1
Exhibit 10-77
2
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement dated as of 11/20, 1992, is
between Bank of America National Trust and Savings Association (the "Bank") and
Carl Karcher Enterprises, Inc. (the "Borrower").
Recitals
Whereas, Bank and Borrower have entered into that certain Credit Agreement
dated as of December 15, 1989, as amended (collectively, the Agreement"); and
Whereas, Bank and Borrower desire to amend and restate in its entirety the
terms and provisions of the Agreement as herein provided.
Agreed
Now, Therefore, in consideration of the foregoing recitals, Borrower and Bank
mutually agree to amend and restate in its entirety the Agreement as follows:
1. LINE OF CREDIT AMOUNT
1.1 Line of Credit Amount.
(a) During the availability period described below, the Bank will provide
a line of credit to the Borrower. The initial amount of the line of credit
(the "Commitment") is Thirty Million Dollars ($30,000,000); provided however,
that on the first day of each calendar month following each fiscal quarter
("Commitment Reduction Date") set forth below the Commitment shall be reduced
to the amount shown opposite such date.
Commitment Commitment
Reduction Date Reduced to:
-------------- -----------
February 1, 1993 $29,000,000
June 1, 1993 $28,000,000
September 1, 1993 $27,000,000
December 1, 1993 $26,000,000
February 1, 1994 $25,000,000
June 1, 1994 $24,000,000
(b) This is a revolving line of credit with a within line facility for
letters of credit. During the availability period, the Borrower may repay
principal amounts and reborrow them.
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(c) Each advance must be for at least One Hundred Thousand Dollars
($100,000), or for the amount of the remaining available line of credit, if
less.
(d) The Borrower agrees not to permit at any time the outstanding
principal balance of the line of credit plus the outstanding amounts of any
letters of credit, including amounts drawn on letters of credit and not yet
reimbursed to exceed the Commitment. If such outstandings exceed the
Commitment, the Borrower will immediately pay the excess to the Bank upon the
Bank's demand.
1.2 Availability Period. The line of credit is available between the date
of this Agreement and June 30, 1994 (the "Expiration Date") unless the
Borrower is in default.
1.3 Interest Rate
(a) Unless the Borrower elects an optional interest rate as described
below, the interest rate is the Bank's Reference Rate plus .25 percentage
points.
(b) The Reference Rate is the rate of interest publicly announced from
time to time by the Bank in San Francisco, California, as its Reference Rate.
The Reference Rate is set by the Bank based on various factors, including the
Bank's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans. The Bank
man price loans to its customers at, above, or below the Reference Rate. Any
change in the Reference Rate shall take effect at the opening of business on
the day specified in the public announcement of a change in the Bank's
Reference Rate.
1.4 Repayment Terms
(a) The Borrower will pay interest on January 1, 1993, and then monthly
thereafter until payment in full of any principal outstanding under this line
of credit.
(b) The Borrow will repay in full all principal and any unpaid interest
or other charges outstanding under this line of credit no later than the
Expiration Date. Any amount bearing interest at an optional interest (as
described below) may be repaid at the end of the applicable interest period,
which shall be no later than the Expiration Date.
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1.5 Optional Interest Rates. Instead of the interest rate based on the
Bank's Reference Rate, the Borrower may elect to have all or portions of the
line of credit (during the availability period) bear interest at the rate
described below during an interest period agreed to by the Bank and the
Borrower. Each interest rate is a rate per year. Interest will be paid on
the first day of every month and on the last day of each interest period. At
the end of any interest period, the interest rate will revert to the rate
based on the Reference Rate, unless the Borrower has designated another
optional interest rate for the portion.
1.6 Offshore Rate. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the greater of (i)
Offshore Rate plus 1.50 percentage points and (ii) the sum of the Reference
Rate plus .25 percentage points, minus .75 percentage points.
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in effect
will be no shorter than 30 days and no longer than six months. The last day
of the interest period will be determined by the Bank using the practices of
the offshore dollar inter-bank market.
