3. TERM LOAN. New Section 2(c) is hereby added to the Agreement as follows:
| | c. | The Term Loan. The Bank shall make a term loan (the "Term Loan") to the Company contemporaneously with the execution of the Fourth Amendment on the following terms and subject to the following conditions: |
| | (i) | Amount. The original principal amount of the Term Loan shall be Twenty Million and 00/100 Dollars ($20,000,000.00). |
| | (ii) | The Term Note. The obligation of the Company to repay the Term Loan will be evidenced by a Promissory Note in the form of Exhibit "B" attached to the Fourth Amendment (the "Term Note"). The principal of the Term Loan shall be repayable in equal quarterly installments of $1,000,000.00 each, together with accrued interest thereon, which shall be due and payable commencing on May 15, 2011, and continuing on the fifteenth (15th) day of each August, November, February, and May thereafter until February 15, 2016, on which date the entire unpaid principal balance of the Term Loan shall be due and payable together with all accrued and unpaid interest. The principal of the Term Loan may be prepaid at any time in whole or in part; provided, that any partial prepayment shall be in an amount which is an integral multiple of $10,000.00 and, provided further, that all partial prepayments shall be applied to the latest maturing installments of principal payable under the Term Loan in inverse order of maturity. |
| | (iii) | Interest on the Term Loan. Except as otherwise provided below in this Section 2(c)(iii), the unpaid principal balance from time to time of the Term Loan shall bear interest from the date the Loan is made prior to the maturity of the Term Note at the LIBOR-based Rate. After maturity, whether scheduled maturity or maturity by virtue of acceleration on account of the occurrence of an Event of Default, interest shall accrue on the Term Loan at a rate per annum equal to three percent (3%) above the otherwise applicable rate of interest and shall be due and payable as accrued and without demand. Prior to maturity, accrued interest shall be due and payable on the fifteenth (15th) day of each August, November, February, and May commencing on May 15, 2011, and at maturity, in addition to the payments of principal due on such dates. After maturity, interest shall be due and payable as accrued and without demand. At any time the LIBOR-based Rate is unavailable for any of the reasons set forth in Section 2(b)(i) herein, prior to maturity, then the applicable rate of interest under the Term Loan prior to maturity shall be the sum of the Prime Rate plus one percent (1%) per annum. |
| | (iv) | Use of Proceeds of the Term Loan. The proceeds of the Term Loan shall be used in their entirety to term out and fix the interest rate on a portion of the Revolving Loan as of the date of the Fourth Amendment. |
4. BREAK FUNDING PAYMENTS AND LIBOR ROUNDING. New Sections 2(b)(i)(C) and 2(b)(vi) are hereby added to the Agreement as follows:
| | C. | In the event of the prepayment of any principal of the Term Loan on any day other than on the last day of an Interest Period for the LIBOR-based Rate applicable thereto (including as a result of an Event of Default), then, in any such event, the Company shall compensate the Bank for the loss, cost and expense attributable to such event, which loss, cost or expense to the Bank shall be deemed to include an amount determined by the Bank to be the excess, if any, of: (I) the amount of interest which would have accrued on the principal amount of the Term Loan had such event not occurred, at the LIBOR-based Rate that would have been applicable to the Term Loan, for the period from the date of such event to the last day of the then current Interest Period therefor, over (II) the amount of interest which would accrue on such principal amount for such period at the interest rate which the Bank would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of the Bank setting forth any amount or amounts that the Bank is entitled to receive pursuant to this provision shall be delivered to the Company and shall be conclusive absent manifest error. The Company shall pay the Bank the amount shown as due on any such certificate within 10 days after receipt thereof. |
(vi) Rounding and Rate Management Obligations. Notwithstanding anything contained herein to the contrary, at any time during which a Rate Management Agreement is then in effect with respect to a Loan, the provisions contained therein dealing with the rounding up of the London Interbank Offered Rate to the nearest 1/16 of 1% shall be disregarded and no longer of any force or effect.
