1
EXHIBIT 10.39
THIRD AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDMENT (this "Amendment"), dated as of May 10, 1995, to the Amended
and Restated Credit Agreement, dated as of October 8, 1993, as amended by a
First Amendment, dated as of January 20, 1994, and a Second Amendment, dated as
of February 10, 1995 (as so amended, the "Credit Agreement"), among The Ground
Round, Inc. (the "First Borrower"), a Delaware corporation, GR of Minn., Inc., a
Delaware corporation (the "Second Borrower", and together with the First
Borrower, the "Borrowers"), the banks named therein (the "Banks"), The Bank of
New York, as Agent (the "Agent") and Chemical Bank, as Co-Agent.
PRELIMINARY STATEMENTS:
A. The Credit Agreement amended and restated the Amended and Restated
Credit Agreement, dated as of April 26, 1992, among the Borrowers, the banks
named therein and Citibank, N.A., as original agent.
B. The Borrowers desire to obtain consent to the transfer of legal and
beneficial ownership of those shares of GRR owned by HMH to U.S. Industries,
Inc. and to amend the Credit Agreement to (i) reduce the Revolving Commitment
on the effective date of this Amendment and on the Conversion Date, (ii) extend
the availability of a portion of the Revolving Commitment past the Conversion
Date through the Tranche A Termination Date, (iii) reduce the Net Worth
covenant for the last three quarters of fiscal year 1996 and fiscal years 1997
through 2000, (iv) delete the interest coverage ratio covenant, (v) decrease
the fixed charge coverage ratio covenant for the last three quarters of fiscal
year 1995, (vi) increase the Funded Debt to Free Operating Cash Flow Ratio for
the second quarter of fiscal year 1995 through the first quarter of fiscal year
1997, (vii) decrease the ratio of Maintenance Capital Expenditures to
consolidated depreciation and amortization covenant for fiscal year 1995 and
thereafter, (viii) place certain restrictions on the building of new stores,
and (ix) amend the definition of Excess Cash Flow to exclude new store
expenditures.
C. The Banks and the Agent are willing to grant the consent and amend
the Credit Agreement with respect to the foregoing.
2
D. Unless otherwise defined herein, all terms defined in the Credit
Agreement shall be used herein as therein defined.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
SECTION 1. Consent.
Subject to the satisfaction of the conditions precedent set forth in
Section 3 below, and notwithstanding anything to the contrary in Section
6.01(k) and (l) of the Credit Agreement, the Agent and the Banks hereby
consent to the transfer of ownership of 100% of the shares of capital stock of
GRR owned by HMH to U.S. Industries, Inc. and waive any Event of Default
arising from such transfer in ownership.
SECTION 2. Amendments to Credit Agreement.
The Credit Agreement is, effective as of the date hereof, subject to the
satisfaction of the conditions precedent set forth in Section 3 below, hereby
amended as follows:
(a) Section 1.01 of the Credit Agreement is amended by deleting
subsection (b) (iv) of the definition "Excess Cash Flow" in its entirety and
substituting therefor the following:
"(iv) the aggregate amount of capital expenditures (excluding New
Restaurant Capital Expenditures), to the extent actually paid in cash, of
GRR and its Subsidiaries made during such period,"
(b) Section 1.01 of the Credit Agreement is amended by inserting the
following definition of "USI" in alphabetical order:
"USI" means U.S. Industries, Inc., a company organized under the laws
of Delaware."
(c) Section 2.01(b)(ii) of the Credit Agreement is amended to delete the
words "Conversion Date" in the seventh line of the first sentence and
substitute therefor the words "Tranche A Termination Date".
- 2 -
3
(d) Section 2.03(a) is amended in its entirety to read as follows:
"(a) Revolving Advances. Provided that no Default or Event of
Default shall then exist, at the close of business on the Conversion Date
(i) the aggregate outstanding principal balance of each Tranche A Lender's
Revolving Advances in an amount up to but not to exceed $4,700,000 shall
automatically convert into a term loan (each, a "Converted Term Loan" and
together with the Converted Term Loans of all other Lenders, the "Converted
Term Loans"), and (ii) the remaining aggregate outstanding principal
balance, if any, of each Tranche A Lender's Revolving Advances in excess of
$4,700,000, together with the aggregate undrawn Revolving Commitment of each
Tranche A Lender shall continue to be available to the Borrowers for
Revolving Advances up to an aggregate amount not to exceed $2,000,000. Such
Conversion shall be deemed to be a Borrowing for purposes of Articles III
and IV."
