14 0199307.01
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of February 17, 1999, by
and between ELMER'S RESTAURANTS, INC., an Oregon corporation
("Borrower"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION
("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations
described below (each, a "Credit" and collectively, the
"Credits"), and Bank has agreed to provide the Credits to
Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Bank and Borrower
hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make advances to Borrower
from time to time up to and including July 1, 2000, not to exceed
at any time the aggregate principal amount of Two Hundred Fifty
Thousand Dollars ($250,000.00) ("Line of Credit"), the proceeds
of which shall be used for general corporate needs and to retire
debt assumed in connection with the merger of CBW Inc. into
Borrower. Borrower's obligation to repay advances under the Line
of Credit shall be evidenced by a promissory note substantially
in the form of Exhibit A attached hereto ("Line of Credit Note"),
all terms of which are incorporated herein by this reference.
(b) Borrowing and Repayment. Borrower may from time to
time during the term of the Line of Credit borrow, partially or
wholly repay its outstanding borrowings, and reborrow, subject to
all of the limitations, terms and conditions contained herein or
in the Line of Credit Note; provided however, that the total
outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as
set forth above.
SECTION 1.2. TERM LOAN A.
(a) Term Loan A. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make a loan to Borrower in
the principal amount of Two Million Six Hundred Thousand Dollars
($2,600,000.00) ("Term Loan A"), the proceeds of which shall be
used to retire debt assumed in connection with the merger of CBW
Inc. into Borrower. Borrower's obligation to repay Term Loan A
shall be evidenced by a promissory note substantially in the form
of Exhibit B attached hereto ("Term Note A"), all terms of which
are incorporated herein by this reference. Bank's commitment to
grant Term Loan A shall terminate on March 17, 1999.
(b) Interest Rate Protection. Within thirty (30) days of
the date of this Agreement, Borrower shall enter into interest
rate protection agreements satisfactory in form and substance to
Bank providing the benefit of interest rate protection on not
less than fifty percent (50%) of Term Loan A for at least three
(3) years.
(c) Repayment. The principal amount of Term Loan A shall
be repaid in accordance with the provisions of Term Note A.
(d) Prepayment. Borrower may prepay principal on Term Loan
A solely in accordance with the provisions of Term Note A.
SECTION 1.3. TERM LOAN B.
(a) Term Loan B. Subject to the terms and conditions of
this Agreement, Bank hereby agrees to make a loan to Borrower in
the principal amount of Four Hundred Eighty Thousand Dollars
($480,000.00) ("Term Loan B"), the proceeds of which shall be
used to finance the Gresham Restaurant with proceeds available to
retire debt assumed in the merger with CBW Inc. Borrower's
obligation to repay Term Loan B shall be evidenced by a
promissory note substantially in the form of Exhibit C attached
hereto ("Term Note C"), all terms of which are incorporated
herein by this reference. Bank's commitment to grant Term Loan B
shall terminate on March 17, 1999.
(b) Repayment. Principal and interest on Term Loan B shall
be repaid in accordance with the provisions of Term Note B.
(c) Prepayment. Borrower may prepay principal on Term Loan
B solely in accordance with the provisions of Term Note B.
SECTION 1.4. TERM LOAN C.
(a) Term Loan. Bank has made a loan to Borrower in the
original principal amount of Six Hundred Thirty Thousand Dollars
($630,000.00) ("Term Loan C"), on which the outstanding principal
balance as of the date hereof is $607,820.54. Borrower's
obligation to repay Term Loan C is evidenced by a promissory note
substantially in the form of Exhibit D attached hereto ("Term
Note C"), all terms of which are incorporated herein by this
reference. Any references in Term Note C to any prior loan
agreement between Bank and Borrower shall be deemed a reference
to this Agreement. Subject to the terms and conditions of this
Agreement, Bank hereby confirms that Term Loan C remains in full
force and effect.
(b) Repayment. Principal and interest on Term Loan C shall
be repaid in accordance with the provisions of Term Note C.
(c) Prepayment. Borrower may prepay principal on Term Loan
C solely in accordance with the provisions of Term Note C.
SECTION 1.5. TERM LOAN D.
(a) Term Loan D. Bank has made a loan to Borrower in the
original principal amount of One Million Three Hundred Seventy-
two Thousand Five Hundred Dollars ($1,372,500.00) ("Term Loan
D"), on which the outstanding principal balance as of the date
hereof is $1,278,640.58. Borrower's obligation to repay Term
Loan D is evidenced by a promissory note substantially in the
form of Exhibit E attached hereto ("Term Note D"), all terms of
which are incorporated herein by this reference. Any references
in Term Note D to any prior loan agreement between Bank and
Borrower shall be deemed a reference to this Agreement. Subject
to the terms and conditions of this Agreement, Bank hereby
confirms that Term Loan D remains in full force and effect.
