UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 29, 2019
FAT Brands Inc.
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 001-38250 | 08-2130269 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
9720 Wilshire Blvd., Suite 500 Beverly Hills, CA |
90212 | |
(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s Telephone Number, Including Area Code: (310) 402-0600
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company [X]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]
Item 1.01 Entry into a Material Definitive Agreement.
On January 29, 2019, FAT Brands Inc. (the “Company”) refinanced its existing lending facility with FB Lending, LLC. The Company as borrower, and its subsidiaries and affiliates as guarantors, entered into a new Loan and Security Agreement (the “Loan Agreement”) with The Lion Fund, L.P. and The Lion Fund II, L.P. (the “Lenders”). Pursuant to the Loan Agreement, the Company borrowed $20.0 million from the Lenders, and utilized the proceeds to repay the existing $16.0 million term loan from FB Lending, LLC plus accrued interest and fees, and provide additional general working capital to the Company.
The term loan under the Loan Agreement matures on June 30, 2020. Interest on the term loan accrues at an annual fixed rate of 20.0% and is payable quarterly. The Company may prepay all or a portion of the outstanding principal and accrued unpaid interest under the Loan Agreement at any time upon prior notice to the Lenders without penalty, other than a make-whole provision providing for a minimum of six months’ interest. The Company is required to prepay all or a portion of the outstanding principal and accrued unpaid interest under the Loan Agreement in connection with certain dispositions of assets, extraordinary receipts, issuances of additional debt or equity, or a change of control of the Company.
In connection with the Loan Agreement, the Company issued to the Lenders a warrant to purchase up to 1,143,112 shares of the Company’s Common Stock at $0.01 per share (the “Lender Warrant”), exercisable only if the amounts outstanding under the Loan Agreement are not repaid in full prior to October 1, 2019. If the Loan Agreement is repaid in full prior to October 1, 2019, the Lender Warrant will terminate in its entirety.
As security for its obligations under the Loan Agreement, the Company granted a lien on substantially all of its assets to the Lenders. In addition, certain of the Company’s direct and indirect subsidiaries and affiliates entered into a Guaranty (the “Guaranty”) in favor of the Lenders, pursuant to which they guaranteed the obligations of the Company under the Loan Agreement and granted as security for their guaranty obligations a lien on substantially all of their assets.
The Loan Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the Company’s ability to, among other things, incur other indebtedness, grant liens, merge or consolidate, dispose of assets, pay dividends or make distributions, in each case subject to customary exceptions. The Loan Agreement also includes customary events of default that include, among other things, non-payment, inaccuracy of representations and warranties, covenant breaches, events that result in a material adverse effect (as defined in the Loan Agreement), cross default to other material indebtedness, bankruptcy, insolvency and material judgments. The occurrence and continuance of an event of default could result in the acceleration of the Company’s obligations under the Loan Agreement and an increase in the interest rate by 5.0% per annum.
The foregoing descriptions of the Loan Agreement, Guaranty and Lender Warrant do not purport to be complete and are qualified in their entirety by reference to the copies thereof which are filed as Exhibits 10.1, 10.2 and 4.2, respectively, to this Current Report on Form 8-K and incorporated herein by this reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information set forth in Item 1.01 above concerning the Loan Agreement and Guaranty is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities
The information set forth in Item 1.01 above concerning the issuance of the Lender Warrant is incorporated herein by reference.
The issuances of the Lender Warrant was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws.
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| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: February 4, 2019
| FAT Brands Inc. | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Andrew A. Wiederhorn | ||
| Chief Executive Officer | ||
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THIS WARRANT (AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE ISSUER, IS AVAILABLE.
FAT BRANDS INC.
WARRANT AGREEMENT
(Common Stock)
Warrant No. 1
This Warrant Agreement (this “Warrant”) is dated as of January 29, 2019 (the “Issue Date”) and entered into by and between FAT Brands Inc., a company organized under the laws of State of Delaware (the “Company”), and the undersigned, (each, together with its successors and assigns, a “Warrant Holder”).
WHEREAS, the Warrant Holders, the Company and its subsidiaries and affiliates parties thereto have entered into that certain Loan Agreement (the “Loan Agreement”), pursuant to which the Warrant Holders agreed to extend a senior secured term loan facility to the Company in the amount of $20,000,000.
WHEREAS, all capitalized terms not separately defined in this Warrant, shall have the same meanings as defined in the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this Warrant, and for other good and valuable consideration, the parties agree as follows:
1. Grant of Warrant. This Warrant entitles the Warrant Holders, upon the terms and subject to the conditions set forth herein, to purchase from the Company up to 1,143,112 (allocated 285,779 to The Lion Fund, L.P. and 857,333 to The Lion Fund II, L.P.) shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), subject to adjustment as provided in Section 6 (the “Warrant Shares”).
2. Term and Termination of Warrant. The Warrant shall be exercisable at any time or times beginning on October 1, 2019 (provided that, as of such date, any amount was outstanding under the Loan Agreement and without regard to whether any such amount was subsequently repaid) and ending on the five (5) year anniversary of the Issue Date (such five-year period, the “Exercise Period”). On the final day of the Exercise Period or if all amounts outstanding under the Loan Agreement were repaid in full prior to October 1, 2019, this Warrant shall terminate.
3. Exercise of the Warrant.
(a) Exercise Price. For the purposes of this Warrant, the exercise price shall be $0.01 per share of Common Stock (the “Exercise Price”), subject to adjustment as provided in Section 6.
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(b) Exercise and Payment. The purchase rights represented by the Warrant may be exercised in round lots only by the Warrant Holders, in whole or in part, by the surrender of the Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with a duly executed notice of exercise in the form attached hereto as Exhibit A (the “Exercise Notice”) at the principal office of the Company and by the payment to the Company by check or wire transfer of immediately available funds of an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of the Warrant multiplied by (ii) the Exercise Price (the “Warrant Price”). For purposes of this Warrant, “Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in this Section 3 shall have been satisfied at or prior to 5:00 p.m., Eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Notice, the Warrant and the Warrant Price. No ink-original Exercise Notice shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Exercise Notice form be required.
