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Exhibit 10.3
FIFTH AMENDMENT TO
LOAN AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AGREEMENT made and entered into as of
this 18th day of October, 1996, ("this Fifth Amendment"), by and between
SHOLODGE, INC., a Tennessee corporation ("Borrower"); SHONEY'S INN OF LEBANON,
INC., a Tennessee corporation; SHONEY'S INN, INC., a Tennessee corporation;
NASHVILLE AIR ASSOCIATES, INC., a Tennessee corporation; XXXXX AND ASSOCIATES,
INC., a Tennessee corporation; SUNSHINE INNS, INC. (successor by change of name
to PenTal Inns, Inc. and successor by merger to Tampa Inn, Inc.), a Tennessee
corporation; LAFLA INN, INC., a Tennessee corporation; SOUTHEAST TEXAS INNS,
INC., a Tennessee corporation; DELAWARE INNS, INC., a Tennessee corporation;
ALABAMA LODGING CORPORATION (successor by change of name to Birmingham Inn,
Inc.), a Tennessee corporation; CAROLINA INNS, INC., a Tennessee corporation;
MIDWEST INNS, INC., a Tennessee corporation; FAR WEST INNS, INC., a Tennessee
corporation; SHONEY'S INN OF BATON ROUGE, a Tennessee general partnership; and
FRONT RANGE SUITES, INC., a Tennessee corporation (individually and
collectively "Co-Obligors"); and FIRST UNION NATIONAL BANK OF TENNESSEE, a
national banking corporation ("Lender").
RECITALS
WHEREAS, Borrower and Lender entered into that certain Loan Agreement
dated January 7, 1994 ("the Loan Agreement"), the terms of which are
incorporated herein by this reference;
WHEREAS, Borrower and Lender entered into that certain First Amendment
to Loan Agreement dated March 21, 1994 ("the First Amendment"), the terms of
which are incorporated herein by this reference;
WHEREAS, Borrower, Lender, and certain of Co-Obligors entered into
that certain Second Amendment to Loan Agreement dated June 20, 1994 ("the
Second Amendment"), the terms of which are incorporated herein by this
reference;
WHEREAS, Borrower, Lender, and certain of Co-Obligors entered into
that certain Third Amendment to Loan Agreement dated August 17, 1995 ("the
Third Amendment"), the terms of which are incorporated herein by this
reference;
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WHEREAS, Borrower, Lender, and certain of Co-Obligors entered into
that certain Fourth Amendment to Loan Agreement dated November 14, 1995 ("the
Fourth Amendment"), the terms of which are incorporated herein by this
reference;
WHEREAS, Co-Obligors are Subsidiaries (as defined in the Loan
Agreement) of Borrower and Co-Obligors have and will directly or indirectly
benefit from extensions of credit made by Lender to Borrower;
WHEREAS, Borrower and Co-Obligors have requested that Lender consent
to a series of Twenty Five Million to Fifty Million Dollar ($25,000,000 -
$50,000,000) offerings of retail debt from a shelf registration in the maximum
aggregate amount of One Hundred Twenty Five Million Dollars ($125,000,000),
which is to be structured as senior subordinated unsecured Indebtedness, which
is prohibited under the terms of the Loan Agreement, as amended;
WHEREAS, in order to induce Lender to consent to the above described
issuance of senior unsecured subordinated Indebtedness and amend the Loan
Agreement, as amended, as outlined in this Fifth Amendment, Borrower and
Co-Obligors have made certain representations to Lender; and
WHEREAS, Lender, in reliance on representations and inducements of
Borrower and Co-Obligors, has agreed to further amend the Loan Agreement as
outlined in this Fifth Amendment.
NOW, THEREFORE, for and in consideration of the agreement of Lender to
amend the Loan Agreement as set out in this Fifth Amendment, the mutual
covenants and agreements hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Lender, relying on the representations and warranties contained in the Loan
Agreement, as amended, agrees to further amend the Loan Agreement as follows:
1. Definitions. All terms used herein will be further
defined in the Loan Agreement, as amended. The defined terms
"Fixed Charge Coverage Ratio," "Obligations," "Pro Forma Debt
Service," and "Solvent" will be deleted in their entirety and the
following will be substituted in lieu thereof:
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"Fixed Charge Coverage Ratio" will mean the quotient obtained
by dividing (a) the sum of net after tax income, net interest,
depreciation, amortization, and net rental expenses, by (b) the sum of
net interest, net rents, the current maturities of long term
Indebtedness (including any indebtedness of any consolidated
Affiliate), and capitalized leases.
