Exhibit 10(q)
FOURTH AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This Fourth Amended and Restated Revolving Credit Agreement dated as of
October 19, 2001 (the "Agreement"), is between Max & Erma's Restaurants, Inc., a
Delaware corporation (the "Company"), and The Provident Bank, individually and
as agent (the "Bank") amends and restates in its entirety the Third Amended and
Restated Revolving Credit Agreement between the parties dated January 7, 2000.
The parties agree as follows:
SECTION 1
AMOUNT AND TERMS OF THE CREDIT
1.1 COMMITMENT OF THE BANK.
(a) COMMITMENT. The Bank agrees, on the terms and conditions
of this Agreement and provided that no Event of Default or Default (the
definitions of those and other capitalized terms used herein have the meanings
provided in Section 9) then exists, to make Loans to the Company at the main
office of the Bank, 0 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx, from time to time on
and after the date hereof but prior to October 31, 2007 (the "Maturity Date").
(b) MAXIMUM COMMITMENT. The Bank agrees to continue the
following credit term facilities: (a) a term loan in the original principal
amount of $22,400,000, of which the principal balance is $20,000,000 as
evidenced by the Term Promissory Note dated as of the date hereof in the amount
of $20,000,000, payable by the Company to the Bank in 24 equal quarterly
installments of principal of $800,000 plus interest commencing October 31, 2001
and terminating on the Maturity Date pursuant to the terms thereof and Section
1.4 hereof ("Term Note A") and (b) a term loan in the original principal amount
of $4,800,000, of which the principal balance is $4,800,000 as evidenced by the
Term Promissory Note dated as of the date hereof in the amount of $4,800,000
payable by the Company to the Bank in 24 equal quarterly installments of
principal of $200,000 plus interest commencing January 31, 2002 and terminating
on the Maturity Date pursuant to the terms thereof and Section 1.4 hereof ("Term
Note B"). In addition, the Bank agrees to lend the Company $12,800,000 on a
revolving basis pursuant to the terms of a Revolving Credit Note dated as of the
date hereof (the "Revolving Note" and, collectively with Term Note A and Term
Note B, the "Notes"). As of the date the Maturity Date, the Bank shall have no
further obligation to fund any Loans under this Agreement. The maximum amount of
all outstanding Loans of the Bank to the Company under this Agreement shall not
exceed $40,000,000 (the "Maximum Commitment"). The Maximum Commitment of the
Bank as adjusted from time to time is hereinafter called the "Commitment" of the
Bank. The $12,800,000 available to the Company under the Revolving Note shall be
hereinafter called the "Revolving Commitment." Any amounts outstanding under the
Revolving Commitment as of October 31, 2002 shall be payable by the Company to
the Bank in 20 equal
quarterly installments of principal and interest commencing January 31, 2003 and
terminating on the Maturity Date pursuant to the terms of the Note and Section
1.4 of this Agreement. No Commitment shall become effective until each of the
parties hereto shall have executed this Agreement or a counterpart hereof.
1.2 CANCELLATION OR REDUCTION OF THE COMMITMENT BY THE COMPANY. During
the period from and including the date of this Agreement to but excluding the
Maturity Date, the Commitment of the Bank may, subject to the payment of the
Interest Preservation Amount described in Section 1.5, be cancelled or may be
reduced permanently from time to time by the Company in the amount of $100,000
or any larger amount which is a whole multiple of $100,000 upon 10 Banking Days'
written notice to the Bank of the Company's election to do so, which notice
shall specify the date when such cancellation or reduction shall be effective
and on the effective date of such reduction the Commitment of the Bank shall be
reduced; PROVIDED that-
(a) any such cancellation or reduction shall be irrevocable;
(b) in the event of a cancellation of the Commitment of the Bank,
(i) the Notes shall be paid in full, (ii) all Commitment Fees due to the date of
cancellation shall be paid in full and (iii) all expenses due pursuant to
Section 10.7 hereof shall be paid in full; and
(c) in the event of a reduction of the Commitment of the Bank to an
amount less than the principal amount then outstanding hereunder, the Notes
shall be prepaid so that the unpaid aggregate principal amount of the then
outstanding Loans does not exceed the Commitment of the Bank as so reduced.
1.3 FEES.
(a) COMMITMENT FEE. As consideration for the Commitment of the
Bank, the Company shall pay to the Bank a Commitment Fee on the daily average
unused portion of the Bank's Revolving Commitment at a rate per annum equal to
1/2 of 1%, commencing with the effective date hereof (calculated on the basis of
the actual number of days elapsed over a year of 360 days). The Commitment Fee
shall be payable quarterly on the date for payment of interest pursuant to
Section 1.4 commencing with the first such date after the effective date hereof.
(b) ADDITIONAL COMMITMENT FEE. The Company hereby agrees to pay an
additional commitment fee equal to 0.25% of any new funds above the amount of
the Maximum Commitment made available to the Company by the Bank in the future.
Any such new funds shall be subject to the terms of this Agreement as amended
from time to time.
(c) AGENCY FEE. As consideration for the Bank agreeing to serve as
agent and participate a portion of the Commitment, the Company shall pay to the
Bank an Agency Fee of $25,000 on each November 1 thereafter until the Maturity
Date.
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1.4 THE NOTES.
(a) FORM. The Loans made by the Bank pursuant hereto shall be
evidenced by the Revolving Note of the Company substantially in the form of
Exhibit A-3 Term Note A of the Company substantially in the form of Exhibit A-4
and Term Note B of the Company substantially in the form of Exhibit A-5, payable
to the order of the Bank and representing the obligation of the Company to pay
the amount of the Commitment or, if less, the aggregate unpaid principal amount
of all Loans made by the Bank, with interest thereon as prescribed in this
Section 1.4. The Notes shall (i) be dated the date of this Agreement- (ii) be
stated to mature on the Maturity Date; and (iii) bear interest at the applicable
interest rate per annum as provided in, and payable as specified in this Section
1.4. Each Loan made by the Bank and each payment made on account of principal on
the Notes shall be recorded by the Bank, on its books and records or endorsed on
the grid attached to the applicable Note, such books and records or endorsements
to constitute prima-facie evidence of the amount of all Loans and payments;
PROVIDED, HOWEVER, that the failure of the Bank to make such recordation shall
not limit or otherwise affect the obligations of the Company under the Notes.
(b) INTEREST. Each Loan shall bear interest on the unpaid principal
balance of all Loans made by the Bank for each day from the day such Loan is
made until it becomes due, at a fluctuating rate per annum which rate will be
immediately adjusted upon the execution of this Amendment. Thereafter such rate
will be adjusted based upon the Company's submission of financial information
pursuant to Section 5.2 herein beginning with the quarter ending November, 1999.
The interest rate adjustment will be effective the first Monday following
receipt by the Bank of the Quarterly Compliance Certificate pursuant to Section
5.4(c) herein. The interest rate will be established according to the following
schedule based upon the ratio of the Indebtedness of the Company to EBITDA of
the Company during the immediately preceding twelve month period as of the date
of each fiscal quarter end:
RATIO AT QUARTER END RATE FOR FOLLOWING QUARTER
-------------------- --------------------------
Less than 2.0:1.0 Either the Prime Rate minus 25 basis points or the LIBOR
Rate plus 250 basis points.
2.01 through 2.5:1.0 Either the Prime Rate plus 25 basis points or the LIBOR
Rate plus 300 basis points
Greater than 2.51:1.0 Either the Prime Rate plus 75 basis points or the LIBOR
Rate plus 350 basis points
Interest on all Loans shall be calculated on the basis of the actual number of
days elapsed over a year of 360 days. As used in this Agreement, the term "Prime
Rate" on any day shall mean the rate published or announced by the Bank as its
prime rate which rate may not be the Bank's lowest rate. Any change in the
interest rate on a Loan due to a change in the Prime Rate shall take effect on
the date of such change in the Prime Rate. "LIBOR Rate" shall mean the offered
rate for U.S. Dollar deposits of not less than $1,000,000.00 for a period of
time equal to each
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Interest Period as of 11:00 A.M. City of London, England time two London
Business Days prior to the first date of each Interest Period of the Notes as
shown on the display designated as "British Bankers Assoc. Interest Settlement
Rates" on the Telerate System ("Telerate"), Page 3750 or Page 3740, or such
other page or pages as may replace such pages on Telerate for the purpose of
displaying such rate; PROVIDED, HOWEVER, that if such rate is not available on
Telerate then such offered rate shall be otherwise independently determined by
the Bank from an alternate, substantially similar independent source available
to the Bank or shall be calculated by the Bank by a substantially similar
methodology as that theretofore used to determine such offered rate in Telerate.