(c) Cashless Exercise. If at any time after the date hereof, there is no effective registration or offering statement effective or qualified in connection with, or no current prospectus or offering circular available for, the public resale of the Warrant Shares by the Warrant Holders, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” by instructing the Company to issue Warrant Shares then issuable upon exercise of all or any part of this Warrant on a net basis such that, without payment of any cash consideration or other immediately available funds, the Warrant Holders shall surrender this Warrant in exchange for the number of Warrant Shares as is computed using the following formula X = Y(A - B) ÷ A:
Where:
X = the number of Warrant Shares to be issued to the Warrant Holder.
Y = the total number of Warrant Shares for which the Warrant Holder has elected to exercise this Warrant
A = the Fair Market Value of one Warrant Share as of the applicable Exercise Date.
B = the Exercise Price in effect under this Warrant as of the applicable Exercise Date.
For purposes of this Warrant, “Fair Market Value” of a Warrant Share shall mean the arithmetic average of the last trade price of the Common Stock (as reported by Bloomberg Financial Markets) for the five (5) consecutive days on which the Nasdaq Stock Market is open for trading, ending on the date immediately preceding the Exercise Date, on the principal trading market on which the Common Stock is quoted or listed for trading. If the Fair Market Value cannot be calculated on a particular date on the foregoing basis, the Fair Market Value shall be the average of the highest bid and lowest asked prices for the Common Stock on the principal trading market at the end of such day. If at any time the Common Stock is not listed on a domestic securities exchange or quoted on the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system, the OTC Markets Group Inc. electronic inter-dealer quotation system or similar quotation system or association, the Fair Market Value of the Common Stock shall be the fair market value determined jointly in good faith by the Board of Directors of the Company and the Warrant Holders; provided, that if the Board of Directors and the Warrant Holders are unable to agree on the Fair Market Value of a Warrant Share within a reasonable period of time (not to exceed five (5) days from the Company’s receipt of the Exercise Notice), Fair Market Value shall be determined by a nationally recognized investment banking, accounting or valuation firm jointly selected by the Warrant Holders and the Company and engaged by the Company. The determination of such firm shall be final and conclusive, and the fees and expenses of such valuation firm shall be borne by the Company. The investment bank so engaged shall determine the Fair Market Value of the Common Stock assuming an orderly sale transaction between a willing buyer and a willing seller, using valuation techniques then prevailing in the securities industry without regard to the lack of liquidity of the Common Stock due to any restrictions (contractual or otherwise) applicable thereto or any discount for minority interests and assuming full disclosure of all relevant information and a reasonable period of time for effectuating such sale and assuming the sale of all of the issued and outstanding Common Stock (including fractional interests) calculated on a fully diluted basis (except those securities, rights and warrants (a) owned or held by or for the account of the Company or any of its subsidiaries, or (b) convertible or exchangeable into Common Stock where the conversion, exchange or exercise price per share is greater than the Fair Market Value). All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
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(d) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Warrant Holders be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.
(e) Warrant Shares. Subject to the other provisions of this Warrant, on or before the second (2nd) day following the date on which the Company has received an Exercise Notice, so long as the Warrant Holder(s) delivers the Warrant Price (such 2nd day, the “Warrant Share Delivery Date”), the Company shall issue and deliver to the Warrant Holder(s) or, at the Warrant Holder’s instruction pursuant to the Exercise Notice, the Warrant Holder’s agent or designee, in each case, via DTC for the number of shares of Common Stock to which the Warrant Holder(s) is entitled pursuant to such exercise. The Company shall be responsible for all fees and expenses of the transfer agent and all fees and expenses with respect to the issuance of shares of Common Stock. Upon delivery of an Exercise Notice, the Warrant Holder(s) shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Warrant Holder’s DTC account. If this Warrant is submitted in connection with any exercise pursuant to this Section 3 and the number of Warrant Shares represented by this Warrant submitted for exercise is for a greater number of Warrant Shares than the number of Warrant Shares being acquired upon an exercise, then, at the request of the Warrant Holder(s), the Company shall as soon as practicable and in no event later than two (2) business days after any exercise and at its own expense, issue and deliver to the Warrant Holder(s) (or its designee) a new Warrant (in accordance with Section 9(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number. If the Company fails to cause its transfer agent to transmit to the Warrant Holder(s) the Warrant Shares by the Warrant Share Delivery Date, then the Warrant Holder(s) will have the right to rescind such exercise.
(f) Legends. The Warrant Shares to be acquired by the Warrant Holder(s) pursuant hereto, may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration or offering statement under the Act, or (ii) the Company or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions and from an attorney who regularly practices securities law) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration. The Company shall ensure that the Warrant Shares issuable upon exercise of this Warrant have been registered for sale under an effective registration statement filed under the Act no later than September 1, 2019 and such registration statement remains effective. In the event of any Warrant Shares not registered for sale under an effective registration statement and except as otherwise provided in this Warrant (and subject to the removal provisions set forth below), until such time as such Warrant Shares issuable upon exercise of the Warrant have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for such Warrant Shares that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED UNLESS (1) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR (2) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE ACT AND, IF THE COMPANY REQUESTS, AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT HAS BEEN RENDERED BY COUNSEL.
The legend set forth above shall be removed and the Company shall issue to the Warrant Holder(s) a new certificate therefor free of any transfer legend if (i) the Company shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Warrant Shares may be made without registration under the Act and the shares are so sold or transferred, or (ii) such security is registered for sale under an effective registration statement filed under the Act.
