9 - SECOND AMENDMENT TO LOAN AGREEMENT AND SECURITY AGREEMENT
0199297.01
SECOND AMENDMENT TO
LOAN AGREEMENT AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT AND SECURITY
AGREEMENT ("Second Amendment") is made effective February 18th,
1999, by and among CBW INC., an Oregon corporation ("Borrower"),
ELMER'S RESTAURANTS, INC., an Oregon corporation ("Elmer's"), and
EAGLE'S VIEW MANAGEMENT COMPANY, INC., an Oregon corporation
("Lender").
RECITALS:
A. Borrower and Lender are parties to that certain
Amended and Restated Loan Agreement and Security Agreement, dated
August 24, 1998 (the "Loan Agreement"), wherein Lender agreed,
subject to certain terms and conditions, to loan Borrower the
sum of $4 million (the "Loan"). Borrower intended to use the
proceeds of the loan primarily to acquire a majority of the then
outstanding shares of stock in Elmer's.
B. Pursuant to the Loan Agreement, Lender made the Loan to
Borrower on or about August 25, 1998. As part of the
consideration for such loan, Borrower provided Lender with
certain security, including pledges of Elmer's common stock (the
"Xxxxxxxx Stock") and Borrower's common stock (collectively, the
"Stock Pledges"), the personal guarantees of certain of
Borrower's shareholders (the "Guarantors"), and the Agreement to
Post Security of Xxxxxxx Xxxxx (the "Xxxxx Agreement").
C. In connection with the Loan, Borrower, as Maker and
Lender, as Holder, are parties to that certain Promissory Note,
dated August 25, 1998, in the principal amount of $4 million (the
"Note"). Borrower has proposed to pay Lender certain sums in
order to reduce the principal balance owed on the Note to $1.25
million.
D. Borrower has proposed to proceed with a merger between
Borrower and Elmer's (the "Merger"). Pursuant to Section 3.2 of
the Loan Agreement, certain conditions, as set forth therein, are
required to be satisfied by Borrower and Elmer's in connection
with the Merger, upon the satisfaction of which, Lender is
required to release and discharge the Guarantors and release its
security interest in the Stock Pledges and the Xxxxx Agreement.
E. Borrower, Lender, and Elmer's have agreed to complete
the Merger, reduce the principal balance owed under the Note, and
to release certain security interests and the guaranties and
substitute new security, subject to the terms and conditions
contained herein.
NOW, THEREFORE, the parties agree as follows:
1. Conditions to Substitution of Security Subsequent to Merger.
Upon the occurrence of all the following on or prior to February
24, 1999, Lender shall execute and deliver a Release of Guaranty
Agreement in favor of each of the Guarantors in the form attached
as Exhibit 1, Releases of Security Interests under Pledge
Agreements in the forms attached as Exhibits 2 and 3, a Release
of Security Interest under the Xxxxx Agreement in the form
attached as Exhibit 4 and a First Amendment to Promissory Note,
the form of which is attached as Exhibit 5. Lender further
agrees that upon fulfillment of all such conditions by such date,
Lender shall return the funds posted under the Xxxxx Agreement.
1.1 Completion of Merger. Borrower shall have completed
the Merger and provided documentation of the Merger to Lender's
reasonable satisfaction sufficient to establish that Elmer's has
assumed all obligations of Borrower.
1.2 Partial Payment of Loan Balance. Borrower shall have
paid Lender the sum of $2,750,000.00 pursuant to the terms of the
First Amendment to Promissory Note, the form of which is attached
as Exhibit 5. The principal amount of the Note shall thereby be
reduced to $1.25 million and Sections 1.3 and 2.5 of the Loan
Agreement shall be amended to reflect a maturity date of
February 25, 2004.
1.3 Real Property Lien. Elmer's shall have granted and
delivered to Lender fully and properly executed Deeds of Trust in
the form attached as Exhibit 6 (the "Deeds of Trust") against the
real properties described in the attached Exhibit 7 and all
improvements located thereon (the "Properties"). The Deeds of
Trust will create valid liens, subject only to the preprinted
exceptions contained in a standard policy of Lender's Extended
Title Insurance, the prior lien of Xxxxx Fargo Bank in the total
amount not to exceed $7,000,000.00, and such other exceptions to
title as Lender may reasonably approve.
1.4 Other Security. Elmer's shall have granted to Lender a
perfected security interest in all items of personal property of
Elmer's listed in Exhibit 8 (the "Collateral"), subject only to
the first priority security interest of Xxxxx Fargo Bank in the
Collateral pursuant to the terms of the Subordination Agreement
between the parties attached as Exhibit 9.
