THIS LOAN AGREEMENT (this "Agreement") dated as of February 19, 1999,
is made by and between LOCAL FEDERAL BANK, F.S.B. ("Lender"); EATERIES, INC., an
Oklahoma corporation ("Eateries"); and FIESTA RESTAURANTS, INC., an Oklahoma
corporation, PEPPERONI GRILL, INC., an Oklahoma corporation, and GARFIELD'S
MANAGEMENT, INC., an Oklahoma corporation (collectively, the "Subsidiaries" and
together with Eateries, "Borrowers").
In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, Lender and Borrowers agree as follows:
1. Definitions and Reference Terms. In addition to any other terms
defined herein, the following terms shall have the meaning set forth with
"Agreement" means this Agreement and all Exhibits attached
thereto, as the same may from time to time be amended, supplemented or
"Current Assets" means the aggregate amount of all of
Borrowers' assets which would, in accordance with GAAP, properly be
defined as current assets.
"Current Liabilities" means the aggregate amount of all
current liabilities as determined in accordance with GAAP, but in any
event shall include all liabilities except those having a maturity date
which is more than one year from the date as of which such computation
is being made.
"Debt" means, as to any person, all indebtedness, liabilities
and obligations of such person as may be required to be reflected on
the balance sheet of such person as a liability, all capital lease
obligations and all guaranties of indebtedness of other persons, all as
determined in accordance with GAAP.
"EBITDA" means the Borrowers' net income before taxes and tax
accruals, plus interest, depreciation and amortization expenses
pursuant to GAAP, all during the period of the last four fiscal
quarters immediately preceding the date of determination.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all regulations issued pursuant
"Funded Debt" means, as of any date of determination, the
amount outstanding on any long term Debt of the Borrowers plus the
current portion of long term Debt, including any capital leases.
"GAAP" means generally accepted accounting principles.
"Hazardous Materials" means and includes all materials defined
as hazardous materials or substances under any local, state or federal
environmental laws, rules or regulations, and petroleum, petroleum
products, oil and asbestos.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement,
or any other interest in property of the Borrowers designed to secure
the repayment of Debt of the Borrowers, whether arising by agreement or
under any statute or law, or otherwise.
"Line" has the meaning set forth in Section 2.b.
"Loan" means any loan described in Section 2 hereof and any
subsequent loan which states that it is subject to this Agreement,.
"Loan Documents" means this Agreement and any and all
promissory notes executed by Borrowers in favor of Lender and all other
documents, instruments, guarantees, certificates and agreements
executed and/or delivered by Borrowers, any guarantor or third party in
connection with any Loan.
"Material Adverse Effect" means any set of circumstances or
events which (i) has an adverse effect upon the validity, performance
or enforceability of this Agreement or any other Loan Documents, (ii)
is material and adverse to the financial condition or business
operations of the Borrowers, (ii) materially impairs the ability of the
Borrowers to perform its obligations under this Agreement or any other
Loan Documents, or (iv) constitutes an Event of Default.
"Net Worth" means the difference between Borrowers (i) Total
Assets, and (ii) Total Liabilities, all as set forth in the
consolidated financial statements of Borrowers.
"Note" has the meaning set forth in Section 2.a.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor to all or any of its functions under ERISA.
"Permitted Liens" means (i) pledges or deposits made to secure
payment of workers' compensation insurance (or to participate in any
fund in connection with workers' compensation insurance), unemployment
insurance, pensions or social security programs, (ii) Liens imposed by
mandatory provisions of law such as for materialmen's, mechanics',
warehousemen's and other like Liens arising in the ordinary course of
business, securing Debt whose payment is not yet due or if the same is
due, it is being contested in good faith by appropriate proceedings and
the imposition of which would not have a Material Adverse Effect on the
Borrowers, (iii) Liens for taxes, assessments and governmental charges
or levies imposed upon a person or upon such person's income or profits
or property, if the same are not yet due and payable or if the same are
being contested in good faith by appropriate proceedings and the
imposition of which would not have a Material Adverse Effect on the
Borrowers, (iv) pledges or deposits to secure
public or statutory, obligations and deposits to secure (or in lieu of)
surety, stay, appeal or customs bonds and deposits to secure the
payment of taxes, assessments, customs duties or other similar charges,
(v) Liens in favor of NationsBank, N.A. encumbering the real property,
improvements and related assets of Borrower's location in Newark, Ohio
and (vi) Liens encumbering assets of Borrowers related to real property
formerly owned by Borrowers, provided, however, that any such Liens
described in this clause (vi) shall be discharged and released no later
than April 30, 1999.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Regulation X" means Regulation X promulgated by the Board of
Governors of the Federal Reserve System, as in effect from time to
"Total Assets" means the Total Assets of Borrowers as
reflected on Borrowers' financial statements and as accounted for under
"Total Liabilities" shall mean the Total Liabilities of
Borrowers as reflected on Borrowers' financial statements and as
accounted for under GAAP.
