$30,000,000
CREDIT AGREEMENT
DATED AS OF
MAY 8, 1998
BETWEEN
APPLE SOUTH, INC.,
AS BORROWER
AND
FIRST UNION NATIONAL BANK
AS LENDER
1
Table of Contents
ARTICLE 1. DEFINITIONS..................................................6
SECTION 1.1. Definitions.........................................6
SECTION 1.2. Accounting Terms and Determinations................15
SECTION 1.3. References.........................................15
SECTION 1.4. Use of Defined Terms...............................15
SECTION 1.5. Terminology........................................15
ARTICLE 2. THE CREDIT..................................................15
SECTION 2.1. Commitment to Lend.................................15
SECTION 2.2. Method of Borrowing................................16
2.2.1. Notice to Bank............................16
2.2.2. When Revolving Loans Made.................16
2.2.3. Application of Certain Proceeds...........16
2.2.4. No Borrowing Upon Default.................16
SECTION 2.3. Note...............................................16
2.3.1. Single Note...............................16
2.3.2. Endorsement to Note.......................16
SECTION 2.4. Maturity of Revolving Loans........................16
SECTION 2.5. Interest Rates.....................................16
2.5.1. Base Rate Loans...........................16
2.5.2. LIBOR Market Index Rate Loans.............17
2.5.3. Euro-Dollar Rate Loans....................17
2.5.4. Bank to Determine.........................17
2.5.5. Savings Clause............................17
SECTION 2.6. Closing Fee........................................17
SECTION 2.7. Termination or Reduction of Commitment.............17
2.7.1. Termination of Commitments................17
2.7.2. Mandatory Reduction and Reinstatement
of Commitment.............................18
SECTION 2.8. Optional Prepayments...............................18
SECTION 2.9. Mandatory Prepayments..............................18
SECTION 2.10. General Provisions as to Payments..................18
2.10.1. Timing....................................18
2.10.2. Next Banking Day..........................18
SECTION 2.11. Computation of Interest............................18
ARTICLE 3. CONDITIONS TO BORROWINGS....................................19
SECTION 3.1. Conditions to First Borrowing......................19
3.1.1. This Agreement............................19
3.1.2. Note......................................19
3.1.3. Opinion...................................19
3.1.4. Closing Certificate.......................19
3.1.5. Other Documents...........................19
3.1.6. Borrowing Notice..........................19
SECTION 3.2. Conditions to All Borrowings.......................19
3.2.1. Notice....................................19
3.2.2. No Default................................19
3.2.3. Truth of Representations..................19
3.2.4. Not Overadvance...........................19
ARTICLE 4. REPRESENTATIONS AND WARRANTIES..............................20
SECTION 4.1. Corporate Existence and Power......................20
SECTION 4.2. Corporate and Governmental Authorization: No
Contravention......................................20
SECTION 4.3. Binding Effect.....................................20
SECTION 4.4. Financial Information: No Material Adverse Effect..21
SECTION 4.5. No Litigation......................................21
SECTION 4.6. Compliance with Laws Generally; Compliance
with ERISA.........................................21
SECTION 4.7. Taxes 21
SECTION 4.8. Subsidiaries.......................................21
SECTION 4.9. Not a Holding Company, Public Utility, Investment
Company, Investment Adviser........................21
SECTION 4.10. Ownership of Property; Liens.......................21
SECTION 4.11. No Default.........................................21
SECTION 4.12. Full Disclosure....................................22
2
SECTION 4.13. Environmental Matters..............................22
SECTION 4.14. Capital Stock......................................22
SECTION 4.15. Margin Stock.......................................22
SECTION 4.16. Solvency...........................................22
SECTION 4.17. Possession of Franchises, Licenses, Etc............23
SECTION 4.18. Insurance..........................................23
ARTICLE 5. COVENANTS...................................................23
SECTION 5.1. Information........................................23
5.1.1. Annual Audit..............................23
5.1.2. Interim Statements........................23
5.1.3. Compliance Certificates...................23
5.1.4. Default Notice............................24
5.1.5. Proxy.....................................24
5.1.6. Registration Statements...................24
5.1.7. ERISA Notices.............................24
5.1.8. Credit Agreements.........................24
5.1.9. Other Reports.............................24
SECTION 5.2. Inspection of Property, Books and Records..........24
SECTION 5.3. Adjusted Funded Debt/Adjusted Capitalization Ratio.24
SECTION 5.4. Minimum Shareholders' Equity.......................25
SECTION 5.5. Fixed Charge Coverage Ratio........................25
SECTION 5.6. Negative Pledge....................................25
SECTION 5.7. Maintenance of Existence...........................26
SECTION 5.8. Dissolution........................................26
SECTION 5.9. Consolidation, Mergers, and Sales of Assets........26
SECTION 5.10. Use of Proceeds....................................26
SECTION 5.11. Compliance with Laws; Payment of Taxes.............27
SECTION 5.12. Insurance..........................................27
SECTION 5.13. Change is Fiscal Year..............................27
SECTION 5.14. Maintenance of Property............................27
SECTION 5.15. Environmental Notices..............................27
SECTION 5.16. Environmental Matters..............................27
SECTION 5.17. Environmental Releases.............................27
SECTION 5.18. Investments........................................28
5.18.1. Current Assets............................28
5.18.2. Capital Expenditures......................28
5.18.3. Franchise Fees............................28
5.18.4. Escrow Deposits...........................28
5.18.5. Bank Accounts.............................28
5.18.6. Surplus Cash..............................28
5.18.7. Subsidiaries..............................28
5.18.8. Travel Advances...........................28
5.18.9. Special Life Insurance Program............29
5.18.10. Reserved..................................29
5.18.11. Other Restaurant Concepts.................29
5.18.12. Other Investments Generally...............29
SECTION 5.19. Subsidiary Debt....................................29
SECTION 5.20. Total Funded Debt/EBITDA Ratio.....................29
SECTION 5.21. Year 2000 Compatibility............................30
SECTION 5.22. Liquidity Facility.................................30
ARTICLE 6. DEFAULTS....................................................33
SECTION 6.1. Events of Default..................................30
6.1.1. Non-Payment...............................30
6.1.2. Failure to Observe Certain Covenants......30
6.1.3. Failure to Observe Covenants Generally....30
6.1.4. Misrepresentation.........................30
6.1.5. Cross-Default.............................30
6.1.6. Voluntary Bankruptcy......................31
6.1.7. Involuntary Bankruptcy....................31
6.1.8. ERISA.....................................31
6.1.9. Judgments.................................31
6.1.10. Tax Liens.................................32
6.1.11. Change of Control.........................32
6.1.12. Loss of Franchise Rights..................32
6.1.13. [Intentionally Omitted]...................32
6.1.14. Material Adverse Effect...................32
3
ARTICLE 7. CHANGE IN CIRCUMSTANCES; COMPENSATION.......................32
SECTION 7.1. Basis for Determining Interest Rate Inadequate
or Unfair..........................................32
SECTION 7.2. Illegality.........................................33
SECTION 7.3. Increased Cost and Reduced Return..................33
7.3.1. Change of Law.............................33
7.3.2. Capital Adequacy..........................34
7.3.3. Notice of Determination...................34
7.3.4. Assignees Covered.........................34
SECTION 7.4. Base Rate Loans Substituted for Affected
Euro-Dollar Rate Loans.............................34
SECTION 7.5. Compensation.......................................34
ARTICLE 8. MISCELLANEOUS...............................................34
SECTION 8.1. Notices.....................................................34
SECTION 8.2. No Waivers.........................................35
SECTION 8.3. Expenses; Documentary Taxes........................35
SECTION 8.4. Indemnification....................................35
SECTION 8.5. Amendments and Waivers.............................35
SECTION 8.6. Successors and Assigns.............................36
8.6.1. No Assignment by Borrower.................36
8.6.2. Participation.............................36
8.6.3. Assignments...............................36
8.6.4. Disclosures...............................36
8.6.5. Status of Transferee......................36
SECTION 8.7. Confidentiality....................................36
SECTION 8.8. GEORGIA LAW........................................37
SECTION 8.9. Interpretation.....................................37
SECTION 8.10. CONSENT TO JURISDICTION............................37
SECTION 8.11. Counterparts.......................................37
SECTION 8.12. Survival...........................................37
SECTION 8.13. Entire Agreement: Amendment; Severability..........37
SECTION 8.14. TIME OF THE ESSENCE................................37
SECTION 8.15. Arbitration........................................38
SECTION 8.16. Preservation and Limitation of Remedies............38
SECTION 8.17. Bank Not a Joint Venturer..........................38
4
EXHIBITS
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B Form of Compliance Certificate
SCHEDULES
SCHEDULE 4.8 Existing Subsidiaries
SCHEDULE 5.6 Existing Permitted Liens
5
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May __, 1998, is made between APPLE
SOUTH, INC., as Borrower; and FIRST UNION NATIONAL BANK, as Lender.
The parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
SECTION 1.1. Definitions.
The terms as defined in this Section 1.1 shall for all purposes of this
Agreement and any amendment hereto (except as herein otherwise expressly
provided or unless the context otherwise requires), have the meanings set forth
herein:
"Adjusted Capitalization" shall be equal to the sum at any date of: (i)
Adjusted Funded Debt; plus (ii) Stockholders' Equity.
"Adjusted Funded Debt" shall mean and include the sum (without duplication)
of the following, at any date, for the Borrower and its Consolidated
Subsidiaries on a consolidated basis: (i) Total Funded Debt; plus (ii) the
present value (discounted at ten percent (10%) per annum) of the minimum amount
of noncancellable operating lease payments owing by Borrower and such
Subsidiaries at such date (excluding, however, for this purpose, any such lease
payments owing under the DR Holdings Lease); plus (iii) the present value
(discounted at ten percent (10%) per annum) of the total payments of "Rent"
owing by the Borrower under the DR Holdings Lease for the entire remaining
"Lease Term" (inclusive of the original term and all renewal terms, whether or
not then effective), with the terms "Rent" and "Lease Term" as used hereinabove
having the meanings given to such terms in the DR Holdings Lease; plus (iv) all
Redeemable Preferred Stock.
"Adjusted Funded Debt/Adjusted Capitalization Ratio" shall mean the ratio
which (i) the Adjusted Funded Debt of the Borrower and its Consolidated
Subsidiaries at any date bears to (ii) the Adjusted Capitalization of the
Borrower and its Consolidated Subsidiaries at such date.
"Adjusted LIBOR Rate," applicable to any Monthly Interest Period, means
that interest rate per annum determined by the Bank to be equal to the quotient
obtained (rounded upwards, if necessary, to the next higher 1/100th of 1%) by
dividing (i) the applicable LIBOR Rate for such Monthly Interest Period by (ii)
1.00 minus the then applicable Euro-Dollar Reserve Percentage (if any).
"Affiliate" means, as to any Person (i) any other Person that directly, or
indirectly through one or more intermediaries, controls such Person (a
"Controlling Person"), (ii) any other Person which is controlled by or is under
common control with such Person or a Controlling Person, or (iii) any other
Person of which such Person owns, directly or indirectly, twenty percent (20%)
or more of the common stock or equivalent equity interests. As used herein, the
term "control" means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit Agreement, together with all amendments and
modifications hereto.
"Applebee's Spinoff" shall mean any sale or other disposition by the
Borrower of any of its ▇▇▇▇▇▇▇▇'▇ Neighborhood Grill & Bar restaurants to
▇▇▇▇▇▇▇▇'▇ International, Inc. or to other third parties, all of which sales in
the aggregate shall result in the sale or other disposition by the Borrower of
all, or substantially all, of the ▇▇▇▇▇▇▇▇'▇ Neighborhood Grill & Bar
6
restaurants owned by the Borrower for an aggregate amount of not less than Three
Hundred Fifty Million Dollars ($350,000,000), of which not less than Three
Hundred Forty Million Dollars ($340,000,000) shall be paid in cash and not more
than Ten Million Dollars ($10,000,000) may be paid by the issuance of purchase
money debt to the Borrower, each payment of which shall be made in full upon the
closing of the final sale for such respective transaction, with all such sales
to occur as soon as practicable, but in any event on or before April 1, 1999.
"Assignee" has the meaning set forth in Section 8.6.3.
"Authority" has the meaning set forth in Section 7.2.