(b) Each Offshore Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(c) The "Offshore Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the first day
of the interest period.)
Offshore Rate = Grand Cayman Rate
(1.00 - Reserve Percentage)
Where,
(i) "Grand Cayman Rate" means the interest rate (rounded upward to the
nearest 1/16th of one percent) at which the Bank's Grand Cayman Branch,
Grand Cayman, British West Indies, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the offshore dollar
inter-bank market.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member banks
of the Federal Reserve System for Eurocurrency Liabilities, as defined
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in Federal Reserve Board Regulation D, rounded upward to the nearest 1/100
of one percent. The percentage will be expressed as a decimal, and will
include, but not be limited to, marginal, emergency, supplemental, special,
and other reserve percentages.
(d) The Borrower may not elect an Offshore Rate with respect to any
portion of the principal balance of the line of credit which is scheduled to
be repaid before the last day of the applicable interest period.
(e) Any portion of the principal balance of the line of credit already
bearing interest at the Offshore Rate will not be converted to a different
rate during its interest period.
(f) Each prepayment of an Offshore Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee equal to the
amount (if any) by which
(i) the additional interest which would have been payable on the amount
prepaid had it not been paid until the last day of the interest period,
exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the offshore dollar market for a
period starting on the date on which it was prepaid and ending on the last
day of the interest period for such portion.
(g) The Bank will have no obligation to accept an election for an
Offshore Rate portion if any of the following described events has occurred
and is continuing
(i) Dollar deposits in the principal amount, and for periods equal to
the interest period, of an Offshore Rate portion are not available in the
offshore Dollar inter-bank market; or
(ii) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
1.7 Letters of Credit. This line of credit may be used for financing
standby letters of credit with a maximum maturity of 365 days but not to
extend more than 180 days beyond the Expiration Date. The amount of letters
of credit outstanding at any one time (including amounts drawn on letters of
credit and not yet reimbursed) may not exceed Five Hundred Thousand Dollars
($500,000).
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The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the
Bank, be added to the principal amount outstanding under this Agreement. The
amount will bear interest and be due as described elsewhere in this
Agreement.
(b) if there is a default under this Agreement, to immediately prepay and
make the Bank whole for any outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval and must be in form and
content satisfactory to the Bank and in favor of a beneficiary acceptable to
the Bank.
(d) to sign the Bank's form Application and Agreement for Standby Letter
of Credit.
(e) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit for the
Borrower.
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
(g) if the line of credit is terminated for any reason, Borrower will
immediately deliver to the Bank as collateral, cash or cash equivalents
acceptable to the Bank, in the amount of all outstanding letters of credit
(including amounts drawn on letters of credit and not yet reimbursed),
together with such security agreements as Bank may require.
2. FEES AND EXPENSES
2.1 Waiver Fee. If the Bank, at its discretion, agrees to waive or amend
any terms of this Agreement, then the Borrower will pay the Bank a fee for
each waiver or amendment. Nothing in this paragraph shall imply that the
Bank is obligated to agree to any waiver or amendment requested by the
Borrower. The Bank may impose additional requirements as a condition to any
waiver or amendment.
2.2 Expenses.
(a) The Borrower agrees to reimburse the Bank for any expenses it incurs
in the preparation of this Agreement and any agreement or instrument required
by this Agreement.
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Expenses include, but are not limited to, reasonable attorneys' fees,
including any allocated costs of the Bank's in-house counsel.
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 Requests for Credit. Each request for an extension of credit will be
made in writing in a manner acceptable to the Bank, or by another means
acceptable to the Bank.
3.2 Disbursements and Payments. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank
from time to time;
(b) made for the account of the Bank's branch selected by the Bank from
time to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrower to sign one or more promissory notes.
3.3 Telephone Authorization
(a) The Bank may honor telephone instructions for advances or repayments
or for the designation of optional interest rates given by any one of the
individual signer(s) of this Agreement or a person or persons authorized by
any one of the signer(s) of this Agreement.
