the laws of the state of Washington.
10.11 Consent to Jurisdiction, Service, and Venue
For the purpose of enforcing payment of any of the Notes, performance of
the obligations under any of the Notes, any arbitration award under the other
Loan Documents, or otherwise in connection herewith, Borrower hereby consents to
the jurisdiction and venue of the courts of the state of Washington or of any
federal court located in such state including but not limited to the Superior
Court of Washington for King County and the United States District Court for the
Western District of Washington. Borrower hereby waives the right to contest the
jurisdiction and venue of courts located in King County, Washington, on the
ground of inconvenience or otherwise and waives any right to bring any action or
proceeding against Lender in any court outside King County, Washington. The
provisions of this Section do not limit or otherwise affect the right of Lender
to institute and conduct action in
CREDIT AGREEMENT PAGE 51
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any other appropriate manner, jurisdiction, or court and do not otherwise limit
Borrower's right to contest such manner, jurisdiction, or court as may be sought
by Lender in any such action or its right to raise substantive claims therein.
10.12 Successors and Assigns
This Agreement and the other Loan Documents shall be binding upon and inure
to the benefit of Borrower, Lender, all future holders of the Notes and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under any Loan Document without the
prior written consent of Lender.
10.13 Waiver of Jury Trial
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THE LOAN TRANSACTION CONTEMPLATED BY THE
LOAN DOCUMENTS OR THE LENDING RELATIONSHIPS THAT ARE BEING ESTABLISHED. The
scope of this waiver is intended to be all-encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
transaction, including without limitation, contract claims, tort claims, breach
of duty claims, and all other common law and statutory claims. Each party hereto
acknowledges that this waiver is a material inducement to enter into a business
relationship, that each has already relied on this waiver in entering into this
Agreement, and that each will continue to rely on this waiver in their related
future dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
10.14 Counterparts
This Agreement and each of the Loan Documents may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to constitute an
original agreement, but all of such counterparts together shall constitute but
one and the same instrument; signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so that all signature
pages are physically attached to the same document.
CREDIT AGREEMENT PAGE 52
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10.15 Statutory Notice
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
[The remainder of this page intentionally left blank.]
CREDIT AGREEMENT PAGE 53
[EXECUTION COPY]
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
duly executed by their respective duly authorized signatories as of the date
first above written.
RED ▇▇▇▇▇ INTERNATIONAL, INC., a
Nevada corporation
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer & Secretary
Notice Address: Red ▇▇▇▇▇ International, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
LENDER:
U.S. BANK NATIONAL ASSOCIATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Title: Vice President
--------------------------------------
Notice Address: U.S. Bank National Association
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
CREDIT AGREEMENT PAGE 54
[EXECUTION COPY]
List of Omitted Exhibits and Schedules
--------------------------------------
The following exhibits and schedules to the Credit Agreement have been omitted
and shall be furnished supplementally to the Commission upon request:
SCHEDULES
Schedule 1.1 - Locations of Inventory
Schedule 4.13 - Legal Description of Fee Property
Schedule 5.1(m) - Existing Indebtedness
Schedule 7.2 - Permitted Affiliate Transactions
Schedule 7.4 - Existing Liens
Schedule 7.7 - Planned Asset Sales
Schedule 7.10 - States in Which Collateral is Located
Schedule 7.20 - Contingent Obligations
Schedule 8.3 - Violation of Agreements
Schedule 8.5 - Litigation
Schedule 8.17 - Fictitious Names
Schedule 8.20 - Subsidiaries of Borrower
EXHIBITS
Exhibit A - Form of Revolving Credit Note; Section 2.3
Exhibit B - Form of Notice of Borrowing; Section 4.1(a)
Exhibit C - Security Agreement; Section 5.1(c)
Exhibit D - Guaranty of Parent; Section 5.1(d)
Exhibit D-1 - Form of Subsidiary Guaranty; Section 5.1(e)
Exhibit E - Form of Subsidiary Security Agreement
Exhibit F - Opinion of Counsel for Borrower; Section 5.1(h)