(b) Repayment. Principal and interest on Term Loan D shall
be repaid in accordance with the provisions of Term Note D.
(c) Prepayment. Borrower may prepay principal on Term Loan
D solely in accordance with the provisions of Term Note D.
SECTION 1.6. INTEREST/FEES.
(a) Interest. The outstanding principal balances of the
Line of Credit, Term Loan A, Term Loan B, Term Loan C and Term
Loan D shall bear interest at the rates of interest set forth in
the Line of Credit Note, Term Note A, Term Note B, Term Note C
and Term Note D.
(b) Computation and Payment. Interest shall be computed on
the basis of a 360-day year, actual days elapsed for the Line of
Credit, Term Loan A, Term Loan B, and Term Loan C. Interest
shall be computed on the basis of a 365-day year, actual days
elapsed for Term Loan D. Interest shall be payable at the times
and place set forth in the Line of Credit Note, Term Note A, Term
Note B, Term Note C, and Term Note D (collectively, the "Notes").
(c) Commitment Fee. Borrower shall pay to Bank a non-
refundable commitment fee for the Line of Credit equal to
$625.00, which fee shall be due and payable in full upon
execution of this Agreement.
(d) Loan Fee. Borrower shall pay to Bank a non-refundable
loan fee for Term Loan A equal to $39,000.00 and a non-
refundable loan fee for Term Loan B equal to $7,200.00, which
fees shall be due and payable in full upon execution of this
Agreement.
(e) Unused Commitment Fee. Borrower shall pay to Bank a
fee equal to one-eighth percent (0.125%) per annum (computed on
the basis of a 360-day year, actual days elapsed) on the average
daily unused amount of the Line of Credit, which fee shall be
calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears on each March 31, June 30,
September 30 and December 31.
SECTION 1.7. COLLECTION OF PAYMENTS. Borrower authorizes
Bank to collect all principal, interest and fees due under each
Credit by charging Borrower's demand deposit account number 4159-
611425 with Bank, or any other demand deposit account maintained
by Borrower with Bank, for the full amount thereof. Should there
be insufficient funds in any such demand deposit account to pay
all such sums when due, the full amount of such deficiency shall
be immediately due and payable by Borrower.
SECTION 1.8. COLLATERAL.
As security for all indebtedness of Borrower to Bank subject
hereto, except Term Loan C, Borrower hereby grants to Bank
security interests of first priority in all Borrower's accounts
receivable and other rights to payment, general intangibles,
inventory, fixtures, and equipment.
As security for all indebtedness of Borrower to Bank subject
hereto, except Term Loan C, Borrower hereby grants to Bank a lien
of not less than first priority on that certain real property
located at 0000 XX Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxx.
As security for all indebtedness of Borrower to Bank under
Term Loan C, Borrower hereby grants to Bank and confirms its
grant to Bank of a lien of not less than first priority on that
certain real property located at 0000 X. Xxxxxxx Xxxxxxxxx,
Xxxxx, Xxxxx.
As security for all indebtedness of Borrower to Bank subject
hereto, except Term Loan C, Borrower hereby grants to Bank a lien
of not less than first priority on that certain real property
located at 0000 000xx Xxxxxx XX, Xxxxxxxx, Xxxxxxxxxx and 0000 X.
Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx.
All of the foregoing shall be evidenced by and subject to
the terms of such security agreements, financing statements,
deeds of trust and other documents as Bank shall reasonably
require, all in form and substance satisfactory to Bank.
Borrower shall reimburse Bank immediately upon demand for all
costs and expenses incurred by Bank in connection with any of the
foregoing security, including without limitation, filing and
recording fees and costs of appraisals, audits and title
insurance.
SECTION 1.9. GUARANTIES. All indebtedness of Borrower to
Bank shall be guaranteed by Elmer's Pancake & Steak House, Inc.
and CBW Food Company L.L.C. in the principal amount of Five
Million Three Hundred Thousand Dollars ($5,300,000.00) each, as
evidenced by and subject to the terms of guaranties in form and
substance satisfactory to Bank.
All liabilities of Elmer's Pancake & Steak House, Inc. and
CBW Food Company L.L.C. under their respective guaranties shall
be secured by Elmer's Pancake & Steak House, Inc.'s and CBW Food
Company L.L.C.'s respective accounts receivable and other rights
to payment, general intangibles, inventory and equipment.
All of the foregoing shall be evidenced by and subject to
the terms of such security agreements, financing statements,
deeds of trust and other documents as Bank shall reasonably
require, all in form and substance satisfactory to Bank.