"Obligations" will mean and include the Note and all loans,
advances, Indebtedness, liabilities, obligations, covenants, and
duties owing by Borrower to Lender of any kind or nature, present or
future, whether or not evidenced by any note, guaranty, or other
instrument, arising under this Agreement or under the Note whether or
not for the payment of money, whether arising by reason of an
extension of credit, opening of a letter of credit, loan, lease,
guaranty, indemnification, or in any other manner, whether direct or
indirect, absolute or contingent, due or to become due, including
without limitation, all interest, charges, expenses, fees, attorneys'
fees, and any other sums chargeable to Borrower under this Agreement
or any of the other Loan Documents.
"Pro Forma Debt Service" will mean the sum of current
principal maturities of long term Indebtedness and capitalized leases
plus assumed amortization of the average principal of all outstanding
revolving credit and line of credit facilities based on a seven (7)
year amortization.
"Solvent" will mean, as to any Person, that such Person has
capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage and is able
to pay any of its Indebtedness, or indebtedness, as applicable, as it
matures and owns property having a value, at fair market value,
greater than the amount required to pay its Indebtedness, or
indebtedness, as applicable.
Section 1 of the Loan Agreement is hereby amended to include the
following additional defined terms:
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"Funded Debt" will mean all Indebtedness evidenced by any
promissory note or other debenture, and obligations or liabilities
created or arising under any lease if capitalized for General Accepted
Accounting Principles.
"Total Capitalization" will mean Funded Debt of Borrower plus
Tangible Net Worth of Borrower, on a consolidated basis.
2. Borrower's Representations and Warranties. Section 3.5 of the Loan
Agreement, as amended, is hereby deleted in its entirety and the following is
substituted in lieu thereof:
3.5 Financial Condition. The financial statements of Borrower
dated July 14, 1996, ("the Financial Statements") which have been
delivered to Lender present fairly the financial condition of Borrower
as of the date or dates thereof and are true and correct in all
material respects, have been prepared in accordance with Generally
Accepted Accounting Principles consistently applied, and present
fairly the financial condition of Borrower at the date(s) or for the
period or periods therein stated. No material adverse change has
occurred in the financial condition of Borrower since the date(s)
thereof and no additional borrowings have been made since the date
thereof, except as disclosed in writing to Lender, or otherwise
allowed under the provisions of this Agreement.
Section 3.21 of the Loan Agreement, as amended, (including Exhibit C
referenced therein and attached to the Loan Agreement, as amended) is hereby
deleted in its entirety and the following is substituted in lieu thereof:
3.21 Subsidiaries. Attached as Exhibit C is a correct and
complete list as of the date of the Fifth Amendment of all
Subsidiaries of Borrower showing, as to each Subsidiary, its name, the
type of entity, the jurisdiction of its incorporation, or
organization, and the ownership of the capital stock or partnership
interest of such Subsidiary owned by Borrower.
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3. Borrower's Covenants and Agreements. The last sentence of Paragraph
(a) of Section 4.2 of the Loan Agreement, as amended, and the last sentence of
Paragraph (b) of Section 4.2 of the Loan Agreement, as amended, are hereby
deleted in their entirety and the following is substituted in lieu thereof:
The failure of Borrower to keep, observe, perform, or fulfill
any financial covenant set out in Sections 4.7, 4.8, 4.18, 4.19, 4.20,
4.21, 4.22, 4.24, 4.26, or 4.27 will be a material failure of Borrower
to perform.