All accounting terms not specifically defined or specified herein shall
have the meanings generally attributed to such terms under GAAP, as in effect
from time to time, consistently applied throughout the periods involved, with
respect to the financial statements referenced in Section 3.h. hereof
a. Loans. Lender hereby agrees to make (or has made) one or more
loans to Borrowers in the aggregate principal face amount of
$14,600,000.00. The obligation to repay the loans is evidenced
by promissory notes of even date herewith (the promissory
notes together with any and all renewals, extensions or
rearrangements thereof being hereafter collectively referred
to as the "Notes") having maturity dates, repayment terms and
interest rates as set forth in the Notes. Each of the Notes
shall be executed by all Borrowers and shall be the joint and
several obligation of each Borrowers.
b. Revolving Credit Feature. One of the Loans is in the principal
face amount of $6,000,000.00 provides for a revolving line of
credit (the "Line") under which Borrowers may from time to
time, borrow, repay and re-borrow funds in accordance with the
terms of the Note evidencing such obligation.
c. Term Credit Feature. One of the Loans is in the principal face
amount of $8,600,000.00 (the "Term Loan") for which Borrowers
shall receive advances by
no later than February 19, 1999 and thereafter repay in
quarterly amortizing installments of principal plus accrued
interest in accordance with the terms and conditions of this
Agreement and the Note evidencing such obligation.
3. Representations and Warranties. Borrowers hereby represent and
warrant to Lender as follows:
a. Good Standing. Each Borrower is an Oklahoma corporation, duly
organized, validly existing and in good standing under the
laws of the State of Oklahoma and has the power and authority
to own its property and to carry on its business in each
jurisdiction in which each Borrower does business.
b. Authority and Compliance. Each Borrower has full power and
authority to execute and deliver the Loan Documents and to
incur and perform the obligations provided for therein, all of
which have been duly authorized by all proper and necessary
action of the appropriate governing body of Borrowers. No
consent or approval of any public authority or other third
party is required as a condition to the validity of any Loan
Document, and each Borrower is in substantial compliance with
all laws and regulatory requirements to which it is subject.
c. Binding Agreement. This Agreement and the other Loan Documents
executed by Borrowers constitute valid and legally binding
obligations of Borrowers, enforceable in accordance with their
d. Litigation. There is no proceeding involving Borrowers pending
or, to the knowledge of Borrowers, threatened before any court
or governmental authority, agency or arbitration authority
which could have a Material Adverse Effect on Borrowers.
e. No Conflicting Agreements. There is no charter, bylaw, stock
provision, partnership agreement or other document pertaining
to the organization, power or authority of Borrowers and no
provision of any existing agreement, mortgage, indenture or
contract binding on any Borrower or affecting its property,
which would prevent, hinder or delay the execution, delivery
or carrying out of the terms of this Agreement and the other
f. Ownership of Assets. Borrowers have good title to their
assets, and such assets are free and clear of liens, except
for Permitted Liens and as otherwise disclosed to Lender in
writing prior to the date of this Agreement.
g. Taxes. All taxes and assessments due and payable by Borrowers
have been paid or are being contested in good faith by
appropriate, proceedings and Borrowers have filed all tax
returns which they are required to file.