"Bank" means First Union National Bank (formerly known as First Union
National Bank of Georgia), a national banking association organized under the
laws of the United States of America, and its successors and permitted assigns.
"Bank's Address" means the address of the Bank referred to or specified in
Section 8.1.
"Base Rate" means for any Base Rate Loan for any day, the rate per annum
equal to the higher as of such day of (i) the Prime Rate, and (ii) one-half of
one percent (1/2%) per annum above the Federal Funds Rate. For purposes of
determining the Base Rate for any day, changes in the Prime Rate or the Federal
Funds Rate, as the case may be, shall be effective on the date of each such
change.
"Base Rate Loan" means a Revolving Loan made at the Base Rate pursuant to
Section 2.1.
"Borrower" means Apple South, Inc., a Georgia corporation, and its
successors and permitted assigns.
"Borrowing" means a borrowing hereunder consisting of a Revolving Loan made
to the Borrower by the Bank pursuant to Article II. A Borrowing is a "Base Rate
Borrowing" if such Revolving Loan is a Base Rate Loan, a "LIBOR Market Index
Rate Borrowing" if such Revolving Loan is a LIBOR Market Index Rate Loan or a
"Euro-Dollar Rate Borrowing" if such Revolving Loan is a Euro-Dollar Rate Loan.
"Capital Stock" means any nonredeemable capital stock of the Borrower or
any Consolidated Subsidiary (to the extent issued to a Person other than the
Borrower), whether common or preferred.
"Capitalized Lease Obligations" shall mean those liabilities of the
Borrower and its Consolidated Subsidiaries under any leases that are required to
be capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such liabilities shall be the capitalized amount of such liabilities
as determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. ss. 9601 et seq. and its implementing regulations and
amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation and
Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 7.2.
"Closing Certificate" has the meaning set forth in Section 3.1.4.
"Closing Date" means the date of this Agreement, as first inscribed
hereinabove.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
7
"Commitment" means $30,000,000, as such amount is subject to further
reduction as provided in Section 2.7.
"Compliance Certificate" has the meaning set forth in Section 5.1.3.
"Consolidated Net Income," for any period, means the net income of the
Borrower and its Consolidated Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, excluding, however, (i) any
extraordinary items and (ii) any equity interest of the Borrower or any
Consolidated Subsidiary in the unremitted earnings of any Person which is not a
Subsidiary, in each case as likewise determined on a consolidated basis in
accordance with GAAP.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which, in accordance with GAAP, would be consolidated with those
of the Borrower in its consolidated financial statements as of such date.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Revolving Loan, on any day, the
sum of two percent (2%) per annum in excess of the interest rate otherwise then
or thereafter payable on such Revolving Loan, but, in any event, not less than
two percent (2%) per annum in excess of the Base Rate.
"Dollars" or "$" means dollars in lawful currency of the United States of
America.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks are not required to be open for business in the
State of Georgia.
"DR Holdings Lease" shall mean the Lease and Development Agreement, dated
as of March 2, 1995, between DR Holdings, L.P., as lessor, and the Borrower, as
lessee, together with Appendix "A" thereto and each "Lease Supplement" thereto
(as defined therein), all "Operative Documents" (as also defined therein) and
all amendments and modifications thereto made from time to time hereafter.
"EBITDA" shall mean, for any fiscal period of the Borrower and its
Consolidated Subsidiaries, that amount equal to the sum, determined in
accordance with GAAP, of the Consolidated Net Income of the Borrower and its
Consolidated Subsidiaries for such period (considered without regard to any
extraordinary gains or extraordinary losses), plus, without duplication, and to
the extent deducted from revenue in determining Consolidated Net Income,
depreciation and amortization expense and any other non-cash charges for such
period, interest expense for such period and taxes for such period.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or orders
arising from or in any way associated with any Environmental Requirements,
whether or not entered upon consent or pursuant to written agreements with an
8
Environmental Authority or any other entity, arising from or in any way
associated with any Environmental Requirement, whether or not incorporated in a
judgment, decree or order.
"Environmental Liabilities" means any liabilities whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority or by
any other Person, of possible or alleged noncompliance with or liability under
any Environmental Requirement, including, without limitation any complaints,
citations, demands or requests from any Environmental Authority or from any
other Person for correction of any violation of any Environmental Requirement or
any investigations concerning any violation of any Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means "releases" as defined in CERCLA or under any
applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or any Property, including, but not limited to, any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day in which
dealings in Dollar deposits are carried out in the London interbank Euro-Dollar
market.
"Euro-Dollar Rate," applicable to any Monthly Interest Period, means that
interest rate per annum equal to the sum of (i) the Adjusted LIBOR Rate for such
Monthly Interest Period, plus (ii) one and one-quarter percent (1.25%). Each
such Euro-Dollar Rate shall remain in effect for the applicable Monthly Interest
Period and shall be adjusted to a new Euro-Dollar Rate as of the first day of
the next Monthly Interest Period.
"Euro-Dollar Rate Loan" means a Revolving Loan made at the Euro-Dollar Rate
pursuant to Section 2.1.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor), for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Rate Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United States
office of the Bank to United States residents). The Adjusted LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
"Event of Default" has the meaning set forth in Section 6.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
9
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to the Bank on such day on such
transactions, as determined by the Bank.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"Fixed Charge Coverage Ratio" shall mean, for any fiscal period, the ratio
which (A) the sum of: (i) Consolidated Net Income for such period; plus (ii) the
sum (without duplication) of (a) interest expense for such period, (b) any
dividends paid in respect of Redeemable Preferred Stock during such period, and
(c) any payments made (howsoever denominated or construed) in respect of any tax
deductible, convertible preferred stock ("TECONS") or similar tax-advantaged
investment vehicles, regardless of maturity or the timing of any redemption or
repurchase rights granted in regard thereto (the sum of (a), (b) and (c) above
being called, collectively, "Investment Costs"); plus (iii) any provision for
taxes and operating lease expense; in each case, for the Borrower and its
Consolidated Subsidiaries for such period; bears to (B) the sum (without
duplication) of: (i) all Investment Costs; plus (ii) operating lease expense; in
each case, for the Borrower and its Consolidated Subsidiaries for the same such
period; all as determined under GAAP.
"Franchise Rights" shall mean all rights, privileges and interests of
Borrower and its Consolidated Subsidiaries to own, operate and develop
franchised restaurants as a franchisee, whether now or hereafter existing, and
whether with respect to the operation of any "Applebee's" restaurants or
otherwise.
"GAAP" means generally accepted accounting principles applied on a basis
consistent with those which, in accordance with Section 1.2, are to be used in
making the calculations for purposes of determining compliance with the terms of
this Agreement.
"Guarantee" or "Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The terms "Guarantee" or "Guaranty" used as a verb has a
corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or hazardous
waste, as defined in the Resource Conservation and Recovery Act of 1980, 42
U.S.C. ss. 6901 et seq. and its implementing regulations and amendments, or in
any applicable state or local law or regulation, (b) "hazardous substance,"
"pollutant," or "contaminant" as defined in CERCLA, or in applicable state or
local law or regulation, (c) gasoline, or any other petroleum product or
by-product, including, crude oil or any fraction thereof, (d) toxic substances,
as defined in the Toxic Substances Control Act of 1976, or in any applicable
state or local law or regulation, and (e) insecticides, fungicides, or
rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide
10
Act of 1975, or in any applicable state or local law or regulation, as each such
Act, statute or regulation may be amended from time to time.
"Interest Period" means with respect to each Borrowing, the period
commencing on the date of such Borrowing and ending on the date on which such
Borrowing is fully paid or converted to a Borrowing of a different type;
provided that:
(a) any Interest Period (other than an Interest Period determined pursuant
to paragraph (b) below) which would otherwise end on a day which is not a
Domestic Business Day shall be extended to the next succeeding Domestic Business
Day;
(b) any Interest Period which begins before the Termination Date and would
otherwise end after the Termination Date shall end on the Termination Date.
"Lending Office" means the Bank's office located at its address set forth
on the signature page hereof or such other office in the United States as the
Bank may hereafter designate as its Lending Office by notice to the Borrower.
"LIBOR Market Index Rate" means, for any day, is the rate per annum
(rounded to the next higher 1/100 of 1%) for 1 month U.S. dollar deposits as
reported on Telerate page 3750 as of 11:00 a.m., London time, on such day, or if
such day is not a London business day, then the immediately preceding London
business day (or if not so reported, then as determined by Bank from another
recognized source or interbank quotation), plus one and one quarter percent
(1.25%).
"LIBOR Market Index Rate Loan" means a Revolving Loan made at the LIBOR
Market Index Rate pursuant to Section 2.1.
"LIBOR Rate" means, for any Euro-Dollar Rate Loan for each Monthly Interest
Period, the rate per annum determined on the basis of the offered rate for
deposits in Dollars of amounts equal or comparable to the principal amount of
such Euro-Dollar Rate Loan offered for a term comparable to such Monthly
Interest Period, which rate appears on the display designated as page "3750" of
the Telerate Service (or such other page as may replace page 3750 of that
service or such other service or services as may be nominated by the British
Banker's Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits), determined as of 10:00 A.M., New York City
time, on the first day of such Monthly Interest Period, provided that (i) if
more than one such offered rate appears on such page, the "LIBOR Rate" will be
the arithmetic average (rounded upward, if necessary, to the next higher 1/100th
of 1%) of such offered rates; (ii) if no such offered rates appear on such page,
the "LIBOR Rate" for such Monthly Interest Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted
by not less than two (2) major banks in New York City, selected by the Bank, at
approximately 10:00 A.M., New York City time, on the first day of such Monthly
Interest Period, for deposits in Dollars offered to leading European banks for a
period comparable to such Monthly Interest Period in an amount comparable to the
principal amount of such Euro-Dollar Loan.
"Lien" means, with respect to any asset, any mortgage, deed to secure debt,
deed of trust, lien, pledge, charge, security interest, security title or other
preferential arrangement, which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law. For
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Liquidity Agreement" shall mean the Credit Agreement, dated as of April 1,
1998, among Wachovia, as agent, the Borrower and the other lenders that are a
11
party thereto, as amended, modified, supplemented or restated from time to time.
"Loan Documents" means this Agreement, the Note, any Subsidiary Guaranty,
any other documents evidencing or relating to the Revolving Loans, and any other
document, instrument, certificate or agreement delivered in connection with this
Agreement, the Note or the Revolving Loans, as such documents, instruments,
certificates and agreements may be amended or modified from time to time.
"Margin Stock" means "margin stock" as defined in Regulations G, T, U or X.
"Master Lease Agreement" shall mean the Master Equipment Lease Agreement,
dated as of September 24, 1997, between First Security Bank, National
Association, as owner trustee, and Borrower, as lessee, all "Operative
Documents" (as used in such agreement), and all modifications and amendments
thereto from time to time.
"Material Adverse Effect" means, with respect to any event, act, condition
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, that such
event or events, act or acts, condition or conditions, and/or occurrence or
occurrences results in a material adverse change in, or has a material adverse
effect upon, any of (a) the financial condition, operations, business, or
properties of the Borrower and its Consolidated Subsidiaries taken as a whole,
(b) the rights and remedies of the Bank under the Loan Documents, or the ability
of the Borrower to perform its obligations under the Loan Documents to which it
is a party, as applicable, or (c) the legality, validity or enforceability of
this Agreement, the Note or any Loan Document.
"Monthly Interest Period" shall mean, with respect to Euro-Dollar Rate
Borrowings, the period beginning on the first day of a calendar month and ending
on the last day of such calendar month.
"Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3)
of ERISA.
"Note" shall mean the promissory note, dated of even date herewith, from
the Borrower to the Bank in the original principal amount of $30,000,000,
together with all amendments, consolidations, modifications, renewals, and
supplements thereto, which note evidences all of the Revolving Loans.
"Notice of Borrowing" has the meaning set forth in Section 2.2.1.
"Participant" has the meaning set forth in Section 8.6.2.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code and is either (i) maintained by a member of the Controlled Group
for employees of any member of the Controlled Group or (ii) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which a member of the Controlled
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
"Prime Rate" refers to that interest rate so denominated and set by the
Bank from time to time as an interest rate basis for borrowings. The Prime Rate
12
is but one of several interest rate bases used by the Bank. The Bank lends at
interest rates above and below the Prime Rate.
