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EXHIBIT 10.1
LOAN AGREEMENT
This Loan Agreement ("Agreement") entered into the 29th day of August,
1995, by and between VOLUNTEER CAPITAL CORPORATION, VCE RESTAURANTS, INC. AND
TOTAL QUALITY MANAGEMENT, INC., Tennessee corporations (collectively referred
to as the "Borrower"), and NATIONSBANK OF TENNESSEE, N.A. ("Lender"), a
national banking association.
W I T N E S S E T H
WHEREAS, to evidence the indebtedness owed by Borrower to Lender,
Borrower executed and delivered to Lender a promissory note, being a Line of
Credit Note having an original maximum principal amount of $30,000,000 dated
August 29, 1995; and
WHEREAS, Lender and Borrower hereby enter into a comprehensive
agreement setting forth the terms and conditions of Borrower's line of credit
and term loan;
NOW, THEREFORE, as an inducement to cause Lender to extend credit to
Borrower, and for other valuable consideration, the receipt and sufficiency of
which are acknowledged, it is agreed as follows:
1. Line of Credit. Concurrently with the execution of this
Agreement, Lender shall make a Line of Credit (the "Line of Credit") available
to Borrower under the following terms:
a. Amount. The principal indebtedness of Borrower to
Lender under the Line of Credit shall not exceed Thirty Million and
No/100 Dollars ($30,000,000).
b. Interest Rate. The principal amount outstanding
under the Line of Credit shall bear interest at Borrower's option at
either (i) the Lender's Prime Rate, as it may change from time to
time, or (ii) Lender's LIBOR Rate for 30, 60, 90, or 180-day periods
(a "LIBOR Period") plus a spread of 1.5% or 2.5%, depending on the
then Fixed Charge Coverage Ratio ("FCC"). Where the FCC Ratio is
greater than or equal to 1.20, the LIBOR spread will be 1.5%; where
the FCC Ratio is greater than or equal to 1.1, the LIBOR spread will
be 2.5%; and where the FCC Ratio is less than 1.1, the Borrower will
be in default. As more particularly described below, Borrower may
elect that a portion of the outstanding principal balance of the Line
of Credit bear interest at the Prime Rate and that a portion bear
interest at a LIBOR Rate plus the spread described above.
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i. As used in this Agreement, Lender's "Prime Rate" is the
fluctuating rate of interest established by Lender from time to time
as its "Prime Rate", whether or not such rate shall be otherwise
published. Such Prime Rate is established by Lender as an index or
base rate and may or may not at any time be the best or lowest rate
charged by Lender on any loan. If at any time or from time to time
the Prime Rate increases or decreases, then the rate of interest
hereunder shall be correspondingly increased or decreased effective on
the day on which any such increase or decrease of the Prime Rate
changes, unless otherwise herein provided. In the event that Lender,
during the term hereof, shall abolish or abandon the practice of
establishing a Prime Rate, or should the same become unascertainable,
Lender shall designate a reasonably comparable reference rate which
shall be deemed to be the Prime Rate.
ii. For purposes hereof, the Fixed Charge Coverage Ratio, ("FCC")
is defined as: (net income plus depreciation and amortization plus
rent and lease payments plus interest expense plus non-cash taxes
minus cash dividends) divided by (current maturities of long term
debts (calculated as set forth below) plus rent and lease payments
plus interest expense), all measured on a trailing four-quarter basis.
Current maturities of long-term debt shall be calculated by totaling
all of the Funded Debt, as defined in Section 31(b), (including
subordinated and convertible debt) plus capital leases (excluding
payables and accruals) and dividing by seven years.
iii. For purposes hereof, the "LIBOR Rate" shall mean the rate per
annum announced by Lender as its LIBOR Rate for a period equal to the
length of such LIBOR Period as adjusted, without duplication, to
reflect Lender's reserve requirements, all as calculated and announced
from time to time by Lender, whose announcement shall be binding
absent manifest error. To elect the LIBOR Rate for a LIBOR Period,
Borrower shall deliver a written election to Lender at least two (2)
business days in advance of the effective date of such election, which
notice shall specify which LIBOR Period is selected and the amount of
the Line of Credit that is to bear interest based upon the LIBOR Rate.
Interest hereunder shall be calculated based upon a 360-day year and
actual days elapsed. If the adoption of or change in any applicable
legal requirement or any change in the interpretation or
administration thereof by any governmental authority or compliance by
the Lender with any request or directive (whether or not having the
force of law) from any central bank or other governmental authority,
shall at any time as a result of any portion of the principal balance
of this Note being maintained on the LIBOR Rate:
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A. Subject the Lender to any tax (including without
limitation any United States Interest Equalization Tax), levy, impost,
duty, charge, fee (collectively "Taxes"), other than income and
franchise taxes of the United States and its political subdivisions;
or
B. Change the basis of taxation on payments due from
the Borrower to the Lender under any LIBOR Rate Borrowing (otherwise
than by a change in the rate of taxation of the overall net income of
the Lender); or
C. Impose, modify, increase or make applicable any
reserve requirement, special deposit requirement or similar requirement
(including, but not limited to, state law requirements and Regulation
D) against assets held by the Lender, or against deposits or accounts
in or for the account of the Lender, or against any loans made by the
Lender, or against any other funds, obligations or other property
owned or held by Lender; or
D. Impose on the Lender any other condition regarding
any LIBOR Rate Borrowing;
and the result of any of the foregoing is to increase the cost to the
Lender of agreeing to make or of making, renewing or maintaining such
borrowing on the basis of the LIBOR Rate, or reduce the amount of
principal or interest received by the Lender, then, upon demand by the
Lender, the Borrower shall pay to the Lender, from time to time as
specified by the Lender, additional amounts which shall reasonably
compensate the Lender for such increased cost or reduced amount
relating to LIBOR Rate Borrowings outstanding after Lender's demand.