h. Financial Statements. The financial statements of Borrowers
heretofore delivered to Lender have been prepared in
accordance with GAAP applied on a consistent basis throughout
the period involved and fairly present Borrowers' financial
condition as of the date or dates thereof, and there has been
no material adverse change in Borrowers' financial condition
or operations since September 27, 1998. All factual
information furnished by Borrowers to Lender in connection
with this Agreement and the other Loan Documents is and will
be accurate and complete on the date as of which such
information is delivered to Lender and is not and will not be
incomplete by the omission of any material fact necessary to
make such information not misleading.
i. Place of Business. Borrowers' chief executive offices are
located at 3240 W. Britton Road, Suite 202, Oklahoma City,
j. Environmental. The conduct of Borrowers' business operations
and the condition of Borrowers' property does not and will not
violate any federal laws, rules or ordinances for
environmental protection, regulations of the Environmental
Protection Agency, any applicable local or state law, rule,
regulation or rule of common law or any judicial
interpretation thereof relating primarily to the environment
or Hazardous Materials.
k. Permits. The Borrowers have all licenses, permits,
certificates, consents and franchises, and all necessary
filings associated thereto have been made, in order to carry
on its business as now being conducted and to own or lease and
operate its properties as now owned, leased or operated. All
such licenses, permits, certificates, consents, and franchises
are valid and subsistent, and the Borrowers are not in
violation thereof to the extent such violation would cause a
Material Adverse Effect.
l. Full Disclosure. Except as otherwise disclosed to Lender in
writing prior to the execution of this Agreement, there is no
material fact known to Borrowers that Borrowers have not
disclosed to Lender which could have a Material Adverse Effect
on the properties, business, prospects or condition (financial
or otherwise) of Borrowers. Neither financial statements
referenced herein, nor any certificate or statement delivered
herewith or heretofore by Borrowers to Lender in connection
with the negotiations of this Agreement, contains any untrue
statement of a material fact or omits to state any material
fact necessary to keep the statements contained herein or
therein from being misleading which would have a Material
m. Use of Proceeds; Margin Stock. The proceeds of the Loans will
be used by Borrowers solely for the purposes described herein.
None of such proceeds will be used in violation of Regulation
U or Regulation X, or for the purpose of reducing or retiring
any Debt which was originally incurred to purchase or carry a
"margin stock" as defined in Regulation U or Regulation X or
for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of such
Regulation U or Regulation X. Borrowers are not engaged in the
business of extending credit for the purpose of purchasing or
carrying margin stocks. Borrowers have not taken or will not
take any action which might cause the Loans or any of the
other Loan Documents, including this Agreement, to violate
Regulation U or Regulation Y, or any other regulations of the
Board of Governors of the Federal Reserve System or to violate
Section 8 of the Securities Exchange Act of 1934 or any rule
or regulation thereunder, in each case as now in effect or as
the same may hereinafter be in effect. Borrowers do not own
n. ERISA. Borrowers are in compliance with all ERISA requirements
and interpretations with respect to any employee benefit. plan
of Borrowers and have not incurred any liability to PBGC with
respect to any such plan.
o. Compliance With Law. Borrowers are not in material violation
of any law, rule, regulation, order or decree which is
applicable to Borrowers or their properties the result of
which could have a Material Adverse Effect.
p. Casualties. Neither the business nor the properties of
Borrowers are currently affected by any environmental hazard,
fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God
or other casualty (whether or not covered by insurance), which
could have a Material Adverse Effect.
q. No Event of Default. No Event of Default has occurred and is
r. Survival of Representations. All representations and
warranties made under this Agreement shall be deemed to be
made at and as of the date hereof and at and as of the date of
any advance under any Loan. All of the representations and
warranties made by the Borrowers herein and in any Loan
Document will survive the delivery of the Loan Documents and
any renewal and extension of the Loans hereunder. All
statements contained in any certificate or other instrument
delivered by or on behalf of the Borrowers under or pursuant
to this Agreement or in connection with the transactions
contemplated hereby shall constitute representations and
warranties made by the Borrowers hereunder as applicable.