"Properties" means all property owned, leased or otherwise used, operated
or occupied by the Borrower or any Subsidiary, wherever located, and whether
real property or personal property.
"Purchase Money Liens" means Liens securing the repayment of any purchase
money debt permitted hereunder incurred to finance the purchase of any Property
hereafter acquired by the Borrower or any Consolidated Subsidiary, so long as
such Liens are limited solely to the Property so acquired, secure only the
purchase money debt so incurred and are terminated upon payment in full of such
purchase money debt.
"Redeemable Preferred Stock" of any Person means any preferred stock issued
by such Person which is at any time prior to the Termination Date either (i)
mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation G" means Regulation G of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
"Revolving Loan" means a Base Rate Loan or a Euro-Dollar Rate Loan made by
the Bank pursuant to Section 2.1.
"Sale-Leaseback Transaction" means any sale-leaseback transaction involving
the sale of any assets or properties of the Borrower or any Subsidiary to any
other Person and the leasing back of such asset or property by the Borrower or
any Subsidiary.
"Senior Note Indenture" means the Indenture of Trust, dated as of May 1,
1996, between SunTrust Bank and the Borrower, and including all applicable
covenants with respect to the Senior Notes contained in the Prospectus, dated as
of May 6, 1996, as supplemented May 23, 1996, for the Senior Notes.
"Senior Notes" means the Borrower's $125,000,000 9.75% Senior Notes due
June 1, 2006.
"Solvent" means as to any Person, that such Person (i) owns Property whose
fair saleable value is greater than the amount required to pay all of such
Person's total debts, direct or indirect, contingent or otherwise, (ii) is able
to pay all of such debts as and when such debts mature and (iii) has capital
sufficient to carry on the business and transactions in which it is engaged and
all business and transactions in which it is about to engage.
"Stockholders' Equity" means, at any time, the stockholders' equity of the
Borrower and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Borrower and its consolidated
13
Subsidiaries prepared in accordance with GAAP, but excluding any Redeemable
Preferred Stock of the Borrower or any of its Consolidated Subsidiaries.
Shareholders' Equity generally would include, but not be limited to (i) the par
or stated value of all outstanding Capital Stock, (ii) capital surplus, (iii)
retained earnings, and (iv) various deductions such as (A) purchases of treasury
stock, (B) valuation allowances, (C) receivables due from an employee stock
ownership plan, and (D) employee stock ownership plan debt Guarantees.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Synthetic Lease" shall mean any agreement, or series of related
agreements, between the Borrower and one or more other parties which are
intended to be treated, for accounting purposes, as an operating lease with the
Borrower as lessee and, for tax purposes, as a financing arrangement with the
Borrower as debtor.
"Termination Date" has the meaning set forth in Section 2.7.1.
"Third Parties" means all leases, subleases, licensees and other users of
the Properties, excluding those users of the Properties in the ordinary course
of the Borrower's business and on a temporary basis.
"Total Funded Debt" shall mean that portion of the total liabilities of the
Borrower and its Consolidated Subsidiaries at any date equal to the sum (without
duplication) of: (i) all indebtedness for borrowed money at such date
(including, for this purpose, indebtedness in respect of any outstanding
bankers' acceptances); plus (ii) all Capitalized Lease Obligations outstanding
at such date; plus (iii) all debts, liabilities and obligations which are
Guaranteed by the Borrower or any Consolidated Subsidiary as of such date; plus
(iv) all debts, liabilities or obligations at such date to any seller incurred
to pay the deferred price of property or services having a deferred purchase
price of One Million Dollars ($1,000,000) or more, excepting, in any event,
trade accounts payable arising in the ordinary course of business and purchase
options prior to their exercise; plus (v) all debts, liabilities and obligations
outstanding at such date in respect of any Synthetic Leases, excluding
therefrom, however, any debts, liabilities or obligations under the DR Holdings
Lease up to a maximum thereof of Twenty-Eight Million Dollars ($28,000,000.00),
it being understood and agreed that, subject to such limitation, no debts,
liabilities or obligations (including any constituting Guaranteed Obligations)
under the DR Holding Lease shall be included in the definition of Total Funded
Debt.
"Transferee" has the meaning set forth in Section 8.6.4.
"Unfunded Vested Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all vested nonforfeitable
benefits under such Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Unused Commitment" means at any date an amount equal to the Commitment
less the aggregate outstanding principal amount of the Revolving Loans.
"Voluntary Store Closing" shall mean any voluntary closing by the Borrower
or any Subsidiary of any franchised restaurant location in the ordinary course
of its business which does not cause, or result in, the forfeiture, suspension,
loss, rejection, disclaimer, impairment, curtailment, alteration of, or other
adverse effect on, any Franchise Rights with respect to the operation or
development of any other existing or future franchised restaurant location or
locations.
14
"Wachovia" means Wachovia Bank of Georgia, National Association, a national
banking association, and its successors.
"Wachovia Credit Agreement" shall mean that certain Second Amended and
Restated Credit Agreement dated as of March 1, 1998, among Borrower, Wachovia,
as agent, and the other banks and financial institutions that are parties
thereto, as the same may be amended, restated, and supplemented from time to
time, and any loan or credit agreement executed in connection with the
refinancing of all or any substantial portion of the indebtedness outstanding
under such Second Amended and Restated Credit Agreement, as such loan or credit
agreement may be amended, restated, and supplemented from time to time.
SECTION 1.2. Accounting Terms and Determinations.
Unlike otherwise specified herein, all terms of an accounting character
used herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial statements required to be delivered hereunder shall
be prepared in accordance with GAAP, applied on a basis consistent (except for
changes concurred with by the Borrower's independent public accountants or
otherwise required by a change in GAAP) with the then most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Bank; provided, however, that upon any change in
GAAP material to Borrower occurring hereafter, the Bank shall have the right to
require either that conforming adjustments be made to any financial covenants
hereafter set forth, or the components thereof, affected by such change or that
the Borrower report its financial condition based on GAAP as in effect
immediately prior to such change occurring.
SECTION 1.3. References.
Unless otherwise indicated, references in this Agreement to "Articles,"
"Exhibits," "Schedules," "Sections" and other Subdivisions are references to
articles, exhibits, schedules, sections and other subdivisions hereof.
SECTION 1.4. Use of Defined Terms.
All terms defined in this Agreement shall have the same defined meanings
when used in any of the other Loan Documents, unless otherwise defined therein
or unless the context shall require otherwise.
SECTION 1.5. Terminology.
All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and the plural shall include the singular.
Titles of Articles and Sections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
ARTICLE 2. THE CREDIT
SECTION 2.1. Commitment to Lend.
The Bank agrees, on the terms and conditions set forth herein, to make
Revolving Loans to the Borrower from time to time before the Termination Date;
provided that, immediately after each such Revolving Loan is made, the aggregate
principal amount of Revolving Loans shall not exceed the amount of the
Commitment, as the same may be reduced from time to time pursuant to Section
2.7. Each Borrowing under this Section shall be in an aggregate principal amount
of One Million Dollars ($1,000,000.00) or any larger multiple of Five Hundred
Thousand Dollars ($500,000.00) (except that any such Borrowing may be in the
aggregate amount of the Unused Commitment). Within the foregoing limits, the
Borrower may borrow under this Section, repay or, to the extent permitted by
Section 2.8, prepay Revolving Loans and reborrow under this Section at any time
or from time to time before the Termination Date.
15
SECTION 2.2. Method of Borrowing.
2.2.1. Notice to Bank. The Borrower shall give the Bank notice (a "Notice
of Borrowing"), which shall be substantially in the form of Exhibit A, not later
than 11:00 a.m. (Atlanta, Georgia time) on the day of each Borrowing,
specifying:
(1) the date of such Borrowing,
(2) the aggregate amount of such Borrowing, and
(3) whether such Borrowing is to be a Base Rate Loan, a LIBOR Market Index
Rate Loan or Euro-Dollar Rate Loan.
2.2.2. When Revolving Loans Made. Not later than 1:00 p.m. (Atlanta,
Georgia time) on the date of each Borrowing, the Bank shall (except as provided
in Section 2.2.3) make available such Borrowing, in Federal or other funds
immediately available in Atlanta, Georgia, to the Borrower at the Bank's Address
unless the Bank determines that any applicable condition specified in Article 3
has not been satisfied.
2.2.3. Application of Certain Proceeds. If the Bank makes a Revolving Loan
hereunder on a day on which the Borrower is to repay all or any part of an
outstanding Revolving Loan, the Bank shall apply the proceeds of its new
Revolving Loan to make such repayment and only an amount equal to the difference
(if any) between the amount being borrowed and the amount being repaid shall be
made available to the Borrower as provided in Section 2.2.2.
2.2.4. No Borrowing Upon Default. Notwithstanding anything to the contrary
contained in this Agreement, no Borrowing may be made if there shall have
occurred a Default, which Default shall not have been cured or waived.
SECTION 2.3. Note.
2.3.1. Single Note. The Revolving Loans shall be evidenced by the Note,
payable to the order of the Bank for the account of its Lending Office, in an
amount equal to the original principal amount of the Commitment.
2.3.2. Endorsement to Note. The Bank may record and, prior to any transfer
of the Note shall, endorse on the schedule forming a part thereof appropriate
notations to evidence the date, amount and maturity of each Revolving Loan, the
date and amount of each payment of principal made by the Borrower with respect
thereto and whether such Revolving Loan is a Base Rate Loan or Euro-Dollar Rate
Loan, and such schedule shall constitute rebuttable presumptive evidence of the
principal amount owing and unpaid on the Note; provided that the failure of the
Bank to make any such recordation or endorsement shall not affect the obligation
of the Borrower hereunder or under the Note. The Bank is hereby irrevocably
authorized by the Borrower so to endorse the Note and to attach to and make a
part of the Note a continuation of any such schedule as and when required.
SECTION 2.4. Maturity of Revolving Loans.
Each Revolving Loan included in any Borrowing shall mature, and the
principal amount thereof shall be due and payable, on the last day of the
Interest Period applicable to such Borrowing.
SECTION 2.5. Interest Rates.
Subject to the terms of Section 7.1:
2.5.1. Base Rate Loans. Each Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the Base Rate, as it may change from time
to time during such Interest Period. Such interest shall be payable monthly, in
arrears, on the tenth day after the last day of each calendar month, in respect
16
of interest accrued in such month (or portion thereof), commencing on June 10,
1998 (with the first payment date to cover the principal balance outstanding
during the period from the date hereof until May 31, 1998), until maturity and
thereafter on demand. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
2.5.2. LIBOR Market Index Rate Loans. Each LIBOR Market Index Rate Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the LIBOR
Market Index Rate, as it may change from day to day during such Interest Period.
Such interest shall be payable monthly, in arrears, on the tenth day after the
last day of each calendar month, in respect of interest accrued in such month
(or portion thereof), commencing on June 10, 1998 (with the first payment date
to cover the principal balance outstanding during the period from the date
hereof until May 31, 1998), until maturity and thereafter on demand. Any overdue
principal of and, to the extent permitted by applicable law, overdue interest on
any LIBOR Market Index Rate Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the Default Rate.
2.5.3. Euro-Dollar Rate Loans. Each Euro-Dollar Rate Loan shall bear
interest on the outstanding principal amount thereof at the Euro-Dollar Rate for
such Monthly Interest Period (or portion thereof during which it is
outstanding). If a Euro-Dollar Rate Loan shall be outstanding during more than
one calendar month, the interest rate thereon shall be adjusted to the new
Euro-Dollar Rate as of the first day of the next succeeding Monthly Interest
Period during which it is outstanding. Such interest shall be payable for each
Interest Period on the tenth day after the last day thereof. Any overdue
principal of and, to the extent permitted by law, overdue interest on any
Euro-Dollar Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the Default Rate; provided that the mere
application of the Default Rate to these Revolving Loans shall not give rise to
the breakage of an Interest Period, but only an increased margin applicable to
these Revolving Loans.
2.5.4. Bank to Determine. The Bank shall determine each interest rate
applicable to the Revolving Loans hereunder. The Bank shall give prompt notice
to the Borrower by telecopier of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
2.5.5. Savings Clause. In no contingency or event whatsoever, whether by
reason of advancement of the proceeds hereof or otherwise, shall the amount paid
or agreed to be paid to the Bank for the use, forbearance or detention of money
advanced hereunder exceed the highest lawful rate permissible under any law
which a court of competent jurisdiction may deem applicable hereto. In the event
that such a court determines that the Bank has charged or received interest
hereunder in excess of the highest applicable rate, such rate shall
automatically be reduced to the maximum rate permitted by applicable law and the
Bank shall promptly refund to the Borrower any interest received by the Bank in
excess of the maximum lawful rate or, if so requested by the Borrower, shall
apply such excess to the principal balance of the Note. It is the intent hereof
that the Borrower not pay or contract to pay, and that the Bank not receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by the Borrower under applicable law.