Borrower shall reimburse Bank immediately upon demand for all
costs and expenses incurred by Bank in connection with any of the
foregoing security, including without limitation, filing and
recording fees and costs of appraisals, audits and title
insurance.
SECTION 1.10. SUBORDINATION OF DEBT. All obligations of
Borrower to Eagle's View Management Company, Inc. shall be
subordinated in right of repayment to all obligations of Borrower
to Bank, as evidenced by and subject to the terms of
subordination agreements in form and substance satisfactory to
Bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties
to Bank, which representations and warranties shall survive the
execution of this Agreement and shall continue in full force and
effect until the full and final payment, and satisfaction and
discharge, of all obligations of Borrower to Bank subject to this
Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation,
duly organized and existing and in good standing under the laws
of the state of Oregon, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to
be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement,
the Notes, and each other document, contract and instrument
required hereby or at any time hereafter delivered to Bank in
connection herewith (collectively, the "Loan Documents") have
been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal,
valid and binding agreements and obligations of Borrower or the
party which executes the same, enforceable in accordance with
their respective terms, except that (a) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to
creditors' rights and (b) injunctive and other terms of equitable
relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding may be brought.
SECTION 2.3. NO VIOLATION. The execution, delivery and
performance by Borrower of each of the Loan Documents do not
violate any provision of any law or regulation, or contravene any
provision of the Articles of Incorporation or By-Laws of
Borrower, or result in any breach of or default under any
contract, obligation, indenture or other instrument to which
Borrower is a party or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the
best of Borrower's knowledge threatened, actions, claims,
investigations, suits or proceedings by or before any
governmental authority, arbitrator, court or administrative
agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those
disclosed by Borrower to Bank in writing prior to the date
hereof.
SECTION 2.5. COMPLETION OF MERGER; CORRECTNESS OF
FINANCIAL STATEMENT. The merger of CBW, Inc. into Borrower has
been completed. The pro-forma financial statement of Borrower
dated January 1, 1999 and giving effect to such merger of CBW
Inc. into Borrower, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and
correct in all material respects and presents fairly in all
material respects the financial condition of Borrower,
(b) discloses all liabilities of Borrower that are required to be
reflected or reserved against under generally accepted accounting
principles, whether liquidated or unliquidated, fixed or
contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied.
Since the date of such financial statement there has been no
material adverse change in the financial condition of Borrower,
nor has Borrower mortgaged, pledged, granted a security interest
in or otherwise encumbered any of its assets or properties except
in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no
knowledge of any pending assessments or adjustments of its income
tax payable with respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement,
indenture, contract or instrument to which Borrower is a party or
by which Borrower may be bound that requires the subordination in
right of payment of any of Borrower's obligations subject to this
Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and
will hereafter possess, all permits, consents, approvals,
franchises and licenses required and rights to all trademarks,
trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all
material respects with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended or recodified
from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as
defined in ERISA) maintained or contributed to by Borrower (each,
a "Plan"); no Reportable Event as defined in ERISA has occurred
and is continuing with respect to any Plan initiated by Borrower;
Borrower has met its minimum funding requirements under ERISA
with respect to each Plan; and each Plan will be able to fulfill
its benefit obligations as they come due in accordance with the
Plan documents and under generally accepted accounting
principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in
default on any obligation for borrowed money, any purchase money
obligation or any other material lease, commitment, contract,
instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed
by Borrower to Bank in writing prior to the date hereof, Borrower
is in compliance in all material respects with all applicable
federal or state environmental, hazardous waste, health and
safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations
and/or properties, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of
1986, the Federal Resource Conservation and Recovery Act of 1976,
and the Federal Toxic Substances Control Act, as any of the same
may be amended, modified or supplemented from time to time. To
the best of Borrower's knowledge, none of the operations of
Borrower is the subject of any federal or state investigation
evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or
hazardous waste or substance into the environment. Borrower has
no material contingent liability in connection with any release
of any toxic or hazardous waste or substance into the
environment.
SECTION 2.12. REAL PROPERTY COLLATERAL. Except as
disclosed by Borrower to Bank in writing prior to the date
hereof, with respect to any real property collateral required
hereby:
(a) All taxes, governmental assessments, insurance
premiums, and water, sewer and municipal charges, and rents (if
any) which previously became due and owing in respect thereof
have been paid as of the date hereof.
(b) There are no construction or similar liens or claims
which have been filed for work, labor or material (and no rights
are outstanding that under law could give rise to any such lien)
which affect all or any interest in any such real property and
which are or may be prior to or equal to the lien thereon in
favor of Bank.