4. Conditions of Lending. The obligation of Lender to perform this
Agreement and to extend the Loans as described herein is subject to the
performance of the following conditions precedent:
a. Loan Documents. This Agreement and the other Loan Documents,
and all other documents required by Lender shall have been
duly executed, acknowledged (where appropriate) and delivered
to Lender, all in form and substance satisfactory to Lender.
b. Information. The Borrowers shall have furnished to Lender such
financial statements and other information as Lender shall
c. No Default, Representations and Warranties. No Events of
Default shall have occurred and be continuing under this
Agreement or the Loan Documents. All representations and
warranties contained herein shall be true and correct.
d. Authority. Borrowers shall have delivered to Lender such
resolutions and other documents reasonably required to
authorize the: execution, delivery and performance of the Loan
Documents, all in form and substance satisfactory to Lender,
together with certified copies of the Borrowers' respective
Certificates of Incorporation (and amendments), Bylaws (and
amendments), and original Good Standing Certificates from the
State of Oklahoma for each Borrower.
e. Incumbency Certificates. Lender shall have received a
certificate of an officer of each Borrower which shall certify
the names of the persons authorized to sign each of the Loan
Documents to be executed by such person and the other
documents or certificates to be delivered by such person
pursuant to the Loan Documents, together with the true
signatures of each of such persons. Lender may conclusively
rely on the certificates until Lender shall receive a further
certificate of an officer of each Borrowers canceling or
amending the prior certificate and submitting the signatures
of the persons named in such further certificate.
f. Opinion of Counsel. A favorable opinion of legal counsel for
Borrowers, in such form as shall be acceptable to Lender and
Lender's counsel, shall have been delivered to Lender,
covering such matters as: (i) each Borrower's due organization
and qualification under the laws of the State of Oklahoma, and
good standing under the laws of the State of Oklahoma and all
other states as may be required by applicable law; (ii) each
Borrower's authorization to enter into this Agreement and the
other Loan Documents, and that such documents, when executed
and delivered, will be the valid and binding obligations of
the Borrowers, enforceable according to their respective
terms; and (iii) that the execution and delivery of this
Agreement and the other Loan Documents shall not violate any
applicable law, regulation or rule.
g. UCC Information. Lender shall have received and reviewed
copies of UCC lien searches for the Borrowers in such
jurisdictions as the Borrowers may require, and all Liens of
any party as evidenced by such information shall have been
released to the satisfaction of Lender.
h. Expenses. Each party shall have paid all of their respective
costs and expenses, including reasonable fees of legal
counsel, incurred in the negotiation and preparation of the
Loan Documents and in closing and perfecting any rights and
interests under the Loan Documents.
5. Affirmative Covenants. Until full payment and performance of all
obligations of Borrowers under the Loan Documents, Borrowers will, unless Lender
consents otherwise in writing (and without limiting any requirement of any other
a. Financial Condition. Maintain Borrowers' financial condition
as follows, determined in accordance with GAAP applied on a
consistent basis throughout the period involved except to the
extent modified by the following definitions:
i. Net Worth. Borrowers shall maintain a Net Worth of at
least $6,500,000.00 during the term of this
Agreement, and the Borrowers shall increase their
consolidated Net Worth by an amount of not less than
fifty percent (50 %) of the Borrowers' quarterly net
income for each calendar quarter. This covenant shall
be tested quarterly as of the close of each such
calendar quarter, and the minimum consolidated Net
Worth increased quarterly based upon the financial
statements submitted pursuant to Section 5.c.i.
ii. Funded Debt to EBITDA. Borrowers will not allow their
ratio of Funded Debt to EBITDA to be in excess of
3.00 to 1.00 during the term of this Agreement. This
covenant shall be tested quarter as of the close of
each such fiscal quarter.