The Lender's reasonable determination of the amount of any such
increased cost, increased reserve requirement or reduced amount shall
be conclusive and binding, absent manifest error.
(iv) In no event shall the interest rate charged on the Line of
Credit exceed the maximum rate allowed under applicable law. Any
amounts paid in excess of the maximum lawful rate shall be applied to
reduce the principal amount of Borrower's obligations to Lender or
shall be refunded to Borrower, at Lender's election. After maturity
(by acceleration or otherwise), the principal amount under the Line of
Credit shall bear interest at the rate of interest in effect
immediately before maturity plus three percent (3%).
c. Payments. Payment of all obligations arising under
the Line of Credit shall be made as follows:
(1) Interest. Interest on the outstanding
principal balance under the Line of Credit shall be paid
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in arrears on the first (1st) day of each month beginning on
August 1, 1995 except, in the case of a LIBOR Rate Borrowing
at Borrower's option, interest shall be payable monthly as set
forth above or at the end of the applicable LIBOR Period.
(2) Voluntary Prepayment. Voluntary prepayments
of principal or accrued interest may be made, in whole or in
part, at any time without penalty.
(3) Mandatory Prepayment. Borrower must
immediately prepay any amount by which the principal balance
of the Line of Credit exceeds $30,000,000.
(4) All Amounts Due. All remaining principal,
interest and expenses outstanding under the Line of Credit
shall become due July 1, 1998, unless the borrower exercises
its option to extend for a seven (7) year term, in which case
all remaining principle, interest and expenses outstanding
under the Line of Credit shall become due July 1, 2005.
(5) Conversion to Term Loan. At any time prior
to July 1, 1998 so long as Borrower is not then in default, Borrower
may elect to convert this Line of Credit to a Term Loan. The election
must in writing and must be delivered to Lender at least fifteen (15)
days prior to the conversion date. There will be a one-quarter (1/4)
of one percent (1%) conversion fee payable on the then outstanding
unpaid principal balance. The principal balance of the Term Note will
be repaid in 84 equal monthly installments of principal with the first
payment due on the 30th day following the conversion date. Interest
will accrue at the NationsBank Prime Rate or LIBOR Rate as provided
above or at a fixed rate equal to 200 basis points in excess of the
then rate on treasury securities having a like maturity as the Term
Loan. The election as to which method of interest accrual (prime,
LIBOR or fixed) will be used in the Term Note must be stated in the
conversion notice to the Lender which method of interest accrual
(either Prime Rate, LIBOR Rate or fixed) will be used.
d. Use of Proceeds. Advances under the Line of Credit
shall be used by Borrower to pay or reimburse itself for capital
expenditures. At no time will the total amount advanced under the
Line of Credit exceed the cumulative amount of capital expenditures
made by Borrower from and after the date of this Agreement.
e. Revolving Loans; Disbursements. During the term of
this Agreement, Borrower may from time to time request, repay and
reborrow advances under the Line of Credit, provided that
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the total principal amount outstanding under the Line of Credit shall
not at any time exceed $30,000,000 and that no event of default or any
event which with the giving of notice, the passage of time, or both,
would constitute an event of default, then exists hereunder.
Disbursements shall be made as follows:
(1) Disbursement Requests. Lender may honor
requests for advances made on Borrower's behalf by Borrower's
CFO, CEO or other officer designated by Borrower, whether such
request is made in person, by telephone, or in writing.
Lender may require that requests for advances be submitted in
writing, and may also require that Borrower submit with such
requests written warranties or other reasonable assurances
acceptable to Lender showing that Borrower is not then in
default hereunder and is otherwise entitled to receive the
requested advance.
(2) Funding. As long as Borrower meets the
conditions for funding stated herein, Lender shall fund
advances requested under the Line of Credit within one (1)
business day of the actual receipt of Borrower's request by
Lender. All funds shall be disbursed directly into an account
maintained by Borrower with Lender. Borrower agrees that if
Lender elects to fund any requested advance(s) sooner after
requested than is required of Lender hereunder, Lender may
nevertheless use the entire response period allowed hereunder
upon receipt of any subsequent request, at Lender's sole
option.
(3) Conditions to Funding. Lender shall not be
obligated to make any advance under the Line of Credit unless
all of the following conditions are satisfied as of the time
of the request and of funding.
A. All of the Loan Documents provided
for herein (or otherwise requested by Lender pursuant
to the "Further Assurance" provision hereof) to
evidence and secure the Line of Credit must have been
executed and delivered to Lender.
B. All warranties made in the Loan
Documents must be true as of the dates of the advance
request and as of the date of funding thereof except
those that by their terms speak of a particular date
(the submission of a request for advance by Borrower
shall be deemed a reaffirmation of such warranties as
of the date of the request).
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C. All covenants made in the Loan
Documents must have been complied with as of the
dates of the advance request and funding thereof.
D. Borrower must not otherwise be in
default hereunder and no condition shall exist which,
with the giving of notice, the passing of time, or
both, would constitute a default hereunder.
(4) Advance Not Waiver. Lender's making of any
advance under the Line of Credit that it is not obligated to
make under Paragraph 1(e)(3) above shall not be construed as a
waiver of Lender's right to withhold future advances, declare
a default, or otherwise demand strict compliance with this
Agreement.