(c) To the best of Borrower's knowledge, none of the
improvements which were included for purpose of determining the
appraised value of any such real property lies outside of the
boundaries and/or building restriction lines thereof, and no
improvements on adjoining properties materially encroach upon any
such real property.
(d) There is no pending, or to the best of Borrower's
knowledge threatened, proceeding for the total or partial
condemnation of all or any portion of any such real property, and
all such real property is in good repair and free and clear of
any damage that would materially and adversely affect the value
thereof as security and/or the intended use thereof.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT.
The obligation of Bank to grant any of the Credits is subject to
the fulfillment to Bank's satisfaction of all of the following
conditions:
(a) Approval of Bank Counsel. All legal matters incidental
to the granting of each of the Credits shall be satisfactory to
Bank's counsel.
(b) Documentation. Bank shall have received, in form and
substance satisfactory to Bank, each of the following, duly
executed:
(i) This Agreement and the Notes.
(ii) Corporate Resolution: Borrowing.
(iii) Certificates of Incumbency.
(iv) Continuing Guaranties.
(v) Corporate Resolution: Guaranty.
(vi) Limited Liability Certificate: Guaranty.
(vii) Corporate Resolution: LLC Activity
(viii) Corporate Resolution: Subordination.
(ix) Security Agreements: Rights to Payment and Inventory.
(x) Security Agreements: Equipment and Fixtures.
(xi) Security Agreement: Rights to Payment and Inventory
(Elmer's Pancake & Steak House, Inc.).
(xii) Security Agreement: Equipment (Elmer's Pancake & Steak
House, Inc.).
(xiii) Security Agreements: Rights to Payment and Inventory
(CBW Food Company L.L.C.).
(xiv) Security Agreement: Equipment (CBW Food Company
L.L.C.).
(xv) Subordination Agreement.
(xvi) UCC Financing Statements.
(xvii) Deeds of Trust, Rider and Modifications to Deeds of
Trust.
(xviii) Such other documents as Bank may require under any
other Section of this Agreement.
(c) Financial Condition. Borrower, immediately after
giving effect to its merger with CBW Inc., shall have a Tangible
Net Worth of not less than $1,250,000.00, with "Tangible Net
Worth" defined as the aggregate of total stockholders' equity
plus subordinated debt less any intangible assets. There shall
have been no material adverse change, as determined by Bank, in
the financial condition or business of Borrower or any guarantor
hereunder, nor any material decline, as determined by Bank, in
the market value of any collateral required hereunder or a
substantial or material portion of the assets of Borrower or any
such guarantor.
(d) Insurance. Borrower shall have delivered to Bank
evidence of insurance coverage on all Borrower's property, in
form, substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with loss
payable endorsements in favor of Bank, including without
limitation, policies of fire and extended coverage insurance
covering all real property collateral required hereby, with
replacement cost and mortgagee loss payable endorsements, and
such policies of insurance against specific hazards affecting any
such real property as may be required by governmental regulation
or Bank.
(e) Appraisals. Bank shall have obtained, at Borrower's
cost, an appraisal of all real property collateral required
hereby, and all improvements thereon, issued by an appraiser
acceptable to Bank and in form, substance and reflecting values
satisfactory to Bank, in its discretion.
(f) Title Insurance. Bank shall have received an ALTA
Policy of Title Insurance, with such endorsements as Bank may
require, issued by a company and in form and substance
satisfactory to Bank, in such amount as Bank shall require,
insuring Bank's lien on the real property collateral required
hereby to be of first priority, subject only to such exceptions
as Bank shall approve in its discretion, with all costs thereof
to be paid by Borrower.