(b) Advances will be deposited in and repayments will be withdrawn from
the Borrower's account number 14585-20411, or such other accounts with the
Bank as designated in writing by the Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone instructions it reasonably
believes are made by a signer of this Agreement or a person authorized by a
signer. This indemnity and excuse will survive this Agreement's termination.
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3.4 Direct Debit (Pre-Billing).
(a) The Borrower agrees that the Bank will debit the Borrower's
deposit account number 14585-20411 (the "Designated Account") on the date
each payment of principal and interest from the Borrower becomes due
(the "Due Date"). If the Due Date is not a banking day, the Designated
Account will be debited on the next banking day.
(b) Approximately 5 days prior to each Due Date, the Bank will mail
to the Borrower a statement of the amounts of principal and interest
that will be due on that Due Date (the "Billed Amount"). The calculation
will be made on the assumption that no new extensions of credit or
payments will be made between the date of the billing statement and the
Due Date, and that there will be no changes in the applicable interest rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount of principal due and interest accrued
(collectively, the "Accrued Amount"). If the Billed Amount debited to the
Designated Account differs from the Accrued Amount, the discrepancy will be
treated as follows:
(i) If the Billed Amount is less than the Accrued Amount, the
Billed Amount for the following Due Date will be increased by the
amount of the discrepancy. The Borrower will not be in default by
reason of any such discrepancy.
(ii) If the Billed Amount is more than the Accrued Amount, the
Billed Amount for the following Due Date will be decreased by the
amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue based
on the actual amount of principal outstanding without compounding. The Bank
will not pay the Borrower interest on any overpayment.
(d) The Borrower will maintain sufficient funds in the Designated
Account to cover each debit. If there are insufficient funds in the
Designate Account on the date the Bank enters any debit authorized by this
Agreement, the debit will be reversed.
3.5 Banking Days. Unless otherwise provided in this Agreement, a banking
day is a day other than a Saturday or a Sunday on which the Bank is open for
business in California. For amounts bearing interest at an offshore rate (if
any), a banking day is a day other than a Saturday or a Sunday on which the
Bank is open for
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business in California and dealing in offshore dollars. All payments and
disbursements which would be due on a day which is not a banking day will be
due on the next banking day. All payments received on a day which is not a
banking day will be applied to the credit on the next banking day.
3.6 Additional Costs. The Borrower will pay the Bank, on demand, for the
Bank's costs or losses arising from any statute or regulation, or any request
or requirement of a regulatory agency which is applicable to all national
banks or a class of all national banks. The costs and losses will be
allocated to the loan in a manner determined by the Bank, using any
reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
3.7 Interest Calculation. Except as otherwise stated in this Agreement,
all interest and fees, if any, will be computed on the basis of a 360-day
year and the actual number of days elapsed. This results in more interest or
a higher fee than if a 365-day year is used.
3.8 Interest on Late Payments. At the Bank's sole option in each
instance, any amount not paid when due under this Agreement (including
interest) shall bear interest from the due date at the Bank's Reference Rate
plus 2 percentage points. This may result in compounding of interest.
3.9 Default Rate. Upon the occurrence and during the continuation of
any default under this Agreement, advances under this Agreement will at the
option of the Bank bear interest at a rate per annum which is 2 percentage
points higher than the rate of interest otherwise provided under this
Agreement. This will not constitute a waiver of any default.
4. CONDITIONS
The Bank must receive the following items, in form and content acceptable to
the Bank, before it is required to extend any credit to the Borrower under
this Agreement:
4.1 Authorizations. Evidence that the execution, delivery and performance
by the Borrower of this Agreement and any instrument or agreement required
under this Agreement have been duly authorized.
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4.2 Other Items. Any other items that the Bank reasonably requires.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a renewed representation:
5.1 Organization of Borrower. The Borrower is a corporation duly formed
and existing under the laws of the state where organized.
5.2 Authorization. This Agreement, and any instrument or agreement
required hereunder, are within the Borrower's powers, have been duly
authorized, and do not conflict with any of its organizational papers.