(5) Draws by Debit Memorandum. Lender may,
without prior notice, draw amounts available under the Line of
Credit to pay any obligation of Borrower to Lender that is not
timely paid.
(6) LIBOR Rate Election. No more than five (5)
LIBOR Rate Borrowings may be outstanding at any time. Each
LIBOR Rate draw must be at least One Million and 00/100
Dollars ($1,000,000) and, if greater, shall be in $250,000
increments.
2. Loan Documents. Concurrently with the execution hereof,
Borrower shall deliver to Lender the following documents in form and substance
acceptable to Lender (the "Loan Documents"):
(a) This Agreement;
(b) Line of Credit Note made by Borrower in the
principal amount of $30,000,000 payable to the order of Lender
("Line of Credit Note");
(c) Certificate of Borrower's Good Standing under
Tennessee law issued by the Tennessee Secretary of State;
(d) Certified copy of Resolution of Borrower's
Board of Directors authorizing a named officer of Borrower to
enter into this Agreement and to execute all related documents
on Borrower's behalf; and
(e) Legal Opinion executed by Borrower's counsel
addressing such matters as Lender shall require.
3. Capacity. Borrower warrants that it is and shall remain a
duly organized Tennessee corporation in good standing under the laws of
Tennessee, and that Borrower is and shall remain duly qualified to do business
in each state other than Tennessee in
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which the failure to qualify would result in a material adverse impact on
Borrower or Borrower's business. Borrower warrants that its execution of and
performance under this Agreement and all related documents are permitted under
and will not violate any provision of Borrower's Charter or By-Laws or any
agreement to which Borrower is a party or any law, rule, ordinance, regulation
or Court Order to which Borrower is subject. Borrower further warrants that
the execution of all necessary resolutions and other prerequisites of corporate
action have been duly performed so that the individual executing this Agreement
and related documents on behalf of Borrower is duly authorized to bind Borrower
by his signature.
4. No Subsidiaries. Except as set forth in Schedule 4, Borrower
warrants that it presently has no subsidiaries or interests in any partnership
or other business entity, and Borrower covenants that it will not hereafter
acquire stock of any other corporation or acquire an equity interest in any
other business entity in excess of One Million and No/Dollars ($1,000,000)
without the prior written approval of Lender.
5. Corporate Records. Borrower covenants to maintain current
corporate minute books and stock ledgers and agrees to allow Lender to inspect
the same at any time.
6. Accounting. Borrower warrants that Borrower's accounting
complies with all generally acceptable accounting principles ("GAAP") and
covenants that it will continue to apply GAAP throughout the life of the loan.
7. ERISA. Borrower has not incurred and shall not incur a
material accumulated funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and has not
incurred any material liability to the Pension Benefit Guaranty Corporation
established under ERISA (or any successor thereto under ERISA) in connection
with any retirement plan, and no reportable event has occurred and is
continuing or shall occur with respect to any such plans.
8. Books, Records and Property. Borrower covenants to maintain
financial books and records in a manner that will allow financial statements to
be prepared in accordance with GAAP, consistently applied, and shall allow
Lender to inspect such records at any time. Borrower warrants that its
consolidated audited annual and unaudited quarterly financial statements
properly reflect the financial condition of Borrower in all material respects
(subject to year-end adjustments not known to Borrower in the case of quarterly
statements) and that no material adverse change has occurred since the date of
the most recent financial information. Lender has full authority to inspect
all Borrower's property at any reasonable time.
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9. Insurance. In addition to any specific insurance requirements
contained herein or in any other document pertaining to the Line of Credit,
Borrower agrees to generally maintain adequate insurance against casualty and
liability losses in accordance with customary practices in Borrower's field of
enterprise (provided that Borrower does not carry employee practices liability
or directors and officers liability insurance). Borrower agrees to provide
Lender with proof of the existence of such insurance upon demand.
10. Chief Executive Office. Borrower warrants that the address
designated herein to which notices are to be sent to Borrower is Borrower's
chief executive office. Borrower agrees to notify Lender in writing of any
change thereof and agrees that the same shall not in any event be moved outside
Davidson or Xxxxxxxxxx County, Tennessee, without Lender's prior written
consent.
11. No Defaults Under Other Agreements. Borrower warrants that
neither Borrower nor, to the best of Borrower's knowledge, information, and
belief, any other party thereto is presently in default under or in breach of
any material contract or agreement to which Borrower is a party, and no
condition presently exists which, with the giving of notice, the passing of
time, or both, would cause such a default or breach.
12. Disclosure of Litigation. Borrower warrants that Borrower is
not presently a party to any pending litigation, arbitration or administrative
proceeding or the subject of any investigation involving a single amount in
controversy in excess of $100,000.00 or in the aggregate in excess of
$500,000.00; that there is no litigation, arbitration or administrative
proceeding or investigation either threatened or likely to be instituted in
which Borrower will be a party involving a single amount in controversy in
excess of $100,000.00 or in the aggregate in excess of $500,000.00; that
Borrower is not subject to any outstanding court or administrative order; and
that, to the best of Borrower's knowledge, information and belief, no facts
exist which give rise to claims by third parties against Borrower involving a
single amount in controversy in excess of $100,000.00 or in the aggregate in
excess of $500,000.00 which have not yet been asserted. Borrower covenants to
give Lender prompt written notice of any litigation, arbitration,
administrative proceeding or investigation that may hereafter be instituted or
threatened in which Borrower would be a party, whether or not Borrower's
liability under such proceeding would be covered by insurance involving a
single amount in controversy in excess of $100,000.00 or in the aggregate in
excess of $500,000.00.