1.5 Assumption of Debt. Pursuant to the terms of the
Merger, Elmer's shall have assumed all obligations, duties and
covenants of Borrower under the Loan Agreement as amended herein.
In addition, Elmer's shall be responsible for all representations
and warranties of Borrower as if Elmer's had made such
representations and warranties in the first instance and shall be
liable for any breach thereof.
1.6 Insurance Policies. Elmer's shall have delivered to
Lender in a form reasonably satisfactory to Lender, certificates
of insurance as set forth in Section 3.2.4 of the Loan Agreement.
1.7 Financing Statements. Borrower shall have executed and
delivered to Lender UCC Financing Statements covering the
Collateral and naming Lender as the secured party, subject to the
subordination described in Section 1.4 above. Lender shall be
entitled to file such financing statements with the appropriate
governmental entity and/or recording office.
1.8 Officer's Certificate. Borrower and Elmer's shall have
executed and delivered to Lender certificates from the Corporate
Secretary of Borrower and Elmer's certifying as follows:
1.8.1 Borrower and Elmer's have full and complete
authority to enter into, execute, deliver and perform the terms
of this Second Amendment, and such execution, delivery, and
performance will not cause a default by Borrower or Elmer's under
the terms of any other document or agreement by which Borrower or
Elmer's is bound.
1.8.2 Upon execution by Borrower and Elmer's, this
Second Amendment will be a valid and legally binding obligation
of Borrower and Elmer's, enforceable against Borrower and Elmer's
in accordance with its terms subject to usual and customary
bankruptcy and equitable remedies qualifications.
1.9 Approvals. Elmer's shall have obtained the approval or
consent of, and all filings and registrations required by any
state or federal agency or other federal, state, or local
regulatory authority, which is required in connection with the
execution, delivery, and performance by Borrower and Elmer's of
this Second Amendment and the documents to be executed in
connection therewith.
1.10 Resolutions. Borrower and Elmer's shall have provided
copies of resolutions adopted by the board of directors of
Borrower and Elmer's, certified by the Secretary or Assistant
Secretary of Borrower and Elmer's, respectively, as being in full
force and effect on the Closing Date, as that term is defined
below, authorizing Borrower and Elmer's to enter into this Second
Amendment and execute all documents necessary in connection
therewith.
1.11 Certificate of Incumbency. Borrower and Elmer's shall
have delivered to Lender certificates signed by the Secretary or
Assistant Secretary of Borrower and Elmer's, respectively, and
dated as of the Closing Date, as to the incumbency of the person
or persons authorized to execute and deliver this Second
Amendment, and all other documents required hereunder on behalf
of Borrower and Elmer's.
2. Representations and Warranties. Borrower and Elmer's each
represent and warrant to Lender that:
2.1 Organization and Existence. Elmer's is an Oregon
corporation duly organized and validly existing under the laws of
the State of Oregon; has all requisite power, and has all
material governmental licenses, authorizations, consents, and
approvals necessary to own its assets and carry on its business
as now being or as proposed to be conducted; and is qualified to
do business in all other jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and
where failure to do so would have a material adverse effect on
its business, financial condition, or operations.
2.2 Authority. The making and performance by Borrower and
Elmer's of this Second Amendment and all exhibits hereto have
been duly authorized by all corporate action and do not and will
not violate any provision of law, rule, regulation, or order,
including, but not limited to, any such law, rule, regulation
under the Oregon Lottery Commission or Oregon Liquor Control
Commission or any other similar state or federal agency or
entity (collectively "Laws"), or any provision of the Articles of
Incorporation or Bylaws of Borrower or Elmer's, or result in the
breach of, or constitute a default or require any consent under,
any Laws or indenture or other agreement or instrument by which
Borrower or Elmer's or any of their property may be bound or
affected, or result in, or require, the creation or imposition of
any lien except as provided herein upon or with respect to any
property of Borrower or Elmer's. Lender and Borrower acknowledge
that the terms and conditions of this Loan Agreement may be
subject to disclosure under applicable securities or other laws.
2.3 Obligations After Merger. Upon completion of the
Merger, Elmer's will assume all of Borrower's duties,
requirements, and obligations under the Loan Agreement, as
amended.
2.4 Approval. Except the approval of the Oregon Lottery
Commission which has already been obtained, no authorization or
approval or other action by, and no notice to or filing or
registration with, any governmental authority or regulatory body
is required for the due execution, delivery, and performance by
Borrower or Elmer's of this Second Amendment and all exhibits
hereto.