5.3 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance
with its terms, and any instrument or agreement required hereunder, when
executed and delivered, will be similarly legal, valid, binding and
enforceable.
5.4 Good Standing. In each state in which the borrower does business, it
is properly licensed, in good standing, and, where required, in compliance
with fictitious name statutes.
5.5 No Conflicts. This Agreement does not conflict with any law,
agreement, or obligation by which the Borrower is bound.
5.6 Financial Information. All financial and other information that has
been or will be supplied to the Bank, is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's financial condition.
(b) in form and content required by the Bank.
(c) in compliance with all government regulations that apply.
5.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been
disclosed in writing to the Bank.
5.8 Permits, Franchises. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required
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and all trademark rights, trade name rights, patent rights and fictitious
name rights necessary to enable it to conduct the business in which it is now
engaged.
5.9 Other Obligations. The Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material
lease, commitment, contract, instrument or obligation, except as have been
disclosed in writing to the Bank.
5.10 Income Tax Returns. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year, except as have
been disclosed in writing to the Bank.
5.11 No Event of Default. There is no event which is, or with notice or
lapse of time or both would be, a default under this Agreement.
5.12 ERISA Plans.
(a) The Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan
and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code, and has not incurred any
liability with respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or withdraw from any Plan
has been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan under
Section 4042 of ERISA, and no event has occurred or condition exists which
might constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes of
this Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(ii) "ERISA" means the Employee Retirement Income Act of 1974, as
amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
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(iv) "Plan" means any employee pension benefit plan maintained or
contributed to by the Borrower and insured by the Pension Benefit Guaranty
Corporation under Title IV of ERISA.
6. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
6.1 Use of Proceeds. To use the proceeds of the initial advance only for
the repayment of term note #00-00-0035-6 and term note #00-00- 0036-4 in
favor of Bank, and use all other proceeds of the credit for working capital,
restaurant development costs and for other general corporate purposes.
6.2 Financial Information. To provide the following financial information
and statements and such additional information as requested by the Bank from
time to time:
(a) Within 100 days of the Borrower's fiscal year end, the Borrower's
annual financial statements. These financial statements must be audited
(with an unqualified opinion) by a Certified Public Accountant ("CPA")
acceptable to the Bank.
(b) Within 50 days of each fiscal quarter end, the Borrower's
quarterly financial statements. These financial statements may be
Borrower prepared.
(c) Within 30 days after the end of each four (4) week operating
period, a copy of Borrower's prepared summary operating statement describing
variances from the business plan required under Paragraph 6.2(f) the causes
of such variances, and their projected impact on Borrower's operations.
(d) Copies of the Borrower's Form 10-K Annual Report within 100 days
of Borrower's fiscal year end, Form 10-Q Quarterly Report within 50 days of
the end of each fiscal quarter, and Form 8-K Current Report within 15 days
after the date of filing with the Securities and Exchange Commission.
(e) Within 30 days of each period's end, the Borrower's property
and/or building for sale or leaseback report in form acceptable to Bank.
(f) Within 10 days of each fiscal year end, Borrower's financial
forecast by fiscal quarter for the next fiscal year, and on a fiscal year
end basis for the following
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four fiscal years. Financial forecast to include balance sheet, operating
statement (including components of other income), operating cash flow
statement, and a schedule showing compliance with all financial covenants;
and for the immediately succeeding fiscal year, a detailed capital budget
report.
(g) Within 50 days of the end of each fiscal quarter, a report listing
all of Borrower's marketable securities and other investments, such
report to be in form acceptable to Bank.
(h) Within 50 days of the end of each fiscal quarter, a report listing
all of the Borrower's notes receivable including debtor's name, terms, due
date, balance owing, such report to be in form acceptable to Bank.
6.3 Current Ratio. To maintain a ratio of current assets to current
liabilities of at least .80:1.0.