13. Financial Statements.
a. Warranties. Borrower warrants that Borrower's
consolidated quarterly and annual financial statements
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delivered to Lender in connection with the Line of Credit have been
prepared in accordance with generally accepted accounting principles,
consistently applied, and are true, accurate and complete in every
material respect. Without limiting the foregoing, Borrower warrants
that such financial statements disclose all known material contingent
liabilities as well as material direct liabilities. Borrower
acknowledges that Lender has advanced (or shall advance) the Line of
Credit in reliance upon such financial statements, and Borrower
warrants that no material adverse change has occurred in the financial
condition of Borrower as set forth in the most recent financial
statements. Borrower warrants that Borrower has good and absolute
title to the assets disclosed on Borrower's balance sheet disclosed to
Lender, subject only to liens, security interest and other
encumbrances securing liabilities listed thereon and, in the case of
real estate, easements and other minor encumbrances that do not affect
Borrower's use thereof.
b. Reporting Requirements. Borrower covenants to
furnish Lender annual audited financial statements and annual budget
and cash flow projections for the upcoming year within ninety (90)
days of the close of the preceding fiscal year. Each audit must be
performed by Ernst & Young or another certified public accountant
reasonably acceptable to Lender, at Borrower's expense. In addition,
Borrower covenants to furnish to Lender, on or before the forty-fifth
(45th) day following the end of each fiscal quarter, income
statements, cash flow statements and balance sheets together with an
officer's certificate executed by the chief financial officer of
Borrower certifying compliance with the financial covenants set forth
herein and further stating that, to the best of his knowledge,
information and belief, no default exists hereunder as of the date of
the certification. Borrower also covenants to furnish to Lender, upon
demand, copies of Borrower's tax returns and additional financial
information in form and substance acceptable to Lender.
14. Notice of Changes in Financial Condition and Defaults.
Borrower covenants to give Lender prompt written notice of (i) the creation or
discovery of any material additional contingent liability or the occurrence of
any other material adverse change in the financial condition of Borrower, and
(ii) the occurrence of any event, or presence of any condition, which
constitutes a default hereunder or which with the giving of notice, the passing
of time, or both, would constitute a default. Borrower represents that its
fiscal year ends on the Sunday closest to December 31, and Borrower covenants
that it will not change its fiscal year without obtaining the prior written
consent of Lender.
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15. No Unpaid Taxes. Except for taxes that Borrower is disputing
in compliance with the last sentence of this Section 15, Borrower warrants that
Borrower is not presently delinquent in the payment of any taxes imposed by any
governmental authority or in the filing of the tax return and that Borrower is
not involved in a dispute with any taxing authority over tax amounts due.
Borrower covenants that all future taxes due from Borrower shall be timely paid
and that all tax returns required of Borrower shall be timely filed. If
Borrower contests in good faith the amount of any tax that is due and owing,
Borrower shall adequately reserve for taxes in accordance with GAAP.
16. No Untrue or Misleading Representations. Borrower warrants
that no information, exhibit or report furnished to Lender nor any statement or
representation made by Borrower to Lender in connection with the Unsecured
Indebtedness contains any untrue statement of material fact or omits to state a
material fact necessary to make the foregoing not misleading.
17. Compliance with Law. Borrower warrants that Borrower's
business activities are conducted substantially in accordance with all material
applicable laws and regulations, including, but not limited to OSHA, EPA,
Pension Guarantee Board, and ERISA. Borrower covenants that such activities
shall continue to be so conducted.
18. Insurance. Borrower warrants that it has proper casualty and
business interruption insurance and will maintain such insurance throughout the
life of the loan.
19. Assistance in Litigation. Borrower covenants to, upon
request, cooperatively participate in any proceeding in which Borrower is not
an adverse party to Lender and which concerns Lender's rights regarding the
Line of Credit or any collateral securing its payment.
20. Name. Borrower warrants that during the past five (5) years,
Borrower has not been known under or done business under any name other than
the name used by Borrower in executing this Agreement and under the X.
Xxxxxxxxx'x and Wendy's Old Fashion Hamburgers trade names. Borrower agrees to
give Lender at least fifteen (15) days prior written notice before Borrower
begins using any name other than that used in executing this Agreement.
21. Negative Pledge. Except for liens existing on the date of this
Agreement, which liens are described on the attached Exhibit 21, any liens
permitted under Section 30(b) hereof and easements or minor encumbrances
relating to real estate, Borrower covenants and agrees that it will not suffer,
permit or grant any lien, security interest, deed of trust, mortgage, deed to
secured debt, pledge, assignment or other collateral assignment of any of its
assets in favor of any party other than Lender without the prior written
consent of Lender.
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22. Expenses. Upon demand, Borrower will advance to Lender or, at
Lender's option, reimburse Lender for, the following expenses:
a. Taxes. All taxes (other than income taxes) that Lender
may be required to pay because of the Line of Credit;
b. Administration. All expenses that Lender may incur in
connection with the preparation, execution, or enforcement of this
Agreement or of any other document pertaining to the Line of Credit;
c. Costs of Collection. All court costs and other costs of
collecting any debt, overdraft or other obligation included in the
Line of Credit;
d. Litigation. All costs arising from any litigation,
investigation, or administrative proceeding (whether or not Lender is
a party thereto) that Lender may incur as a result of the Line of
Credit or as a result of Lender's association with Borrower,
including, but not limited to, expenses incurred by Lender in
connection with a case or proceeding involving Borrower under any
chapter of the Bankruptcy Code or any successor statue thereto;
e. Attorneys Fees. Reasonable attorneys' fees incurred in
connection with any of the foregoing.