iii. Debt Coverage. Borrowers shall not permit the ratio
of their (i) net income after taxes and tax accruals,
plus interest, depreciation and amortization
expenses, all during the period of the last four
fiscal quarters immediately preceding the date of
determination, to (ii) the sum of (a) the current
portion of long term Debt of the Borrowers for the
last fiscal quarter, and (b) all interest expense of
Borrowers, during the last four fiscal quarters after
the date of determination, to be less than 2.00 to
1.00. Such ratio shall be determined quarterly as of
the close of each fiscal quarter, beginning with the
first fiscal quarter of 1999. In the event the above
ratio exceeds 2.75 to 1.00 at any time, all excess
cash flow of Borrowers as indicated in such ratio
calculation shall be required to reduce the principal
balance of the Term Loan on the next scheduled
installment date as provided in the Note evidencing
the Term Loan. Such prepayments of excess cash flow
shall continue until the scheduled installments of
principal as provided in the Note evidencing the Term
Loan are sufficient to fully amortize the Term Loan
by the stated Maturity Date as set forth in such
b. Financial Statements and Other Information. Maintain a system
of accounting satisfactory to Lender and in accordance with
GAAP applied on a consistent basis throughout the period
involved, permit Lender's officers or authorized
representatives to visit and inspect Borrowers' books of
account and other records at such reasonable times and as
often as Lender may desire, and pay the reasonable fees and
disbursements of any accountants or other agents of Lender
selected by Lender for the foregoing purposes. Unless written
notice of another
location is given to Lender, Borrowers' books and records will
be located at Borrowers' chief executive office at the address
set forth in Section 3.i. All financial statements called for
below shall be prepared in form and content acceptable to
Lender and by independent certified public accountants
acceptable to Lender.
c. Purposes of Loans. The Term Loan shall be utilized solely for
(i) the purchase by Eateries of up to 1,056,200 of its issued
and outstanding shares at a price not to exceed $5.125 per
share, such shares to be held as treasury stock by Eateries
and not to at any time constitute "margin stock" or otherwise
cause Borrowers or Lender to be in violation of Section 3.m.
of this Agreement, (ii) refinance existing indebtedness of
Borrowers with NationsBank, N.A., and (iii) such other
purposes as may be approved by Lender. The Line shall be used
(i) to refinance the existing revolving facility of Borrowers
with NationsBank, N.A. and (ii) for general corporate purposes
of Borrowers, but shall not be used for the purchase by
Eateries of any of its shares.
In addition, Borrowers will:
i. Furnish to Lender audited, consolidated, annual
financial statements of Borrowers for each fiscal
year of Borrowers, within 120 days after the close of
each such fiscal year.
ii. Furnish to Lender unaudited, consolidated quarterly
financial statements (including a balance sheet and
profit and loss statement) of Borrowers for each
fiscal quarter of each fiscal year of Borrowers,
within 60 days after the close of each such period.
iii. Furnish to Lender a quarterly compliance certificate
for (and executed by an authorized representative of)
Borrowers concurrently with and dated as of the date
of delivery of each of the financial statements as
required in paragraphs i and ii above, containing (a)
a certification that the financial statements of even
date are true and correct and that Borrowers are not
in default under the terms of this Agreement, and (b)
computations and conclusions, in such detail as
Lender may request, with respect to compliance with
this Agreement, and the other Loan Documents,
including computations of all quantitative covenants.
iv. Furnish to Lender promptly such additional
information, reports and statements respecting the
business operations and financial condition of
Borrowers, from time to time, as Lender may
reasonably request including but not limited to: (a)
all quarterly and other periodic reports to the
Securities and Exchange Commission (Forms 10-Q, 10-K,
etc.) which, reports among other information
provided, shall detail all new store openings and
other material business matters of Borrowers; and (b)
notification, in form acceptable to Lender, of any
potential merger, acquisition, reorganization or sale
of a material part of the assets of Borrowers to any
d. Insurance. Maintain insurance with responsible insurance
companies on such of its properties, in such amounts and
against such risks, as is customarily maintained by similar
businesses operating in the same vicinity, specifically to
include fire and extended coverage insurance covering all
assets, business interruption insurance, workers compensation
insurance and liability insurance, all to be with such
companies and in such amounts as are satisfactory to Lender
and providing for at least 30 days prior notice to Lender of
any cancellation thereof. Satisfactory evidence of such
insurance will be supplied to Lender prior to funding under
the Loan(s) and 30 days prior to each policy renewal.
e. Existence and Compliance. Maintain its existence, good
standing and qualification to do business, where required and
comply with all laws, regulations and governmental
requirements including, without limitation, environmental laws
applicable to it or to any of its property, business
operations and transactions.