(g) Limitation on Exercise.
(i) The Company shall not affect any exercise of this Warrant, and the Warrant Holder(s) shall not have the right to exercise any portion of this Warrant, pursuant to Section 3 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Warrant Holder(s) (together with its Affiliates, and any other Persons acting as a group together with the Warrant Holder(s) or any of its Affiliates), would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant (the “Beneficial Ownership Limitation”). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Warrant Holder(s) and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Warrant Holder(s) or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock (collectively, “Common Stock Equivalents”)) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Warrant Holder(s) or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(g), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 3(g)(i) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Warrant Holder(s) together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Warrant Holder(s), and the submission of an Exercise Notice shall be deemed to be the Warrant Holder’s determination of whether, and representation and certification to the Company that, this Warrant is exercisable (in relation to other securities owned by the Warrant Holder(s) together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 3(g), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two (2) trading days confirm orally and in writing to the Warrant Holder(s) the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Warrant Holder(s) or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.
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(ii) Notwithstanding anything contained herein, this Warrant shall not be exercisable to the extent that (A) the aggregate shares of Common Stock issued after giving effect to the exercise of this Warrant as set forth on the applicable Exercise Notice, plus (B) the aggregate shares of Common Stock issued or issuable by the Company to holders of Common Stock Equivalents upon conversion or exchange thereof (excluding from this calculation any Common Stock and Common Stock Equivalents beneficially owned by Fog Cutter Capital Group Inc. or its Affiliates) would exceed 19.99% of all shares of Common Stock issued and outstanding on the Issue Date, subject to pro rata adjustment in connection with any stock splits, stock dividends, or similar changes to the Company’s capitalization occurring after the Issue Date (the “20% Cap”), unless the Company receives stockholder approval to exceed the 20% Cap. To the extent that the limitation contained in this Section 3(g)(ii) applies, the determination of whether this Warrant is exercisable, and of which portion of this Warrant is exercisable, shall be in the sole discretion of the Company. If applicable, the restrictions and redemption obligations set forth in this Section 3(g)(ii) shall cease to apply if (1) the Company obtains stockholder approval to issue Common Stock in excess of the 20% Cap pursuant to the rules and regulations of The Nasdaq Stock Market (or such other principal trading market on which the Common Stock is quoted or listed for trading), or (2) the Company provides the Warrant Holders with irrevocable written notice, based upon the written advice of its counsel, that any such issuance of Common Stock is not subject to the 20% Cap pursuant to the rules and regulations of The Nasdaq Stock Market LLC. The Company will use its best efforts promptly to obtain either the stockholder approval or the irrevocable notice described in the preceding sentence and to provide the Warrant Holders with a copy of same. Without limiting the foregoing, in the event at any time the number of Common Stock described in (A) and (B) above is 85% of the 20% Cap (assuming full exercise without regard to any beneficial ownership limitations set forth herein or therein), then the Company shall within 60 days hold a stockholder meeting and solicit the aforementioned stockholder approval by soliciting proxies in favor of issuing Common Stock in excess of the 20% Cap and will use its best efforts to have all affiliates of the Company which own or control shares of Common Stock to vote their shares in favor of such resolution.
(iii) Notwithstanding anything contained herein, this Warrant shall not be exercisable to the extent that the exercise thereof would have the effect of causing Fog Cutter Capital Group Inc. to hold less than 80.0% of the issued and outstanding shares of Common Stock of the Company; provided, that such restriction shall terminate immediately upon any consolidation, merger or other similar business combination between Fog Cutter Capital Group Inc. and the Company.
(iv) Upon any attempted exercise of this Warrant, the Warrant Holders shall have the right to receive cash payments from the Company for all shares of Common Stock that Section 3(g)(i), 3(g)(ii) or 3(g)(iii) renders the Company incapable of issuing to the Warrant Holders (“Deficiency Shares”) at a price equal to the value determined by the Black-Scholes pricing model for such portion of the Warrants which would otherwise be exercisable for Deficiency Shares, and the number of Warrant Shares corresponding to such payment shall be cancelled upon delivery of such payment to the Warrant Holders.
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4. Stock Fully Paid; Reservation of Warrant Shares.
(a) Stock Fully Paid. All of the Warrant Shares issuable upon the exercise of the Warrant (and any Warrant issued in substitution for or replacement of this Warrant) will, upon issuance and receipt of the Warrant Price for such Warrant Shares, be duly authorized, validly issued, fully paid and nonassessable, and will issued without violation of any preemptive or similar rights of any stockholder of the Company and be free and clear of all taxes, liens, encumbrances and charges with respect to the issue.
(b) Reservation. For so long as this Warrant is outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the exercise of this Warrant, 100% of the number of shares of Common Stock as shall from time to time be necessary to effect such exercise (the “Required Reserve Amount”).
(c) Insufficient Authorized Shares. If at any time the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of this Warrant at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall use its reasonable best efforts immediately to take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Warrant. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall use its reasonable best efforts to either (x) obtain the written consent of its stockholders for the approval of an increase in the number of authorized shares of Common Stock or (y) hold a special meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock; provided, that if the Company is then subject to review of any such related documents by the Securities and Exchange Commission, the time frame above shall be extended by an additional thirty (30) days. In connection with such meeting, the Company shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock, to cause its Board of Directors to recommend to the stockholders that they approve such proposal and to cause its management to vote in favor of such proposal.
5. Rights of the Warrant Holders. The Warrant Holders shall have no voting rights as a stockholder or rights to dividends or other distributions with respect to Warrant Shares subject to this Warrant until payment in full of the Warrant Price for Warrant Shares being issued.
6. Adjustment of Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 6 (in each case, after taking into consideration any prior adjustments pursuant to this Section 6).
(a) Stock Dividend, Subdivision or Combination. If the Company shall, at any time or from time to time after the Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 6(a) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.