If Lender pays any of the foregoing expenses, they shall become a part of the
Line of Credit and shall bear interest at the rate of interest then in effect.
This paragraph shall remain in full effect regardless of the full payment of
the Line of Credit, the purported termination of this Agreement, the delivery
of the executed original of this Agreement to Borrower, or the content or
accuracy of any representation made by Borrower to Lender; provided, however,
Lender may terminate this Paragraph by executing and delivering to Borrower a
written instrument of termination specifically referring to this Paragraph.
23. Further Assurances. Borrower covenants to execute such other
assignments, security agreements, financing statements, and other documents
that Lender may reasonably deem necessary to further evidence the obligations
provided for herein.
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24. Default Certificates. Borrower covenants to deliver to
Lender, within five (5) business days after request, the certificate of
Borrower or of Borrower's appropriate representative (as specified by Lender)
stating whether, to the best of the person's knowledge, information, and belief
and after due investigation, a default exists under this Agreement. The
certificate shall describe with particularity any default and shall address
with particularity any circumstances or subjects described by Lender in its
request. Borrower covenants that it will promptly forward to Lender a copy of
any notice of default Borrower receives from any party with which Borrower has
a contract, where the amount of such contract exceeds $100,000.
25. Recitals. Borrower warrants and agrees that the recitals set
forth at the beginning of this Agreement are true.
26. No Burdensome Agreements. Borrower warrants that Borrower is
not a party to any contract or agreement and is not subject to any contingent
liability that does or may impair Borrower's ability to perform under the terms
of this Agreement. Borrower further warrants that the execution and
performance of this Agreement will not cause a default, acceleration or other
event under any other contract or agreement to which Borrower or any property
of Borrower is subject, and will not result in the imposition of any charge,
penalty, lien or other encumbrance against any of Borrower's property except in
favor of Lender.
27. Legal and Binding Agreement. Borrower warrants that the
execution and performance of this Agreement will not violate any judicial or
administrative order or governmental law or regulation, and that this Agreement
is valid, binding and enforceable in every respect according to its terms,
subject to bankruptcy and other laws affecting the rights of creditors
generally.
28. No Consent Required. Borrower warrants that Borrower's
execution, delivery and performance of this Agreement do not require the
consent of or the giving of notice to any third party including, but not
limited to, any other lender, governmental body or regulatory authority.
29. No Default. Borrower warrants that, as of the execution of
this Agreement, no default exits hereunder and no condition exists which, with
the giving of notice, the passing of time, or both, would constitute such a
default.
30. Negative Covenants. Without Lender's prior written consent,
Borrower shall not do any of the following:
a. Other Debt. Incur, create, assume or permit to exist
any indebtedness for borrowed money except:
(1) Indebtedness to Lender.
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(2) Debts existing as of the execution hereof and
disclosed in the financial statements delivered to Lender and
any modifications, renewals or extensions thereof.
(3) Unsecured debts on open account incurred in
the ordinary course of business.
(4) Ten Million ($10,000,000) of debt to be used
for capital expenditures of Wendy's or X. Xxxxxxxxx'x to be
allocated in one-third (1/3) increments during calendar years
1995, 1996 and 1997, on a cumulative basis.
b. Pledge or Mortgage of Assets. Pledge or mortgage any of
its existing, or future acquired assets to any other party, except:
(1) liens that exist on the date hereof, together
with renewals, extensions and modification thereof; and
(2) land, building or equipment which has a
fair-market value not to exceed $10,000,000 in the aggregate may be
pledged, from time to time, to secure some or all of the indebtedness
permitted under Section 30(a)(4).
c. Stock Transactions. Redeem or agree to redeem any
stock, subordinated debt, warrants, or debt securities convertible
into stock, other than redemptions of up to 1,000 shares of Borrower's
common stock at its then fair-market value in any fiscal year and
now-scheduled payments to the sinking fund or to make an early
redemption of subordinated debt up to $1,875,000 prior to July 1,
1998.
d. Reorganization. Enter into any agreement to merge,
consolidate, or otherwise reorganize or recapitalize; provided,
however, this shall not apply to any transaction where Borrower is the
surviving corporation and the fair market value of the assets acquired
does not exceed $1 million.
e. Disposition of Assets. Sell, lease, or otherwise
transfer more than $1,000,000 of its assets in any transaction which
is not in the ordinary course of business.
f. Acquisition of Assets. Acquire assets or an interest
in any entity having a value of more than $1,000,000 in any
transaction which is not in the ordinary course of business or for the
development of new X. Xxxxxxxxx'x or Wendy's Restaurants.
g. Store Openings. Open more than ten (10) X. Xxxxxxxxx
stores in any one calendar year, open more than
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twelve (12) new X. Xxxxxxxxx stores from January 1, 1995 through
December 31, 1996, open more than twenty (20) new X. Xxxxxxxxx stores
for the period from January 1, 1995 through December 31, 1997 and open
more than 25 new X. Xxxxxxxxx stores for the period from January 1,
1995 through July 1, 1998.
i. Guaranties. Guarantee any obligations of any other
business or individual, except through the endorsement of items
tendered to Borrower as payment in the ordinary course of business.
j. Action Outside Ordinary Course. Take any other
material action outside the ordinary course of its business.
k. Creation of New Subsidiaries. Acquire an interest in
any subsidiary corporation which has assets of $10,000 or more unless,
concurrent with the acquisition of such ownership interest, the new
subsidiary executes the Line of Credit Note and becomes a party to
this Agreement.