6.4 Tangible Net Worth. As of each date indicated below, achieve and
maintain a Tangible Net Worth that is greater than the Tangible Net Worth as
of the last day of the immediately prior fiscal year as indicated below, by
at least the amount set opposite such date:
Minimum Semi-Annual increase
in Tangible Net Worth over
Date Prior Fiscal Year End
--------------- ----------------------------
August 09, 1993 $6,500,000
August 15, 1994 $6,500,000
Minimum Annual increase
in Tangible Net Worth Over
Date Prior Fiscal Year End
---------------- --------------------------
January 25, 1993 $ 9,000,000
January 31, 1994 $11,000,000
For the purposes of this Agreement, "Tangible Net Worth" means the gross book
value of the Borrower's assets (excluding goodwill, patents, trademarks,
trade names, organization expense, treasury stock, unamortized debt discount
and expense, deferred research and development costs, deferred marketing
expenses, and other like intangibles, and monies due from affiliates,
officers, directors or shareholders of the Borrower) less total liabilities,
including but not limited to accrued and deferred income taxes, and any
reserves against assets.
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6.5 Debt to Tangible Net Worth. To maintain a ratio of total liabilities
to Tangible Net Worth not exceeding the amounts indicated for each period
specified below:
Period Ratio
------ -----
August 10, 1992 2.25:1.0
through January 24, 1993
January 25, 1993 2.00:1.0
through January 30, 1994
January 31, 1994 and 1.75:1.0
thereafter
"Total liabilities" means the sum of current liabilities plus long term
liabilities.
6.6 Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio
at least equal to 1.00 to 1.00. For purposes of this Agreement, 'Fixed
Charge Coverage Ratio' means the following calculation, expressed as a ratio
for any fiscal period: (a) the difference between EBITDA and the net gain
realized on sales of fixed assets (or the sum of EBITDA and the net loss
incurred on sales of fixed assets) divided by (b) the sum of (i) interest and
tax expense, (ii) dividends paid, (iii) current portion of long-germ debt,
(iv) current portion of capital leases, and (v) the difference between (A)
the total price of fixed assets purchased and (B) the total principal amount
of loans incurred to finance such purchases and the total amount of cash
proceeds realized from any sales of fixed assets; 'EBITDA' means earnings
before interest and tax expense, depreciation, amortization, and other
non-cash charges. This ratio shall be calculated quarterly using the results
of the fiscal quarter then most recently ended and the immediately preceding
three (3) quarters together with the full current portion of long-term debt
and current portion of capital leases.
6.7 Liquidity. Maintain marketable securities and other long term
investments, valued at the lower of cost or market value, that are
unencumbered except for security interests in favor of brokers security
margin loans, that have a total market value, net of such brokers' loans, at
least equal to 70% of the sum of the outstanding principal balance of all
term debt owing by Borrower to Bank and the amount of the Commitment
hereunder through fiscal year end 1993, and, at least equal to 75% of the sum
of the outstanding principal balance of all term debt owing by Borrower to
Bank and the amount of the Commitment hereunder at all times thereafter.
6.8 Notes Receivable. Not permit the aggregate amount of all notes
receivable (including notes receivable from
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affiliates, officers, directors and shareholders of Borrower) to exceed
Thirty Million Dollars ($30,000,000).
6.9 Restaurant Property Costs. Not permit the aggregate amount of
Restaurant Property costs to exceed Fifteen Million Dollars ($15,000,000) in
any fiscal period. For the purposes of this Agreement, "Restaurant Property
Costs" means the current asset item shown as "Restaurant Property Costs to be
Reimbursed or Sold and Leased Back" on Borrower's financial statements.
6.10 Other Debts. Not to have outstanding or incur any direct or
contingent debts (other than those to the Bank), or become liable for the
debts of others without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debt and lines of credit having a maturity of one year or less
which do not exceed a total amount of Five Hundred Thousand Dollars
($500,000) outstanding at any one time.
(e) Additional debts for the acquisition or refinancing of real
property and/or equipment securing such indebtedness.
(f) Debts and contingent liabilities and leases in existence on the
date of this Agreement and disclosed in writing to the Bank.