2.5 Taxes. Borrower and Elmer's have filed all tax returns
which are required to be filed under any applicable law on or
before the date such filing is required (taking into account any
lawful extensions with respect thereto), and have paid, or made,
provision for the payment of all taxes shown to be due pursuant
to said returns or pursuant to any assessment received by
Borrower or Elmer's, except such taxes, if any, being contested
in good faith and by proper proceedings and as to which adequate
reserves have been provided. Borrower and Elmer's have had no
tax deficiencies asserted or assessed against them within the
three-year period preceding the date of this Agreement.
2.6 Default. Borrower and Elmer's are not in default in
the payment or performance or observance of any contract,
agreement, or other instrument to which either is a party or by
which either or its properties or assets may be bound, which
individually or together with all other such defaults could have
a material adverse effect on the financial condition of Borrower
or Elmer's or materially impair the ability of Borrower or
Elmer's to pay the Note or perform or observe the respective
provisions of the other Loan Documents as amended.
2.7 Binding Agreements. Upon execution and delivery
thereof by Borrower and Elmer's, this Second Amendment and all
exhibits hereto will constitute the respective legal, valid, and
binding obligations of Borrower and Elmer's enforceable in
accordance with their respective terms subject to usual and
customary bankruptcy and equitable remedies qualifications.
2.8 Business Authorizations. Borrower and Elmer's possess
all patents, patent rights, licenses, trade marks, trade xxxx
rights, trade names, trade name rights and copyrights required to
conduct their business as now conducted without conflict with the
rights or privileges of others.
2.9 Compliance with Laws. The operations of Borrower and
Elmer's are in material compliance, and shall continue to be,
during the time that any sums remain owing under the Loan
Agreement, in material compliance, with all Laws, including, but
not limited to, state and federal securities laws.
3. Cross-Default. The parties agree and acknowledge that in
addition to the events of default described under Section 7 of
the Loan Agreement, it shall also be an event of default under
the Loan Agreement if Borrower or Elmer's defaults under any
obligation owed to Xxxxx Fargo or any other individual or entity
with a security interest in or lien against any material item or
part of the Collateral or any of the Properties, and such default
is not cured within applicable cure periods.
4. Covenants. Elmer's agrees that from or after the date of
the Merger, Elmer's shall comply with all covenants contained in
Sections 6.1, 6.2, 6.3, 6.4, 6.7, 6.8, 6.9, and 6.13 of the Loan
Agreement, as amended herein, and that Borrower in said sections
shall refer to Elmer's as if Elmer's had signed the Loan
Agreement in place of Borrower in the first instance.
5. Closing. The transactions contemplated by this Second
Amendment shall be closed in escrow (the "Closing") at Fidelity
National Title Company of Oregon (the "Title Company"), in
escrow, at its offices located at 000 X.X. Xxxxx Xxxxxx,
Xxxxxxxx, Xxxxxx. The Closing shall occur not later than
February 24, 1999 (the "Termination Date").
5.1 Lender's Deliveries at Closing. At Closing, Lender
shall deliver to escrow the following executed originals of
Exhibits 1 through 5 to this Second Amendment.
5.2 Borrower's and Elmer's Deliveries at Closing. At
Closing, Borrower and Elmer's shall deliver the sums mentioned in
Section 1.2, the executed Deeds of Trust, the executed security
agreement and subordination agreement listed in Section 1.4,
satisfactory evidence of Elmer's assumption of Borrower's
covenants and obligations under the Loan Agreement as amended
herein, the insurance policies described in Section 1.6, the
executed financing statements listed in Section 1.7, and fully
executed originals of all other items mentioned in Sections 1.8,
1.9, 1.10, and 1.11 of this Second Amendment (to the extent not
previously delivered). Borrower and Elmer's shall also deliver
all other sums and items required under this Second Amendment.
6. Title Insurance. Within 30 days after Closing, Borrower and
Elmer's shall pay for and deliver to Lender ALTA title insurance
policies with extended coverage on each parcel of the Properties.
The title insurance policies shall insure title to the Properties
subject only to the Title Company's preprinted standard
exceptions contained in a Lender's extended coverage policy, the
first priority lien of Xxxxx Fargo Bank, and other exceptions
which are acceptable to Lender in its reasonable discretion.
7. Default. Section 7.1(i) of the Loan Agreement is hereby
deleted in its entirety.
8. Time of Essence. Time is of the essence for each of the
party's obligations under this Second Amendment.