31. Financial Covenants. Borrower shall maintain the following
financial requirements as determined by GAAP on a consolidated basis (unless
otherwise noted):
a. Total Liabilities. Borrower's total liabilities to
net worth shall be the ratio of less than or equal to 1.2:1.0 through
December 31, 1995; less than or equal to 1.50:1.0 through December 31,
1996; less than or equal to 1.75:1.0 through December 31, 1997; and
less than or equal to 2.0:1.0 through July 31, 1998.
b. Funded Debt. The ratio of Funded Debt to Net Fixed
Assets shall be no greater than .7 to 1.0 at all times. Funded Debt
means all long-term debt, the current portion of long-term debt,
obligations under Leases (both long-term and current), any notes
payable or other borrowed money and any subordinated or convertible
debt. Net Fixed Assets means all tangible property (real and
personal), equipment and improvements of the Borrower, net of
accumulated depreciation and amortization, which would appear as such
on a consolidated balance sheet of the Borrower prepared at such time
in accordance with generally-accepted accounting principles.
c. Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio measured on a trailing four fiscal-quarters basis shall
be at least 1.1 to 1.0 at all times.
x. Xxxxx of Security. If Borrower elects to convert to
a Term Loan and thereafter if the Fixed Charge Coverage Ratio
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measured on a trailing four-quarters basis falls below 1.2 to 1.0,
Borrower shall provide to Bank, at Lender's request, security for the
then outstanding balance of the Term Loan. Borrower agrees to xxxxx x
xxxx to Bank in all of Borrower's assets, with the loan-to-value ratio
being no more than 70%. The cost of obtaining current appraisals
shall be borne by Borrower. Should the ratio of the then outstanding
balance of the Line of Credit to the then Fair Market Value of the
assets be less than 70%, Borrower shall make a payment to Lender of
the difference, which amount shall be a permanent reduction of the
Term Loan to be applied in inverse order of the maturity. The liens
in favor of Bank will be evidenced by deeds of trust, mortgages, deeds
to secure debt, security interests and other collateral documents in
form and content satisfactory to Bank. All costs and expense of
granting the liens to Bank, including, but not limited to, costs of
appraisals, environmental assessments, title searches, surveys, title
insurance premiums, indebtedness tax and counsel fees to Bank shall be
borne by Lender. All liens must attach and be perfected within 45
days of the date of Lender's request.
32. Environmental Matters
a. Definitions
(1) "Environmental Laws" means the Environmental
Protection Act, the Resource Conservation and Recovery Act of
1976, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Hazardous Materials
Transportation Act and any other federal, state or municipal
law, rule or regulation relating to air emissions, water
discharge, noise emissions, solid or liquid waste disposal,
hazardous or toxic waste or materials, or other environmental
or health matters.
(2) "Hazardous Materials" means those substances
included from time to time within the definition of hazardous
substances, hazardous materials, toxic substances, or solid
waste under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, 42 U.S.C.
Section 9601 et seq.; the Resource Conversation and Recovery
Act of 1976, 42 U.S.C. Section 1801 et seq., and in the
regulations promulgated pursuant to such acts and laws; and
such other substances that are or become regulated under any
applicable local, state or federal law or regulation
addressing environmental hazards.
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b. Environmental Law Compliance. Borrower warrants and
covenants that the conduct of Borrower's business operations does not
and will not violate, in any material respect, any federal laws,
rules, or ordinance for environmental protection, regulations of the
Environmental Protection Agency and any applicable local or state law,
rule, regulation, or rule of common law and any judicial
interpretation thereof relating primarily to the environmental or
Hazardous Materials and Borrower will not use or permit any other
party to use any Hazardous Materials at any of Borrower's places of
business or at any other property owned by Borrower except such
materials as are incidental to Borrower's normal course of business,
maintenance and repairs and which are handled in material compliance
with all applicable environmental laws. Borrower agrees to permit
Lender, its agents, contractors, and employees to enter and inspect
any of Borrower's places of business or any other property of Borrower
at any reasonable times upon five (5) days prior notice for the
purpose of conducting an environmental investigation and audit
(including taking physical samples) to insure that Borrower is
complying with this covenant and Borrower shall reimburse Lender on
demand for the costs of any such environmental investigation and
audit, provided Borrower shall pay the cost only if it reasonably
appears that Borrower is not complying with this covenant. Borrower
shall provide Lender, its agents, contractors, employees, and
representatives with access to and copies of any and all data and
documents relating to or dealing with any Hazardous Materials used,
generated, manufactured, stored or disposed of by Borrower's business
operations within five (5) days of the request thereof.
c. Notification of Environmental Claims. Borrower shall
immediately advise Lender in writing of (i) any and all enforcement,
cleanup, remedial, removal, or other governmental or regulatory
actions instituted, completed, or threatened pursuant to any
applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting Borrower's business
operations; and (ii) all claims made or threatened by any third party
against Borrower relating to damages, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials.
Borrower shall immediately notify Lender of any remedial action taken
by Borrower with respect to Borrower's business operations.
d. Indemnification. Borrower shall indemnify, defend,
and hold Lender and its successors and assigns harmless from and
against any and all claims, demands, suits, losses, damages,
assessments, fines, penalties, costs, or other expenses (including
reasonable attorneys' fees and court costs) arising from or in any way
related to any of the transactions contemplated hereby, including but
not limited to
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actual or threatened damage to the environment, agency costs of
investigation, personal injury or death, or property damage, due to a
release or alleged release of Hazardous Materials, arising from
Borrower's business operations, any other property owned by Borrower
or in the surface or ground water arising from Borrower's business
operations, or gaseous emissions arising from Borrower's business
operations or any other condition existing from Borrower's business
operations resulting from the use or existence of Hazardous Materials,
whether such claim proves to be true or false. Borrower further
agrees that its indemnity obligations shall include, but are not
limited to, liability for damages resulting from the personal injury
or death of an employee of the Borrower, regardless of whether the
Borrower has paid the employee under the workmen's compensation laws
of any state or other similar federal or state legislation for the
protection of employees. The term "property damage" as used in this
paragraph includes, but is not limited to, damage to any real or
personal property of the Borrower, the Lender, and of any third
parties. The Borrower's obligations under this paragraph shall
survive the repayment of the Loan and any deed in lieu of foreclosure
or foreclosure of any Deed of Trust, Security Agreement, or Mortgage
securing the Loan.