f. Adverse Conditions or Events. Promptly advise Lender in
writing of (i) any condition, event or act which comes to its
attention that would or might materially adversely affect
Borrowers' financial condition or operations or Lender's
rights under the Loan Documents, (ii) any material litigation
filed by or against Borrowers, (iii) any event that has
occurred that would constitute an event of default under any
Loan Documents and (iv) any uninsured or partially uninsured
loss through fire, theft, liability or property damage in
excess of an aggregate of $25,000.00.
g. Taxes and Other Obligations. Pay, prior to delinquency, all of
its taxes, assessments and other obligations, including, but
not limited to taxes, costs or other expenses arising out of
this transaction, as the same become due and payable, except
to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
h. Maintenance. Maintain all of its tangible property in good
condition and repair and make all necessary replacements
thereof, and. preserve and maintain all licenses, trademarks,
privileges, permits, franchises, certificates and the like
necessary for the operation of its business.
i. Environmental. Immediately advise Lender in writing of (i) any
and all enforcement, cleanup remedial, removal, or other
governmental or regulatory actions instituted, completed or
threatened pursuant to any applicable federal, state, or local
laws, ordinances or regulations relating to any Hazardous
Materials affecting Borrowers' business operations; and (ii)
all claims made or threatened by any third party against
Borrowers relating to damages, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous
shall immediately notify Lender of any remedial action taken
by Borrowers with respect to Borrowers' business operations.
Borrowers will not use or permit any other party to use any
Hazardous Materials at any of Borrowers' places of business or
at any other property owned by Borrowers except such materials
as are incidental to Borrowers' normal course of business,
maintenance and repairs and which are handled in compliance
with all applicable environmental laws. Borrowers agree to
permit Lender, its agents, contractors and employees to enter
and inspect any of Borrowers' places of business or any other
property of Borrowers at any reasonable times upon three (3)
days prior notice for the purposes of conducting an
environmental investigation and audit (including taking
physical samples) to insure that Borrowers are complying with
this covenant and Borrowers shall reimburse Lender on demand
for the costs of any such environmental investigation and
audit. Borrowers shall provide Lender, its agents,
contractors, employees and representatives with access to and
copies of any and all data and documents relating to or
dealing with any Hazardous Materials used, generated,
manufactured, stored or disposed of by Borrowers' business
operations within five (5) days of the request therefor.
j. Authorizations and Approvals. Borrowers shall promptly obtain,
from time to time at their own expense, all such governmental
licenses, authorizations, consents, permits and approvals
which may be required or necessary in the Borrowers' business
or with respect to their assets and properties if the failure
to obtain the same could have a Material Adverse Effect.
k. ERISA Compliance. Borrowers shall (i) at all times, make
prompt payment of all contributions required under all
employee benefit plans and as required to meet the minimum
funding standard set forth in ERISA with respect to its plans,
(ii) notify Lender immediately of any fact, including, but not
limited to, any reportable event arising in connection with
any of its plans, which might constitute grounds for
termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to
administer such plan, together with a statement, if requested
by Lender, as to the reason therefor and the action, if any,
proposed to be taken with respect thereto, and (iii) furnish
to Lender, upon its request, such additional. information
concerning any of their plans as may be reasonably requested.
l. Maintenance of Tangible Assets. Borrowers will do all things
necessary to maintain, preserve, protect and keep all their
tangible assets in good condition, and make all necessary and
proper repairs, renewals and replacements thereto so that the
business anticipated by the Borrowers through the ownership,
operation or use of such assets can be performed and conducted
at all times.
m. Maintenance of Accounts. On or before August 31, 1999,
Borrowers will have begun to utilize the major cash management
services offered through Lender and all Oklahoma-based
depository services available through Lender .