(g) Borrower's obligations owing to the CIT Group/Equipment
Financing, Inc. under that certain Program Agreement dated as of March 9,
1992 as such agreement is in effect on the date hereof; provided, however:
(i) the total amount of all such obligations incurred in any
fiscal year of Borrower may not exceed Five Million Dollars
($5,000,000); and
(ii) the total amount of all such obligations may not exceed
Ten Million Dollars ($10,000,000).
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(h) Contingent debts not to exceed $16,000,000 in the aggregate,
including obligations under Paragraphs 6.10(f) and 6.10(g).
6.11 Other Liens. Not to create, assume, or allow any security interest or
lien (including judicial liens) on any property relating to Restaurant
Property Costs and on any other property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in
writing to the Bank.
(d) Additional purchase money security interests in personal or real
property acquired after the date of this Agreement.
(e) Lines relating to the refinancing of real property or equipment
held as long term assets.
(f) Liens on marketable securities or long term investments securing
brokers margin loans.
6.12 Capital Leases. Not to permit the aggregate payments due in any
fiscal year under all capital leases incurred as a result of sale/leaseback
transactions to exceed Two Million Dollars ($2,000,000).
6.12 Stock Redemption. Nor to expend funds for the redemption of capital
stock of the Borrow in excess of Two Million Dollars ($2,000,000) in any
fiscal year, provided, however, that Borrower shall not redeem any of such
stock unless (a) after giving effect to any such redemption Borrower will be
in compliance with all financial covenants under this Agreement; (b) in any
fiscal quarter in which Borrower redeems its stock, Borrower agrees to sell
so many of its marketable securities such that the total sales price thereof
equals or exceeds the price of the stock redeemed; and (c) in the fiscal
quarter immediately preceding any such redemption Borrower's net after-tax
income less any gains resulting from the sale of assets is not less than the
following amounts for the periods indicated:
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Fiscal Quarter Ending Amount
--------------------- ------
August 10, 1992 $4,500,000
November 2, 1992 2,000,000
January 25, 1993 2,000,000
May 17, 1993 3,500,000
August 9, 1993 2,000,000
November 1, 1993 3,500,000
January 31, 1994 2,000,000
6.14 Operating Profit. Maintain an Operating Profit for each fiscal
quarter. For the purposes of this Agreement "Operating Profit" means, income
before interest expense and taxes, restructuring reserves, other income, and
gains on sales of assets.
6.15 Change of Ownership. Not to cause, permit, or suffer any change,
direct or indirect, in the Borrower's capital ownership in excess of 50%.
6.16 Notices to Bank. To promptly notify the Bank in writing of:
(a) any lawsuit over Five Hundred Thousand Dollars ($500,000)
against the Borrower.
(b) any substantial dispute between the Borrower and any governmental
authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's financial
condition or operations.
(e) any change in the Borrower's name, legal structure, place of
business, or chief executive office.
6.17 Books and Records. To maintain adequate books and records.
6.18 Audits. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are
in the possession of a third party, the Borrower authorizes that third party
to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information concerning such
properties, books and records.
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6.19 Compliance with Laws. To comply with the laws (including any
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's business.
6.20 Preservation of Rights. To maintain and preserve all rights,
privileges, and franchises the Borrower now has.
6.21 Maintenance of Properties. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
6.22 Cooperation. To take any action requested by the Bank to carry out
the intent of this Agreement.
6.23 Insurance. To maintain insurance as is usual for the business it is
in.
6.24 Additional Negative Covenants. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from
the Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture,
syndicate, or other combination.
(d) lease, or dispose of all or a substantial part of the Borrower's
business or the Borrower's assets except in the ordinary course of the
Borrower's business.
(e) acquire or purchase a business or its assets.
(f) sell or otherwise dispose of any assets for less than fair market
value or enter into any sale and leaseback agreement covering any of its
fixed or capital assets other than property relating to Restaurant
Property Costs.
6.25 Owned Restaurants. Maintain at least 365 company owned restaurants
and a ratio of total company owned restaurants of not less than 45% of total
restaurants on a system wide basis.