9. Expenses. Borrower and Elmer's agree to pay to Lender the
reasonable fees and expenses, including, but not limited to,
those of Dunn, Carney, Xxxxx, Xxxxxxx & Tongue, counsel to
Lender, incurred in connection with this Second Amendment. Said
sum shall be paid at Closing.
10. Miscellaneous.
10.1 Entire Agreement. This Second Amendment, along with
all exhibits and attachments, comprises the entire agreement of
the parties with respect to the matters covered herein, written
or oral. All provisions of this Second Amendment may be modified
or waived only by an instrument in writing signed by all parties
hereto.
10.2 Survival. All representations, warranties, and
agreements contained on the part of Borrower and Elmer's shall
survive the making of this Second Amendment and the execution of
all documents in connection herewith, as long as any interest on
or principal of the loan remains unpaid.
10.3 Authority. Each individual executing this Second
Amendment represents and warrants that he or she is duly
authorized to duly execute and deliver this Second Amendment on
behalf of the contracting party.
10.4 Counterparts. This Second Amendment and the exhibits
thereto may be executed in one or more counterparts, all of which
taken together shall constitute one and the same First Amendment,
and any of the parties hereto may execute this First Amendment by
signing any such counterpart.
10.5 Borrower's and Elmer's Indemnity of Lender. Borrower
and Elmer's shall, jointly and severally, indemnify, defend, and
hold harmless Lender from and against any loss, liability,
damage, or expense, including reasonable attorney fees, caused by
or related to: (i) any breach of Borrower's or Elmer's
warranties or any misrepresentation by Borrower or Elmer's; (ii)
the condition of any of the Properties, including, but not
limited to, any environmental contamination in, on, under, or
about the Properties; or (iii) the operation of Borrower's or
Elmer's business, unless such liability, damage, or expense
arises from the gross negligence or intentional misconduct of
Lender. The provisions of this Section shall survive Closing.
11. Consent to Merger. Subject to the satisfaction of each of
the conditions set forth above in Section Conditions to
Substitution of Security Subsequent to Merger. Upon the
occurrence of all the following on or prior to February 24, 1999,
Lender shall execute and deliver a Release of Guaranty Agreement
in favor of each of the Guarantors in the form attached as
Exhibit 1, Releases of Security Interests under Pledge Agreements
in the forms attached as Exhibits 2 and 3, a Release of Security
Interest under the Xxxxx Agreement in the form attached as
Exhibit 4 and a First Amendment to Promissory Note, the form of
which is attached as Exhibit 5. Lender further agrees that upon
fulfillment of all such conditions by such date, Lender shall
return the funds posted under the Xxxxx Agreement., Lender hereby
consents to the Merger and the transactions contemplated thereby.
12. Security Agreement. For value, the current receipt and
reasonable equivalence of which are hereby acknowledged, and to
secure the payment and performance of the Loan as evidenced by
the Note, as amended, Elmer's hereby grants to Lender a security
interest pursuant to Article 9 of the Uniform Commercial Code, in
and to the Rights to Payment, Inventory, Collateral and Proceeds
described in Exhibit 8.
13. All Other Terms of Loan Agreement to Remain Unchanged. All
terms and conditions of the Loan Agreement not specifically
amended or deleted by this Second Amendment shall remain in full
force and effect, as if fully set forth herein. If closing has
not occurred by the Termination Date, this Second Amendment shall
terminate and be null and void.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment effective the date first written above.
CBW INC., EAGLE'S VIEW MANAGEMENT
an Oregon corporation COMPANY, INC., an Oregon
corporation
By: ___/s/ Xxxxx X. Davis___ By: ___/s/ Xxxxx X. Woolley__
Name: Xxxxx X. Xxxxx Name: Xxxxx X. Xxxxxxx
Title: President Title: President
Date: 2/17/99 Date: 2/18/99
ELMER'S RESTAURANTS, INC.,
an Oregon corporation
By: ___/s/ Xxxxx X. Davis___
Name: Xxxxx X. Xxxxx
Title: President
Date: 2/17/99
Exhibit List:
Exhibit 1-Release of Guaranty Agreement
Exhibits 2 and 3-Releases of Security Interests under Pledge
Agreements
Exhibit 4-Release of Security Interest under the Xxxxx Agreement
Exhibit 5-First Amendment to Promissory Note
Exhibit 6-Deed of Trust form
Exhibit 7-Real Properties description
Exhibit 8-Personal Property of Elmer's
Exhibit 9-Subordination Agreement