SECTION 2.6. Closing Fee.
The Borrower shall pay to the Bank on the Closing Date a fully earned,
non-refundable closing fee of $7,500.
SECTION 2.7. Termination or Reduction of Commitment.
2.7.1. Termination of Commitments. The Commitment shall terminate on the
earlier of (i) March 1, 1999 or (ii) the occurrence of an Event of Default
17
hereunder (the "Termination Date"), and any Revolving Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
In addition to the foregoing, the Borrower shall have the right to terminate the
Commitment at any time if no Borrowings are then outstanding or all Borrowings
are repaid or prepaid in accordance with the terms of Section 2.9, as the case
may be, on or prior to such early termination, provided that (i) the Borrower
shall have given at least one (1) Domestic Business Day's advance written notice
to the Bank of such election and (ii) any such notice of termination shall be
irrevocable once made.
2.7.2. Mandatory Reduction and Reinstatement of Commitment. If at any time
the Borrower's "Consolidated Fixed Charge Coverage Ratio" (as defined in the
Senior Note Indenture) is equal to or less than 2.5:1.0, the Commitment shall be
automatically and without further action on the part of the Bank, the Borrower
or any other Person, reduced to $20,000,000. At such time as the Borrower
provides a written certification to the Bank that the "Consolidated Cash Flow
Coverage Ratio" (as defined in the Senior Note Indenture) exceeds 2.5:1.0, the
Commitment shall thereafter be increased to $30,000,000 without any further
action on the part of the Bank, the Borrower or any other Person.
SECTION 2.8. Optional Prepayments.
The Borrower may, on any Business Day, upon giving notice to the Bank by
not later than 11:00 A.M. (Atlanta, Georgia time) on such Business Day, and
making payment to the Bank, on such Business Day of any compensation required by
Section 7.5, prepay any Borrowing in whole at any time, or from time to time in
part in amounts aggregating at least One Million Dollars ($1,000,000) and
integral multiples of Five Hundred Thousand Dollars ($500,000), by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay the
Revolving Loans.
SECTION 2.9. Mandatory Prepayments.
On each date, if any, on which the Commitment is terminated or reduced
pursuant to Section 2.7, the Borrower shall repay or prepay such principal
amount of the outstanding Revolving Loans, if any, as may be necessary so that
after such payment the aggregate unpaid principal amount of the Revolving Loans
is reduced to zero, in the case of any termination, or does not exceed the
aggregate amount of the Commitment as then reduced, in the case of any
reduction, plus, in each case, accrued interest thereon to the date of
prepayment and any compensation required by Section 7.5.
SECTION 2.10. General Provisions as to Payments.
2.10.1. Timing. The Borrower shall make each payment of principal of, and
interest on, the Revolving Loans and of any fees hereunder, not later than 2:00
P.M. (Atlanta, Georgia time) on the date when due, in Federal or other funds
immediately available in Atlanta, Georgia, to the Bank's Address.
2.10.2. Next Banking Day. Whenever any payment of principal of, or interest
on, any Loans or of any fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day.
SECTION 2.11. Computation of Interest.
Interest on the Revolving Loans shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed, calculated as to each
Interest Period from and including the first day thereof to but excluding the
last day thereof.
18
ARTICLE 3. CONDITIONS TO BORROWINGS
SECTION 3.1. Conditions to First Borrowing.
The obligation of the Bank to make the initial Revolving Loan on the
occasion of the first Borrowing is subject to the satisfaction of the conditions
set forth in Section 3.2 and receipt by the Bank of the following:
3.1.1. This Agreement. A duly executed counterpart of this Agreement signed
by the Borrower;
3.1.2. Note. The duly executed Note complying with the provisions of
Section 2.3;
3.1.3. Opinion. An opinion (together with any opinions of local counsel
relied on therein) of legal counsel for the Borrower, dated as of the Closing
Date, in form and substance satisfactory to the Bank;
3.1.4. Closing Certificate. A certificate ("Closing Certificate"), dated as
of the Closing Date, in form and substance satisfactory to the Bank, signed by
the chief financial officer of the Borrower, to the effect that (i) no Default
has occurred and is continuing on the date of the first Borrowing and (ii) the
representations and warranties of the Borrower contained in Article 4 are true
on and as of the Closing Date;
3.1.5. Other Documents. All documents which the Bank may reasonably request
relating to the existence of the Borrower, the corporate authority for and the
validity of this Agreement, the Note and the other Loan Documents, and any other
matters relevant hereto, all in form and substance satisfactory to the Bank,
including, without limitation, a certificate of incumbency of the Borrower,
signed by the Secretary or an Assistant Secretary of the Borrower, certifying as
to the names, true signatures and incumbency of the officer or officers of the
Borrower authorized to execute and deliver the Loan Documents, and certified
copies of the following items: (i) the Borrower's Articles of Incorporation,
(ii) the Borrower's Bylaws, (iii) a certificate of the Secretary of State of the
State of Georgia as to the good standing of the Borrower in the State of
Georgia, and (iv) the action taken by the Board of Directors of the Borrower
authorizing the Borrower's execution, delivery and performance of this
Agreement, the Note and the other Loan Documents to which the Borrower is a
party;
3.1.6. Borrowing Notice. A Notice of Borrowing.
SECTION 3.2. Conditions to All Borrowings.
The obligation of the Bank to make a Revolving Loan on the occasion of each
Borrowing is subject to the satisfaction of the following conditions:
3.2.1. Notice. Receipt by the Bank of a Notice of Borrowing;
3.2.2. No Default. The fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing;
3.2.3. Truth of Representations. The fact that the representations and
warranties of the Borrower contained in Article 4 of this Agreement shall be
true on and as of the date of such Borrowing; and
3.2.4. Not Overadvance. The fact that, immediately after such Borrowing,
the aggregate outstanding principal amount of the Revolving Loans will not
exceed the amount of the Commitment.
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts specified
in Sections 3.2.2, 3.2.3 and 3.2.4.
19
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.1. Corporate Existence and Power.
Each of the Borrower and each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to transact business in every jurisdiction
where, by the nature of its business, such qualification is necessary, and has
all corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to so qualify, or obtain such licenses, authorizations, consents or
approvals could not be reasonably expected to have or cause a Material Adverse
Effect.
SECTION 4.2. Corporate and Governmental Authorization: No Contravention.
The execution, delivery and performance by the Borrower and each Subsidiary
which is party thereto of this Agreement, the Note and the other Loan Documents
(i) are within the Borrower's and such Subsidiary's corporate powers, (ii) have
been duly authorized by all necessary corporate action, (iii) require no action
by or in respect of or filing with, any governmental body, agency or official,
(iv) do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the articles of incorporation or by-laws of
the Borrower or such Subsidiary or, to the best of the Borrower's knowledge, of
any material agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries, and (v) do not result in
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
SECTION 4.3. Binding Effect.
This Agreement constitutes a valid and binding agreement of the Borrower
enforceable in accordance with its terms, and the Note and the other Loan
Documents, when executed and delivered in accordance with this Agreement, will
constitute valid and binding obligations of the Borrower and each Subsidiary
party thereto enforceable in accordance with their respective terms, provided
that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.
SECTION 4.4. Financial Information: No Material Adverse Effect.
The audited balance sheet of the Borrower and its Consolidated Subsidiaries
as of December 31, 1997, and the related consolidated audited statements of
income, shareholders' equity and cash flows of the Borrower and its Consolidated
Subsidiaries for the Fiscal Year then ended, copies of which have been delivered
to the Bank, and the unaudited financial statements of the Borrower and its
Consolidated Subsidiaries as of and for the Fiscal Quarter ended closest to
March 31, 1998, copies of which have been delivered to the Bank, fairly present,
in conformity with GAAP, the financial position of the Borrower and its
Consolidated Subsidiaries as of such dates and the results of its operations and
cash flow for such periods stated; provided, that, (i) the interim statements
remain subject to normal year-end audit adjustments and (ii) during the term of
this Agreement after the Closing Date, future representations as to the matters
set forth in this sentence shall be deemed to refer to the most recent financial
statements delivered pursuant to Sections 5.1.1 and 5.1.2. Since December 31,
1995, there has been no event, act, condition or occurrence having or which
could be expected to have a Material Adverse Effect, except for matters
disclosed in the quarterly financial statements referred to above; provided that
during the term of this Agreement following the Closing Date, future
representations as to matters set forth in this sentence shall be deemed to
refer to the last day of the most recent audited financial statements delivered
by the Borrower pursuant to Section 5.1.1.
20
SECTION 4.5. No Litigation.
There is no action, suit or proceeding pending, or to the knowledge of the
Borrower threatened, against or affecting the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official which could have a Material Adverse Effect or which in any manner draws
into question the validity of, or could impair the ability of the Borrower to
perform its obligations under, this Agreement, the Note or any of the other Loan
Documents.
SECTION 4.6. Compliance with Laws Generally; Compliance with ERISA.
The Borrower and each Subsidiary are in compliance in all material respects
with applicable laws (including, but not limited to, ERISA), regulations and
similar requirements of governmental authorities (including, but not limited to,
PBGC), non-compliance with which could have or cause a Material Adverse Effect,
except where the necessity of such compliance is being contested in good faith
through appropriate proceedings. To the best of the Borrower's knowledge, (i)
the Borrower and each member of the Controlled Group have fulfilled their
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each Plan and are in compliance in all material respects with
the presently applicable provisions of ERISA and the Code, and have not incurred
any liability to the PBGC or a Plan under Title IV of ERISA; and (ii) neither
the Borrower nor any member of the Controlled Group is or ever has been
obligated to contribute to any Multiemployer Plan.
SECTION 4.7. Taxes.
There have been filed on behalf of the Borrower and its Subsidiaries all
federal, state and local income, excise, property and other tax returns which
are required to be filed by them and all taxes due pursuant to such returns or
pursuant to any assessment received by or on behalf of the Borrower or any
Subsidiary have been paid, except for amounts that either are immaterial or are
being disputed in good faith and by appropriate proceedings. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Borrower, adequate.
SECTION 4.8. Subsidiaries.
As of the Closing Date, the Borrower has no Subsidiaries, except for the
Subsidiaries set forth on Schedule 4.8, all of which are Consolidated
Subsidiaries.
SECTION 4.9. Not a Holding Company, Public Utility, Investment Company,
Investment Adviser.
Neither the Borrower nor any Subsidiary is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," or a "public
utility," within the meaning of the Public Utility Holding Company Act of 1935,
as amended; or a "public utility" within the meaning of the Federal Power Act,
as amended; or an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended; or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended.
SECTION 4.10. Ownership of Property; Liens.
The Borrower owns Properties, or interests in Properties, sufficient for
the conduct of its business; and none of such Properties is subject to any Lien
except as permitted in Section 5.7.
SECTION 4.11. No Default.
21
Neither the Borrower nor any of its Subsidiaries is in default under or
with respect to any agreement, instrument or undertaking to which it is a party
or by which it or any of its Property is bound which could have or cause a
Material Adverse Effect. No Default has occurred and is continuing.
SECTION 4.12. Full Disclosure.
All written information and, to the best of the Borrower's knowledge, all
other information, heretofore furnished by the Borrower to the Bank for purposes
of or in connection with this Agreement or any transaction contemplated hereby
is, and all such information hereafter furnished by the Borrower to the Bank
will be, true, accurate and complete in every material respect or based on
reasonable estimates on the date as of which such information is stated or
certified. The Borrower has disclosed to the Bank in writing any and all facts
which could reasonably be expected to have or cause a Material Adverse Effect.
SECTION 4.13. Environmental Matters.