6. Negative Covenants. Until full payment and performance of all
obligations of Borrowers under the Loan Documents, Borrowers will not, without
the prior written consent of Lender (and without limiting any requirement of any
other Loan Documents):
a. Capital Expenditures. Make capital expenditures during each
fiscal year (including capitalized leases) exceeding in the
aggregate $3,000,000.00, net of landlord reimbursements.
b. Transfer of Assets or Control. Sell, lease, assign or
otherwise dispose of or transfer any assets, except in the
normal course of its business, or enter into any merger or
consolidation, or transfer control or ownership of the
Subsidiaries or form or acquire any other subsidiary.
c. Dividends. No dividends shall be declared or paid to the
shareholders of Eateries during the term of this Agreement.
d. Liens. Grant, suffer or permit any contractual or
non-contractual lien on or security interest in its assets,
except those that may be granted in favor of Lender or
Permitted Liens, or fail to promptly pay when due all lawful
claims, whether for labor, materials or otherwise which would
have a Material Adverse Effect.
e. Extensions of Credit. Make or permit any Subsidiary or other
subsidiary to make, any loan or advance to any person or
entity (other than one of the Borrowers), or purchase or
otherwise acquire, or permit any subsidiary to purchase or
otherwise acquire, any capital stock, assets, obligations, or
other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in any entity
(provided, however, that Eateries may repurchase up to an
additional 500,000 of its issued and outstanding shares at a
price not to exceed $7.00 per share so long as any such
repurchase does not cause Borrowers to violate any provision
of this Agreement, including without limitation the financial
covenants set forth in Section 5.a.), or participate as a
partner or joint venturer with any person or entity, except
for the purchase of direct obligations of the United States or
any agency thereof with maturities of less than one year.
f. Borrowings. Create, incur, assume or become liable in any
manner for any indebtedness (for borrowed money, deferred
payment for the purchase of assets, lease payments, as surety
or guarantor for the debt for another, or otherwise) other
than to Lender, in excess of $300,000.00 except debts incurred
in the ordinary course of Borrowers' business, and except for
existing indebtedness disclosed to Lender in writing and
acknowledged by Lender prior to the date of this Agreement.
g. Character of Business. Change the general character of
business as conducted at the date hereof, or engage in any
type of business not reasonably related to their business as
h. Management Change. Make any substantial change in their
present executive or management personnel without giving prior
notice to Lender.
7. Default. Borrowers shall be in default under this Agreement and
under each of the other Loan Documents if any Borrower shall: (i) default in the
payment of any amounts due and owing under a Loan and it shall have failed to
cure such default within five (5) days after written notice thereof to Borrowers
as provided herein; or (ii) fail to timely and properly observe, keep or perform
any term, covenant, agreement or condition in any Loan Document or in any other
loan agreement, promissory note, security agreement, deed of trust, deed to
secure debt, mortgage, assignment or other contract securing or evidencing
payment of any indebtedness of Borrowers to Lender or any affiliate or
subsidiary of Lender, and it shall have failed to cure such default within
twenty (20) days after written notice thereof to Borrowers as provided herein.
8. Remedies upon Default. If an event of default shall occur, Lender
shall have all rights, powers and remedies available under each of the Loan
Documents as well as all rights and remedies available at law or in equity.
9. Notices. All notices, requests or 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 the other party at the following
Borrowers: c/o Eateries, Inc.
3240 West Britton Road, Suite 202
Oklahoma City, Oklahoma 73120
Attention: Vincent F. Orza, Jr., President
Fax. No. (405) 751-7348
With a copy to: Thomas F. Golden, Esq.
Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C.
320 South Boston, Suite 400
Tulsa, Oklahoma 74103-3708
Fax. No. (918) 594-0505
Lender: Local Federal Bank, F.S.B.
3601 N.W. 63rd Street
Oklahoma City, Oklahoma 73120
Attention: Kelly H. Sachs, Senior Vice President
Fax No. (405) 841-2175
With a copy to: Phillips McFall McCaffrey McVay & Murrah, P.C.
One Leadership Square, 12th Floor
Oklahoma City, Oklahoma 73102
Attention: J. Mark Lovelace, Esq.
Fax. No. (405) 235-4133
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
a. If sent by mail, upon the earlier of the date of receipt or
five (5) days after deposit in the U.S. Mail, first class
b. If sent by any other means, upon delivery.