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(b) Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the Company’s assets to another Person; (v) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock; (vi) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person or group of persons whereby such other person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination); or (vii) other similar transaction, in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after each such transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor person (and if holders of Common Stock are given any choice as to the shares of stock or other securities or assets, then the Warrant Holder(s) shall be given the same choice) resulting from such transaction to which the Warrant Holder(s) would have been entitled upon consummation of such transaction if the Warrant Holder(s) had exercised this Warrant in full immediately prior to the time of such transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment shall be made with respect to the Warrant Holder’s rights under this Warrant to insure that the provisions of this Section 6 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 6(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Warrant Holders, the obligation to deliver to the Warrant Holders such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Warrant Holders shall be entitled to receive upon exercise of this Warrant.
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(c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Sections 6(a)-(b) above, if at any time during which this Warrant is outstanding the Company grants, issues or sells any Common Stock Equivalents or other rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Warrant Holders will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Warrant Holders could have acquired if the Warrant Holders had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the limits imposed by Section 3(g)) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Warrant Holder’s right to participate in any such Purchase Right would result in the Warrant Holders exceeding the Beneficial Ownership Limitation, then the Warrant Holder(s) shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Warrant Holder(s) until such time, if ever, as its right thereto would not result in the Warrant Holder(s) exceeding the Beneficial Ownership Limitation). The provisions of this Section 6(c) will not apply to any grant, issuance or sale of Common Stock Equivalents or other rights to purchase stock, warrants, securities or other property of the Company which is not made pro rata to the record holders of any class of shares of Common Stock.
(d) Certificate as to Adjustment.
(i) As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later ten (10) days thereafter, the Company shall furnish to the Warrant Holders a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.
(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Warrant Holder(s), but in any event not later than ten (10) days thereafter, the Company shall furnish to the Warrant Holder(s) a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.
(iii) All calculations under this Section 6 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. No adjustment shall be made to the Exercise Price unless such adjustment would require a change of at least 1% in the Exercise Price. Any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment or in connection with any exercise of the Warrant.
(e) Notices. In the event:
(i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or
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(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;
then, and in each such case, the Company shall send or cause to be sent to the Warrant Holders at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.
7. Representations, Warranties and Covenants.
(a) Obligations of the Company. The Company hereby covenants and agrees:
(i) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of its Certificate of Incorporation or Bylaws, any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).
(ii) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Warrant Holders, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.
(b) Representation and Warranties of the Warrant Holders. The Warrant Holders represent and warrant that each Warrant Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Act. The Warrant Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Act.
8. Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Warrant Holders. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect and (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
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9. Reissuance Of Warrants.
(a) Transfer of Warrant. If this Warrant is to be transferred or divided or reallocated among the Warrant Holders, the Warrant Holders shall surrender this Warrant to the Company, together with an assignment form in the form attached as Exhibit B, whereupon the Company will forthwith issue and deliver upon the order of the Warrant Holders one or more new Warrants (in accordance with Section 9(d)), registered as the Warrant Holder(s) may request, representing the right to purchase the number of Warrant Shares being transferred, divided or reallocated by the Warrant Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 9(d)) to the Warrant Holder(s) representing the right to purchase the number of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification and payment of any required bond undertaking by the Warrant Holder(s) to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Warrant Holder(s) a new Warrant (in accordance with Section 9(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder(s) at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 9(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Warrant Holder(s) at the time of such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 9(a) or Section 9(c), the Warrant Shares designated by the Warrant Holder(s) which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issue Date, and (iv) shall have the same rights and conditions as this Warrant.
10. Registration Rights. The Company grants to the Warrant Holders all rights and benefits of an “Investor” set forth in the Company’s Registration Rights Agreement, dated as of July 3, 2018, as amended (the “Rights Agreement”), including without limitation registration rights and information rights, and agrees to use its reasonable best efforts to amend the Rights Agreement so that (i) the Warrant Shares issuable upon exercise of this Warrant shall be considered “Registrable Shares” (as defined in the Rights Agreement) under the Rights Agreement and (ii) each Warrant Holder shall be considered an “Investor” for all purposes of Section 2 of the Rights Agreement, provided that in all cases the Company shall ensure that a registration statement for the Warrant Shares shall be effective no later than September 30, 2019 and shall remain effective.
11. Amendment And Waiver. Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of Warrant Holders entitled to receive on exercise a majority the Warrant Shares.
12. Transfer.
(a) Subject to Section 16(a), this Warrant may not be transferred to a person that is not an Affiliate of a Warrant Holder without consent of the Company prior to October 1, 2019; and
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(b) if any amounts under the Loan Agreement were outstanding as of October 1, 2019, then, on and subsequent to October 1, 2019 and without regard to whether such amounts were later repaid, subject to compliance with applicable securities laws, this Warrant and all rights hereunder are transferable, in whole or in part, by the Warrant Holder(s) without charge to the Warrant Holder(s), upon surrender of this Warrant to the Company at its then principal executive offices with a duly executed assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 7(a)(ii) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.
13. Remedies. The Warrant Holder(s), in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages alone would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
14. Severability. If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
15. Choice of Law and Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Loan Agreement.
16. Miscellaneous.
(a) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of the Warrant Holder. The provisions of this Warrant are intended to be for the benefit of any Warrant Holder from time to time of this Warrant and shall be enforceable by the Warrant Holder or holder of Warrant Shares.
(b) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Warrant Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Warrant Holder, shall give rise to any liability of the Warrant Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
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(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of a Warrant Holder shall operate as a waiver of such right or otherwise prejudice the Warrant Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Loan Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to a Warrant Holder, the Company shall pay to a Warrant Holder such amounts as shall be sufficient to cover any and all costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by a Warrant Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
17. Notices. Any notice, request or other document required or permitted to be given or delivered to the Warrant Holder by the Company shall be delivered in accordance with the notice provisions of the Loan Agreement.