(e) Section 2.05(a) is amended by deleting the second sentence thereof
in its entirety and substituting therefor the sentence to read as follows:
"Each such prepayment shall be applied to the Term Advances to be
applied pro rata to the installments thereof under Section 2.03; provided,
however, that the Borrowers may prepay outstandings under the Revolving
Facility in an aggregate principal amount of $400,000 or an integral
multiple of $100,000 in excess thereof and provided further that prepayments
under the Revolving Facility prior to the Conversion Date may be made
without regard to the application of prepayments set forth in this clause
(a), except that if at any time prior to the Conversion Date any prepayments
are made in an amount exceeding the then outstanding principal balance of
the Revolving Advances, the amount of such excess shall be applied to
permanently reduce the Term Facility as set forth above, and such prepaid
amount may not thereafter be reborrowed under the Revolving Facility."
(f) Section 2.05(b)(i) is amended by deleting the second sentence
thereof in its entirety and substituting therefor the sentence to read as
follows:
- 3 -
4
"Each such prepayment shall be applied pro rata to the installments
of principal of the outstanding Term Advances under Section 2.03."
(g) Section 2.05(b)(ii) is amended by deleting the second and third
sentences thereof in their entirety and substituting therefor the sentences to
read as follows:
"Each such prepayment pursuant to clause (A) of this subsection,
with respect to any sale of assets shall be applied first to the Term
Advances to be applied pro rata to the installments thereof under Section
2.03, and second to reduce outstandings under the Revolving Facility. Each
such prepayment pursuant to clause (B) of this subsection, with respect to
issuance of Debt shall be applied first to the Tranche B Term Advances to be
applied in the inverse order of the maturity thereof, second to the Tranche A
Term Advances to be applied pro rata to the installments thereof under
Section 2.03, and third to reduce outstandings under the Revolving Facility."
(h) Section 2.05(b)(v) is amended by deleting the second sentence thereof
in its entirety and substituting therefor the sentence to read as follows:
"Each such prepayment shall be applied first to the Tranche A Term
Advances to be applied pro rata to the installments thereof, and second to
the Tranche B Term Advances to be applied pro rata to the installments
thereof under Section 2.03, and third to the outstandings under the Revolving
Facility to be applied pro rata to the outstandings thereunder."
(i) Section 2.05(b)(vi) is amended by deleting the second sentence
thereof in its entirety and substituting therefor the sentence to read as
follows:
"Each such prepayment shall be applied first to the Tranche A Term
Advances to be applied pro rata to the installments thereof, second to the
Tranche B Term Advances to be applied pro rata to the installments thereof
under Section 2.03, and third to reduce outstandings under the Revolving
Facility."
(j) Section 2.13(a) is amended by deleting the section beginning with
the third sentence to the end thereof and substituting therefor the following:
- 4 -
5
"The Letter of Credit shall have an initial term of no longer than
one year, but at the request of the Borrowers to BNY and the Agent, given
not less than 45 days prior to the expiration of the then-outstanding Letter
of Credit, BNY may, at its option renew or extend such Letter of Credit for
a term of one year, for one or more years, provided that the Letter of
Credit shall have a final termination date which shall be not later than the
Business Day immediately preceding the Tranche A Termination Date. The
Letter of Credit shall not be issued if the Agent, or any Lender by notice
to the Agent no later than 1:00 P.M. one Business Day prior to the requested
date of issuance of such Letter of Credit, shall have determined that the
conditions set forth in Section 3.02 have not been satisfied."
(k) Section 5.01(n) is amended by deleting the chart for each period
and inserting the following in substitution therefor:
"Fiscal Year Fiscal Quarter
----------- --------------
1995 2nd-4th $ 63,473,000
1996 1st $ 63,473,000
1996 2nd-4th $ 65,000,000
1997 1st-4th $ 68,000,000
1998 1st-4th $ 71,000,000
1999 1st-4th $ 80,000,000
2000 1st-4th $ 89,000,000"
(l) Section 5.01(p) is deleted in its entirety.