"London Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions are generally authorized or obligated by law or
executive order to close in the City of London, England. Each change in the rate
to be charged hereunder will become effective without notice on the commencement
of each Interest Period based upon the LIBOR Rate then in effect. "Interest
Period" means each consecutive one, two, three or six month period (the first of
which shall commence on the date of this Agreement) effective as of the first
day of each Interest Period and ending on the last day of each Interest Period,
provided that if any Interest Period is scheduled to end on a date for which
there is no numerical equivalent to the date on which the Interest Period
commenced, then it shall end instead on the last day of such calendar month.
Under no circumstances will the interest rate on the Notes be more than the
maximum rate allowed by applicable law.
(c) INTEREST PAYMENTS. Interest on the Loans shall be payable
quarterly on the last day of each January, April, July, and October, commencing
on the first such date following the initial Loan. To the extent permitted by
applicable law, the Bank may charge interest at the foregoing rates on all
interest and other amounts owing hereunder which are not paid when due.
(d) PRINCIPAL. Principal on the Loans shall be due and payable
pursuant to the terms of the Notes and shall be due and payable in full on the
Maturity Date; PROVIDED, HOWEVER, that any Excess Cash Flow payments the Company
makes shall be applied to principal reduction of Term Note A and Term Note B in
the inverse order of maturity. The Company shall be required to pay any Excess
Cash Flow to the Bank. "Excess Cash Flow" of the Company means, for any fiscal
year, the difference between (i) the sum of net income plus depreciation plus
amortization minus (ii) the sum of required principal debt payments plus
required capital lease payments plus the cash balance required to maintain
compliance with all covenants of the Agreement plus Unfunded Capital
Expenditures. "Unfunded Capital Expenditures" means the sum of (a) (i) the
number of Company restaurants that have been open more than one year as of the
date this covenant is calculated multiplied by (ii) $47,000 plus (b) Capital
Expenditures that are not intended to be financed in a Permitted Sale/Leaseback
with an Approved Sale/Leaseback Creditor.
1.5 PREPAYMENTS AND RIGHT TO REBORROW. Except as set forth below,
outstanding Loans may be prepaid in whole at any time or in part from time to
time without premium or penalty. No prepayment shall affect the Company's right
to reborrow from the Bank under the Revolving Commitment of the Bank up to the
permissible amount hereunder prior to the Maturity Date. The Company may prepay
all or any portion of the principal amount of the Loans bearing interest at a
LIBOR Rate, PROVIDED that if the Company makes any such prepayment other than on
the last day of an Interest Period, the Company shall pay all accrued
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interest on the principal amount prepaid with such prepayment and, on demand,
shall reimburse the Bank and hold the Bank harmless from all losses and expenses
incurred by the Bank as a result of such prepayment, including, without
limitation, any losses and expenses arising from the liquidation or reemployment
of deposits acquired to fund or maintain the principal amount prepaid. Such
reimbursement shall be calculated as though the Bank funded the principal amount
prepaid through the purchase of U.S. Dollar deposits in the London, England
interbank market having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the LIBOR Rate for such Interest Period,
whether in fact that is the case or not. The Bank 's determination of the amount
of such reimbursement shall be conclusive in the absence of manifest error.
1.6 LOANS. Each Loan shall be made pursuant to the Bank's Automated
Line of Credit Service. Further, the Bank will, at the request of the Company
repay prior Loans pursuant to the Automated Line of Credit service. The Company
may request the Bank to make Loans by written or telephonic request made prior
to 2:00 p.m. Columbus, Ohio time. The proceeds of any such request will subject
to the satisfaction of the terms and conditions of this Agreement, promptly made
available to the Company by the Bank at the office of the Bank by crediting the
account of the Company on the books of such office of the Bank.
1.7 LETTERS OF CREDIT.
(A) The Company may request a Letter of Credit by completing the
Bank's then standard application for a Letter of Credit and delivering the
application to the Bank at least two days before the date on which the Letter of
Credit is to be issued. On the date the Letter of Credit is to be issued, the
Bank shall deliver the Letter of Credit to the Company, or to the Person
designated by the Company. No Letter of Credit shall be issued with an
expiration date after the Maturity Date or which is payable in a currency other
than United States dollars. Except as otherwise provided herein, all the terms
of the Letter of Credit and such standard application shall govern the Letter of
Credit. The amount of each Letter of Credit must be approved by the Bank
(PROVIDED that there shall never be more than $500,000 in face amount of Letters
of Credit outstanding), and the Bank may disapprove a Letter of Credit request
at any time for any reason. The Revolving Commitment shall be reduced by the
face amount of any Letter of Credit.
(B) The Company shall immediately reimburse the Bank for the amount
paid on all drafts drawn under Letters of Credit issued hereunder. If,
notwithstanding the foregoing sentence, the Company should fail to so
immediately reimburse the Bank, then, in addition to any other remedy which the
Bank may have with respect to such failure, any amount paid by the Bank on any
draft under a Letter of Credit shall be treated as a Loan (bearing interest as
provided in Section 1.4).
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SECTION 2
GENERAL TERMS
2.1 PAYMENTS. The Company shall make all payments of principal,
interest and Commitment Fees to the Bank as payee at its main office, 0 Xxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx, Ohio, in immediately available funds prior to 3:00
p.m., Cincinnati, Ohio time, on the date such payments shall become due in
accordance with the terms hereof and of the Notes.
2.2 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a day other than a
Banking Day, such payment shall be made on the next succeeding Banking Day and
such extension of time shall in such case be included in the computation of
payment of interest hereunder or under the Notes or the Commitment Fees
hereunder, as the case may be.
2.3 SETOFFS. Upon the occurrence of any Event of Default, the Bank
shall ha the right to setoff against all obligations of the Company to the Bank
hereunder, under the Notes or under any of the Loan Documents, whether matured
or unmatured, all amounts owing to the Company by the Bank or any Affiliate of
the Bank, whether or not then due and payable, and all other funds or property
of the Company on deposit with or otherwise held by or in the custody of the
Bank or any Affiliate of the bank for the beneficial account of the Company.
2.4 CAPITAL ADEQUACY. If, on or after the date hereof, the Bank shall
have determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return below that achieved on the date of this Agreement on the Bank's
capital as a consequence of its obligations hereunder to a level below that
which the bank could have achieved but for such adoption, change or compliance
(taking into consideration the Bank's policies with respect to capital adequacy)
by an amount deemed by the Bank to be material, then, sixty days after the Bank
delivers notice to the Company regarding such circumstances, the Company shall
pay to the Bank such additional amount or amounts as will compensate the Bank
for such reduction.
2.5 INTEREST AFTER MATURITY. Whenever any payment to be made hereunder,
under the Notes or under any of the Loan Documents shall become due and payable,
whether at the stated maturity thereof, by acceleration or otherwise, interest
thereon shall thereafter be payable at the interest rate per annum then in
effect plus 300 basis points.
2.6 SECURITY. The obligations of the Company hereunder are secured
pursuant to the Security Agreements.
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SECTION 3
CONDITIONS OF BORROWING
The obligation of the Bank to make the Loans to the Company provided
for hereunder shall be subject to the following conditions.
3.1 CONDITIONS PRECEDENT TO INITIAL LOAN. Prior to the initial Loan,
the Company shall furnish to the Bank all of the following, each dated the date
hereof (unless otherwise indicated) in form and substance satisfactory to the
Bank:
(a) NOTES. Properly executed forms of the Revolving Note, Term Note
A and Term Note B, each drawn to the order of the Bank in the principal amount
of the Bank's Commitment.
(b) SECURITY AGREEMENTS. A properly executed Third Amended and
Restated Security Agreement in the form attached hereto as Exhibit B-1 (the
"Personal Property Security Agreement") and a properly executed Amended and
Restated Intellectual Property Security Agreement in the form attached hereto as
Exhibit B-2 (the "Intellectual Property Security Agreement" and, collectively
with the Personal Property Security Agreement, the "Security Agreements").
(c) FINANCING STATEMENTS, ASSIGNMENTS, ETC.. Copies of duly
completed and executed Uniform Commercial Code financing statements and/or
statements of assignment and/or statements of amendment with respect to the
property covered by the Security Agreements in proper form for filing in all
jurisdictions in which such filing is necessary or appropriate to establish,
perfect, protect and preserve the rights, titles, interests, remedies, powers,
privileges and Liens of the Bank in such property.