5. FINANCIAL COVENANTS. Sections 5(g) of the Agreement is hereby amended and restated in its entirety as follows:
| | g. | Financial Covenants. The Company shall observe, on a consolidated basis with the Consolidated Entities, each of the following financial covenants: |
| | (i) | Fixed Charge Coverage Ratio. As of the end of each FCCR Test Period (as hereinafter defined), the Consolidated Entities shall maintain a Fixed Charge Coverage Ratio (as hereinafter defined) of greater than or equal to 1.75 to 1.00. For purposes of this covenant, the phrase “Fixed Charge Coverage Ratio” means, determined for the Consolidated Entities, the ratio of: (A) EBITDA, plus rent and operating lease expense, less capital expenditures (other than capital expenditures financed with the proceeds of purchase money Indebtedness or capital leases to the extent permitted hereunder), and other extraordinary items for FCCR Test Period then ending, to (B) the consolidated sum of (i) interest expense, and all scheduled principal payments with respect to Indebtedness that were paid or were due and payable by all Consolidated Entities during the FCCR Test Period, plus rent and operating lease expense incurred and all cash taxes paid during the FCCR Test Period. For purposes hereof, the term “FCCR Test Period” means each period of four (4) consecutive fiscal quarters ending at the end of each fiscal quarter, commencing with the fiscal quarter ending in March, 2011. |
| | (ii) | Total Liabilities to Tangible Net Worth Ratio. As of the end of each fiscal quarter, commencing with the fiscal quarter ending in March, 2011, the Consolidated Entities shall maintain a ratio of Total Liabilities to Tangible Net Worth at not more than 2.25 to 1.00. For purposes of testing compliance with this covenant, the entire committed principal amount of the Revolving Loan shall be deemed to be outstanding as of the date of determination regardless of the actual outstanding principal balance of the Revolving Loan at such time. |
| | (iii) | Minimum Tangible Net Worth. Effective as of the date of the Fourth Amendment, the Consolidated Entities shall maintain a Tangible Net Worth at all times of not less than that shown in the table below for the corresponding period: |
| Period | Ratio |
| | |
At February 15, 2011, until fiscal year end September, 2011 | $150,000,000.00 |
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at fiscal year end September, 2011, until fiscal year end September, 2012 | $140,000,000.00 |
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at fiscal year end September, 2012, until fiscal year end September, 2013 | $120,000,000.00 |
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at fiscal year end September, 2013, and at all times thereafter | $100,000,000.00 |
| | (iv) | Ratio of Funded Indebtedness to EBITDA. For each period of four (4) consecutive fiscal quarters commencing with the period of four (4) consecutive fiscal quarters ending in March, 2011, the Consolidated Entities shall maintain the ratio of Funded Indebtedness to EBITDA at not greater than 2.50 to 1.00. For purposes hereof, the term “Funded Indebtedness” means: (A) Indebtedness (I) in respect of money borrowed, or (II) evidenced by a note, debenture (senior and subordinated) or other like written obligation to pay money, or (III) in respect of the rent or hire of property under leases or lease arrangements which under GAAP are required to be capitalized, or (IV) in respect of obligations under conditional sales or other title retention agreements, and Funded Indebtedness shall include all such senior Indebtedness and all capitalized leases. |
6. PARENT’S ANNUAL STATEMENTS. A new Section 5(b)(ix) is hereby added to the Agreement as follows:
| | (i) | Parent’s Annual Statements. As soon as available and in any event within one hundred twenty (120) days after the close of each fiscal year, consolidated financial statements of the Parent for such fiscal year prepared and presented in accordance with GAAP (except for changes in which the independent accountants of the Parent concur) in each case setting forth in comparative form corresponding figures for the preceding fiscal year, together with the audit report, unqualified as to scope, of independent certified public accountants approved by the Bank, which approval shall not be unreasonably withheld, together with the management letter, if any, issued by such independent certified public accountants. |
7. EVENTS OF DEFAULT. New Section 8(h) is hereby added to the Agreement as follows:
h. Default on Rate Management Obligations. Nonpayment by the Company of any Rate Management Obligation when due, or the breach or default by the Company of any term, provision or condition contained in any Rate Management Agreement.
8. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter into this Amendment, the Company affirms that the representations and warranties contained in the Agreement are correct as of the date of this Amendment, except that (i) they shall be deemed to also refer to this Amendment as well as all documents named herein and, (ii) Section 3(d) of the Agreement shall be deemed also to refer to the most recent audited and unaudited financial statements of the Consolidated Entities delivered to the Bank.
9. EVENTS OF DEFAULT. The Company certifies to the Bank that no Event of Default or Unmatured Event of Default under the Agreement, as amended by this Amendment, has occurred and is continuing as of the date of this Amendment.