10. Costs, Expenses and Attorneys' Fees. Borrowers shall pay to Lender
immediately upon demand the full amount of all costs and expenses, including
reasonable attorney fees (to include outside counsel fees and all allocated
costs of Lender's in-house counsel if permitted by applicable law), incurred by
Lender in connection with (a) the enforcement of this Agreement and each of the
Loan Documents, and (b) all other costs and attorneys' fees incurred by Lender
for which Borrowers are obligated to reimburse Lender in accordance with the
terms of the Loan Documents.
11. Miscellaneous. Borrowers and Lender further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
a. Cumulative Rights and No Waiver. Each and every right granted
to Lender under any Loan Document, or allowed it by law or
equity shall be cumulative of each other and may be exercised
in addition to any and all other rights of Lender, and no
delay in exercising any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of
any right preclude any other or future exercise thereof or the
exercise of any other right. Borrowers expressly waive any
presentment, demand, protest or other notice of any kind,
including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on
Borrowers in any case shall, of itself, entitle Borrowers to
any other or future notice or demand in similar or other
b. Applicable Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted
in accordance with the laws of Oklahoma and applicable United
States federal law.
c. Amendment. No modification, consent, amendment or waiver of
any provision of this Agreement, nor consent to any departure
by Borrowers therefrom, shall be effective unless the same
shall be in writing and signed by an officer of Lender, and
then shall be effective only in the specified instance and for
the purpose for which given. This Agreement is binding upon
Borrowers, their respective successors and assigns, and inures
to the benefit of Lender, its successors and assigns; however,
no assignment or other transfer of Borrowers' rights or
obligations hereunder shall be made or be effective without
Lender's prior written consent, nor shall it relieve Borrowers
of any obligations hereunder. There is no third party
beneficiary of this Agreement.
d. Documents. All documents, certificates and other items
required under this Agreement to be executed and/or delivered
to Lender shall be in form and content satisfactory to Lender
and its counsel.
e. Partial Invalidity. The unenforceability or invalidity of any
provision of this Agreement shall not affect the
enforceability or validity of any other provision herein and
the invalidity or unenforceability of any provision of any
Loan Document to any person or circumstance shall not affect
the enforceability or validity of such provision as it may
apply to other persons or circumstances.
f. Indemnification. Borrowers shall jointly and severally
indemnify, defend and hold Lender and its successors and
assigns harmless from and against any and all claims, demands,
suits, losses, damages, assessments, fines, penalties, costs
or other expenses (including reasonable attorneys' fees and
court costs) arising from or in any way related to any of the
transactions contemplated hereby, including but not limited to
actual or threatened damage to the environment, agency costs
of investigation, personal injury or death, or property
damage, due to a release or alleged release of Hazardous
Materials, arising from Borrowers' business operations, any
other property owned by Borrowers or in the surface or ground
water arising from Borrowers' business operations, or gaseous
emissions arising from Borrowers' business operations or any
other condition existing or arising from Borrowers' business
operations resulting from the use or existence of Hazardous
Materials, whether such claim proves to be true or false.
Borrowers further agree that their indemnity obligations shall
include, but are not limited to, liability for damages
resulting from the personal injury or death of an employee of
the Borrowers, regardless, of whether the Borrowers have paid
the employee under the workmen' s compensation laws of any
state or other similar federal or state legislation for the
protection of employees. The term "property damage" as used in
this paragraph includes, but is not limited to, damage to any
real or personal property of the Borrowers, Lender, and of any
third parties. Borrowers' obligations under this paragraph
shall survive the repayment of the Loan.
g. Survivability. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall
survive the making of the Loan and shall continue in full
force and effect so long as the Loan is outstanding or the
obligation of Lender to make any advances under the Line shall
not have expired.
12. NO ORAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
"BORROWERS": EATERIES, INC.
Vincent F. Orza, Jr., President
FIESTA RESTAURANTS, INC.
Vincent F. Orza, Jr., Chairman of the Board
PEPPERONI GRILL, INC.
Vincent F. Orza, Jr., President
GARFIELD'S MANAGEMENT, INC.
Vincent F. Orza, Jr., Chairman of the Board
"LENDER": LOCAL FEDERAL BANK, F.S.B.
Kelly H. Sachs, Senior Vice President