6.26 ERISA Plans. To give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice.
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19
(b) Any action by the Borrower to terminate or withdraw from a
Plan or the filing of any notice of intent to terminate under
Section 4041 of ERISA.
(c) any notice of noncompliance made with respect to a Plan under
Section 4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan
under Section 4042 of ERISA.
7. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply
whether the hazardous substance is on, under or about the Borrower's property
or operations or property leased to the Borrower. The indemnity includes but
is not limited to attorneys' fees (including the reasonable estimate of the
allocated cost of in-house counsel and staff). The indemnity extends to the
Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns. For these purposes,
the term "hazardous substances" means any substance which is or becomes
designated as "hazardous" or "toxic" under any federal, state or local law.
This indemnity will survive repayment of the Borrower's obligations to the
Bank.
8. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If a bankruptcy petition is filed with
respect to the Borrower, the entire debt outstanding under this Agreement
will automatically be due immediately.
8.1 Failure to Pay. The Borrower fails to make a payment under this
Agreement within 5 days after the date when due.
8.2 False Information. The Borrower has given the Bank false or
misleading information or representations.
8.3 Bankruptcy. The Borrower files a bankruptcy petition, a bankruptcy
petition is filed against the Borrower or the Borrower makes a general
assignment for the benefit of creditors. The default will be deemed cured if
any bankruptcy
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20
petition filed against the Borrower is dismissed within a period of 45 days
after the filing; provided, however, that the Bank will not be obligated to
extend any additional credit to the Borrower during that period.
8.4 Receivers. A receiver or similar official is appointed for the
Borrower's business, or the business is terminated.
8.5. Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower in an aggregate amount of One Million
Dollars ($1,000,000) or more in excess of any insurance coverage.
8.6 Judgments. Any judgments or arbitration awards are entered against
the Borrower, or the Borrower enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of Three
Million dollars ($3,000,000) or more in excess of any insurance coverage.
8.7 Government Action. Any government authority takes action that the
Bank believes materially adversely affects the Borrower's financial condition
or ability to repay.
8.8 Material Adverse Change. A material adverse change occurs in the
Borrower's financial condition, properties or prospects, or ability to repay
the loan.
8.9 Cross-default. Any default occurs under any agreement in connection
with any credit the Borrower has obtained from anyone else or which the
Borrower has guaranteed.
8.10 Other Bank Agreements. The Borrower fails to meet the conditions of,
or fails to perform any obligation under any other agreement the Borrower has
with the Bank or any affiliate of the Bank.
8.11 ERISA Plans. The occurrence of any one or more of the following
events with respect to the Borrower, provided such event or events could
reasonably be expected, in the judgment of the Bank, to subject the Borrower
to any tax, penalty or liability (or any combination of the foregoing) which,
in the aggregate, could have a material adverse effect on the financial
condition of the Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a Plan which is,
in the reasonable judgment of the Bank likely to result in the
termination of such Plan for purposes of Title IV of ERISA.
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21
(b) Any Plan termination (or commencement of proceedings to
terminate a Plan) or the Borrower's full or partial withdrawal from a
Plan.
8.12 Other Breach Under Agreement. The Borrower fails to meet the
conditions of, or fails to perform any obligation under, any term of this
Agreement not specifically referred to in this Article. If, in the Bank's
opinion, the breach is capable of being remedied, the breach will not be
considered an event of default under this Agreement for a period of fifteen
(15) days after the date on which the Bank gives written notice of the breach
to the Borrower; provided, however, that the Bank will not be obligated to
extend any additional credit to the Borrower during that period.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made
under generally accepted accounting principles, consistently applied.
9.2 California Law. This Agreement is governed by California law.
9.3 Successors and Assigns. This Agreement is binding on the Borrower's
and the Bank's successors and assignees. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent. The Bank may sell
parcitipations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the
right of set-off against the Borrower.