10. CONDITIONS PRECEDENT. As conditions precedent to the effectiveness of this Amendment, the Bank shall have received the following contemporaneously with execution and delivery of this Amendment, each duly executed, dated and in form and substance satisfactory to the Bank:
| | (i) | This Amendment duly executed by the Company and the Bank. |
| | (ii) | The Revolving Note in the form attached hereto as Exhibit "A" duly executed by the Company. |
| | (iii) | The Term Note in the form attached hereto as Exhibit "B" duly executed by the Company. |
| | (iv) | The Reaffirmation of Guaranty Agreement in the form attached hereto as Exhibit "C" duly executed by Steak n Shake Enterprises, Inc. |
| | (v) | The Reaffirmation of Guaranty Agreement in the form attached hereto as Exhibit "D" duly executed by Steak n Shake, LLC. |
| | (vi) | Resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance, respectively, of this Amendment, the Revolving Note, the Term Note, and all other Loan Documents provided for in this Amendment to which the Company is a party, certified by the Secretary of the Board of Directors of the Company as being in full force and effect and duly adopted as of the date of this Amendment. |
| | (vii) | The Certificate of the Secretary of the Board of Directors of the Company certifying the names of the officer or officers authorized to execute this Amendment, the Revolving Note, the Term Note, and all other Loan Documents provided for in this Amendment to which the Company is a party, together with a sample of the true signature of each such officer, dated as of the date of this Amendment. |
| | (viii) | Resolutions of the Board of Directors of Steak n Shake Enterprises, Inc. authorizing the execution, delivery and performance, respectively, of its Reaffirmation of Guaranty Agreement and the other Loan Documents provided for in this Amendment to which Steak n Shake Enterprises, Inc. is a party, certified by the Secretary of the Board of Directors of Steak n Shake Enterprises, Inc. as being in full force and effect and duly adopted as of the date of this Amendment. |
| | (ix) | The Certificate of the Secretary of the Board of Directors of Steak n Shake Enterprises, Inc. certifying the names of the officer or officers authorized to execute of its Reaffirmation of Guaranty Agreement and all other Loan Documents provided for in this Amendment to which Steak n Shake Enterprises, Inc. is a party, together with a sample of the true signature of each such officer, dated as of the date of this Amendment. |
| | (x) | Resolutions of the Board of Directors of Steak n Shake Operations, Inc., the sole member of Steak n Shake, LLC, authorizing the execution, delivery and performance, respectively, of the Reaffirmation of Guaranty Agreement to be executed by Steak n Shake, LLC and all other Loan Documents provided for in this Amendment to which Steak n Shake, LLC is a party, certified by the Secretary of the Board of Directors of Steak n Shake Operations, Inc. as being in full force and effect and duly adopted as of the date of this Amendment. |
| | (xi) | Such other documents as the Bank may reasonably request. |
11. PRIOR AGREEMENTS. The Agreement, as amended by this Amendment, supersedes all previous agreements and commitments made or issued by the Bank with respect to the Loans and all other subjects of this Amendment, including, without limitation, any oral or written proposals which may have been made or issued by the Bank.
12. EFFECT OF AMENDMENT. The provisions contained herein shall serve to supplement and amend the provisions of the Agreement. To the extent that the terms of this Amendment conflict with the terms of the Agreement, the provisions of this Amendment shall control in all respects.
13. REAFFIRMATION. Except as expressly amended by this Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect as originally written and as previously amended.
14. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be an original and all of which when taken together shall be one and the same agreement.
IN WITNESS WHEREOF, the Company and the Bank have executed and delivered this Fourth Amendment Credit Agreement in Indiana by their respective duly authorized officers as of February 15, 2011.
STEAK N SHAKE OPERATIONS, INC., an Indiana corporation |
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| By: | |
| | Sardar Biglari, Chairman and Chief Executive Officer |
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FIFTH THIRD BANK, an Ohio banking corporation, successor by merger to Fifth Third Bank, a Michigan banking corporation |
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| By: | |
| | William J. Krummen, Vice President |
SCHEDULE OF EXHIBITS
| | Exhibit "A" | - | Promissory Note (Revolving Note)($30,000,000.00)(Steak n Shake Operations, Inc.) |
| | Exhibit “B” | - | Promissory Note (Term Note)($20,000,000.00)(Steak n Shake Operations, Inc.) |
| | Exhibit “C” | - | Reaffirmation of Guaranty Agreement (Steak n Shake Enterprises, Inc.) |
| | Exhibit "D" | - | Reaffirmation of Guaranty Agreement (Steak n Shake, LLC) |