To the best of the Borrower's knowledge, (i) neither the Borrower nor any
Subsidiary is subject to any Environmental Liability which could have or cause a
Material Adverse Effect and neither the Borrower nor any Subsidiary has been
designated as a potentially responsible party under CERCLA or under any state
statute similar to CERCLA. None of the Properties located in the United States,
owned by either the Borrower or a Subsidiary, has been identified on any current
or proposed (A) National Priorities List under 40 C.F.R. ss. 300, (B) CERCLIS
list or (C) any list arising from a state statute similar to CERCLA; (ii) to the
best of the Borrower's knowledge, no Hazardous Materials have been or are being
used, produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
from the Properties or are otherwise present at, in or under the Properties,
owned or operated by either the Borrower or a Subsidiary, or, to the best of the
knowledge of the Borrower, at or from any adjacent site or facility, except for
Hazardous Materials, such as cleaning solvents, pesticides and other materials
used, produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed, or otherwise handled in the ordinary course of business in
compliance with all applicable Environmental Requirements; and (iii) to the best
of the Borrower's knowledge, the Borrower and its Subsidiaries are in compliance
with all Environmental Requirements in connection with the ownership, use and
operation of the Properties and the Borrower's and such Subsidiary's respective
businesses.
SECTION 4.14. Capital Stock.
All Capital Stock, debentures, bonds, notes and all other securities of the
Borrower and its Subsidiaries presently issued and outstanding are validly and
properly issued in accordance with all applicable laws, including but not
limited to, the "Blue Sky" laws of all applicable states and the federal
securities laws.
SECTION 4.15. Margin Stock.
Neither the Borrower nor any of its Subsidiaries is engaged principally, or
as one of its important activities, in the business of purchasing or carrying
any Margin Stock, and no part of the proceeds of any Revolving Loan will be used
to purchase or carry any Margin Stock or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock, or be used for any purpose
which violates, or which is inconsistent with the provisions of, Regulations G,
T, U or X.
SECTION 4.16. Solvency.
After giving effect to the execution and delivery of the Loan Documents and
the making of the Revolving Loans under this Agreement, the Borrower will be
Solvent.
22
SECTION 4.17. Possession of Franchises, Licenses, Etc.
The Borrower and its Subsidiaries possess to the extent material all
franchises, certificates, licenses, permits and other authorizations from
governmental and political subdivisions or regulatory authorities, and all
patents, trademarks, service marks, trade names, copyrights, franchises,
licenses and other rights that are necessary for ownership, maintenance and
operation of any of their respective material Properties and assets, and neither
the Borrower nor any of its Subsidiaries is in violation of any thereof, which,
individually or in the aggregate, would or might have or cause a Material
Adverse Effect. Without limiting the generality of the foregoing, and, in any
event, the Borrower and its Subsidiaries possess all Franchise Rights necessary
for the ownership, operation and development of its (or their) franchised
restaurant business as conducted, or contemplated to be conducted, by the
Borrower and such Subsidiaries, including, without limitation, in the case of
"Applebee's" restaurants, franchise agreements for each franchised restaurant
location and exclusive development rights for each designated area in which
franchised restaurants are located or contemplated to be located.
SECTION 4.18. Insurance.
The Borrower and each of its Subsidiaries maintains adequate insurance on,
and in respect of the ownership and operation of, its Properties in at least
such amounts and against at least such risks as are usually insured against in
the same general areas by companies of established repute engaged in the same or
similar business.
ARTICLE 5. COVENANTS
The Borrower agrees that, so long as the Bank has any Commitment hereunder
or any amount payable hereunder or under the Note remains unpaid:
SECTION 5.1. Information.
The Borrower will deliver to the Bank:
5.1.1. Annual Audit. As soon as available and in any event within ninety
(90) days after the end of each Fiscal Year, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Year and
the related consolidated statements of income, shareholders' equity and cash
flows for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous fiscal year, all certified by independent public
accountants of nationally recognized standing, with such certification to be
free of any material exceptions and qualifications; provided that, the
information required by this paragraph may be satisfied by delivery of
information pursuant to Section 5.1.5 or Section 5.1.6.
5.1.2. Interim Statements. As soon as available and in any event within
fifty (50) days after the end of each of the first three (3) Fiscal Quarters of
each Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related
statement of income and statement of cash flows for such quarter and for the
portion of the Fiscal Year ended at the end of such quarter, setting forth in
each case in comparative form the figures for the corresponding quarter and the
corresponding portion of the previous Fiscal Year, all certified (subject to
normal year-end adjustments) as to fairness of presentation, GAAP and
consistency by the chief financial officer of the Borrower; provided, that the
information required by this paragraph may be satisfied by delivery of
information pursuant to Section 5.1.5 or Section 5.1.6.
5.1.3. Compliance Certificates. Simultaneously with the delivery of each
set of financial statements referred to in Sections 5.1.1 and 5.1.2, a
certificate, substantially in the form of Exhibit B (a "Compliance
Certificate"), of the chief financial officer of the Borrower (i) setting forth
23
in reasonable detail the calculations required to establish whether the Borrower
was in compliance with the requirements of Sections 5.3, 5.4, 5.5, and 5.18 on
the date of such financial statements and (ii) stating whether any Default
exists on the date of such certificate and, if any Default then exists, setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
5.1.4. Default Notice. Promptly, (and, in any event, within five (5)
Domestic Business Days) after the Borrower becomes aware of the occurrence of
any Default, a certificate of the chief financial officer of the Borrower
setting forth details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
5.1.5. Proxy. Promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
5.1.6. Registration Statements. Promptly upon the filing thereof, copies of
all registration statements and annual, quarterly or monthly reports which the
Borrower shall have filed with the Securities and Exchange Commission;
5.1.7. ERISA Notices. If and when any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any reportable event (as
defined in Section 4043 of ERISA) with respect to any Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives notice
of complete or partial withdrawal liability under Title IV of ERISA, a ▇▇▇ of
such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate or appoint a trustee to administer any Plan, a copy of
such notice; and
5.1.8. Credit Agreements. Promptly upon the occurrence thereof, (x) notice
of any "default" or "event of default" under, or amendment of, (i) the Wachovia
Agreement, (ii) the Master Lease Agreement, the (iii) Liquidity Agreement, or
(iv) the Senior Notes or the Senior Note Indenture pursuant to which such Senior
Notes were issued and (y) notice that the Borrower's "Consolidated Fixed Charge
Coverage Ratio" (as defined in the Senior Note Indenture) does not exceed
2.5:1.0.
5.1.9. Other Reports. From time to time such additional information
regarding the financial position or business of the Borrower and its
Subsidiaries as the Bank may reasonably request.
SECTION 5.2. Inspection of Property, Books and Records.
The Borrower will keep, and require each Subsidiary to keep, proper books
of record and account in which full, true and correct entries in conformity with
GAAP (or, in the case of any non-domestic Subsidiary, such other accounting
standards, rules, regulations and practices applicable to businesses operating
in the locality in which each such Person operates); and permit, and cause each
Subsidiary to permit, representatives of the Bank at the Bank's expense prior to
the occurrence of a Default and at the Borrower's expense after the occurrence
and during the continuance of a Default to visit and inspect any of their
respective Properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers, employees and independent public
accounts. The Borrower agrees to cooperate and assist in such visits and
inspections in each case at such reasonable times and as often as may reasonably
be desired.
SECTION 5.3. Adjusted Funded Debt/Adjusted Capitalization Ratio.
The Adjusted Funded Debt/Adjusted Capitalization Ratio will not at any time
exceed .65:1.
24
SECTION 5.4. Minimum Shareholders' Equity.
Stockholders' Equity will at no time be less than the sum of (i)
$180,000,000, as of the Fiscal Quarter ended closes to December 31, 1996 (the
"Base Fiscal Quarter"), plus (ii) fifty percent (50%) of Consolidated Net Income
(if positive) for each Fiscal Quarter subsequent to the Base Fiscal Quarter;
plus, without duplication, (iii) seventy-five percent (75%) of any net proceeds
received by Borrower from any offering of equity securities (other than
Redeemable Preferred Stock) by Borrower subsequent to the Closing Date; plus,
without duplication, (iv) seventy-five percent (75%) of any net proceeds
received by Borrower from any conversion of debt into equity subsequent to the
Closing Date; plus, without duplication, (v) seventy-five percent (75%) of any
adjustment to equity due to any pooling of interests occurring subsequent to
December 31, 1996; plus, without duplication, (vi) seventy-five percent (75%) of
any increase in Stockholders' Equity resulting from the issuance or exchange of
any equity securities in furtherance of any acquisition constituting a permitted
investment under Section 5.18.
SECTION 5.5. Fixed Charge Coverage Ratio.
Borrower's Fixed Charge Coverage Ratio, measured on a rolling four (4)
Fiscal Quarters' basis as of the end of such Fiscal Quarter, commencing with the
Fiscal Quarter ending closest to December 31, 1997, shall be (i) not less than
1.80:1.0 for the Fiscal Quarter ending closest to December 31, 1997, March 31,
1998 and June 30, 1998, (ii) not less than 1.90:1.0 for the Fiscal Quarter
ending closest to September 30, 1998 and (iii) 2.0:1.0 for each Fiscal Quarter
ending thereafter.
SECTION 5.6. Negative Pledge.
The Borrower will not, nor will the Borrower permit any Subsidiary to,
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except: (i) those Liens, if any, described on Schedule 5.6,
concerning existing debt of the Borrower, to be set forth and described more
particularly therein, together with any Lien arising out of the refinancing,
extension, renewal or refunding of any debt secured by any such Lien, provided
that such debt is not secured by any additional assets, and the amount of such
debt secured by any such Lien is not increased; (ii) Liens incidental to the
conduct of its business or the ownership of its Properties which (A) do not
secure debt and (B) do not in the aggregate materially detract from the value of
its Properties or materially impair the use thereof or the operation of its
business, including, without limitation, easements, rights of way, restrictive
covenants, zoning and other similar restrictions on real property; (iii)
materialmen's, mechanics', warehousemen's, carriers', landlords' and other
similar statutory Liens which secure debt or other obligations that are not past
due, or, if past due are being contested in good faith by the Borrower or the
appropriate Subsidiary by appropriate proceedings; (iv) Liens for taxes not
delinquent or taxes being contested in good faith and by appropriate
proceedings; (v) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation; (vi) deposits to
secure performance of bids, trade contracts, leases, statutory grants of
security and rights of setoff in accounts, securities and other Properties held
at banks or financial institutions to secure the payment or reimbursement under
overdraft, letter of credit, acceptance and other credit facilities; (viii)
rights of setoff, banker's liens and other similar rights arising solely by
operation of law; (ix) Purchase Money Liens; (x) Liens on any Properties
acquired by Borrower or any Subsidiary subsequent to the Closing Date, to the
extent that (A) such Liens are existing at the time of acquisition, (B) the debt
secured thereby is not secured by any other Properties of Borrower or such
Subsidiary except the acquired Properties, (C) the amount of such debt so
secured thereby is not increased at or subsequent to the acquisition and (D) the
total amount of all such debt secured by all such acquired Properties does not
exceed at any time, in aggregate amount, fifteen percent (15%) of Tangible Net
Worth; together with any Lien arising out of the refinancing, extension, renewal
or refunding of any debt secured by any such Lien, provided that such debt is
not secured by any additional assets and the amount of such debt secured by any
such Lien is not increased; (xi) capital leases made in the ordinary course of
25
business (but excluding, however, Sale-Leaseback Transactions to the extent not
permitted by Section 5.9) in which there is no provision for title to the leased
Property to pass to the Borrower or such Subsidiary at the expiration of the
lease term or as to which no bargain purchase option exists; and (xii) rights of
lessors in respect of Properties leased to the Borrower or its Subsidiaries
under operating leases.
SECTION 5.7. Maintenance of Existence.
Except as permitted in Section 5.9, the Borrower shall, and shall cause
each Subsidiary to, maintain its corporate existence and carry on its business
in substantially the same manner and in substantially the same fields as such
business is now carried on and maintained. Without limiting the generality of
the foregoing, the Borrower shall, and shall cause each Subsidiary to, maintain
at all times in full force and effect all Franchise Rights necessary to the
ownership, operation and development of all franchised restaurant business
conducted, or contemplated to be conducted, by the Borrower and such
Subsidiaries, except with respect to Voluntary Store Closings and except with
respect to any Applebee's Spinoff.
SECTION 5.8. Dissolution.
Neither the Borrower nor any of its Subsidiaries shall suffer or permit
dissolution or liquidation either in whole or in part, except through corporate
reorganization to the extent permitted by Section 5.9.