(g) Tax Service Contract. Borrower shall have procured and
delivered to Bank, at Borrower's cost, such tax service contract
as Bank shall require for any real property collateral required
hereby, to remain in effect as long as such real property secures
any obligations of Borrower to Bank as required hereby.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The
obligation of Bank to make each extension of credit requested by
Borrower hereunder shall be subject to the fulfillment to Bank's
satisfaction of each of the following conditions:
(a) Compliance. The representations and warranties
contained herein and in each of the other Loan Documents shall be
true on and as of the date of the signing of this Agreement and
on the date of each extension of credit by Bank pursuant hereto,
with the same effect as though such representations and
warranties had been made on and as of each such date, and on each
such date, no Event of Default as defined herein, and no
condition, event or act which with the giving of notice or the
passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional
documents which may be required in connection with such extension
of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities
(whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of
Borrower subject hereto, Borrower shall, unless Bank otherwise
consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all
principal, interest, fees or other liabilities due under any of
the Loan Documents at the times and place and in the manner
specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books
and records in accordance with generally accepted accounting
principles consistently applied, and permit any representative of
Bank, at any reasonable time and upon reasonable notice to
Borrower (except that no notice shall be required at any time an
Event of Default has occurred and is continuing), to inspect,
audit and examine such books and records, to make copies of the
same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of
the following, in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each
fiscal year, audited consolidated and consolidating financial
statements of Borrower, prepared by a certified public accountant
acceptable to Bank, to include balance sheet, income statement,
statement of cash flow, together with form 10-K;
(b) not later than 60 days after and as of the end of each
fiscal quarter, a consolidated and consolidating financial
statement of Borrower, prepared by Borrower, to include balance
sheet and income statement, together with form 10-Q;
(c) except, if applicable, as otherwise earlier required by
(a) or (b) above, not later than (10) days after the filing
thereof, copies of all proxy statements, financial statements,
reports, and notices sent or made available generally by Borrower
to its security holders or to any holders of its debt and all
regular, periodic and special reports, and all registration
statements filed with the Securities and Exchange Commission or
any governmental authority that may be substituted therefor, or
with any national securities exchange;
(d) contemporaneously with each annual and quarterly
financial statement of Borrower required hereby, a certificate of
the president or chief financial officer of Borrower that said
financial statements are accurate and that there exists no Event
of Default nor any condition, act or event which with the giving
of notice or the passage of time or both would constitute an
Event of Default;
(e) from time to time such other information as Bank may
reasonably request, including without limitation, copies of rent
rolls and other information with respect to any real property
collateral required hereby.
SECTION 4.4. COMPLIANCE. Preserve and maintain all
licenses, permits, governmental approvals, rights, privileges and
franchises necessary for the conduct of its business; and comply
with the provisions of all documents pursuant to which Borrower
is organized and/or which govern Borrower's continued existence
and with the requirements of all laws, rules, regulations and
orders of any governmental authority applicable to Borrower
and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force
insurance of the types and in amounts customarily carried in
lines of business similar to that of Borrower, including but not
limited to fire, extended coverage, public liability, flood,
property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to
Bank, and deliver to Bank from time to time at Bank's request
schedules setting forth all insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or
necessary to Borrower's business in good repair and condition in
all material respects, and from time to time make necessary
repairs, renewals and replacements thereto so that such
properties shall be preserved and maintained in good repair and
condition in all material respects.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and
discharge when due any and all indebtedness, obligations,
assessments and taxes, both real or personal, including without
limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may
in good faith contest or as to which a bona fide dispute may
arise, and (b) for which Borrower has made provision, to Bank's
reasonable satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing
to Bank of any litigation pending or threatened against Borrower
with a claim in excess of $100,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's
financial condition as follows using generally accepted
accounting principles consistently applied and used consistently
with prior practices (except to the extent modified by the
definitions herein):
(a) Total Liabilities divided by Tangible Net Worth not at
any time greater than 5.5 to 1.0 at the March 31, 1999 and June
30 fiscal quarter ends, 4.5 to 1.0 at the September 30, 1999 and
December 31, 1999 fiscal quarter ends, and 4.0 to 1.0 at the
March 31, 2000 fiscal quarter end and at each fiscal quarter end
thereafter, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated
debt, and with "Tangible Net Worth" as defined in Section 3.1(c)
above.
(b) EBITDA Coverage Ratio not less than 2.25 to 1.0 on a
year to date basis as of the end of each fiscal quarter up to and
including the fiscal quarter ending September 30, 1999, and
thereafter on a trailing four-quarter basis as of the end of each
fiscal quarter, with "EBITDA" defined as net profit before tax
plus interest expense (net of capitalized interest expense),
depreciation expense and amortization expense, and with "EBITDA
Coverage Ratio" defined as EBITDA divided by the aggregate of
total interest expense plus the prior period current maturity of
long-term debt and the prior period current maturity of
subordinated debt.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event
more than five (5) days after the occurrence of each such event
or matter) give written notice to Bank in reasonable detail of:
(a) the occurrence of any Event of Default, or any condition,
event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change
in the name or the organizational structure of Borrower; (c) the
occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding deficiency
with respect to any Plan; or (d) any termination or cancellation
of any insurance policy which Borrower is required to maintain,
or any uninsured or partially uninsured loss through liability or
property damage, or through fire, theft or any other cause
affecting Borrower's property in excess of an aggregate of
$100,000.00.
SECTION 4.11. YEAR 2000 COMPLIANCE. Perform all acts
reasonably necessary to ensure that (a) Borrower and any business
in which Borrower holds a substantial interest, and (b) all
customers, suppliers and vendors that are material to Borrower's
business, become Year 2000 Compliant in a timely manner. Such
acts shall include, without limitation, performing a
comprehensive review and assessment of all of Borrower's systems
and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used
herein, "Year 2000 Compliant" shall mean, in regard to any
entity, that all software, hardware, firmware, equipment, goods
or systems utilized by or material to the business operations or
financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000.