[signatures on following page]
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IN WITNESS WHEREOF, the undersigned hereby execute this Warrant Agreement as of the day and year first above written.
| COMPANY | ||
| FAT BRANDS INC. | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chief Executive Officer | |
| THE LION FUND, L.P. | ||
| By: | Biglari Capital Corp., its general partner | |
| By: | /s/ Sardar Biglari | |
| Name: | Sardar Biglari | |
| Title: | Authorized Signatory | |
| THE LION FUND II, L.P. | ||
| By: | Biglari Capital Corp., its general partner | |
| By: | /s/ Sardar Biglari | |
| Name: | Sardar Biglari | |
| Title: | Authorized Signatory | |
Signature Page
EXHIBIT A
NOTICE OF EXERCISE
The undersigned holder hereby exercises the right to purchase _________________ shares of Common Stock (“Warrant Shares”) of FAT Brands Inc., a Delaware corporation (the “Company”), evidenced by the attached Warrant No. [ ] (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
| 1. | _____ Check if Applicable. The undersigned, pursuant to the provisions set forth in the within Warrant, hereby agrees to purchase ________ shares of Common Stock covered by such Warrant, and makes payment herewith in full therefore at the price per share provided by such Warrant in cash or by certified or official bank check or by wired funds in the amount of $_______. | |
| 2. | _____ Check if Applicable. The undersigned, pursuant to the provisions set forth in the within Warrant, hereby elects to exercise the cashless exercise provisions of the within warrant with respect to ________ shares of Common Stock covered by such Warrant, and requests that the Company issue to the undersigned an aggregate of _______ Warrant Shares based on the application of the formula set forth in Section 3(c) of such Warrant. |
[Delivery instructions via DTC to be included]
| Date: _______________ __, ______ | ||
| Name of Registered Holder | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information.
Do not use this form to exercise the Warrant.)
FOR VALUE RECEIVED, ____ all of or _______ shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| whose address is: |
Date: ______________, _______
| Holder’s Signature: | |
| Holder’s Address: | |
| Signature Guaranteed: |
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
Exhibit 10.1
LOAN AND SECURITY AGREEMENT
among
FAT Brands Inc., as the Borrower;
the subsidiaries and affiliates of the Borrower
listed on the signature pages hereto, as Guarantors;
The Lion Fund, L.P. and The Lion Fund II, L.P., as Lenders;
and
The Lion Fund, L.P., as Collateral Agent for the Lenders
Dated as of January 29, 2019
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement, dated as of January 29, 2019 (the “Closing Date”) is made by and among FAT Brands Inc., a Delaware corporation (“Borrower”), the subsidiaries and affiliates of the Borrower listed on the signature pages hereto (the “Guarantors”), The Lion Fund, L.P. and The Lion Fund II, L.P. (each a “Lender”, and together with their respective successors and assigns, collectively, the “Lenders”), and The Lion Fund, L.P., as collateral agent for the Lenders (in such capacity, the “Collateral Agent”).
RECITALS:
A. The Borrower has requested that Lenders extend a senior secured term loan facility to the Borrower in the amount of Twenty Million Dollars ($20,000,000), the proceeds of which will be used to (i) retire and extinguish all of the existing senior secured indebtedness owed to FB Lending, LLC, a California limited liability company (“FB Lending”) under that certain Loan and Security Agreement dated July 3, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “FB Facility”) between the Borrower and FB Lending, for a payment of approximately Eighteen Million Dollars ($18,000,000) and (ii) fund Transaction Costs. To induce the Lenders to make the Loan hereunder, the Borrower has agreed to grant a first priority security interest in all its assets to secure its Obligations under the Loan Documents.
B. To induce the Lenders to make the Loan hereunder, the Guarantors, for good and valuable consideration, have agreed to guaranty the Borrower’s Obligations under the Loan Documents and to grant to the Collateral Agent, for the benefit of the Lenders, a first priority security interest in all the assets of the Guarantors to secure the Obligations under the Loan Documents.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties, intending to be legally bound, agree as follows:
AGREEMENT
1. DEFINITIONS. As used herein, the following terms shall have the following meanings (terms defined in the singular shall have the same meaning when used in the plural and vice versa):
1.1 “Affiliate” shall mean any Person: (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, Borrower; (ii) which beneficially owns or holds 5% or more of any class of the voting stock or other equity interest in Borrower; or (iii) 5% or more of the voting stock or other equity interest of which is beneficially owned or held by Borrower. For purposes hereof, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting stock or other equity interests. by contract or otherwise.
1.2 “Agreement” shall mean this Loan and Security Agreement, together with all Schedules and Exhibits attached or otherwise identified thereto, as the same may be amended, modified, restated or supplemented from time to time.
1.3 “Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption, including without limitation the United States Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act 2010 and other similar legislation in any other jurisdictions.
1.4 “Anti-Terrorism Laws” shall mean any and all laws, regulations, rules, orders, etc. in effect from time to time relating to anti-money laundering and terrorism, including, without limitation, Executive Order No. 13224 (effective September 24, 2001) and the USA Patriot Act.
1.5 “Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
1.6 “Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
1.7 “Blocked Person” shall mean any person: (a) listed in the annex to Executive Order No. 13224, (b) owned or controlled by, or acting for or on behalf of, any person listed in the annex to Executive Order No. 13224, (c) with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224. (e) a person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list, (f) a person that is named a “denied person” on the most current list published by the U.S. Commerce Department, or (g) (i) an agency of the government of a Sanctioned Country, (ii) an organization controlled by a Sanctioned Country, or (iii) a person resident in a Sanctioned Country to the extent subject to a sanctions program administered by OFAC.
1.8 “Borrower” shall have the meaning set forth in the Preamble of this Agreement.