33. Default Defined. The occurrence of any one or more of the
following events shall constitute a default under this Agreement:
a. Monetary Default. The failure of Borrower to timely pay any
amount due Lender under the Line of Credit or under any other
obligation to Lender if such failure continues for ten (10) days after
notice of nonpayment from Bank to Borrower provided, however, that
should Bank give Borrower a notice of nonpayment, then for the
12-month period following such notice of nonpayment, Bank shall not be
required to give Borrower notice of nonpayment and Borrower will be in
default if it fails to make a monetary payment within ten (10) days of
the due date.
b. Breach of Covenant. The failure of Borrower or any other
party to perform or observe any obligation or covenant made with
respect to the Line of Credit or contained within this Agreement or
any other Loan Document; provided, except for the provisions of
Sections 30 and 31, Borrower shall have a cure period of thirty (30)
days after Borrower has actual knowledge or notice of the failure by
Borrower to perform.
c. Breach of Warranty. Lender's discovery that any
representation of warranty in connection with this Agreement or the
Line of Credit or any other Loan Document was materially false when
made.
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d. Default Under Other Document. Subject to applicable cure
periods, the occurrence of a default under the terms of any document
evidencing, securing, or otherwise pertaining to the Line of Credit,
including, without limitation, the Loan Documents.
e. Voluntary Bankruptcy. The Borrower shall commence a voluntary
case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property or shall consent to any such
relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action
to authorize any of the foregoing.
f. Involuntary Bankruptcy. An involuntary case or other
proceeding shall be commenced against the Borrower seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty
(60) days; or an order for relief shall be entered against the
Borrower under the bankruptcy laws as now or hereafter in effect.
34. Remedies Upon Default. Lender may exercise any or all of the
following remedies:
a. Remedies. Lender may exercise any right that it may
have at law or equity, including an action to collect the Line of
Credit Loan or the Term Loan and to foreclose under any deeds of trust
and security agreements or other collateral documents securing
repayment thereof. All obligations of Bank to advance or readvance
under the Line of Credit will terminate.
b. Application of Proceeds. All amounts received by
Lender for Borrower's account by exercise of its remedies hereunder
shall be applied as follows: First, to the payment of all reasonable
expenses incurred by Lender in exercising its rights hereunder,
including reasonable attorney's fees, and any other expenses due
Lender from Borrower; Second, to the payment of all interest included
in the Line of Credit or Term Loan, in such order as Lender may elect;
Third, to the payment of all principal included in the Line of Credit
or
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Term Loan, in such order as Lender may elect; and Fourth, surplus to
Borrower or other party entitled thereto.
35. Resolution of Disputes.
a. Arbitration. Any controversy or claim between or
among the parties to the Loan Documents or any related agreements or
instruments, including any claim based on or arising from an alleged
tort, shall be determined by binding arbitration in accordance with
the Federal Arbitration Act (or if not applicable, the applicable
state law), the Rules of Practice and Procedure for the arbitration of
commercial disputes of Judicial Arbitration and Mediation Services,
Inc. (J.A.M.S.), and the "special rules" set forth below. In the
event of any inconsistency, the special rules shall control. Judgment
upon any arbitration award may be entered in any court having
jurisdiction. Any party to the Loan Documents may bring an action,
including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this agreement applies in any court
having jurisdiction over such action.
b. Special Rules. The arbitration shall be conducted in
Nashville, Tennessee and administered by J.A.M.S. who will appoint an
arbitrator; if J.A.M.S. is unable or legally precluded from
administering the arbitration, then the American Arbitration
Association will serve. All arbitration hearings will be commenced
within 90 days of the demand for arbitration; further, the arbitrator
shall only, upon a showing of cause, be permitted to extend the
commencement of such hearing for up to an additional 60 days.
c. Reservations of Rights. Nothing in foregoing
arbitration shall be deemed to (i) limit the applicability of any
otherwise applicable statutes of limitation or repose and any waivers
contained in the Loan Documents; or (ii) be a waiver by NationsBank of
the protection afforded to it by 12 U.S.C. Sec. 91 or any
substantially equivalent state law; or (iii) limit the rights of
NationsBank under the Loan Documents (a) to exercise self help
remedies such as (but not limited to) set-off, or (b) to foreclose
against any real or personal property collateral, or (c) to obtain
from a court provisional or ancillary remedies such as (but not
limited to) injunctive relief, possession of collateral or the
appointment of a receiver. NationsBank may exercise such self help
rights, foreclose upon such property, or obtain such provisional or
ancillary remedies before, during or after the pendency of any
arbitration proceeding brought pursuant to the Loan Documents. At
NationsBank's option, foreclosure under a deed of trust or mortgage
may be accomplished by any of the following: the exercise of a power
of sale under the deed of trust or mortgage, or by judicial sale under
the deed of trust or
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mortgage, or by judicial foreclosure. Neither this exercise or self
help remedies nor the institution or maintenance of an action for
foreclosure or provisional or ancillary remedies shall constitute a
waiver of the right of any party, including the claimant in any such
action, to arbitrate the merits of the controversy or claim
occasioning resort to such remedies.