(d) LIENS AND OTHER SEARCHES. Results of record searches by a
Person satisfactory to the Bank, of the Uniform Commercial Code filings which
may have been filed with respect to the personal property of the Company in the
state and county filing offices and real estate records in each of the
jurisdictions requested by the Bank, and of judgment and tax Liens with respect
to the Company.
(e) CERTIFIED RESOLUTIONS OF COMPANY. A certified copy of the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement, the Notes issued hereunder, and the
Security Agreements.
(f) OPINION OF COUNSEL. The counsel for the Company ("Counsel"),
shall deliver a revised version of its October 29, 1999 opinion, addressed to
the Bank and each of the participants, and in a form and scope satisfactory to
the Bank, to the following effect-
(g) CLOSING FEE. The Company shall pay a Closing Fee of $20,000 to
the Bank, to be divided among the Bank and the participant lenders.
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(h) PAYMENTS DUE AT CLOSING. The Company shall pay the
out-of-pocket expenses of the Bank incurred in connection with the closing,
including, without limitation, legal fees and lien search expenses.
3.2 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Bank to
make any Loan hereunder (including the initial Loan) shall be subject to the
further condition precedent that, at the time of each Loan, the Company shall be
in compliance with all of the provisions, warranties, covenants and conditions
contained in this Agreement, and there shall exist no Default or Event of
Default as set forth in Section 7. Each borrowing hereunder shall be deemed to
be a representation and warranty by the Company on the date of such borrowing
that the representations and warranties contained in Section 4 are true and
correct, and that the Company is then in compliance with the covenants contained
in Sections 5 and 6.
SECTION 4
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank, which representations
and warranties will survive the execution and delivery of this Agreement and the
Notes, as follows:
4.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
incorporated, and is existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority,
corporate or otherwise, to own or lease its properties and to carry on its
business as now conducted. The Company has all requisite power and authority,
corporate or otherwise, to enter into and perform all of its obligations under
this Agreement, the Notes, and the Security Agreements. The execution, delivery
and performance of this Agreement, the Notes and each of the Loan Documents have
been duly authorized by the Company by appropriate corporate action, there is no
prohibition, either in law, in its Certificate of Incorporation or Bylaws, in
any order, writ, injunction or decree of any court or arbitrator presently in
effect having applicability to the Company, or in any agreement to which it is a
party, which in any way prohibits or would be violated by the execution and
carrying out of this Agreement, the Notes or any of the Loan Documents in any
respect; this Agreement, the Notes and each of the Loan Documents have been duly
executed and delivered and are the legal, valid and enforceable obligations of
the Company, except as enforceability hereof or thereof may be limited by
bankruptcy, insolvency or laws affecting creditors' rights generally.
4.2 QUALIFICATION. The Company is duly qualified or licensed and in good
standing as a foreign corporation duly authorized to do business in each
jurisdiction in which the character of the properties owned or leased or the
nature of the activities conducted makes such qualifications or licensing
necessary.
4.3 FINANCIAL STATEMENTS. The Company has furnished to the Bank audited
financial statements of the Company including (a) an audited balance sheet as at
October 25 , 1998; (b) an audited statement of operations for the year ended
October 25, 1998, (c) an audited statement of shareholders' equity for the year
ended October 25 , 1998; and (d) an audited statement of cash flow for the year
ended October 25 , 1998. The Company has also furnished to the Bank
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unaudited financial statements for the interim period ending on, and as of
August 1, 1999. Except as disclosed to the Bank in writing prior to the date
hereof, such financial statements are complete and correct in all material
respects, and fairly reflect the financial condition of the Company as at such
dates and the results of operations of the Company for the periods ended on such
dates. Since August 1, 1999, no material or adverse change has occurred in the
businesses property or condition (financial or other) of the Company except as
disclosed to the Bank in writing prior to the date hereof.
4.4 TAX RETURNS AND PAYMENTS. The Company has filed all tax returns
required by law to be filed and has paid all taxes, assessments and other
governmental charges levied upon any of its properties, assets, income or
franchises, other than those not yet delinquent. The charges, accruals and
reserves on the books of the Company in respect to income taxes for all fiscal
periods are adequate in the opinion of the Company, and the Company knows of no
unpaid assessment for additional income taxes for any fiscal period or of any
basis therefor.
4.5 TITLES TO PROPERTIES: Liens. The Company has good and marketable
title to all of its properties, in each case including the properties and assets
reflected in the balance sheet as of August 1, 1999 except properties held under
leases which are capitalized in accordance with GAAP and except properties and
assets disposed of since the date of such balance sheet in the ordinary course
of business, and none of such properties or assets is subject to any Lien except
as permitted by Section 6.1 (a). The Company enjoys peaceful and undisturbed
possession under all leases under which it operates, and all of such leases are
valid, subsisting and in full force and effect. None of such leases contains any
provision restricting incurrence of Indebtedness by the Company, or any
provision which materially adversely affects or in the future may (so far as the
Company can now foresee) materially adversely affect the operations of the
Company under any such lease.
4.6 LITIGATION, ETC. There is no action, proceeding or investigation
pending or, to the Company's knowledge, threatened (or any basis therefor known
to the Company) which questions the validity of this Agreement, the Notes or any
of the Loan Documents, or any action taken or to be taken pursuant hereto or
thereto, or which might result, either in any case or in the aggregate, in any
material adverse change in the business, operations, affairs or condition of the
Company or its properties and assets or in any material liability on the part of
the Company except as set forth on Schedule 4.6.
4.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not in
violation of any provision of its Certificate of Incorporation or Bylaws, as
amended to date, or to the Company's knowledge, of any agreement, instrument,
judgment, decree, order, statute or governmental law, rule or regulation
applicable to the Company and the execution, delivery and performance of this
Agreement, the Notes or any of the Loan Documents will not result in any such
violation or be in conflict with or constitute a default under any such
provisions or result in the creation of any Lien upon any of the properties or
assets of the Company which now or in the future may (so far as the Company can
now foresee) materially and adversely affect the business, operations, affairs
or condition of the Company or its properties or assets.
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4.8 ERISA. Without in any way limiting the scope of Section 4.7, the
Company has not (a) incurred any material accumulated funding deficiency within
the meaning of the Employee Retirement Income Security Act of 1974, as amended
from time to time ("ERISA")- (b) incurred any material liability to the Pension
Benefit Guaranty Corporation established under ERISA (or any successor thereto
under ERISA) in connection with any employee benefit plan established or
maintained by the Company; nor (c) had any tax assessed against it by the
Internal Revenue Service for any alleged violation under Section 4975 of the
Internal Revenue Code.
4.9 PATENTS, TRADEMARKS, ETC. The Company owns or possesses all the
patents, trademarks, service marks, trade names, copyrights, licenses and rights
in respect of the foregoing, necessary for the conduct of its business as now
conducted, without any known conflict with the rights of others except such
conflicts which would not materially and adversely affect the business of the
Company.
4.10 LIABILITIES. The Company has no material Liabilities, direct or
contingent except (a) as disclosed in the balance sheet of the Company as of
August 5, 2001; (b) as disclosed to the Bank in writing prior to the execution
of this Agreement; and (c) debt, contractual commitments, canceled purchase
orders, and accruals, all arising out of the ordinary course of business.
4.11 SUBSIDIARIES AND AFFILIATES. The Company has no Subsidiaries
or Affiliate except those set forth on Schedule 4.11 attached hereto.
4.12 DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to the Bank or to special counsel for the
Bank by the Company or its counsel in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact known to the Company which
materially and adversely affects or in the future may (so far as the Company can
now foresee) materially and adversely affect the business, operations, affairs
or condition of the Company or any of its properties or assets which has not
been set forth in this Agreement or in the other documents, certificates or
statements furnished to the Bank by or on behalf of the Company prior to the
date hereof in connection with the transactions contemplated hereby.
4.13 NO GOVERNMENTAL APPROVALS. No authorization, consent, approval or
exemption of, or registration, qualification or filing with, any governmental
authority is required to permit the execution, delivery and performance by the
Company of this Agreement, the Notes, or the Security Agreements. The Company is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
4.14 INVESTMENTS, LOANS AND ADVANCES. The Company (a) is not a general
partner in any partnership or a member in any joint venture other than as
disclosed on Schedule 4.1 1, (b) does not own or hold the assets, stocks, bonds,
notes or other evidence of Indebtedness or any other security of any Person
other than as disclosed on Schedule 4.11 or in the financial statements
delivered to the Bank pursuant to Section 4.3, nor (c) is a party to any
agreement relating to commodity futures, financial futures or similar
investments.