(m) Section 5.01(q) is amended by deleting the chart for each Rolling
Period and inserting the following in substitution therefor:
"Fiscal Year Fiscal Quarter
----------- --------------
1995 1st 2.25 to 1.00
1995 2nd 1.75 to 1.00
1995 3rd 1.60 to 1.00
1995 4th, 1.75 to 1.00
and thereafter 1.25 to 1.00"
(n) Section 5.01(r) is amended by deleting the chart for each Rolling
Period and inserting the following in substitution therefor:
- 5 -
6
"Fiscal Year Fiscal Quarter
----------- --------------
1995 1st 4.25 to 1.00
1995 2nd-4th 5.50 to 1.00
1996 1st 4.40 to 1.00
1996 2nd 3.20 to 1.00
1996 3rd 3.00 to 1.00
1996 4th 2.50 to 1.00
1997 1st, 2.50 to 1.00
and thereafter 2.25 to 1.00"
(o) Section 5.01(s) is amended by deleting the chart for each Rolling
Period and inserting the following in substitution therefor:
"Fiscal Year
-----------
1995 0.75 to 1.00
1996 and thereafter 0.50 to 1.00"
(p) Section 5.02(i)(ii) to the Credit Agreement is amended by adding at
the end thereof a new subsection (D) to read as follows:
"(D) the Borrowers shall not make any New Restaurant Capital
Expenditures or enter into any Restaurant Commitments to do so (except for the
two New Restaurants to be located in Whitemarsh, Pennsylvania and South Des
Moines, Iowa) unless the Funded Debt to Free Operating Cash Flow Ratio equals or
exceeds the following for a period of two consecutive quarters:
Fiscal Year
-----------
1995 2nd-4th 2.50 to 1.0
1996 1st-4th 2.50 to 1.0
1997 1st 2.50 to 1.0
1997 2nd-4th,
and thereafter 2.25 to 1.0"
(q) Section 6.01 is amended by deleting subsections (k), (l) and (m)
thereof in their entirety and substituting therefor the following:
"(k) USI shall at any time for any reason cease to be the legal
and beneficial owner of at least 25% of the shares of capital stock of GRR,
provided, that on and after such date as GRR has received additional common
- 6 -
7
equity capital in an amount not less than $10,000,000 in excess of the amount
of common stockholders' equity in existence on the Restatement Date and
provided that no Default or Event of Default then exists or is continuing,
this clause (k) shall be of no further effect; or
(l) USI shall at any time when it is a legal and beneficial owner
of the capital stock of GRR fail to have two nominees of USI serving on the
board of directors of GRR at all times; provided, however, that if one or both
of the nominees of USI cease to serve on the board of directors of GRR as a
result of death or resignation, USI shall have ten days in which to appoint
their successor or successors and, provided further, however, that on and after
such date as GRR has received additional common equity capital in an amount not
less than $10,000,000 in excess of the amount of common stockholders' equity in
existence on the Restatement Date and provided that no Default or Event of
Default then exists or is continuing, this clause (l) shall be of no further
effect; or
(m) any Person or two or more Persons (other than USI or any of its
Affiliates) 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), directly or indirectly, of Voting Stock of GRR
(or other securities convertible into such Voting Stock) representing 50% or
more of the combined voting power of all Voting Stock of GRR; or"
(r) Schedule 1.1 to the Credit Agreement is amended by deleting Parts I
B. and C. thereof in their entirety and substituting therefor Part I B. of
Schedule 1.1 attached hereto.
SECTION 3. Conditions of Effectiveness.
This Amendment, except Section 2(q) herein, shall become effective as of the
date hereof, when the Agent shall have received:
(a) counterparts of (i) this Amendment executed by the Borrowers,
the Banks and the Agent, (ii) the Consent appended hereto (the "Consent")
executed by each of the Guarantors, and (iii) such other documents as the
Agent shall reasonably request; and
- 7 -
8
(b) a fee in the amount of 1/4 of 1% on each Lender's Commitment as
in effect on the date of this Amendment, paid by the Borrowers for the
account of each of the Lenders.
Section 2(q) shall become effective upon the date of transfer of
legal and beneficial ownership of those shares of GRR owned by HMH to USI
provided the requirements of this Section 3(a) and (b) have been satisfied.
SECTION 4. Representations and Warranties.
The Borrowers hereby (a) reaffirm and admit the validity and
enforceability of the Loan Documents and all of their obligations thereunder,
(b) agree and admit that they have no defenses to or offsets against any of
their obligations to the Agent or any Lender under the Loan Documents, and (c)
represent and warrant that there exists no Default or Event of Default and that
the representations and warranties contained in the Credit Agreement are true
and correct on and as of the date hereof.
SECTION 5. Reference to and Effect on the Loan Documents.
(a) Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import, and each reference in the other
Loan Documents to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended hereby;
(b) Except as specifically amended above, the Credit Agreement and
the Notes, and all other Loan Documents, shall remain in full force and effect
and are hereby ratified and confirmed. Without limiting the generality of the
foregoing, the Collateral Documents and all Collateral described therein shall
continue to secure the payment of the obligations of the Borrowers thereunder,
under the Credit Agreement, as amended hereby, and under the Notes and other
Loan Documents; and
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any Bank or the Agent under any of the Loan Documents,
nor constitute a waiver of any provision of any of the Loan Documents.
- 8 -
9
SECTION 6. Costs and Expenses.