Borrower shall, immediately upon request, provide to Bank such
certifications or other evidence of Borrower's compliance with
the terms hereof as Bank may from time to time require.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains
committed to extend credit to Borrower pursuant hereto, or any
liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's
prior written consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any
of the Credits except for the purposes stated in Article I
hereof.
SECTION 5.2. MERGER, CONSOLIDATION, TRANSFER OF ASSETS.
Merge into or consolidate with any other entity; make any
substantial change in the nature of Borrower's business as
conducted as of the date hereof; acquire all or substantially all
of the assets of any other entity; nor sell, lease, transfer or
otherwise dispose of all or a substantial or material portion of
Borrower's assets except in the ordinary course of its business;
provided, however, that Borrower is permitted to engage in a
merger or acquire assets in connection with the Grass Valley,
Ltd., Inc./Richard's Deli & Pub business (the "GVL Acquisition"),
so long as (a) Borrower remains the surviving entity in the event
of any merger, (b) no Event of Default or any condition, event or
act which with the giving of notice or the passage of time or
both would constitute an Event of Default would result from the
consummation of the GVL Acquisition, immediately after giving
effect thereto, and (c) the assets or any stock or other
interests acquired by Borrower in any such GVL Acquisition shall
become security for all indebtedness of Borrower to Bank subject
to the terms of Section 1.8 hereunder. Bank's consent shall not
be unreasonably withheld with respect to any merger or
acquisition that would not otherwise cause an Event of Default to
occur, or that immediately following consummation thereof would
result in any circumstance which with the giving of notice or the
passage of time or both would constitute an Event of Default.
SECTION 5.3. GUARANTIES. Guarantee or become liable in
any way as surety, endorser (other than as endorser of negotiable
instruments for deposit or collection in the ordinary course of
business), accommodation endorser or otherwise for, nor pledge or
hypothecate any assets of Borrower as security for, any
liabilities or obligations of any other person or entity, except
any of the foregoing in favor of Bank.
SECTION 5.4. LOANS, ADVANCES, INVESTMENTS. Make any loans
or advances to or investments in any person or entity, except any
of the foregoing existing as of, and disclosed to Bank prior to,
the date hereof, and except in connection with the GVL
Acquisition, as described and subject to the requirements set
forth in Section 5.2 above.
SECTION 5.5. DIVIDENDS, DISTRIBUTIONS. Declare or pay any
dividend or distribution in cash or any other property other than
stock, on Borrower's stock now or hereafter outstanding, nor
redeem, retire, repurchase or otherwise acquire any shares of any
class of Borrower's stock now or hereafter outstanding.
SECTION 5.6. PLEDGE OF ASSETS. Mortgage, pledge, grant or
permit to exist a security interest in, or lien upon, all or any
portion of Borrower's assets now owned or hereafter acquired,
except any of the foregoing in favor of Bank or which is existing
as of, and disclosed to Bank in writing prior to, the date
hereof.
SECTION 5.7. OTHER INDEBTEDNESS. Create, incur, assume or
permit to exist any or liabilities resulting from borrowings,
loans or advances, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, except
(a) the liabilities of Borrower to Bank, (b) any other
liabilities of Borrower existing as of, and disclosed to Bank
prior to, the date hereof, and (c) subordinated debt of Borrower
to Eagle's View Management Company, Inc. in a principal amount
not to exceed $1,250,000.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(a) Borrower shall fail to pay within five (5) days
following the date due any principal, interest, fees or other
amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to
Bank in connection with, or any representation or warranty made
by Borrower or any other party under this Agreement or any other
Loan Document shall prove to be incorrect, false or misleading in
any material respect when furnished or made.
(c) Any default in the performance of or compliance with
any obligation, agreement or other provision contained herein or
in any other Loan Document (other than those referred to in
subsections (a) and (b) above or those for which a specific time
for performance or cure has already been specified), and with
respect to any such default which by its nature can be cured,
such default shall continue for a period of thirty (30) days from
the first to occur of (i) the date any officer of Borrower first
knew of such default, or (ii) the date Bank gives written notice
of such default to Borrower.
(d) Any default in the payment or performance of any
obligation, or any defined event of default, under the terms of
any contract or instrument (other than any of the Loan Documents)
pursuant to which Borrower or any guarantor hereunder has
incurred any debt or other liability to Bank, or has incurred any
debt or other liability to any other person or entity involving
an amount of at least Three Hundred Thousand Dollars
($300,000.00), if such default gives to such other person or
entity the right to demand immediate payment of such amount or
the right to accelerate the obligation in default.