SECTION 5.9. Consolidation, Mergers, and Sales of Assets.
The Borrower will not, nor will it permit any Subsidiary to, consolidated
or merge with or into, or sell, lease or otherwise transfer all or any
substantial part of its assets to, any other Person, or discontinue or eliminate
any business line or segment, provided, however, that, subject at all times to
Section 5.18, the Borrower or any Subsidiary may merge with another Person
(which is not the Borrower or such Subsidiary) if (i) such Person was organized
under the laws of the United States of America or one of its states (ii) the
Borrower or such Subsidiary (as the case may be) is the corporation surviving
such merger and (iii) immediately after giving effect to such merger, no Default
or Event of Default shall have occurred and be continuing; provided, further,
that any Subsidiaries of the Borrower may (i) merge or consolidate with each
other or with the Borrower (so long as the Borrower is the corporation surviving
such merger), or (ii) sell assets to each other or to the Borrower; and
provided, further, that the Borrower may, upon giving at least two (2) Business
Days' written notice to the Lender thereof, consummate an Applebee's Spinoff, if
made on the terms set forth within the definition thereof, and provided that the
Net Cash Proceeds therefrom, to the extent not used to repay, in full or in
part, the indebtedness of Borrower then existing under the Wachovia Agreement
are used either (i) to make an optional prepayment of any Borrowings then
outstanding hereunder, or (ii) to make investments permitted under Section 5.18
or (iii) for working capital in Borrower's business; but for no other purposes.
SECTION 5.10. Use of Proceeds.
The proceeds of Revolving Loans will be used by the Borrower solely for
working capital purposes, and for no other purposes. Without limiting the
generality of the foregoing, no portion of the proceeds of the Revolving Loans
will be used by the Borrower (i) in connection with, whether directly or
indirectly, any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation if a
majority or controlling interest of the officers, directors or shareholders of
such corporation shall be opposed to such acquisition by the Borrower, (ii)
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose
in violation of any term of this Agreement or of any applicable law or
regulation.
26
SECTION 5.11. Compliance with Laws; Payment of Taxes.
The Borrower will, and will cause each of its Subsidiaries and each member
of the Controlled Group to, comply in all material respects with applicable laws
(including but not limited to ERISA), regulations and similar requirements of
governmental authorities (including but not limited to PBGC), except where the
necessity of such compliance is being contested in good faith through
appropriate proceedings. The Borrower will, and will cause each of its
Subsidiaries to, pay promptly when due all taxes, assessments governmental
charges, claims for labor, supplies, rent and other obligations which, if
unpaid, might become a Lien against the Property of the Borrower or any
Subsidiary, except liabilities being contested in good faith and against which,
if requested by the Bank, the Borrower will set up reserves in accordance with
GAAP.
SECTION 5.12. Insurance.
The Borrower will maintain, and will cause each of its Subsidiaries to
maintain (either in the name of the Borrower or in such Subsidiary's own name),
with financially sound and reputable insurance companies, insurance on, and in
respect of the ownership and operation of, its Properties in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies of established repute engaged in the same or
similar business.
SECTION 5.13. Change is Fiscal Year.
The Borrower will not change its Fiscal Year without the consent of the
Bank.
SECTION 5.14. Maintenance of Property.
The Borrower shall, and shall cause each Subsidiary to, maintain all of its
Properties in good condition, repair and working order, ordinary wear and tear
excepted.
SECTION 5.15. Environmental Notices.
The Borrower shall furnish to the Bank, promptly after the Borrower becomes
aware thereof, written notice of all Environmental Liabilities, pending,
threatened Environmental Proceedings, Environmental Notices, Environmental
Judgements and Orders and Environmental Releases, at, on, in, under or in any
way affecting the Properties or any adjacent property and all facts, events, or
conditions that could reasonably be expected to lead to any of the foregoing.
SECTION 5.16. Environmental Matters.
The Borrower will not, and will not permit any Third Party to, use,
produce, manufacture, process, treat, recycle, generate, store, dispose of,
manage at, or otherwise handled or ship or transport to or from the Properties
any Hazardous Materials except for Hazardous Materials such as cleaning
solvents, pesticides and other similar materials used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed, managed, or otherwise
handled in the ordinary course of business in compliance with all applicable
Environmental Requirements.
SECTION 5.17. Environmental Releases.
The Borrower agrees that upon the occurrence of an Environmental Release
(except for any Environmental Release which (x) occurred in compliance with all
Environmental Requirements and (y) could not reasonably be expected to have or
cause a Material Adverse Effect), it will act immediately to investigate the
extent of, and to take appropriate remedial action to eliminate, such
Environmental Release, whether or not ordered or otherwise directed to do so by
any Environmental Authority.
27
SECTION 5.18. Investments.
The Borrower will not make (nor will the Borrower permit any Subsidiary to
make) any investment in any Person or Property (which term "investment," for
purposes hereof, shall mean and include, without limitation, the acquisition of
any property, the issuance, acquisition or exchange of any capital stock, debt
or other obligations or security to, from or with any Person, and the making of
any loan, advance, extension of credit, credit accommodation, Guarantee or
capital contribution to or on behalf of any Person), provided, however, that,
notwithstanding the foregoing, the Borrower (or any Subsidiary) may, from time
to time, undertake the following, without the necessity of obtaining the Bank's
prior written consent thereto:
5.18.1. Acquire current assets for use in, or arising from, the sale of
goods or services in the ordinary course of its business (including, for this
purpose, but without limitation, credit card receivables);
5.18.2. Make capital expenditures in the ordinary course of its business;
5.18.3. Pay franchisee fees and royalties to its franchisors in the
ordinary course of its business;
5.18.4. Make or maintain escrow deposits for the payment of taxes, rents,
utilities, insurance or like matters in the ordinary course of its business;
5.18.5. Make and maintain deposits of cash in demand deposit accounts of
banks in the ordinary course of its business, and make endorsements of checks,
drafts or other instruments in connection therewith;
5.18.6. Consistent at all times with the Borrower's internal Statement of
Investment Policy, invest surplus cash in (A) obligations of, or guaranteed by,
the United States of America or any agency thereof, (B) short-term certificates
of deposit issued by, and time deposits with, the Bank or any other financial
institution domiciled in the United States of America with assets of at least
$500,000,000, (C) short-term commercial paper rated at lest "A1" by Standard &
Poors or "P1" by Moody's, and (D) fixed or adjustable rate corporate debt
securities with a credit rating of at least double A (Aa/AA) by either Moody's
or Standard & Poors, provided that any fixed rate debt securities have a
maturity of one year or less;
5.18.7. Make investments in those Consolidated Subsidiaries of the Borrower
which are wholly-owned, directly or indirectly, by the Borrower, in the ordinary
course of, and pursuant to the reasonable requirements of, the Borrower's and
such Subsidiaries' respective businesses, provided that the aggregate amount of
such investments which may be outstanding at any one time hereafter, as to all
such Subsidiaries, shall not exceed, in any event, (A) ten percent (10%) of the
consolidated total assets of Borrower and its Consolidated Subsidiaries at any
time prior to December 30, 1997, and (B) seven and one-half percent (7-1/2%) of
the consolidated total assets of Borrower and its Consolidated Subsidiaries on
or at any time after December 31, 1997, but prior to the Termination Date; it
being understood and agreed that (a) there shall be excluded from such
calculation any investment deemed made by the Borrower in DF&R Restaurants,
Inc., a Texas corporation which is a wholly-owned, Consolidated Subsidiary of
the Borrower, pursuant to the accounting for the prior acquisition of such
corporation by the Borrower as a pooling of interests; (b) there shall be
deducted in any event from the amount of investments in Subsidiaries which may
be made pursuant to this clause (vii) the aggregate amount of Capitalized Lease
Obligations of all Subsidiaries which are at any time outstanding; and (c) the
provisions of this clause (vii) henceforth shall be the exclusive means by which
the Borrower (or any Subsidiary) may make investments in any Subsidiaries
(whether or not wholly-owned Subsidiaries) and shall override any other
provisions of this Section 5.18 (including, particularly, clauses (x), (xi) and
(xii) below) which may be construed otherwise to permit such investments.
5.18.8. Make travel and similar advances to employees from time to time in
the
28
ordinary course of business.
5.18.9. The Borrower may invest up to Eight Hundred Fifty Thousand Dollars
($850,000) per Fiscal Year in the making of annual premiums payable on the split
dollar joint survivor life insurance program implemented, or to be implemented,
covering the lives of ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and his spouse ▇▇▇▇ ▇▇▇▇▇▇, with an
initial death benefit of Fifty Million Dollars ($50,000,000), provided, however,
that (i) such investments are made over a period not to exceed ten (10) Fiscal
Years and (ii) Borrower maintains at all times during the effective period of
the program a security interest in policy proceeds and cash values of policies
issued as part of the program equal in amount to not less than its then
cumulative premium investments;
5.18.10. (10) Reserved
5.18.11. Make investments in new restaurant concepts, so long as the total
amount of each such investment (either considered individually or as part of a
series of related, concurrent investments), does not exceed ten percent (10%) of
Borrower's consolidated total assets immediately before such investment (or the
last in a series of related, concurrent investments) is made; or
5.18.12. Make other investments, not described in clauses (i) through (xi)
above, provided that all such investments, in the aggregate, do not exceed at
any one time ten percent (10%) of Stockholders' Equity.
The Borrower shall notify the Bank from time to time, but not less
frequently than quarterly, or at any time at the Bank's request, of the nature
and amount of any investments made pursuant to clauses (xi) and (xii) hereof
which, individually or in the aggregate, exceed One Hundred Thousand Dollars
($100,000).
Notwithstanding anything in this Section 5.18 to the contrary, no
Subsidiary shall be required to comply with, and Borrower shall not be required
to cause any Subsidiary to comply with, any part of clause (vii), (xi) and (xii)
of this Section 5.18 to the extent it would cause a violation of any term of the
Senior Notes or the Senior Note Indenture.
SECTION 5.19.Subsidiary Debt
Except solely to the extent expressly permitted in clause (vii) of Section
5.18 of this Agreement, the Borrower will not permit any Consolidated Subsidiary
of the Borrower which is a wholly-owned Subsidiary, directly or indirectly, of
the Borrower, to create, incur or suffer to exist any of the following: (i)
indebtedness for borrowed funds; (ii) Capitalized Lease Obligations, provided,
however, that DF&R Restaurants, Inc. and its Subsidiaries may incur Capitalized
Lease Obligations in an aggregate amount not to exceed Ten Million Dollars
($10,000,000) at any one time outstanding; (iii) Guarantees; (iv) debts,
liabilities or obligations to any seller incurred to pay the deferred purchase
price of property or services having a deferred purchase price of One Million
Dollars ($1,000,000) or more, excepting, in any event, trade accounts payable
arising in the ordinary course of business and purchase options prior to their
exercise; and (v) debts, liabilities or obligations in respect of Synthetic
Leases.
SECTION ▇.▇▇.▇▇▇▇▇ Funded Debt/EBITDA Ratio
The ratio which (i) the Total Funded Debt of the Borrower and its
Consolidated Subsidiaries at the end of any Fiscal Quarter, commencing with the
Fiscal Quarter ended closest to December 31, 1997, bears to (ii) EBITDA of the
Borrower and its Consolidated Subsidiaries, measure on a rolling four (4) Fiscal
Quarters' basis as of the end of such Fiscal Quarter, shall be (i) no more than
3.8:1.0 for the Fiscal Quarters ending closest to December 31, 1997 and March
31, 1998 and (ii) no more than 3.50:1.0 for each Fiscal Quarter ending
thereafter. In computing EBITDA in respect of the foregoing ratio, (a) any asset
or stock dispositions by the Borrower consisting of the sale of a business line,
29
segment or other group of related stores (including, particularly, for this
purpose, the Applebee's Spinoff) occurring within a Fiscal Quarter shall be
accounted for by reducing EBITDA by the individual EBITDA attributable to each
store within such group for such Fiscal Quarter and the three (3) preceding
Fiscal Quarters; and (b) any asset or stock acquisitions by the Borrower
consisting of the purchase of a business line, segment or other group of related
stores occurring within a Fiscal Quarter shall be accounted for by increasing
EBITDA by the individual EBITDA attributable to each store within such group for
such Fiscal Quarter and for the three (3) preceding Fiscal Quarters; in each
instance, on an historical basis, in a matter which the Borrower shall
determine, but subject to prior review with, and approval by, the Lender.