The Borrowers agree to pay on demand all reasonable costs and expenses
of the Agent in connection with the preparation, reproduction, execution and
delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including the reasonable fees and expenses of Emmet, Marvin
& Martin, LLP, special counsel for the Agent, with respect thereto, and of local
counsel, if any, who may be retained by said special counsel with respect
thereto.
SECTION 7. Counterparts.
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be an
original and all of which together shall constitute but one and the same
document.
SECTION 8. Governing Law.
This Amendment is intended to be performed in the State of New York and
shall be construed and is enforceable in accordance with, and shall be governed
by, the internal laws of the State of New York without regard to principles of
conflict of laws.
- 9 -
10
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
THE GROUND ROUND, INC.
By:/s/ Michael R. Jorgensen
-----------------------------------
Name: Michael R. Jorgensen
Title: Senior V.P., CFO & Treasurer
GR OF MINN., INC.
By:/s/ Michael R. Jorgensen
-----------------------------------
Name: Michael R. Jorgensen
Title: Vice President & Treasurer
THE BANK OF NEW YORK,
individually and as Agent
By:/s/ Glenn Autorino
-----------------------------------
Name: Glenn Autorino
Title: Vice President
CHEMICAL BANK, individually and
as Co-Agent
By:/s/ William J. Caggiano
-----------------------------------
Name: William J. Caggiano
Title: Managing Director
BANK OF AMERICA ILLINOIS
By:/s/ Arlene Pedovich
-----------------------------------
Name: Arlene Pedovich
Title: Vice President
- 10 -
11
NBD BANK
By:/s/ James T. Verlinde
-----------------------------------
Name: James T. Verlinde
Title: Second Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By:/s/ Alain Papiasse
-----------------------------------
Name: Alain Papiasse
Title: Senior Vice President,
Deputy General Manager
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /s/ Alain Papiasse
-----------------------------------
Name: Alain Papiasse
Title: Authorized Signatory
- 11 -
12
CONSENT OF GUARANTORS
DATED AS OF MAY 10, 1995
The undersigned, as the Guarantors referred to in the foregoing
Amendment, dated as of May 10, 1995, to the Amended and Restated Credit
Agreement, dated as of October 8, 1993, as amended by a First Amendment, dated
as of January 20, 1994, and a Second Amendment, dated as of February 10, 1995,
among The Ground Round, Inc., GR of Minn., Inc., the banks named therein, The
Bank of New York, as Agent and Chemical Bank as Co-Agent, each hereby consents
to the foregoing Amendment and hereby confirms and agrees that, notwithstanding
the effectiveness of said Amendment, (i) the Guaranty and each Collateral
Document in effect on the date hereof to which it is a party are, and shall
continue to be, in full force and effect and are hereby confirmed and ratified
in all respects, except that, upon the effectiveness of, and after the date of,
said Amendment, all references in the Guaranty and such Collateral Document to
the Credit Agreement shall mean the Credit Agreement as amended by said
Amendment and (ii) such Collateral Documents consisting of security agreements
and all collateral described therein do, and shall continue to, secure the
payments by the Borrowers referred to in said Amendment of their obligations
under the Credit Agreement, as amended by said Amendment, and under the Notes.
GRH OF NJ, INC.
By:/s/ Michael R. Jorgensen
---------------------------------
Name: Michael R. Jorgensen
Title: Vice President & Treasurer
GROUND ROUND HOLDINGS, INC.
By:/s/ Michael R. Jorgensen
---------------------------------
Name: Michael R. Jorgensen
Title: Vice President & Treasurer
GROUND ROUND RESTAURANTS, INC.
By:/s/ Michael R. Jorgensen
-----------------------------------
Name: Michael R. Jorgensen
Title: Senior V.P., CFO & Treasurer
- 12 -
13
G.R. GLENDLOC, INCORPORATED
By:/s/ Robin L. Moroz
---------------------------------------
Name: Robin L. Moroz
Title: Vice President & Asst. Secretary
GROUND ROUND OF BALTIMORE, INC.
By:/s/ Robin L. Moroz
---------------------------------------
Name: Robin L. Moroz
Title: Vice President & Secretary
GRXR OF BEL AIR, INC.
By:/s/ Robin L. Moroz
---------------------------------------
Name: Robin L. Moroz
Title: President
GRXR OF FREDERICK, INC.
By:/s/ Robin L. Moroz
---------------------------------------
Name: Robin L. Moroz
Title: President & Asst. Secretary
GRXR OF HAGERSTOWN, INC.
By:/s/ Robin L. Moroz
---------------------------------------
Name: Robin L. Moroz
Title: President & Asst. Secretary
- 13 -