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4.15 INSURANCE. All of the properties and operations of the Company of
a character usually insured by Persons of established reputation engaged in the
same or a similar business similarly situated are adequately insured, by
financially sound and reputable insurers, against loss or damage of the kinds
and in the amounts customarily insured against by such Persons; and the Company
carries, with such insurers in customary amounts, such other insurance,
including public and product liability insurance, as is usually carried by
Persons of established reputation engaged in the same or a similar business
similarly situated.
4.16 ENVIRONMENTAL MATTERS. To the best of the Company's knowledge,
there are no materials presently located- on any real property owned by, leased
to or operated by the Company which are radioactive or toxic, or which under
federal, state or local law, statute, ordinance or regulations, or court or
administrative order or decree, or private agreement (the "Environmental
Requirements") require special handling in collection, storage, treatment or
disposal ("Hazardous Materials") which are not being handled in accordance with
the Environmental Requirements and no part of such real property has been
contaminated by any Hazardous Materials.
4.17 SECURITY. Each Note is entitled to the benefits of, and is
secured by valid Liens created by the Security Agreements.
4.18 PERFECTION. The provisions of the Security Agreements are effective
to create in favor of the Bank legal, valid and enforceable security interests
in all right, title and interest of the Company in the Collateral, as defined
therein. All necessary filings, recordings and actions have been taken so that
the security interests created by the Security Agreements constitute perfected
security interests in all right, title and interest of the Company in the
Collateral superior in right to any "Collateral Interest" (as defined below),
existing or future, which the Company or any third Person may have against the
Collateral or interests therein except as expressly permitted under this
Agreement or the Security Agreements, and such filings are the only filings
necessary to give constructive notice to third Persons of the security interest
created thereby. The term "Collateral Interest" shall include Liens created
under the Uniform Commercial Code, Liens of record, and consensual Liens created
by the Company which are not of record.
4.19. STOCK REDEMPTION. Since January 7, 2000, the Company has
redeemed 401,501 shares of is issued and outstanding common stock and has paid a
total of $3,479,246 in such redemptions.
SECTION 5
AFFIRMATIVE COVENANTS
Until all Loans and other sums due and owing under this Agreement to
the Bank have been paid in full and the Company no longer has any right to
borrow hereunder, the Company covenants and agrees as follows.
5.1 USE OF PROCEEDS. The Company shall use the Loan proceeds disbursed
pursuant to this Agreement for (a) repayment of term indebtedness owing to the
Bank, (b) store
11
expansion, (c) common stock repurchases and (d) general working capital
purposes; PROVIDED, HOWEVER, that the maximum amount of Loan proceeds that may
be used to repurchase common stocks is $20,000,000.
5.2 PERIODIC FINANCIAL STATEMENTS. The Company shall furnish to the
Bank:
(a) Within 45 days after the end of its first three quarterly
accounting periods of its fiscal year (i) a balance sheet of the Company as at
the close of such period; (ii) a statement of operations for the Company for
such period and for the year to date; and (iii) a statement of cash flows as at
the close of such period; all in reasonable detail, prepared in accordance with
GAAP and certified as complete and correct, subject to changes resulting from
year-end adjustments, by the chief financial officer of the Company.
(b) On or before the 15th day of each four week accounting period a
statement of operations for each of the Company's restaurants for the preceding
month, prepared in accordance with GAAP and certified as complete and correct,
subject to changes resulting from year-end adjustments, by the chief financial
officer of the Company.
(c) Within 45 days after the end of each quarterly accounting
period of the Company's fiscal year, a report that lists (i) all new store
openings in such quarter, (ii) the addresses of all new stores (including the
county where such store is located), (iii) the proceeds used by the Company from
Loans made hereunder to acquire assets that are intended to be financed in a
Permitted Sale/Leaseback with an Approved Sale/Leaseback Creditor and (iv) the
total number of shares of the common stock of the Company redeemed by the
Company, and the total of the redemption prices paid by the Company, during such
quarter.
5.3 ANNUAL FINANCIAL STATEMENTS. The Company shall furnish to the Bank
within 90 days after the close of each fiscal year a complete annual audit
report, including (a) a balance sheet of the Company as at the end of such
fiscal year; and (b) statements of operations, shareholders' equity and cash
flow for such fiscal year; all in reasonable detail and prepared in accordance
with GAAP and accompanied by an unqualified opinion thereon of Deloitte &
Touche, or other independent auditors of recognized national standing selected
by the Company and acceptable to the Bank.
5.4 QUARTERLY COMPLIANCE CERTIFICATE. The quarterly and annual
financial statements furnished pursuant to Sections 5.2 and 5.3 shall be
accompanied by a certificate of the chief financial officer of the Company:
(a) NO EVENT OF DEFAULT. Stating that except as disclosed in the
certificate, such officer, after reasonable investigation, has no knowledge of
any (i) Event of Default or (ii) Default;
(b) FINANCIAL RATIOS. Setting forth, in summary form, calculations
showing the financial status of the Company (at the end of, or, in the case of
incurrence tests, during such accounting Period) in respect of the restrictions
contained in Sections 6.1(a)(v), 6.1(b)(iii), 6.2 and 6.3 hereof; and
12
(c) INTEREST RATE. Setting forth, in summary form, calculations
showing the ratio set forth in Section 1.4(b).
5.5 NOTICE OF EVENT OF DEFAULT. In addition to the certificate
furnished pursuant to Section 5.4, the Company shall furnish to the Bank,
forthwith upon any executive officer of the Company obtaining knowledge of any
Default or Event of Default, a certificate specifying the nature and period of
the existence thereof, and what action the Company has taken or is taking or
proposes to take in respect thereof.
5.6 AUDITORS' CERTIFICATE. The annual audit report called for by
Section 5.3 shall be accompanied by a certificate prepared by the Company's
independent auditors stating that except as disclosed in the certificate they
have knowledge of any Event of Default or Default which relates to the financial
and accounting matters set forth in Sections 6 and 7.
5.7 MAINTENANCE OF PROPERTIES AND INSURANCE. The Company shall at all
times maintain in good repair, working order and condition all properties used
or useful in the business of the Company and from time to time will make all
appropriate repairs, renewals and replacements thereof- maintain insurance upon
its property of such character and amounts as are usually maintained by
companies engaged in like business; furnish to the Bank, upon request, a
statement of its insurance coverage.
5.8 INSPECTION. Upon request of the Bank, the Company shall allow any
authorized representatives of the Bank to visit and inspect any of its
properties, to examine and make copies of and from its books of record and
account and to discuss its affairs, finances and accounts with its officers,
employees and independent accountants, and shall furnish to the Bank any
information regarding its business affairs and financial condition within a
reasonable time after receipt of a written request therefor. Except (i) as the
Bank deems it necessary in connection with the enforcement of its rights arising
out of any Default or as required by law or with respect to disclosures to bank
regulatory authorities or the independent auditors or counsel or the employees,
officers or directors of the Bank, (ii) disclosure to any actual or potential
participant or assignee of the Bank's rights under this Agreement, or (iii) as
consented to by the Company, the Bank will not publish or disclose to any third
Person any information gained under any inspection conducted pursuant to this
Section 5.8 unless and until such information is or becomes a matter of public
knowledge.
5.9 PAYMENT OF TAXES AND CLAIMS. The Company shall promptly pay and
discharge all taxes and assessments levied and assessed or imposed upon its
property or upon its income as well as all claims which, if unpaid, might by law
become a Lien upon its property; provided, however, that nothing herein
contained shall require the Company to pay any such taxes, assessments or claims
so long as the Company shall in good faith contest the validity and stay the
execution and enforcement thereof.
5.10 REPORTS, ETC. The Company shall furnish to the Bank copies of all
material which the Company shall send to any class of its security holders or
file with the Securities and Exchange Commission or any national securities
exchange including, but not limited to, all
13
registration statements, annual reports on Form 10-K, quarterly reports on Form
10-Q, reports on Form 8-K, proxy material and annual reports to shareholders,
and any and all amendments thereof or supplements thereto, within 15 days after
mailing or filing such materials.
5.11 PRESERVATION OF CORPORATE EXISTENCE, ETC.: BUSINESS. Subject to
the provisions of Section 6.1(d) hereof, the Company shall, at all times
preserve and keep in full force and effect its corporate existence, rights and
franchises. The Company will engage primarily in a business of the same general
character as that now conducted.