1.9 “Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks under the laws of the State of New York are authorized or required by law to close.
1.10 “Capital Expenditure” shall mean, as determined in accordance with GAAP, the dollar amount of gross expenditures (including obligations under capital leases) made or incurred for fixed assets, real property, plant and equipment, and all renewals, improvements and replacements thereto (but not repairs thereof) during any period.
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1.11 “Change of Control” means the occurrence of any of the following:
(a) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Borrower and its Subsidiaries taken as a whole to any “person” or “group” (as such terms are used in Section 13(d) or 14(d) of the Exchange Act or any successor provision);
(b) the adoption of a plan relating to the liquidation or dissolution of the Borrower;
(c) the consummation of any transaction (including, without limitation, any merger, consolidation or other business combination), the result of which is that any “person” or “group” (as defined above), other than a Permitted Holder, becomes the Beneficial Owner in a single transaction or a series of related transactions, directly or indirectly, of more than 50% of the voting stock of the Borrower, measured by voting power rather than number of shares; or
(d) the first day on which a majority of the members of the Board of Directors of the Borrower were not members of the Board of Directors on the Closing Date.
1.12 “Closing Date” shall have the meaning set forth in the Preamble.
1.13 “Code” shall mean the Internal Revenue Code of the United States, as amended.
1.14 “Collateral” shall mean all tangible and intangible personal property of each Loan Party, wherever located and whether now owned or hereafter acquired, including but not limited to all accounts, contracts rights, franchise rights, chattel paper, cash, general intangibles, investment property, machinery, equipment, goods, inventory, furniture, fixtures, letter of credit rights, books and records, deposit accounts, documents, instruments, money and commercial tort claims now or hereafter acquired (including, without limitation, those listed on Schedule 1.14), together with all proceeds thereof, including insurance proceeds (as each such term above is defined in the UCC).
1.15 “Collateral Access Agreement” shall mean a Collateral Access Agreement with respect to the chief executive office of the Borrower as may be approved by the Lenders.
1.16 “Collateral Questionnaire” shall mean a certificate reasonably satisfactory to the Lenders that provides information with respect to the personal or mixed property of each Loan Party.
1.17 “Compliance Certificate” shall mean a compliance certificate substantially in the form attached hereto as Exhibit B.
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1.18 “Consolidated Adjusted EBITDA” shall mean, without duplication for any period, Consolidated Net Income for such period, adjusted by adding thereto, in each case only to the extent (and in the same proportion) deducted in determining such Consolidated Net Income and without duplication:
(a) GAAP depreciation, amortization, Consolidated Interest Expense and income taxes;
(b) one-time non-cash restructuring and integration expenses, extraordinary losses and charges related to legal and financial services and extraordinary debt extinguishment, excluding severance fees, and fees and expenses relating to the transactions contemplated under the Loan Documents; provided that the aggregate amount included pursuant to this clause (b) shall not exceed 20% of Consolidated Adjusted EBITDA (prior to giving effect to this clause (b));
less without duplication and to the extent reflected as a gain or otherwise included in the calculation of Consolidated Net Income for such period, non-cash gains.
1.19 “Consolidated Interest Expense” shall mean, for any period, total consolidated interest expense (including interest attributable to obligations under capital leases in accordance with GAAP) of the Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries.
1.20 “Consolidated Net Income” shall mean, for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided, however, that there shall be excluded, without duplication:
(a) the income (or loss) of any Person accrued prior to the date it became a Subsidiary or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Subsidiaries;
(b) the income (or loss) of any Person that is not a Subsidiary of the Borrower or that is accounted for by the equity method of accounting; provided that Consolidated Net Income shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash or cash equivalents (or to the extent subsequently converted into cash or cash equivalents) to the Borrower or any of its Subsidiaries by such Person in such period;
(c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by operation of the terms of its Organizational Documents or any contractual obligation (other than under any Loan Document) or requirement of law applicable to such Subsidiary;
(d) any after-tax effect of any extraordinary, non-recurring or unusual items (including gains or losses and all fees and expenses relating thereto) for such period; and
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(e) the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies during such period to the extent included in Consolidated Net Income.
1.21 “Control Agreement” means, with respect to each Loan Party, a deposit account control agreement over each deposit account (other than any deposit account that is exclusively a payroll account or zero balance account) of such Loan Party, for which the average balance over a period of three months is $20,000 or more.
1.22 “Copyright Licenses” shall mean any and all agreements, licenses and covenants providing for the granting of any right in or to any Copyright or otherwise providing for a covenant not to sue for infringement or other violation of any Copyright (whether such Loan Party is licensee or licensor thereunder) including, without limitation, each agreement required to be listed in Schedule 9.19 under the heading “Copyright Licenses” (as such schedule may be amended or supplemented from time to time).
1.23 “Copyrights” shall mean all United States, and foreign copyrights (whether or not the underlying works of authorship have been published), including but not limited to copyrights in software and all rights in and to databases, and all designs, whether registered or unregistered, as well as all moral rights, reversionary interests, and termination rights, and, with respect to any and all of the foregoing: (i) all registrations and applications therefor including, without limitation, the registrations and applications required to be listed in Schedule 9.19 under the heading “Copyrights” (as such schedule may be amended or supplemented from time to time), (ii) all extensions and renewals thereof, (iii) the right to sue or otherwise recover for any past, present and future infringement or other violation thereof, (iv) all Proceeds of the foregoing, including, without limitation, license fees, royalties, income, payments, claims, damages and proceeds of suit now or hereafter due and/or payable with respect thereto, and (v) all other rights of any kind accruing thereunder or pertaining thereto throughout the world.
1.24 “Default” shall mean an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default, whether or not Lenders have declared an Event of Default to have occurred.
1.25 “Default Rate” shall have the meaning set forth in Section 3.1.