SECTION 5.21.Year 2000 Compatibility
Borrower shall take all action necessary to assure that Borrower and its
Subsidiaries computer based systems are able to operate and effectively process
data including dates on and after January 1, 2000, and at the request of Bank,
Borrower shall provide to Bank assurances acceptable to Bank of Borrower's Year
2000 compatibility.
SECTION 5.22.Liquidity Facility
The Borrower shall maintain at all times, in addition to its senior
revolving credit facility under the Wachovia Agreement, a liquidity facility in
a principal amount of at least $100,000,000, with a maturity date no earlier
than July 1, 1999, on an unsecured basis and with representations, warranties,
covenants and defaults that are no more restrictive than the representations,
warranties, covenants and defaults set forth in this Agreement.
ARTICLE 6. DEFAULTS
SECTION ▇.▇.▇▇▇▇▇▇ of Default
If one or more of the following events ("Events of Default") shall have
occurred and be continuing:
6.1.1. The Borrower (i) shall fail to pay when due any principal of any
Revolving Loan or (ii) shall fail to pay any interest on any Revolving Loan
within five (5) Domestic Business Days after such interest shall become due, or
(iii) shall fail to pay any fee or other amount payable hereunder or under any
Loan Document within five (5) Domestic Business Days after such fee or other
amount becomes due; or
6.1.2. The Borrower shall fail to observe or perform any covenant contained
in Sections 5.3 through 5.8, 5.9, 5.10, 5.11, 5.14, or 5.18, inclusive; or
6.1.3. The Borrower shall fail to observe or perform any covenant or
agreement contained or incorporated by reference in this Agreement (other than
those covered by Sections 6.1.1 and 6.1.2) and such failure shall not have been
cured within ten (10) days after the earlier to occur of (i) written notice
thereof has been given to the Borrower by the Bank or (ii) an executive, senior
financial or accounting officer of the Borrower otherwise becomes aware of any
such failure; or
6.1.4. Any representation, warranty, certification or statement made by the
Borrower in Article IV of this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall prove to
have been incorrect or misleading in any material respect when made (or deemed
made); or
6.1.5. The Borrower or any Subsidiary shall fail to make any payment in
respect of the Wachovia Credit Agreement, the Master Lease Agreement, the Senior
Notes, the Liquidity Agreement or any other debt, liability or obligation
outstanding individually or in the aggregate with all other such debts,
liabilities or
30
obligations, equal to or in excess of Five Hundred Thousand Dollars ($500,000),
other than the Note, when due or within any applicable grace period; or any
event or condition shall occur which results in the acceleration of the maturity
of the debt evidenced by the Wachovia Credit Agreement, the Master Lease
Agreement, the Senior Notes, the Liquidity Agreement or any other such debt,
liability or obligation outstanding of the Borrower or any Subsidiary
individually or in the aggregate with all other such debts, liabilities or
obligations equal to or in excess of Five Hundred Thousand Dollars ($500,000) or
the mandatory prepayment or purchase of the debt evidenced by the Wachovia
Credit Agreement, the Master Lease Agreement, the Senior Notes, the Liquidity
Agreement or any such other debt, liability or obligation by the Borrower (or
its designee) or such Subsidiary (or its designee) individually or in the
aggregate with all other such debts, liabilities or obligations equal to or in
excess of Five Hundred Thousand Dollars ($500,000) prior to the scheduled
maturity thereof, or enables (or, with the giving of notice or lapse of time or
both, would enable) Wachovia (as agent under the Wachovia Credit Agreement), the
"Owner Trustee" (as used in the Master Lease Agreement), or any assignee or
agent on behalf of such Owner Trustee, the holders of the Senior Notes, Wachovia
(as agent under the Liquidity Agreement) or the holders of any such other debt,
liability or obligation individually or in the aggregate with all other such
debts, liabilities or obligations equal to or in excess of Five Hundred Thousand
Dollars ($500,000) or any Person acting on such holders' behalf to accelerate
the maturity thereof or require the mandatory prepayment or purchase thereof
prior to the scheduled maturity thereof, without regard to whether such holders
or other Person shall have exercised or waived their right to do so; or
6.1.6. The Borrower or any Subsidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its Property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or
6.1.7. An involuntary case or other proceeding shall be commenced against
the Borrower or any Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its Property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against the Borrower or any Subsidiary under
the federal bankruptcy laws as now or hereafter in effect; or
6.1.8. The Borrower or any member of the Controlled Group shall fail to pay
when due any material amount which it shall have become liable to pay to the
PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a
Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member
of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall
not have been dismissed within thirty (30) days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated; or
6.1.9. One or more judgments or orders for the payment of money in an
aggregate amount equal to or greater than Five Hundred Thousand Dollars
($500,000) shall be rendered against the Borrower or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of thirty
(30) days; or
31
6.1.10. A federal tax Lien shall be filed against the Borrower under
Section 6323 of the Code or a Lien of the PBGC shall be filed against the
Borrower or any Subsidiary under Section 4068 of ERISA and in either case such
Lien shall remain undischarged for a period of thirty (30) days after the date
of filing; or
6.1.11. ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. shall cease to own and control, beneficially and
with power to vote, at least fifteen percent (15%) of the outstanding shares of
the voting common stock of the Borrower; or any Person (other than ▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇.) or two or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of twenty percent
(20%) or more of the outstanding shares of the voting common stock of the
Borrower; or as of any date, a majority of the Board of Directors of the
Borrower consists of individuals who were not either (A) directors of the
Borrower as of the corresponding date of the previous year, (B) selected or
nominated to become directors by a Board of Directors of the Borrower of which a
majority consisted of individuals described in clause (A), or (C) selected or
nominated to become directors by the Board of Directors of the Borrower of which
a majority consisted of individuals described in clause (A) and individuals
described in clause (B); or
6.1.12. If any of the Franchise Rights of the Borrower or its Subsidiaries
shall be forfeited, suspended, lost, rejected, disclaimed, impaired, curtailed
or otherwise adversely altered or affected in any manner, in whole or in any
material part, for any reason whatsoever, whether or not related to the
Borrower's or such Subsidiary's performance of its duties and obligations as
franchisee at any time hereafter except with respect to any Voluntary Store
Closing; or there shall occur any default by the Borrower or any such Subsidiary
in the payment, performance or observance of any terms, covenants or conditions
of any franchise or development agreements giving rise to the existence and/or
continuation of any such Franchise Rights, and any grace or cure period relative
thereto granted therein shall have expired without such default being waived or
cured; or
6.1.13. .13. [Intentionally Omitted]
6.1.14. The occurrence of any event, act, occurrence, or condition which
the Bank determines either does or has a reasonable probability of causing, or
resulting in, a Material Adverse Effect;
then, and in every such event, the Bank may by notice to the Borrower
terminate the Commitment and it shall thereupon terminate, and (ii) by notice to
the Borrower declare the Note (together with accrued interest thereon) to be,
and the Note shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower, together with interest at the Default Rate
accruing on the principal amount thereof from and after the date of such Event
of Default; provided that if any Event of Default specified in Sections 6.1.6 or
6.1.7 above occurs with respect to the Borrower or any Subsidiary, without any
notice to the Borrower or any other acts by the Bank, the Commitment shall
thereupon terminate and the Note (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower, together
with interest thereon at the Default Rate accruing on the principal amount
thereof from and after the date of such Event of Default. Notwithstanding the
foregoing, the Bank shall have available to it all other remedies at law or
equity, and may exercise any one or all of them at its discretion.
ARTICLE 7. CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 7.1.Basis for Determining Interest Rate Inadequate or Unfair
If on or prior to the first day of any Interest Period, the Bank determines
that deposits in Dollars (in the applicable amounts) are not being offered in
32
the relevant market for such Interest Period, or the Bank determines that the
Adjusted LIBOR Rate, as determined by the Bank, will not adequately and fairly
reflect the cost to the Bank of funding the relevant Euro-Dollar Rate Loans for
such Interest Period, then, the Bank shall forthwith give notice thereof to the
Borrower, whereupon until the Bank notifies the Borrower that the circumstances
giving rise to such suspensions no longer exist, the obligations of the Bank to
make the Euro-Dollar Rate Loans specified in such notice shall be suspended.
Unless the Borrower notifies the Bank at least two (2) Domestic Business days
before the date of any Borrowing of such Euro-Dollar Rate Loans for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 7.2.Illegality
If, after the date hereof, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof (any such
agency being referred to as an "Authority" and any such event being referred to
as a "Change of Law"), or compliance by the Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for the Bank (or its Lending
Office) to make, maintain or fund its Euro-Dollar Rate Loans, the Bank shall
forthwith give notice thereof to the Borrower, whereupon until the Bank notifies
the Borrower that the circumstances giving rise to such suspension no longer
exist, the obligation of the Bank to make Euro-Dollar Rate Loans shall be
suspended. If the Bank shall determine that it may not lawfully continue to
maintain and fund any of its outstanding Euro-Dollar Rate Loans to maturity and
shall so specify in such notice, the Borrower shall immediately prepay in full
the then outstanding principal amount of each Euro-Dollar Rate Loan, together
with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar
Rate Loan, the Borrower shall borrow, pursuant to Section 2.2.2, a Base Rate
Loan in an equal principal amount (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Rate Loans), and the Bank
shall make such a Base Rate Loan.
SECTION 7.3.Increased Cost and Reduced Return
7.3.1. If after the date hereof, a Change of Law or compliance by the Bank
(or its Lending Office) with any request or directive (whether or not having the
force of law) of any Authority either: (i) shall subject any Bank (or its
Lending Office) to any tax, duty or other charge with respect to the Revolving
Loans, the Note or its obligation to make Revolving Loans, or shall change the
basis of taxation of payments to the Bank (or its Lending Office) of the
principal of or interest on the Revolving Loans or any other amounts due under
this Agreement in respect of the Revolving Loans or its obligation to make
Revolving Loans (except for changes in the rate of tax on the overall net income
of the Bank or its Lending Office imposed by the jurisdiction in which the
Bank's principal executive office or Lending Office is located); or (ii) shall
impose, modify or deem applicable any reserve, special deposit insurance or
similar requirement (including, without limitation, any such requirements
imposed by the Board of Governors of the Federal Reserve System, but excluding
any such requirement included in an applicable Euro-Dollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended by,
the Bank (or its Lending Office); or (iii) shall impose on the Bank (or its
Lending Office) or the London Interbank Market any other similar condition
affecting the Revolving Loans, the Note or its obligation to make Revolving
Loans; and the result of any of the foregoing is to increase the cost to the
Bank (or its Lending Office) of making or maintaining any Revolving Loan, or to
reduce the amount of any such received or receivable by the Bank (or its Lending
Office) under this Agreement or under the Note with respect thereto, by an
amount deemed by the Bank to be material, then, within fifteen (15) days after
demand by the Bank the Borrower shall pay to the Bank such additional amount or
amounts as will compensate the Bank for such increased cost or reduction.
33
7.3.2. If the Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof, or compliance by the Bank (or its Lending Office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any Authority, has or would have the effect of reducing the rate of return on
the Bank's capital as a consequence of its obligations hereunder to a adoption,
change or compliance (taking into consideration the Bank's policies with respect
to capital adequacy), by an amount deemed by the Bank to be material, then from
time to time, within fifteen (15) days after demand by the Bank, the Borrower
shall pay to the Bank such additional amount or amounts as will compensate the
Bank for such reduction.
7.3.3. The Bank will promptly notify the Borrower of any event of which it
has knowledge, occurring after the date hereof, which will entitle the Bank to
compensation pursuant to this Section and will designate a different Lending
Office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of the Bank, be otherwise
disadvantageous to the Bank, in any respect deemed material by the Bank. A
certificate of the Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount, the
Bank may use any reasonable averaging and attribution methods.
7.3.4. The provisions of this Section 7.3 shall be applicable with respect
to any Assignee or other Transferee (excluding any Participants), and any
calculations required by such provisions shall be made based upon the
circumstances of such Assignee or other Transferee.