5.12 COMPLIANCE WITH LAWS, ETC. The Company shall comply in all
material respects with all statutes, laws, ordinances and governmental rules,
regulations and orders to which it is subject or which are applicable to its
business, properties and assets.
5.13 BOOKS AND RECORDS. The Company shall keep adequate records and
books of account in which complete entries will be made in accordance with
generally accepted accounting procedures consistently applied, reflecting all
financial transactions.
5.14 NOTICE OF LITIGATION. The Company shall notify the Bank in writing
promptly of any litigation, arbitration proceeding or administrative
investigation, inquiry or other proceeding to which the Company is or hereafter
may become a party which may involve any risk of any material judgment or
liability which would exceed the amounts covered by insurance by $100,000 or
more or which may otherwise result in any materially adverse change in the
business or assets or in the condition (financial or otherwise) of the Company
or which may impair the ability of the Company to perform this Agreement.
5.15 ERISA. The Company shall comply in all material respects with the
applicable provisions of ERISA. The Company shall furnish to the Bank (a) as
soon as possible, and in any event within one Banking Day after any executive
officer of the Company knows or has reason to know that any Reportable Event (as
described in ERISA) with respect to any plan of the Company has occurred, a
statement of the chief financial officer of the Company setting forth details as
to such Reportable Event and the action which is proposed to be taken with
respect thereto, together with a copy of the notice of such Reportable Event
given to the Pension Benefit Guaranty Corporation, (b) promptly after filing
with the Internal Revenue Service, copies of each annual report with respect to
each plan subject to ERISA, (c) promptly upon filing with the Pension Benefit
Guaranty Corporation, a copy of any notice from the Company or the administrator
of any such plan to the Pension Benefit Guaranty Corporation that any such plan
is to be terminated, (d) promptly after receipt thereof, a copy of any notice
the Company, any such plan or the administrator of any such plan may receive
from the Pension Benefit Guaranty Corporation to terminate any such plan or to
appoint a trustee to administer any such plan, (e) promptly after receipt
thereof, a copy of any notice the Company or the administrator of such plan may
receive from the Internal Revenue Service relating to the disqualification of
any previously qualified plan, and (f) promptly after any executive officer of
the Company knows or has reason to know that the Company will be involved in a
withdrawal or partial withdrawal from a multiemployer plan, a statement to that
effect and setting forth the details of such withdrawal or partial withdrawal,
including the estimated liability of the Company with respect thereto.
14
5.16 PERFORMANCE OF CONTRACTS. The Company shall perform and comply
with all of its agreements if non-performance thereof could materially adversely
affect the business or credit of the Company or could impair the ability of the
Company to perform this Agreement, the Notes or any of the Loan Documents.
5.17 ENVIRONMENTAL MATTERS. If at any time the Company obtains notice
that any real property owned by, leased to or operated by the Company has
located therein Hazardous Materials, the Company shall, within 30 days after
receipt of such notice, take or cause to be taken, at its sole expense, such
actions as may be necessary to comply with all Environmental Requirements.
5.18. LANDLORD WAIVERS. Immediately after execution hereof, the Company
shall use its best efforts to obtain from its landlords, in those jurisdictions
where such landlords are given a statutory Lien superior to or pari passu with
the Lien granted to the Bank under the Loan Documents, a Landlord's Waiver and
Consent in a form acceptable to the Bank.
5.19. MANAGEMENT. The Company shall retain Xxxx X. Xxxxxx in the
capacity of Chairman of the Board and Chief Executive Officer of the Company, or
replaced by an individual performing similar duties who shall be satisfactory to
the Bank within 180 days from the date Xx. Xxxxxx shall cease to function in
such capacity.
5.20. BANK ACCOUNTS. The Company will establish and maintain the Bank
as its principal bank of account and primary depositary. The Company will, at
all times, maintain a compensating balance of at least $100,000 in its
depository account maintained at the Bank.
5.21. INTEREST RATE PROTECTION. The Company shall maintain an interest
rate protection agreement concerning a minimum of $20,000,000 of the Commitment
in a form substantially similar to the interest rate swap described in the
letter agreement dated December 1, 1999 between the Company and National City
Bank.
SECTION 6
NEGATIVE COVENANTS
Until all Loans and other sums due and owing under this Agreement to
the Bank have been paid and the Company no longer has the right to borrow
hereunder, unless the Bank shall have otherwise agreed in writing, the Company
covenants and agrees as follows.
6.1 RESTRICTIONS. The Company will not either directly or indirectly:
(a) LIENS. Create, assume, or suffer to exist any mortgage, pledge,
encumbrance, security interest, lien or charge of any kind (collectively,
"Liens") upon any of its property or assets, whether now owned or hereafter
acquired, or assign or otherwise convey any right to receive income, except.
15
(i) Liens securing taxes, assessments, fees or other
governmental charges or levies or securing the claims of
materialmen, mechanics, carriers, warehousemen,
landlords and other similar persons, the payment of
which is not at the time required by Section 5.9;
(ii) Liens incurred or deposits made in the ordinary course
of business (A) in connection with workers'
compensation, unemployment insurance, social security
and other similar laws, or (B) to secure the performance
of bids, tenders, sales, contracts, public or statutory
obligations, surety, customs, appeal and performance
bonds and other similar obligations not incurred in
connection with the borrowing of money, the obtaining of
advances or the payment of the purchase price of
property;
(iii) Attachment, judgment and other similar Liens arising in
connection with court proceedings, provided, however,
that the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are
currently being contested in good faith by appropriate
proceedings and as to which the Company shall have set
aside on its books adequate reserves in accordance with
GAAP;
(iv) Easements, rights of way, restrictions, leases,
installations of public utilities, title imperfections
and restrictions, reservations in land patents, zoning
ordinances and other similar encumbrances affecting real
or tangible personal property, which in the aggregate do
not materially detract from the value of such property
or materially impair its use in the operations of the
business of the Company taken as a whole;
(v) Liens securing purchase money obligations respecting
personal property of the Company so long as such Liens
apply only to the personal property being purchased or
leased;
(vi) Other Liens existing on the date hereof to the extent
shown in Schedule 6.1 attached hereto;
(vii) Liens securing the repayment of Indebtedness owed by the
Company to the Bank;
(viii) Existing Liens of General Electric Capital Corporation
encumbering not more than four (4) restaurant locations
which shall secure Indebtedness of the Company incurred
in a Permitted Sale/Leaseback; and
16
(ix) Liens related to Indebtedness incurred in a Permitted
Sale/Leaseback.
(b) SUBSIDIARIES. Create or suffer to exist any Subsidiaries other
than those listed on Schedule 4.11 hereof unless such Subsidiaries sign the
appropriate documentation subjecting each such Subsidiary to the terms and
conditions of this Agreement including, without limitation, terms which evidence
that the repayment of the Indebtedness is secured by all of the assets of such
Subsidiary.
(c) CONTINGENT LIABILITIES. Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of
any one or more Persons if the amount of all such guaranties, endorsements, and
other contingent Liabilities at any one time outstanding exceeds $100,000 except
those liabilities associated with the establishment of a new wholly-owned
subsidiary, the sole purpose of which is to operate one or more Italian theme
restaurants, or become a general partner in any partnership other than (i) those
partnerships reflected in Schedule 6.1(c) or (ii) those partnerships established
to own and operate one or more Max & Erma's restaurants as long as the
partnership(s) are consolidated into the financial statements of the Company
provided to the Bank pursuant to Sections 5.2 and 5.3 hereof and such
partnerships and the Company execute documents, in form and substance acceptable
to the Bank, that allow the Bank to obtain a first priority security interest in
the assets of the partnerships, prohibit transfers of assets from the Company to
the partnerships and prohibit the assumption of partnership Indebtedness by the
Company.
(d) MERGER, CONSOLIDATION AND SALE OF ASSETS; CHANGE OF CONTROL;
CHANGE OF MANAGEMENT. Merge or consolidate with any other corporation, or
liquidate, or sell, lease, transfer or otherwise dispose of (whether in one
transaction or in a series of transactions) all or a substantial part of its
assets; PROVIDED, HOWEVER, that a Permitted Sale/Leaseback with an Approved
Sale/Leaseback Creditor shall be permitted. The Company shall not suffer a
Change of Control to occur. "Change of Control" means that the individuals
serving as the officers and the Board of Directors of the Company as of the date
of this Agreement fail to own at least 30% of the outstanding common stock of
the Company or the composition of the Board of Directors of the Company changes
so that at least 6 (which 6 Directors must include Xxxx X. Xxxxxx, Xxxx X.