1.26 “Domestic Subsidiaries” shall mean a Subsidiary that was formed under the laws of the United States or any State thereof or the District of Columbia and is a “United States person” within the meaning of Section 7701(a)(30) of the Code
1.27 “Environment” shall mean any water or water vapor, any land surface or subsurface, air, fish, wildlife, biota and all other natural resources.
1.28 “Environmental Laws” shall mean all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the Environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of “hazardous substances” and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto.
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1.29 “Equity Interest” shall mean, with respect to a Person, all of the shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in such Person, whether voting or nonvoting, including capital stock (or other ownership or profit interests or units), preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).
1.30 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
1.31 “Events of Default” shall have the meaning set forth in Article 12 of this Agreement.
1.32 “Extraordinary Receipts” means any cash received by or paid to or for the account of any Loan Party not in the ordinary course of business, including without limitation amounts received in respect of indemnity obligations of a seller under any stock or asset purchase agreements, foreign, United States, state or local tax refunds to the extent not included in the calculation of EBITDA and pension plan reversions, but excluding (a) cash proceeds received by any Loan Party pursuant to business interruption policies of insurance and (b) cash proceeds not exceeding $1,000,000 (per occurrence) received from casualty insurance policies to the extent used by the Loan Party to replace Equipment within sixty (60) days of receipt thereof.
1.33 “Fiscal Year” shall mean with respect to any Person, a year of 365 or 366 days, as the case may be, ending on the last day of June in any calendar year.
1.34 “GAAP” shall mean United States generally accepted accounting principles consistently applied and maintained throughout the period indicated and consistent with the prior financial practice of Borrower, except for changes mandated by the Financial Accounting Standards Board or any similar accounting authority of comparable standing. Whenever any accounting term is used herein which is not otherwise defined, it shall be interpreted in accordance with GAAP.
1.35 “Governmental Authority” shall mean the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
1.36 “Governmental Rules” shall have the meaning set forth in Section 6.20 of this Agreement.
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1.37 “Guarantors” shall mean each of the Borrower’s wholly-owned subsidiaries and affiliates, including , but not limited to, Fatburger North America, Inc., a Delaware corporation, Ponderosa Franchising Company LLC, a Delaware limited liability company, Bonanza Restaurant Company LLC, a Delaware limited liability company, Ponderosa International Development, Inc., a Delaware corporation, Puerto Rico Ponderosa, Inc., a Delaware corporation, Buffalo’s Franchise Concepts Inc., a Delaware corporation, Fatburger Corporation, a Delaware corporation, and Homestyle Dining LLC, a Delaware limited liability company (together with any additional Domestic Subsidiary that at any time after the Closing Date becomes an additional Guarantor to this Agreement and any additional Person that at any time after the Closing Date guarantees payment or performance of the whole or any part of the Obligations).
1.38 “Indebtedness” shall mean and include all obligations for borrowed money of any kind or nature, including funded debt and unfunded liabilities; contingent obligations under guaranties or letters of credit; and all obligations for the acquisition or use of any fixed asset, including capitalized leases, or improvements which are payable over a period longer than one year, regardless of the term thereof or the Person or Persons to whom the same is payable, and the Obligations; provided that “Indebtedness” shall not include surety bonds or performance bonds or other obligations of a like nature incurred in the Borrower’s ordinary course of business as currently conducted.
1.39 “IP Security Agreement” shall mean each intellectual property security agreement executed and delivered by a Loan Party in favor of The Lion Fund, L.P., as Collateral Agent for the Lenders, to perfect the Lenders’ security interest in Collateral consisting of Patents, Trademarks or Copyrights held by such Loan Party.
1.40 “Lenders’ Commitment” shall mean Twenty Million Dollars ($20,000,000), of which (i) The Lion Fund, L.P.’s commitment is in a principal amount not to exceed Five Million Dollars ($5,000,000) and (ii) The Lion Fund II, L.P.’s commitment is in a principal amount not to exceed Fifteen Million Dollars ($15,000,000).
1.41 “Loan” shall mean the term loan made by the Lenders under this Agreement.
1.42 “Loan Documents” shall mean this Agreement, the Term Loan Note, the Warrant, the Rights Agreement (as defined in the Warrant), the Collateral Access Agreement, each IP Security Agreement, each Control Agreement and all other agreements, guaranties, pledges, collateral access agreements, support agreements, assignments, certificates, documents and instruments to be delivered by Borrower or any other Person under this Agreement or in connection with the Loans, the Warrant, the Rights Agreement the Collateral or any other Indebtedness or Obligations of Borrower to Lenders, as the same may be amended, modified, restated or supplemented from time to time.
1.43 “Loan Interest Rate” shall mean twenty (20) percent per annum.
1.44 “Loan Party” shall mean the Borrower and the Guarantors.
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1.45 “Material Adverse Effect” shall mean any material adverse effect on (a) the business, assets, operations, or condition, financial or otherwise, of any Loan Party; (b) any Loan Party’s ability to pay or perform the Obligations in accordance with their terms; (c) the value, collectability or salability of the Collateral or the perfection or priority of Lenders’ liens; (d) the validity or enforceability of this Agreement or any of the Loan Documents; or (e) the practical realization of the benefits, rights and remedies inuring to Lenders under this Agreement or under the Loan Documents, all at the reasonable discretion of the Lenders.
1.46 “Material Contract” means (i) any contract, license or other arrangement to which the Borrower or any of its Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect, (ii) any contract, license, agreement or arrangement, individually or in the aggregate, to which the Borrower or any of its Subsidiaries is a party (including, without limitation, any agreement or instrument evidencing or governing Indebtedness) involving aggregate consideration payable (A) to the Borrower or such Subsidiary in connection with a revenue-generating contract, license or agreement of $1,000,000 or more per Fiscal Year or (B) by the Borrower or such Subsidiary in connection with a distributor, licensor, vendor or supplier contract, license or agreement of $1,000,000 or more per Fiscal Year (in the case of this clause (ii), other than contracts that by their terms may be terminated by such Person or the Borrower or any of its Subsidiaries in the ordinary course of its business upon less than 60 days’ notice without penalty or premium), and (iii) to the extent not listed above, all contracts and arrangements listed on Schedule 9.19 (and any extensions or renewals thereof).