(e) The filing of a notice of judgment lien against
Borrower or any guarantor hereunder; or the recording of any
abstract of judgment against Borrower or any guarantor hereunder
in any county in which Borrower or such guarantor has an interest
in real property; or the service of a notice of levy and/or of a
writ of attachment or execution, or other like process, against
the assets of Borrower or any guarantor hereunder; or the entry
of a judgment against Borrower or any guarantor hereunder;
provided however, that the foregoing shall only constitute an
Event of Default hereunder if the related judgment involves at
least Three Hundred Dollars ($300,000.00) and is not bonded or
insured against, or removed or dismissed without expenditure of
funds by Borrower except for legal proceedings within 30 days;
provided, however, that no advances under any Credit shall be
available until such bonding, insurance, removal, or dismissal
occurs.
(f) Borrower or any guarantor hereunder shall become
insolvent, or shall suffer or consent to or apply for the
appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any guarantor hereunder
shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement
with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or recodified
from time to time ("Bankruptcy Code"), or under any state or
federal law granting relief to debtors, whether now or hereafter
in effect; or any involuntary petition or proceeding pursuant to
the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for
debtors is filed or commenced against Borrower or any guarantor
hereunder and is not dismissed within 45 days (provided, however,
that no advances under any Credit shall be available until such
dismissal), or Borrower or any such guarantor shall file an
answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or Borrower or any such
guarantor shall be adjudicated a bankrupt, or an order for relief
shall be entered against Borrower or any such guarantor by any
court of competent jurisdiction under the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.
(g) The dissolution or liquidation of Borrower or any
guarantor hereunder; or Borrower or any such guarantor, or any of
its directors, stockholders or members, shall take action seeking
to effect the dissolution or liquidation of Borrower or such
guarantor.
(h) The sale, transfer, hypothecation, assignment or
encumbrance, whether voluntary, involuntary or by operation of
law, without Bank's prior written consent, of all or any part of
or interest in any real property collateral required hereby.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event
of Default: (a) all indebtedness of Borrower under each of the
Loan Documents, any term thereof to the contrary notwithstanding,
shall at Bank's option and without notice become immediately due
and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each
Borrower; (b) the obligation, if any, of Bank to extend any
further credit under any of the Loan Documents shall immediately
cease and terminate; and (c) Bank shall have all rights, powers
and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort
to any or all security for any of the Credits and to exercise any
or all of the rights of a beneficiary or secured party pursuant
to applicable law. All rights, powers and remedies of Bank may
be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers
or remedies provided by law or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or
discontinuance of Bank in exercising any right, power or remedy
under any of the Loan Documents shall affect or operate as a
waiver of such right, power or remedy; nor shall any single or
partial exercise of any such right, power or remedy preclude,
waive or otherwise affect any other or further exercise thereof
or the exercise of any other right, power or remedy. Any waiver,
permit, consent or approval of any kind by Bank of any breach of
or default under any of the Loan Documents must be in writing and
shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands
which any party is required or may desire to give to any other
party under any provision of this Agreement must be in writing
delivered to each party at the following address:
BORROWER: ELMER'S RESTAURANTS, INC.
X.X. Xxx 00000
Xxxxxxxx, XX 00000
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
Portland Regional Commercial Banking Xxxxxx
0000 X.X. Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
or to such other address as any party may designate by written
notice to all other parties. Each such notice, request and
demand shall be deemed given or made as follows: (a) if sent by
hand delivery, upon delivery; (b) if sent by mail, upon the
earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent
by telecopy, upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES.
Borrower shall pay to Bank immediately upon demand the full
amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys' fees (to include outside counsel
fees and all allocated costs of Bank's in-house counsel),
expended or incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and the other Loan
Documents, Bank's continued administration hereof and thereof,
and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the
collection of any amounts which become due to Bank under any of
the Loan Documents, and (c) the prosecution or defense of any
action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or
motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of
the parties; provided however, that Borrower may not assign or
transfer its interest hereunder without Bank's prior written
consent. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any
interest in, Bank's rights and benefits under each of the Loan
Documents. In connection therewith, Bank may disclose all
documents and information which Bank now has or may hereafter
acquire relating to any of the Credits, Borrower or its business,
any guarantor hereunder or the business of such guarantor, or any
collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement
and the other Loan Documents constitute the entire agreement
between Borrower and Bank with respect to the Credits and
supersede all prior negotiations, communications, discussions and
correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only in writing signed by
each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement
is made and entered into for the sole protection and benefit of
the parties hereto and their respective permitted successors and
assigns, and no other person or entity shall be a third party
beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any other of the Loan
Documents to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and
every provision of this Agreement and each other of the Loan
Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision
of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the
remainder of such provision or any remaining provisions of this
Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when executed and
delivered shall be deemed to be an original, and all of which
when taken together shall constitute one and the same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Oregon.