Xxxxxxx and Xxxxxxx X. Xxxxxxx, Xx.) of the 8 Directors sitting in such office
as of the date of this Agreement are not serving as a Director of the Company
without the prior written consent of the Bank. The Company shall not suffer a
change in management of the Company such that Xxxx X. Xxxxxx is no longer the
President and either Xxxx X. Xxxxxxx or Xxxxxxx X. Xxxxxxx, Xx. is no longer an
officer of the Company, without the prior written consent of the Bank.
(e) SALE AND LEASEBACK. Enter into any agreement with any Person
providing for the leasing by the Company of real or personal property which has
been or is to be sold or transferred by the Company to such Person or of real or
personal property intended to be used for substantially the same purpose as the
property sold or transferred by the Company; PROVIDED, HOWEVER, that any future
sale and leaseback transaction with Franchise Finance Corporation of America,
General Electric Capital Corporation or any other creditor that issues a
commitment (in form and substance satisfactory to the Bank) to provide
sale/leaseback financing to the Company (an "Approved Sale/Leaseback Creditor")
shall be deemed to be permitted hereunder if it meets
17
all the following conditions: (1) no Default or Event of Default exists
hereunder and (2) the Company has received reasonably equivalent value in the
transaction (a "Permitted Sale/Leaseback").
(f) ACCOUNTS RECEIVABLE. Discount or sell any of its notes or
accounts receivable.
(g) INVESTMENTS. Acquire or purchase the assets of any Person or
acquire or purchase the outstanding securities of any Person, or make any
additional investments in or capital contributions to any Person; PROVIDED,
HOWEVER, that this prohibition shall not apply to the following: (i) purchases
of (A) U. S. Government securities directly or pursuant to repurchase agreements
with the Bank, (B) certificates of deposit of the Bank and (C) commercial paper
rated A-1 or P-1 if all of such investments have a maturity of one year or less;
or (ii) any such purchase or acquisition of assets for the sole purpose of
establishing or converting such assets into one or more Max & Erma's restaurants
as long as (A) the assets are consolidated into the financial statements of the
Company provided to the Bank pursuant to Sections 5.2 and 5.3 hereof and (B) the
Company executes documents, in form and substance acceptable to the Bank, that
allow the Bank to obtain a first priority security interest in such assets,
prohibit the transfer of assets from the Company to any entity owning the assets
and prohibit the assumption of Indebtedness by the Company in connection with
the acquisition of such assets; or (iii) the investment or capital contribution
of up to $2,500,000 in a new wholly owned subsidiary established to operate one
or more Italian theme restaurants. The investment limitation for this subsidiary
shall no longer apply after the Company has provided certification to the Bank
along with any supporting documentation which the Bank may reasonably request
that for the six months immediately preceding the date of such certification (A)
a minimum of four such restaurants have been in existence, and (B) the aggregate
Net Income for all such restaurants as evidenced by the restaurant Income
Statements for the six month period prepared in the form attached hereto as
Exhibit 6.1(g) is equal to or in excess of $250,000.
(h) LOANS AND ADVANCES. Make any loans or advances in excess of an
aggregate of $100,000 at any one time outstanding.
6.2 FINANCIAL RATIOS. The Company will not:
(a) CURRENT RATIO. After November 1, 1999, permit the ratio of
Current Assets to Current Liabilities at any time to be less than 0.35 to 1.
(b) LIABILITIES/TANGIBLE NET WORTH RATIO. Permit the ratio of
Liabilities to Tangible Net Worth to exceed (i) 17.0 to 1 on October 31, 2001,
(ii) 10.0 to 1 on October 31, 2002, (iii) 7.5 to 1 on October 31, 2003, (iv) 5.0
to 1 on October 31, 2004, (v) 3.5 to 1 on October 31, 2005 and thereafter.
(c) FIXED CHARGE COVERAGE RATIO. Permit the ratio of Fixed Charge
Coverage Ratio at the end of any Fiscal Period (as defined in Section 9) to be
less than 1.15 to 1. "Fixed Charge Coverage Ratio" means, for the Company during
the Fiscal Period being measured, the quotient of (a) the sum of (i) net income
(adjusted upward to the extent non-recurring, non-cash
18
charges are reflected therein and adjusted downward to the extent non-recurring,
non-cash gains are reflected therein), plus (ii) depreciation plus (iii) accrued
interest expense plus (iv) income taxes payable during such period plus (v)
amortization minus (vi) one time non-cash charges reflected within net income,
DIVIDED BY (b) the sum of (v) current maturities of other long term indebtedness
plus (w) current maturities of capitalized lease obligations plus (x) accrued
interest expense plus (y) either (1) after October 31, 2000 but before October
31, 2001, (A) the amount of long term Indebtedness of the Company outstanding
under the Term Note A that matured in the prior 12 months plus (B) the amount of
long term Indebtedness of the Company outstanding under the Revolving Commitment
on the fiscal quarter end date this ratio is being measured divided by six or
(2) after October 31, 2001, (A) the amount of long term Indebtedness of the
Company outstanding under the Term Note A during the Fiscal Period plus (B)the
amount of long term Indebtedness of the Company outstanding under the Term Note
B during the Fiscal Period this ratio is being measured plus (C) the amount of
long term Indebtedness of the Company outstanding during the Fiscal Period this
ratio is being measured that is attributable to any amount of the Revolving
Credit Commitment, divided by five, that is outstanding on October 31, 2002 and
converted to a term obligation (z) Store Capital Expenditures in the prior 12
months. "Store Capital Expenditures" means the greater of (A) the product of (i)
the number of Company restaurants that have been open more than one year during
the Fiscal Period this ratio is being measured multiplied by (ii) $47,000 or (B)
the actual Capital Expenditures on such restaurants during the Fiscal Period.
(d) EARNINGS BEFORE TAXES. As of each fiscal quarter end, permit
the sum of its net income before taxes plus one time non-cash charges reflected
within net income for the then-present fiscal quarter and the one immediately
preceding fiscal quarter to be less than $0.
(e) TANGIBLE NET WORTH. Permit its Tangible Net Worth to be less
than (i) $3,000,000 from the date hereof through October 31, 2001, (ii)
$4,500,000 from November 1, 2001 through October 31, 2002, (iii) $6,000,000 from
November 1, 2002 through October 31, 2003, (iv) $7,500,000 from November 1, 2003
through October 31, 2004, (v) $9,000,000 from November 1, 2004 through October
31, 2005, (vi) $10,500,000 from November 1, 2005 through October 31, 2006 and
(vii) $12,000,000 from November 1, 2006 the Maturity Date.
(f) INTEREST COVERAGE RATIO. As of the end for each Fiscal Period,
permit the ratio of (a) (i) the Company's net income during the Fiscal Period
being measured plus (ii) interest of the Company during the Fiscal Period being
measured plus (iii) taxes of the Company during the Fiscal Period being measured
plus (iv) one time non-cash charges reflected within net income for the Company
during the Fiscal Period being measured to (b) the Company's interest expense
during the Fiscal Period being measured to be less than (1) 2.0 to 1.0 for each
fiscal quarter end that occurs after the date of the First Amendment until the
end of the second quarter of fiscal year 2001, (2) 2.25 to 1.0 for each fiscal
quarter end that occurs after the end of the second quarter of fiscal year 2001
and until the end of the second quarter of fiscal year 2002, and (3) 2.5 to 1.0
thereafter.
(g) SENIOR DEBT TO EBITDA. At the end of any Fiscal Period, permit
the ratio of (i) the Company's Indebtedness during the Fiscal Period being
measured to (ii) the Company's EBITDA during the Fiscal Period being measured to
be greater than 3.0 to 1.0.
19
6.3 DIVIDENDS AND PURCHASES. The Company will not declare or pay any
dividends on, or make any distribution with respect to, any shares of capital
stock of the Company of any class.
6.4 TRANSACTIONS WITH AFFILIATES. The Company will not enter into any
transaction, including, without limitation, the purchase, sale or exchange of
any property or the rendering of any service, with any Affiliate of the Company
except in the ordinary course of and pursuant to the reasonable requirements of
the business of the Company and upon fair and reasonable terms no less favorable
to the Company than would obtain in an arm's length transaction with a Person
not an Affiliate of the Company.