Sections 4.7 and 4.8 of the Loan Agreement, as amended, are hereby
deleted in their entirety and the following is substituted in lieu thereof:
4.7 Indebtedness. Without the express prior written consent
of Lender, except for: (i) additional subordinated unsecured
Indebtedness not in excess of Fifty Seven Million Five Hundred
Thousand Dollars ($57,500,000), in the aggregate (Fifty Four Million
Dollars ($54,000,000) of which has been incurred as of the date of the
Fifth Amendment); (ii) additional senior subordinated unsecured
Indebtedness not in excess of One Hundred Twenty Five Million Dollars
($125,000,000), in the aggregate; provided, that, Borrower will allow
Lender an opportunity to review the Form S-3 Registration Statement,
and any supplements or amendments thereto, related to this
Indebtedness prior to closing and will deliver a draft of this
documentation to Lender on October 18, 1996, and will deliver any
revisions thereto to Lender no later than one (1) day following the
filing of same with the Securities and Exchange Commission; (iii)
additional unsecured Indebtedness not in excess of Three Million Five
Hundred Thousand Dollars ($3,500,000) to the Bank of Nashville and
pursuant to terms and conditions no more restrictive than the terms
and conditions of the Loan (One Million Five Hundred Thousand Dollars
($1,500,000) of which has been incurred as of the date of the Fifth
Amendment); (iv) additional acquisition Indebtedness that is secured
by the assets purchased and is not in excess of the lesser of Five
Million Dollars ($5,000,000), in the aggregate, or seventy five
percent (75%) of the total aggregate purchase price; and (v)
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additional acquisition Indebtedness incurred to acquire the furniture,
fixtures, equipment, and other personal property located in any hotel
owned by Borrower, or any Subsidiary of Borrower, Borrower will not,
during the term of the Loan, create, incur, assume, or permit to exist
(except as otherwise allowed by the Loan Agreement) any Indebtedness
for borrowed money of any description whatsoever (excluding: (a) the
Obligations; (b) the endorsement of negotiable instruments payable to
Borrower, or any consolidated Affiliate of Borrower, for deposit or
collection in the ordinary course of business; and (c) long term (a
maturity of more than one (1) year) mortgage loans the proceeds of
which are used to repay the Loan, or any portion thereof. The
following will not be considered Indebtedness for purposes of the
calculations in this Section 4.7: (x) any additional Indebtedness
incurred by Borrower pursuant to advances made under a credit facility
or line of credit in existence on July 14, 1996, and shown on the
Financial Statements or otherwise disclosed in writing to Lender; (y)
any refinancing of any existing Indebtedness, or any Indebtedness that
is permitted under the Loan Agreement (so long as the refinanced
amount does not increase and the terms of any refinancing do not
otherwise violate the terms of the Loan Agreement); and (z)
Indebtedness incurred by Borrower pursuant to advances made under a
credit facility or line of credit in existence on the date of the
Fifth Amendment with First American National Bank (so long as the
outstanding maximum principal amount does not exceed Ten Million
Dollars ($10,000,000) and/or First Tennessee Bank National Association
(so long as the maximum principal amount does not exceed Five Million
Dollars ($5,000,000)). The total amount of all obligations guaranteed
in accordance with Section 4.8 of the Loan Agreement will not be
deemed "Indebtedness" for purposes of making the calculations in this
Section 4.7.
4.8 Guaranties; Loans; Investments. Borrower will not
guarantee or be liable in any manner, whether directly or indirectly,
or make itself liable in any manner, whether directly or indirectly,
or become contingently liable after the date of this Agreement for
the obligations or indebtedness of any Person or Persons
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whomsoever, except for: (i) the endorsement of negotiable instruments
payable to Borrower for deposit or collection in the ordinary course
of business; (ii) guaranties of the obligations of Affiliates that are
included in Borrower's consolidated Financial Statements; and (iii)
long term (a maturity of more than one (1) year) mortgage loans the
proceeds of which are used to repay the Loan, or any portion thereof.
Borrower may also guarantee the obligations of Persons who are not
Affiliates, provided that such guaranties are in the ordinary course
of business, are reasonably necessary to promote some portion of
Borrower's business or the business of its Affiliates and do not
exceed, in the aggregate, the amount of Four Million Dollars
($4,000,000) at any one time. The total amount of all of the
obligations so guaranteed will not be deemed "Indebtedness" for
purposes of making the calculations in Section 4.7. Guaranties of any
obligations which are merely refinances of existing obligations (so
long as the refinanced amount does not increase) will not be
prohibited by this Section 4.8. Borrower will not make any loan,
advance, or extension of credit to any Person who is not an Affiliate
in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate
(other than a loan in the original principal amount of Eight Hundred
Forty Seven Thousand Eight Hundred Ninety Seven Dollars ($847,897)
from Borrower to Xxx Xxxxxx).
Section 4.9 of the Loan Agreement, as amended, (including Exhibit D
referenced therein and attached to the Loan Agreement, as amended) is hereby
deleted in its entirety and the following is substituted in lieu thereof:
4.9 Subsidiaries as Co-Obligors. All Subsidiaries of Borrower
of which Borrower and/or its Subsidiaries own more than seventy five
percent (75%) of the outstanding voting stock or partnership interest,
with the exception of Shoney's Inns Group IV, Inc.; Two Seventeen,
Inc.; MOBAT, Inc.; MURJAC, Inc.; Security Financial Corporation;
Airport Inn, Inc.; ShoLodge Franchise Systems, Inc.; Clearwater Inn,
Inc.; Inn Partners, Inc.; Virginia Inns, Inc. (successor by change of
name to Richmond Inn, Inc.); Desert Inns, Inc. (successor by
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change of name to CFO, Inc.); ShoLodge Beverage Corporation; and all
general partnerships, limited partnership, and joint ventures in
existence on the date of the Second Amendment (other than Shoney's Inn
of Baton Rouge), will be co-obligors of the Obligations. Borrower and
Co-Obligors represent and warrant that as of the date of the Fifth
Amendment, these Subsidiaries are as shown on Exhibit D.