36. Not Partners; No Third Party Beneficiaries. Nothing contained
herein or in any related document shall be deemed to render Lender a partner of
Borrower for any purpose. This Agreement has been executed for the sole
benefit of Lender, and no third party is authorized to rely upon Lender's
rights hereunder or to rely upon an assumption that Lender has or will exercise
its rights under this Agreement or under any document referred to herein.
37. Regulation U. Borrower warrants that none of the proceeds of
the loan evidenced by the Note will be used to purchase or carry "margin
stock," as defined in Regulation U issued by the Federal Reserve Board.
38. Business Days. If any payment date under the Unsecured
Indebtedness fails on a day that is not a business day of Lender, or if the
last day of any notice period falls on such a day, the payment shall be due and
the notice period shall end on the next succeeding Lender business day.
39. Notices. Any communications concerning this Agreement or the
credit described herein shall be addressed as follows:
As to Borrower:
Volunteer Capital Corporation
Attention: R. Xxxxxxx Xxxxx
0000 Xxxx Xxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
With a Copy to:
T. Xxxxxx Xxxxx
BASS, XXXXX & XXXX
First American Center, Suite 2700
Xxxxxxxxx, Xxxxxxxxx 00000
As to Lender:
NationsBank of Tennessee, N.A.
Attention: Xxxxxxx X. Xxxxx, Vice President
Xxx XxxxxxxXxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
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With a copy to:
Xxxx & Xxxxxxx
Attn: Xxxxx X. Xxxxxx
2000 First Union Tower, 000 0xx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Communications to be given to Lender shall only be effective when set forth in
writing and actually received by an officer of Lender at the address indicated
above. Communications to be given to Borrower shall be effective when actually
or constructively received by Borrower or two (2) days after when set forth in
writing and mailed or delivered to Borrower's address stated above. Any party
may change its address for receipt of notices by submitting the change in
writing to the other party.
41. Participations. Lender may, from time to time, in its sole
discretion, and without notice to Borrower, sell participations in any credit
subject hereto to such other investors or financial institutions as it may
elect. Such participants will have no direct relationship with Borrower and
will have no right with respect to waivers or amendments or default
declarations. Lender may from time to time disclose to any participant or
prospective participant such information as Lender may have regarding the
financial condition, operations, and prospects of Borrower, but Lender shall
take reasonable precautions to require such participant or prospective
participant to keep such information confidential. Lender agrees that it will
not assign or participate more than 33% of the interest in the Line of Credit
Note and the Agreement.
42. Incorporation of Exhibits. All Exhibits referred to in this
Agreement are incorporated herein by this reference.
43. Indulgence Not Waiver. Lender's indulgence in the existence
of a default hereunder or any other departure from the terms of this Agreement
shall not prejudice Lender's rights to declare a default or otherwise demand
strict compliance with this Agreement.
44. Cumulative Remedies. The remedies provided Lender in this
Agreement are not exclusive of any other remedies that may be available to
Lender under any other document or at law or equity.
45. Amendment and Waiver in Writing. No provision of this
Agreement can be amended or waived, except by a statement in writing signed by
the party against which enforcement of the amendment or waiver is sought.
46. Assignment. This Agreement shall be binding upon and inure to
the benefit of the respective heirs, successors and assigns of Borrower and
Lender, except that Borrower shall not
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assign any rights or delegate any obligations arising hereunder without the
prior written consent of Lender. Any attempted assignment or delegation by
Borrower without the required prior consent shall be void.
47. Entire Agreement. This Agreement and the other written
agreements between Borrower and Lender represent the entire agreement between
the parties concerning the subject matter hereof, and all oral discussions and
prior agreements are merged herein. Provided, if there is a conflict between
this Agreement and any other documents executed contemporaneously herewith with
respect to the Unsecured Indebtedness, the provision most favorable to Lender
shall control.
48. Severability. Should any provision of this Agreement be
invalid or unenforceable for any reason, the remaining provisions hereof shall
remain in full effect.
49. Time of Essence. Time is of the essence of this Agreement,
and all dates and time periods specified herein shall be strictly observed,
except that Lender may permit specific deviations therefrom by its written
consent.
50. Applicable Law. The validity, construction and enforcement of
this Agreement and all other documents executed with respect to the Unsecured
Indebtedness shall be determined according to the laws of Tennessee applicable
to contracts executed and performed entirely within that state, in which state
this Agreement has been executed and delivered.
51. Gender and Number. Words used herein indicating gender or
number shall be read as context may require.
52. Captions Not Controlling. Captions and headings have been
included in this Agreement for the convenience of the parties, and shall not be
construed as affecting the content of the respective paragraphs.
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Executed the date first written above.
THE UNDERSIGNED ACKNOWLEDGE A
THOROUGH UNDERSTANDING OF THE TERMS OF
THIS AGREEMENT AND AGREE TO BE BOUND
THEREBY:
NATIONSBANK OF TENNESSEE, N.A.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Title: Vice President
-----------------------------
VOLUNTEER CAPITAL CORPORATION
By: /s/ R. Xxxxxxx Xxxxx
--------------------------------
Its: Vice President and Chief
Financial Officer
-------------------------------
VCE RESTAURANTS, INC.
By: /s/ R. Xxxxxxx Xxxxx
--------------------------------
Its: Secretary
-------------------------------
TOTAL QUALITY MANAGEMENT, INC.
By: /s/ R. Xxxxxxx Xxxxx
--------------------------------
Its: Secretary
-------------------------------
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