6.5 LIMITATION ON STORE OPENINGS; NOTICE OF STORE OPENINGS. The Company
will not open more than ten new stores per fiscal year. The company will notify
the Bank of each new store opening by delivering an updated Exhibit C that
contains a complete list of all borrower's operating stores.
SECTION 7
EVENTS OF DEFAULT AND REMEDIES
If any of the following events ("Events of Default") shall occur and be
continuing:
(a) PRINCIPAL PAYMENTS. The Company shall default in the payment of
the principal of the Notes when and as the same shall become due and payable,
after having received written notification of such payment being due, whether at
the due date thereof or by acceleration or otherwise;
(b) INTEREST PAYMENTS AND FEES. The Company shall default in the
payment of interest on the Notes, or the payment of any Commitment Fee, when and
as the same shall become due and payable, whether at the due date thereof or by
acceleration or otherwise, PROVIDED such default shall continue for a period of
10 days;
(c) REPRESENTATIONS AND WARRANTIES. Any representation or warranty
made by the Company in this Agreement or in connection with any Loans hereunder,
or in any Loan Document, agreement, report, certificate, financial statement, or
other instrument furnished in connection with this Agreement or the Loans
hereunder shall prove to be false or misleading in any material respect;
(d) NEGATIVE COVENANTS. The Company shall fail to observe or
perform any covenant, condition or agreement in Section 6 of this Agreement;
(e) OTHER COVENANTS. The Company shall fail to observe or perform
any covenant, condition or agreement (other than those mentioned in Section 6)
to be observed or performed pursuant to the terms hereof or the terms of any
Loan Document, provided such
20
default shall continue unremedied for 30 days after written notice thereof to
the Company by the Bank;
(f) CROSS DEFAULT. (i) The Company or any Subsidiary shall default
with respect to the payment of any Indebtedness other than Indebtedness
represented by the Notes, or (ii) any event or condition shall occur which
enables the holder of any Indebtedness (other than Indebtedness represented by
the Notes) or any Person acting on such holder's behalf to accelerate the
maturity thereof, or (iii) the holder of any Indebtedness other than
Indebtedness represented by the Notes shall accelerate the maturity of such
Indebtedness; PROVIDED no Default under this Section 7(f) shall be deemed to
occur where the amount, individually or in the aggregate, of such Indebtedness
does not exceed $200,000;
(g) JUDGMENTS. One or more judgments from which no appeal may be
taken or with respect to which the time to appeal has expired for the payment of
money aggregating $200,000 or more shall be rendered against the Company and/or
any Subsidiary and the same shall remain undischarged for a period of 30
consecutive days during which the execution shall not be effectively stayed;
(h) BANKRUPTCY, ETC. The Company shall (i) apply for or consent to
the appointment of a receiver, trustee or liquidator for it or for any of its
property- (ii) admit in writing its inability to pay its debts as they mature;
(iii) make a general assignment for the benefit of creditors; (iv) be
adjudicated a bankrupt or insolvent; or (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
answer admitting the material allegations of a petition filed against it in any
proceeding under any such law or if corporate action shall be taken by the
Company for the purpose of effecting any of the foregoing;
(i) REORGANIZATION, RECEIVER, ETC. An order, judgment or decree
shall be entered without the application, approval or consent of the Company by
any court of competent jurisdiction, approving a petition seeking reorganization
of the Company or appointing a receiver, trustee or liquidator of the Company or
of all or a substantial part of the assets thereof, and such order, judgment or
decree shall continue unstayed and in effect for any period of 60 days,
(j) ERISA. A Reportable Event (as defined in ERISA) shall have
occurred with respect to any Plan (as defined therein) and, within 30 days after
the reporting of such Reportable Event to the Bank, the Bank shall have notified
the Company in writing that (i) it has made a determination that, on the basis
of such Reportable Event, there are reasonable grounds for the termination of
such Plan by the Pension Benefit Guaranty Corporation or for the appointment by
the appropriate United States District Court of a trustee to administer such
Plan; and (ii) as a result thereof an Event of Default exists hereunder; or a
trustee shall be appointed by a United States District Court to administer any
Plan; or the Pension Benefit Guaranty Corporation shall institute proceedings to
terminate any Plan;
21
(k) COLLATERAL DEFAULT. Any default shall occur pursuant to the
terms of any of the Loan Documents, then (i) the Bank at any time thereafter
during the continuance of any such Event of Default specified above (other than
in Section (h) or (i)), may, by written notice to the Company terminate the
Commitment of the Bank (if still in existence), and declare the entire principal
amount of the Notes to be due and payable forthwith, whereupon the Notes
including all principal and interest and all other amounts payable hereunder or
under any Loan Document shall forthwith become due and payable; and (ii)
automatically upon the occurrence of any of the events specified in Section (h)
or (i) the Commitment of the Bank shall terminate (if still in existence) and
the Notes, including all principal and interest and all other amounts payable
hereunder or under any Loan Document shall become immediately due and payable,
in either case without presentment, demand, protest, or notice of any kind, all
of which are hereby expressly waived, anything contained herein or in the Notes
or the Loan Documents to the contrary notwithstanding.
SECTION 8
ASSIGNMENTS/PARTICIPATIONS
8.1 ASSIGNMENT BY THE COMPANY. The Company may not assign its
rights or obligations hereunder or under the Notes without the prior written
consent of the Bank.
8.2 ASSIGNMENTS BY THE Bank. The Bank may assign any of the Loans,
the Notes, or its Commitment without the prior consent of the Company.
8.3 PARTICIPATIONS. The Bank may sell or agree to sell to one or more
other Persons a participation in all or any part of any Loans held by it or any
Loan made or to be made by it.
8.4 INFORMATION. Upon the request of the Bank, the Company shall furnish
any information concerning the Company required to be furnished under this
Agreement to assignees and participants (including prospective assignees and
participants).
SECTION 9
DEFINITIONS
9.1 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings specified.
"AFFILIATE" with respect to any Person shall mean each Person that
directly or indirectly (through one or more intermediaries or otherwise),
controls, is controlled by, or is under common control with such Person.
"AGREEMENT" is defined in the preamble.
"APPROVED SALE/LEASEBACK CREDITOR" is defined at Section 6.1(e).
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"BANK" is identified in the preamble.
"BANKING DAYS" shall mean days other than Saturdays, Sundays and
other legal holidays or days on which the principal office of the Bank is
closed.
"CAPITAL EXPENDITURES" shall mean, as to any Person, for any
period, expenditures (including the aggregate amount due under capital leases
incurred during such period but excluding such amounts under capital leases of
assets as to which inclusion of which would cause such amount to be double
counted for such period) made by such Person to acquire or construct fixed
assets, plant and equipment (including renewals, improvements and replacements)
during such period, computed in accordance with GAAP .
"COMMITMENT" is defined at Section 1. 1(b).
"COMMITMENT FEE" is defined at Section 1.3.
"COMPANY" is identified in the preamble.
"COUNSEL" is identified at Section 3.1 (f).
"CURRENT ASSETS" shall mean all assets which may properly be
classified as current assets in accordance with GAAP.
"CURRENT LIABILITIES" shall mean all Liabilities as may properly be
classified as current Liabilities in accordance with GAAP and, prior to the
Maturity Date, shall include the amount of all Loans which are outstanding
hereunder which are due within the next twelve months.
"DEFAULT" shall mean any condition or event which constitutes an
Event of Default or which would become an Event of Default with the giving of
notice or lapse of time or both (unless cured or waived).
"EBITDA" shall mean earnings of the Company before interest, taxes,
depreciation and amortization, as determined in accordance with GAAP.
"ENVIRONMENTAL REQUIREMENTS" is defined at Section 4.16.
"ERISA" is defined at Section 4.8.
"EVENTS OF DEFAULT" is defined at Section 7.
"FISCAL PERIOD" for purposes of calculating the ratios pursuant to
Sections 6.2(c), (f) and (g) prior to October 29, 2001, each Fiscal Period will
begin on October 30, 2000 and end on each Fiscal quarter end date, commencing
with the Fiscal quarter ending February 18, 2001. After October 29, 2001, the
Period will end on each fiscal quarter end date, and will include the
immediately preceding four fiscal quarters. Prior to October 29, 2001, the
income and expenses
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relating to the Period will be annualized for the purpose of this calculation by
multiplying such income or expense by the ratio of fifty-two divided by the
number of weeks contained within the Period.
"GAAP" means generally accepted accounting principles consistently
applied, as reflected in the financial statements delivered pursuant to Section
4.3 hereof.
"HAZARDOUS MATERIALS" is defined at Section 4.16.