SECTION 7.11. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute
shall be resolved by binding arbitration (except as set forth in
(e) below) in accordance with the terms of this Agreement. A
"Dispute" shall mean any action, dispute, claim or controversy of
any kind, whether in contract or tort, statutory or common law,
legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan
Documents, or any past, present or future extensions of credit
and other activities, transactions or obligations of any kind
related directly or indirectly to any of the Loan Documents,
including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other
remedies pursuant to any of the Loan Documents. Any party may by
summary proceedings bring an action in court to compel
arbitration of a Dispute. Any party who fails or refuses to
submit to arbitration following a lawful demand by any other
party shall bear all costs and expenses incurred by such other
party in compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be
administered by the American Arbitration Association ("AAA") or
such other administrator as the parties shall mutually agree upon
in accordance with the AAA Commercial Arbitration Rules. All
Disputes submitted to arbitration shall be resolved in accordance
with the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in
any of the Loan Documents. The arbitration shall be conducted at
a location in Oregon selected by the AAA or other administrator.
If there is any inconsistency between the terms hereof and any
such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute
shall apply to any arbitration proceeding. All discovery
activities shall be expressly limited to matters directly
relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court
having jurisdiction; provided however, that nothing contained
herein shall be deemed to be a waiver by any party that is a bank
of the protections afforded to it under 12 U.S.C. 91 or any
similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and
Foreclosure. No provision hereof shall limit the right of any
party to exercise self-help remedies such as setoff, foreclosure
against or sale of any real or personal property collateral or
security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration,
attachment, garnishment or the appointment of a receiver, from a
court of competent jurisdiction before, after or during the
pendency of any arbitration or other proceeding. The exercise of
any such remedy shall not waive the right of any party to compel
arbitration hereunder.
(d) Arbitrator Qualifications and Powers; Awards.
Arbitrators must be active members of the Oregon State Bar or
retired judges of the state or federal judiciary of Oregon, with
expertise in the substantive laws applicable to the subject
matter of the Dispute. Arbitrators are empowered to resolve
Disputes by summary rulings in response to motions filed prior to
the final arbitration hearing. Arbitrators (i) shall resolve all
Disputes in accordance with the substantive law of the state of
Oregon, (ii) may grant any remedy or relief that a court of the
state of Oregon could order or grant within the scope hereof and
such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other
actions as they deem necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the Oregon
Rules of Civil Procedure or other applicable law. Any Dispute in
which the amount in controversy is $5,000,000 or less shall be
decided by a single arbitrator who shall not render an award of
greater than $5,000,000 (including damages, costs, fees and
expenses). By submission to a single arbitrator, each party
expressly waives any right or claim to recover more than
$5,000,000. Any Dispute in which the amount in controversy
exceeds $5,000,000 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three
arbitrators must actively participate in all hearings and
deliberations.
(e) Judicial Review. Notwithstanding anything herein to
the contrary, in any arbitration in which the amount in
controversy exceeds $25,000,000, the arbitrators shall be
required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators
shall not have the power to make any award which is not supported
by substantial evidence or which is based on legal error, (ii) an
award shall not be binding upon the parties unless the findings
of fact are supported by substantial evidence and the conclusions
of law are not erroneous under the substantive law of the state
of Oregon, and (iii) the parties shall have in addition to the
grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of
(A) whether the findings of fact rendered by the arbitrators are
supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the
state of Oregon. Judgment confirming an award in such a
proceeding may be entered only if a court determines the award is
supported by substantial evidence and not based on legal error
under the substantive law of the state of Oregon.
(f) Miscellaneous. To the maximum extent practicable, the
AAA, the arbitrators and the parties shall take all action
required to conclude any arbitration proceeding within 180 days
of the filing of the Dispute with the AAA. No arbitrator or
other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of
information by a party required in the ordinary course of its
business, by applicable law or regulation, or to the extent
necessary to exercise any judicial review rights set forth
herein. If more than one agreement for arbitration by or between
the parties potentially applies to a Dispute, the arbitration
provision most directly related to the Loan Documents or the
subject matter of the Dispute shall control. This arbitration
provision shall survive termination, amendment or expiration of
any of the Loan Documents or any relationship between the
parties.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE
BY BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first written
above.
XXXXX FARGO BANK,
ELMER'S RESTAURANTS, INC. NATIONAL ASSOCIATION
By: __/s/Xxxxx X. Davis____ By: __/s/Xxxxx Day____________
Xxxxx Xxx
Title: President Vice President