Section 4.18 of the Loan Agreement, as amended, is hereby deleted in
its entirety and the following is substituted in lieu thereof:
4.18 Capital Expenditures. Except in the normal course of
business, consistent with past practice, Borrower will not incur any
capital expenditures without the consent of Lender other than capital
expenditures of no more than Five Million Dollars ($5,000,000) in the
aggregate for the acquisition, construction, furnishing, and equipping
of new office facilities of Borrower in Hendersonville, Tennessee. For
purposes of this covenant, capital expenditures will be computed in
accordance with Generally Accepted Accounting Principles.
Section 4.19 of the Loan Agreement, as amended, is hereby deleted in
its entirety and the following is substituted in lieu thereof:
4.19 Current Ratio. Borrower will at all times maintain, on a
consolidated basis, a ratio of Current Assets to Current Liabilities
not less than 0 to 1.0, computed quarterly. Provided, however, that
for purposes of computing this ratio for the quarter ending July 9,
1995, and for each quarter thereafter through the Maturity Date, all
outstanding Indebtedness of Borrower under existing revolving credit
and line of credit facilities with Lender, First American National
Bank, The Bank of Nashville, and First Tennessee Bank National
Association will be excluded from "Current Liabilities."
Section 4.21 of the Loan Agreement, as amended, is hereby deleted in
its entirety and the following is substituted in lieu thereof:
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4.21 Funded Debt to Total Capitalization Ratio.
Borrower will at all times maintain, on a consolidated
basis, a ratio of Funded Debt to Total Capitalization
equal to or less than .7 to 1.0.
The following Section 4.27 is hereby added to the Loan Agreement, as
amended:
4.27 Indebtedness to Tangible Net Worth Ratio. Borrower will
at all times maintain, on a consolidated basis, a ratio of
Indebtedness (including any indebtedness of any consolidated
Affiliate), excluding the senior subordinated unsecured Indebtedness
permitted under Items (i) and (ii) of Section 4.7, to Tangible Net
Worth of less than 0.75 to 1.0.
3. Conditions Precedent. Notwithstanding any other provisions of this
Fifth Amendment, it is understood and agreed that Lender will have no
obligation to fund at any time unless and until the following conditions have
been met and continue to be met, to the reasonable satisfaction of Lender and
its counsel:
(a) Lender will have received such documents, instruments,
and agreements, including, but not limited to, the Fifth Amendment and all
modifications and/or amendments thereto, in form satisfactory to Lender, as
Lender will reasonably request to evidence the agreement set out herein;
(b) A Certificate of Existence of Borrower and each of
the Co-Obligors (other than Shoney's Inn of Baton Rouge) issued by
the Secretary of State of Tennessee; and
(c) Opinion of counsel for Borrower and each of the Co-
Obligors in form and substance satisfactory to Lender.
4. Costs. Borrower agrees to pay all reasonable fees and costs
incurred by Lender in connection with the preparation, execution, and delivery
of all documentation reasonably required to evidence the agreement set out
herein, including Lender's counsel fees.
5. Continuing Representation and Warranty by Borrower and Co-Obligors.
Borrower and Co-Obligors represent and warrant to
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Lender that all of the covenants, agreements, representations, and warranties
made by Borrower and Co-Obligors in the Loan Agreement, as amended, in any
writing delivered pursuant to the Loan Agreement, as amended, and in this Fifth
Amendment, are true and correct, and have been fully complied with, in all
material respects, as of such date.
6. Continuing Effect. Except as specifically set forth in this Fifth
Amendment, the Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Third Amendment, and the Fourth Amendment, and all of the Loan
Documents remain in full force and effect as originally written.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
LENDER:
First Union National Bank of
Tennessee
By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Vice President
BORROWER:
ShoLodge, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
CO-OBLIGORS:
Shoney's Inn of Lebanon, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Shoney's Inn, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Nashville Air Associates, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Xxxxx and Associates, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Sunshine Inns, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
LAFLA Inn, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Southeast Texas Inns, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
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Delaware Inns, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Alabama Lodging Corporation
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Carolina Inns, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Midwest Inns, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
Far West Inns, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
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Xxxxxx'x Xxx xx Xxxxx Xxxxx
By: Two Seventeen, Inc.
General Partner
By: /s/ Xxxx Xxxxx
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Its: President
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By: Inn Partners, Inc.
General Partner
By: /s/ Xxxx Xxxxx
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Its: President
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Front Range Suites, Inc.
By: /s/ Xxxx Xxxxx
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Xxxx Xxxxx, President