"INDEBTEDNESS" shall mean any Liabilities representing obligations
for borrowed money or the deferred purchase price of property or services
(except accruals and trade accounts payable arising in the ordinary course of
business) including, without limitation, capitalized lease obligations, and
Liabilities similar to the foregoing of other Persons which are secured by a
Lien on any asset of the Company, or guaranteed directly or indirectly by the
Company; PROVIDED, HOWEVER, that Indebtedness shall not include any Capital
Expenditures which qualify for a Permitted Sale/Leaseback with an Approved
Sale/Leaseback Creditor.
"INVENTORY" shall mean all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in the business of the Company or used in connection
with the manufacturing, packing, shipping, advertising, selling or finishing of
such goods, merchandise and other personal property, and all goods, merchandise
and other personal property wherever located, to be furnished by the Company
under any contract or contract for service or held for sale or lease, whether
now owned or hereafter acquired, and all documents of title or other documents
representing the foregoing.
"LETTER OF CREDIT" means a commercial letter of credit issued
hereunder by the Bank pursuant to this Agreement on behalf of the Company.
"LIABILITIES" as applied to any Person, shall mean (a) all items
(except items of capital stock of capital surplus, of general contingency
reserves or of retained earnings and amounts attributable to minority interest,
if any) which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Liabilities are to be determined, including specifically
capitalized lease obligations and the reimbursement obligations under a Letter
of Credit and (b) all obligations secured by any Lien or conditional sale or
other title retention agreement to which any property or asset owned or held by
such Person is subject, whether or not the obligations secured thereby shall
have been assumed (excluding non-capitalized leases which may amount to title
retention agreements).
"LIENS" are identified at Section 6.1 (a).
"LOAN" shall mean a loan made by the Bank pursuant to Section 1.
"LOAN DOCUMENTS" shall mean the Notes, the Security Agreements and
all other documents, instruments and certificates to be delivered hereunder or
thereunder.
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"MATURITY DATE" is defined at Section 1.1(a).
"MAXIMUM COMMITMENT" is defined at Section 1.1(b).
"NET INCOME" shall mean for any period the net income (loss) of the
Company incurred during such period as determined in accordance with.
"NOTES" is defined at Section 1.1(b).
"PERMITTED SALE/LEASEBACK" is defined at Section 6.1(e).
"PERSON" shall mean and include an individual, partnership,
corporation, trust, unincorporated organization, a government or any department
or agency thereof or any other entity.
"PRIME RATE" is defined at Section 1.4(b).
"REVOLVING COMMITMENT" is defined at Section 1.1(b).
"REVOLVING NOTE" is defined at Section 1.1(b).
"SECURITY AGREEMENTS" is defined at Section 3.1 (b).
"SUBORDINATED DEBT" shall mean all unsecured Indebtedness of the
Company maturing more than 12 months from the date of determination thereof
which in each case shall be subordinated to all Loans and all other amounts owed
to the Bank, all on specific terms and conditions satisfactory to and approved
in writing by the Bank prior to the incurrence thereof.
"SUBSIDIARY" shall mean any corporation which is incorporated under
the laws of the United States or Canada at least a majority of the outstanding
voting stock of which shall, at the time as of which any determination is being
made, be owned by the Company either directly or through Subsidiaries.
"TANGIBLE NET WORTH" shall mean the total of the capital stock (net
of treasury stock), paid in surplus and retained earnings (deficit) as
determined in accordance with GAAP, minus the following items (without
duplication of deductions), if any, appearing on the balance sheet of the
Company:
(a) all deferred charges (net of amortization);
(b) the book amount of all assets which would be treated as
intangibles (including capital leases) under GAAP, including, without
limitation, such items as good will, unamortized debt discount and
expense and corporate organization expenses, treasury stock, trademarks,
trademark applications, trade names, service marks, brand names,
copyrights, patents, patent applications and licenses, and rights with
respect to the foregoing; and
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(c) any write-up in the book amount of any asset resulting
from a revaluation thereof from the book amount entered upon
acquisition.
"TERM NOTE A" is defined at Section 1.1(b).
"TERM NOTE B" is defined at Section 1.1(b).
"UNSUBORDINATED INDEBTEDNESS" as applied to any Person, shall mean
all Indebtedness of such Person less Subordinated Debt of such Person.
"WHOLLY OWNED SUBSIDIARY" shall mean a Subsidiary, all of the
voting stock (other than directors' qualifying shares) of which and all other
stock and equity securities of which are owned by the Company, or by the Company
and one or more Wholly Owned Subsidiaries.
9.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those applied
in the preparation of the financial statements of the Company at the date
hereof.
SECTION 10
MISCELLANEOUS
10.1 TERM OF AGREEMENT: SUCCESSORS AND ASSIGNS. This Agreement and all
covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the making by the Bank of
the Loans and the execution and delivery to the Bank of the Notes and shall
continue in full force and effect until the termination of the Commitment or
until payment in full of the Notes, whichever is later. Whenever in this
Agreement either of the parties hereto are referred to, such reference shall be
deemed to include the permitted successors and assigns of such party; and all
terms and provisions of this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.
10.2 NOTICES. Notices, demands and communications shall be deemed to
have been properly given to the Company when deposited in the United States
mail, registered or certified, postage prepaid, and addressed to the Company at
X.X. Xxx 000000, 0000 Xxxxxxxxx Xxxxx, Xxxxxxxx, XX 00000, Attention- Chief
Financial Officer, whether or not the same are actually received by the Company.
Except for purposes of notification of an Event of Default hereunder, such
communication shall be effective only upon receipt by the Company at the address
indicated. Any communication to the Bank shall be deemed properly given if
similarly mailed and addressed to The Provident Bank, 0 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, XX 00000.
10.3 NO IMPLIED WAIVERS. No delay on the part of the bank in exercising
any right, power or privilege granted hereunder shall operate as a waiver
thereof, nor shall any single or
26
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof. The rights and remedies herein expressly specified are
cumulative and not exclusive of any other rights and remedies which the Bank
would otherwise have.
10.4 AMENDMENTS, MODIFICATIONS, ETC. No amendment, modification,
termination, or waiver of any provision of this Agreement or of the Notes nor
consent to any departure by the Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No notice or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in
similar or other circumstances.
10.5 APPLICABLE LAW. This Agreement and the Notes shall be deemed
to be contracts made under the laws of the State of Ohio, and for all purposes
shall b construed in accordance with the laws of such state.
10.6 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
10.7 EXPENSES. All legal fees, costs or expenses, incurred by the Bank
in connection with the preparation, execution, delivery and enforcement of this
Agreement, the Notes or any of the Loan Documents shall be paid by the Company.
10.8 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument. Complete sets of counterparts shall be lodged with the Company
and the Bank.
10.9 MERGER. This Agreement, the Notes and the Loan Documents reflect
the entire understanding of the parties with respect to their subject matter and
supersede all prior agreements or understandings with respect thereto in their
entirety.
10.10 HEADINGS. Headings of the sections of this Agreement are for
convenience only and shall not affect the construction of this Agreement.
10.11 EFFECTIVE DATE. This Agreement shall become effective upon
the execution of a counterpart hereof by each of the parties.
10.12 CONFESSION OF JUDGMENT. The undersigned Company and all indorsers
authorize any attorney at law, including an attorney engaged by the holder, to
appear in any court of record in Columbus, Ohio, after the indebtedness
evidenced hereby, or any part thereof, becomes due and waive the issuance and
service of process and confess judgment against the undersigned and all
indorsers in favor of the holder, for the amount then appearing due, together
with costs of suit and, thereupon, to release all errors and waive all rights of
appeal and stay of execution. The foregoing warrant of attorney shall survive
any judgment; and if any judgment be vacated for
27
any reason, the holder hereof nevertheless may thereafter use the foregoing
warrant of attorney to obtain an additional judgment or judgments against the
undersigned and all indorsers or any one or more of them. The undersigned and
all indorsers hereby expressly waive any conflict of interest that the holder's
attorney may have in confessing such judgment against such parties and expressly
consent to the confessing attorney receiving a legal fee from the holder for
confessing such judgment against such parties.
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The parties hereto have caused this Agreement to be duly executed by
their respective duly authorized officers as of the date first above written.
--------------------------------------------------------------------------------
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
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MAX & ERMA'S RESTAURANTS, INC. THE PROVIDENT BANK
By: . By:
----------------------------- ------------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx. Name: Xxxxxxx X. Xxxxx
Its: Chief Financial Officer Its: Vice President
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