9.4 Arbitration.
(a) This paragraph concerns the resolution of any controversies or
claims between the Borrower and the Bank, including but not limited to
those that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or
delivered in connection with this Agreement;
(iii) Any violation of this Agreement; or
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22
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for injury to
persons, property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such
controversies or claims will be settled by arbitration in accordance with
the United States Arbitration Act. The United States Arbitration Act
will apply even though this Agreement provides that it is governed by
California law.
(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial rules of
arbitration.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent of
the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations
and, if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the controversy or
claim, at the time of the proposed submission to arbitration, arises from
or relates to an obligation to the Bank secured by real property located in
California. In this case, both the Borrower and the Bank must consent to
submission of the claim or controversy to arbitration. If both parties do
not consent to arbitration, the controversy or claim will be settled as
follows:
(i) The Borrower and the Bank will designate a referee (or a
panel of referees) selected under the auspices of the American
Arbitration Association in the same manner as arbitrators are selected
in Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees) will be
appointed by a court as provided in
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23
California Code of Civil Procedure Section 638 and the following related
sections:
(iii) The referee (or the presiding referee of the panel) will be an
active attorney or a retired judge; and
(iv) The award that results from the decision of the referee (or the
panel) will be entered as a judgment in the court that appointed the
referee, in accordance with the provisions of California Code of Civil
Procedure Sections 644 and 645.
(h) This provision does not limit the right of the Borrower or the Bank
to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not constitute
a waiver of the right of the Borrower or the Bank, including the suing party,
to submit the controversy or claim to arbitration if the other party contests
the lawsuit. However, if the controversy or claim arises from or relates to
an obligation to the Bank which is secured by real property located in
California at the time of the proposed submission to arbitration, this right
is limited according to the provision above requiring the consent of both the
Borrower and the Bank to seek resolution through arbitration.
(j) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under the
deed of trust or mortgage, or to proceed by judicial foreclosure.
9.5 Severability; Waivers. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If
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24
the Bank waives a default, it may enforce a later default. Any consent or
waiver under this Agreement must be in writing.
9.6 Costs. If the Bank incurs any expenses in connection with
administering or enforcing this Agreement, or if the Bank takes collection
action under this Agreement, it is entitled to costs and reasonable
attorneys' fees, including any allocated costs of in-house counsel.
9.7 Attorneys' Fees. In the event of a lawsuit or arbitration proceeding,
the prevailing party is entitled to recover costs and reasonable attorneys'
fees (including any allocated costs of in-house counsel) incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator.
9.8 One Agreement. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the
Bank and the Borrower concerning this credit;
(b) replace any prior oral or written agreements between the Bank and
the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete
and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
9.9 Notices. All notices required under this Agreement shall be
personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this Agreement, or to such other addresses
as the Bank and the Borrower may specify from time to time in writing.
9.10 Headings. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
9.11 Counterparts. This Agreement may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
9.12 Amendment to Note. The Borrower hereby amends that certain Note:
Principal in Installments with Interest Added
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executed by Borrower in favor of Bank on November 14, 1989, as amended, in
the original principal sum of $35,000,000 ("Fixed Rate Note"), to read as
follows:
"The Fixed Rate Note is subject to the terms and conditions of the Amended
and Restated Credit Agreement dated as of 11/20, 1992, as it may be amended
from to time; provided, further that if said Amended and Restated Credit
Agreement is terminated prior to the maturity of this Fixed Rate Note, this
Fixed Rate Note shall be subject to the terms and conditions of the Amended
and Restated Credit Agreement in effect on the date of its termination."
This Agreement is executed as of the date stated at the top of the first page.
Bank of America National Carl Karcher Enterprises,
Trust and Savings Association Inc.
By /s/ Deborah Miller By /s/ Loren Pannier
Title Vice President Title Group VP-Finance Admin.
By _______________________ By /s/ Elaine Falbe
Title ____________________ Title VP-Treasurer
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
3233 Park Center Dr., 5th Fl. 1200 North Harbor Blvd.
Costa Mesa, California 92626 Anaheim, California 92803
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