SECTION 7.4.Base Rate Loans Substituted for Affected Euro-Dollar Rate Loans
If (i) the obligation of the Bank to make or maintain Euro-Dollar Rate
Loans has been suspended pursuant to Section 7.2 or (ii) any Bank has demanded
compensation under Section 7.3.1, and the Borrower shall, by at least five (5)
Euro-Dollar Business Days' prior notice to the Bank have elected that the
provisions of this Section shall apply to the Bank, then, unless and until the
Bank notifies the Borrower that the circumstances giving rise to such suspension
or demand for compensation no longer apply: (i) all Revolving Loans which would
otherwise be made by the Bank as Euro-Dollar Rate Loans, shall be made instead
as Base Rate Loans and (ii) after each of the Euro-Dollar Rate Loans has been
repaid, all payments of principal which would otherwise be applied to repay such
Euro-Dollar Rate Loans shall be applied to repay its Base Rate Loans instead.
SECTION 7.5.Compensation
Upon the request of the Bank, delivered to the Borrower, the Borrower shall
pay to the Bank such amount or amounts as shall compensate the Bank for any
actual out of pocket loss, cost or expense incurred by the Bank (in connection
with the relevant Interest Period) as a result of: (i) any payment or prepayment
(whether pursuant to Section 7.2 or otherwise) of a Euro-Dollar Rate Loan on a
date other than the last day of an Interest Period for such Euro-Dollar Rate
Loan; or (ii) any failure by the Borrower to prepay a Euro-Dollar Rate Loan on
the date for such prepayment specified in the relevant notice of prepayment
hereunder; or (iii) any failure by the Borrower to borrow a Euro-Dollar Rate
Loan on the date for the Euro-Dollar Borrowing of which such Euro-Dollar Rate
Loan is a part specified in the applicable Notice of Borrowing delivered
pursuant to Section 2.2.
ARTICLE 8. MISCELLANEOUS
SECTION 8.1.Notices
All notices, requests and other communications to any party hereunder or
under any Loan Document shall be in writing (including bank wire, telecopier or
34
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopier number as such party may hereafter specify for the purpose by notice
to the other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and the appropriate confirmation is
received, (ii) if given by mail, seventy-two (72) hours after such communication
is deposited in the United States mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Bank under
Article 2 shall not be effective until received.
SECTION ▇.▇.▇▇ Waivers
No failure or delay by the Bank in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 8.3.Expenses; Documentary Taxes
The Borrower shall pay (i) all out-of-pocket expenses of the Bank,
including fees and disbursements of special counsel for the Bank, in connection
with the preparation of this Agreement and the other Loan Documents, any waiver
or consent hereunder or thereunder or any amendment hereof or thereof or any
Default or alleged Default hereunder or thereunder and (ii) if a Default occurs,
all out-of-pocket expenses incurred by the Bank, including fees and
disbursements of counsel (including a reasonable allocation of the cost of
internal counsel), in connection with such Default and collection and other
enforcement proceedings resulting therefrom, including out-of-pocket expenses
incurred in enforcing this Agreement, the Note and other Loan Documents. The
Borrower shall indemnify the Bank against any transfer taxes, documentary taxes,
assessments or charges made by any Authority by reason of the execution and
delivery of this Agreement, the Note or the other Loan Documents.
SECTION 8.4.Indemnification
The Borrower shall indemnify the Bank and each affiliate thereof and their
respective directors, officers, employees and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims or damages to which
any of them may become subject, insofar as such losses, liabilities, claims or
damages arise out of or result from any actual or proposed use by the Borrower
of the proceeds of any extension of credit by the Bank hereunder or breach by
the Borrower of this Agreement, the Note or any other Loan Document or from any
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Borrower shall
reimburse the Bank, and each affiliate thereof and their respective directors,
officers, employees and agents, upon demand for any expenses (including, without
limitation, legal fees) incurred in connection with any such investigation or
proceeding; but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified. The indemnification provisions (including, without
limitation, provisions for default interest, to the extent that this Section 8.4
might be construed as duplicating the Borrower's obligation to pay interest at
the Default Rate as required elsewhere in this Agreement) set forth in this
Section 8.4 are meant to be without duplication of any other indemnification
provisions set forth in this Agreement.
SECTION 8.5.Amendments and Waivers
Any provision of this Agreement, the Note or any other Loan Documents may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed by the Borrower and the Bank.
35
SECTION 8.6.Successors and Assigns
8.6.1. The provisions of this Agreement shall be binding upon and insure to
the benefit of the parties hereto and their respective successors and assigns;
provided that the Borrower may not assign or otherwise transfer any of its
rights under this Agreement.
8.6.2 The Bank may, without the consent of the Borrower, at any time sell
to one or more Persons (each a "Participant") participating interests in any
Revolving Loan, the Note, the Commitment hereunder or any other interest of the
Bank hereunder. In the event of any such sale by the Bank of a participating
interest to a Participant, the Bank's obligations under this Agreement shall
remain unchanged, the Bank shall remain solely responsible for the performance
thereof, the Bank shall remain the holder of the Note for all purposes under
this Agreement, and the Borrower shall continue to deal solely and directly with
the Bank in connection with the Bank's rights and obligations under this
Agreement. The Bank, if it sells a participating interest in the Revolving Loan,
Note, Commitment or other interest under this Agreement, shall, within ten (10)
Domestic Business Days of such sale, provide the Borrower with written
notification stating that such sale has occurred and identifying the Participant
and the interest purchased by such Participant. The Bank and the Borrower agree
that each Participant shall be entitled to the benefits of Article 7 with
respect to its participation in Revolving Loans outstanding from time to time,
but only to the extent that the Bank would have been entitled thereto pursuant
to the terms of this Agreement.
8.6.3. The Bank may at any time assign to one or more banks or financial
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Note, and such Assignee
shall assume all such rights and obligations.
8.6.4. Subject to the provisions of Section 8.7, the Borrower authorizes
the Bank to disclose to any Participant, Assignee or other transferee (each a
"Transferee") and any prospective Transferee any and all information in the
Bank's possession concerning the Borrower which has been delivered to the Bank
by the Borrower pursuant to this Agreement or which has been delivered to the
Bank by the Borrower in connection with the Bank's credit evaluation prior to
entering into this Agreement.
8.6.5. No Transferee shall be entitled to receive any greater payment under
Section 7.3 than the Bank would have been entitled to receive with respect to
the rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 7.2 or 7.3 requiring
the Bank to designate a different Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
SECTION 8.7.Confidentiality
The Bank agrees to exercise its best efforts (and, in any event, with at
least the same degree of care as it ordinarily exercises with respect to
confidential information of its other customers) to keep any information
delivered or made available by the Borrower to it, including, without
limitation, information obtained by the Bank by reason of a visit or
investigation by any Person contemplated in Section 5.2, confidential from any
one other than persons employed or retained by the Bank who are or are expected
to become engaged in evaluating, approving, structuring or administering the
Revolving Loans; provided, however that nothing herein shall prevent the Bank
from disclosing such information (i) upon the order of any court or
administrative agency, (ii) upon the request or demand of any regulatory agency
or authority having jurisdiction over the Bank, (iii) which has been publicly
disclosed other than by an act or omission of the Bank except as permitted
herein, (iv) to the extent reasonably required in connection with any litigation
(with respect to this Agreement, any of the other Loan Documents, in connection
with any of the foregoing, or any other obligations of the Borrower or any
36
Subsidiary owing to the Bank) to which the Bank or its Affiliates may be a
party, (v) to the extent reasonably required in connection with the exercise of
any remedy hereunder, (vi) to the Bank's legal counsel and independent auditors
and (vii) to any actual or proposed Participant, Assignee or other Transferee of
all or part of its rights hereunder which has agreed in writing to be bound by
the provisions of this Section 8.7.
SECTION 8.8.GEORGIA LAW
THIS AGREEMENT, EACH NOTE AND EACH OTHER LOAN DOCUMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF GEORGIA.
SECTION 8.9.Interpretation
No provision of this Agreement or any of the other Loan Documents shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or dictated such provision.
SECTION 8.10.CONSENT TO JURISDICTION
THE BORROWER AND THE BANK IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE
PERSONAL JURISDICTION IN THE STATE OF GEORGIA, THE COURTS THEREOF AND THE UNITED
STATES DISTRICT COURTS SITTING THEREIN, FOR THE ENFORCEMENT OF THIS AGREEMENT,
THE NOTE AND THE OTHER LOAN DOCUMENTS, (B) WAIVE ANY AND ALL PERSONAL RIGHTS
UNDER THE LAW OF ANY JURISDICTION TO OBJECT ON ANY BASIS (INCLUDING, WITHOUT
LIMITATION, INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE WITHIN THE STATE OF
GEORGIA FOR THE PURPOSE OF LITIGATION TO ENFORCE THIS AGREEMENT, THE NOTE OR THE
OTHER LOAN DOCUMENTS, AND (C) AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT
IN THE MANNER PRESCRIBED IN SECTION 8.1 FOR THE GIVING OF NOTICE TO THE
BORROWER. NOTHING HEREIN CONTAINED, HOWEVER, SHALL PREVENT THE BANK FROM
BRINGING ANY ACTION OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST
THE BORROWER PERSONALLY, AND AGAINST ANY ASSETS OF THE BORROWER, WITHIN ANY
OTHER STATE OR JURISDICTION.
SECTION 8.11.Counterparts
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
SECTION 8.12.Survival
All representations, warranties and covenants made herein shall survive the
execution and delivery of all of the Loan Documents. The terms and provisions of
this Agreement shall continue in full force and effect until the payment of the
Note and termination of the Commitment.
SECTION 8.13.Entire Agreement: Amendment; Severability
This Agreement shall constitute the entire agreement among the parties
hereto with respect to the subject matter hereof. Neither this Agreement nor any
provision hereof may be changed, waived, discharged, modified or terminated
orally, but only by an instrument in writing in accordance with Section 8.5. If
any provision of any of the Loan Documents or the application thereof to any
party thereto or circumstances shall be invalid or unenforceable to any extent,
the remainder of such Loan Documents and the application of such provisions to
any other party thereto or circumstances shall not be affected thereby and shall
be enforced to the greatest extent permitted by law.
SECTION 8.14.TIME OF THE ESSENCE
TIME IS OF THE ESSENCE IN THIS AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS.
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SECTION 8.15.Arbitration
Upon demand of any party hereto, whether made before or after institution
of any judicial proceeding, any dispute, claim or controversy arising out of,
connected with, or relating to this Agreement and other Loan Documents
("Disputes") between or among parties to this Agreement shall be resolved by
binding arbitration as provided herein. Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration hereunder.
Disputes may include, without limitation, tort claims, counterclaims, disputes
as to whether a matter is subject to arbitration, claims brought as class
actions, claims arising from Loan Documents executed in the future, or claims
arising out of or connected with the transaction reflected by this Agreement.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of
Lender first stated above is located. The expedited procedures set forth in Rule
51 et seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the estate where the hearing will be conducted or if such person is not
available to serve, the single arbitrator may be a licensed attorney.
Notwithstanding the foregoing, this arbitration provision does not apply to
disputes under or related to swap agreements.
SECTION 8.16.Preservation and Limitation of Remedies
Notwithstanding the preceding binding arbitration provisions, Bank and
Borrower agree to preserve, without diminution, certain remedies that any party
hereto may employ or exercise freely, independently or in connection with an
arbitration proceeding or after an arbitration action is brought. Bank and
Borrower shall have the right to proceed in any court of proper jurisdiction or
by self-help to exercise or prosecute the following remedies, as applicable; (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale granted under Loan Documents or under applicable
law or by judicial foreclosure and sale, including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute.
Bank and Borrower agree that they shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
SECTION ▇.▇▇.▇▇▇▇ Not a Joint Venturer
Neither this Agreement nor any agreements, instruments, documents or
transactions contemplated hereby (including the Loan Documents), shall in any
respect be interpreted, deemed or construed as making the Bank a partner or
joint venturer with the Borrower or as creating any similar relationship or
entity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, by their respective authorized officers, as of the
day and year first above written.
"BORROWER"
APPLE SOUTH, INC. (SEAL)
By:
Title:______________________________
Attest:
Title:_______________________________
Apple South, Inc.
Corporate Headquarters
▇▇▇▇▇▇▇ at Washington
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Financial Officer
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
"BANK"
FIRST UNION NATIONAL BANK
By:
Title:
Lending Office:
First Union National Bank
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Georgia Corporate Banking
Telecopier Number: 404/225-4255
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