1.47 “Make-Whole Amount” shall have the meaning set forth in Section 3.2.
1.48 “Maturity Date” shall mean June 30, 2020.
1.49 “Net Cash Proceeds” shall mean shall mean:
(a) with respect to any sale or disposition by any Loan Party of assets (including, without limitation, the loss, destruction or damage of any thereof or any actual or threatened (in writing to any Loan Party or Subsidiary thereof) condemnation, confiscation, requisition, seizure or taking thereof), the amount of cash proceeds received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration) by or on behalf of such Loan Party, in connection therewith after deducting therefrom only (i) fees, commissions, and expenses related thereto and required to be paid by such Loan Party in connection with such sale or disposition to the extent that such fees, commissions and expenses are acceptable to Lenders in their commercially reasonable discretion based on comparable sales or dispositions, (ii) any Indebtedness that financed such assets and that is required to be paid by the Loan Party in connection with such sale or disposition and (iii) taxes paid or payable to any taxing authorities by such Loan Party in connection with such sale or disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of any Loan Party, and are properly attributable to such transaction;
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(b) with respect to the issuance or incurrence of any Indebtedness by any Loan Party, or the issuance by any Loan Party of any Equity Interests, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Loan Party in connection with such issuance or incurrence, after deducting therefrom only (i) reasonable fees, commissions, and expenses related thereto and required to be paid by such Loan Party in connection with such issuance or incurrence to the extent that such fees, commissions and expenses are acceptable to Lenders in their commercially reasonable discretion based on comparable sales or dispositions, and (ii) taxes paid or payable to any taxing authorities by such Loan Party in connection with such issuance or incurrence, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of any Loan Party, and are properly attributable to such transaction; and
(c) with respect to any Extraordinary Receipt, the aggregate cash proceeds received by any Loan Party pursuant thereto, net of the direct costs relating thereto.
1.50 “Notice of Borrowing” shall mean a borrowing request in substantially the form set forth in Exhibit A attached hereto.
1.51 “Obligations” shall mean and include all loans (including the Loan), debts, liabilities, obligations, covenants and duties owing by the Borrower to the Lenders or any Affiliate of the Lenders of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement, or any of the other Loan Documents or under any other agreement or by operation of law, whether or not for the payment of money, whether arising by reason of an extension of credit, opening, guaranteeing or confirming of a letter of credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by purchase or assignment), absolute or contingent, due or to become due, now due or hereafter arising and howsoever acquired including, without limitation, all interest, charges, expenses, fees, commitment, facility, collateral management or other fees, attorneys’ fees and expenses, consulting fees and expenses and any other sum chargeable to the Borrower under this Agreement, or any of the other Loan Documents and any such other interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower or any other Loan Party, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding.
1.52 “OFAC” shall mean the U.S. Department of Treasury Office of Foreign Assets Control (or any successor agency).
1.53 “Organizational Document” shall mean (i) with respect to any corporation or company, its certificate, memorandum or articles of incorporation, association or organization, as amended, and its by-laws, as amended, (ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended. In the event any term or condition of this Agreement or any other Loan Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “Organizational Document” shall only be to a document of a type customarily certified by such governmental official.
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1.54 “Patent Licenses” shall mean all agreements, licenses and covenants providing for the granting of any right in or to any Patent or otherwise providing for a covenant not to sue for infringement or other violation of any Patent (whether any Loan Party is licensee or licensor thereunder) including, without limitation, each agreement required to be listed in Schedule 9.19 under the heading “Patent Licenses” (as such schedule may be amended or supplemented from time to time).
1.55 “Patents” shall mean all United States and foreign patents and certificates of invention, or similar industrial property rights, and applications for any of the foregoing, including, without limitation: (i) each patent and patent application required to be listed in Schedule 9.19 under the heading “Patents” (as such schedule may be amended or supplemented from time to time), (ii) all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (iii) all patentable inventions and improvements thereto, (iv) the right to sue or otherwise recover for any past, present and future infringement or other violation thereof, (v) all Proceeds of the foregoing, including, without limitation, license fees, royalties, income, payments, claims, damages, and proceeds of suit now or hereafter due and/or payable with respect thereto, and (vi) all other rights of any kind accruing thereunder or pertaining thereto throughout the world.
1.56 “Permitted Holders” shall mean Fog Cutter Capital Group.
1.57 “Permitted Preferred Equity” shall mean the preferred stock existing as on the Closing Date and listed in Schedule 1.58.
1.58 “Permitted Liens” shall mean:
(a) liens securing the Obligations;
(b) the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords arising out of operation of law so long as the obligations secured thereby (i) are not past due or (ii) are being properly contested and for which Borrower has established adequate reserves;
(c) liens consisting of deposits or pledges made in the ordinary course of business in connection with workers’ compensation, unemployment insurance, social security and similar laws;
(d) liens in equipment (including capital leases) to secure purchase money Indebtedness permitted under Section 10.1 hereof, so long as such security interests do not apply to any property of Borrower other than the equipment so acquired, and the Indebtedness secured thereby does not exceed the cost of such equipment;
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(e) liens incurred in connection with surety bonds or performance bonds and other obligations of like nature incurred in its ordinary course of business as currently conducted; and
(f) liens for taxes, assessments or governmental charges not delinquent or being contested by Borrower in good faith by appropriate proceedings being diligently conducted and for which reserves in accordance with GAAP have been established and maintained, provided that Borrower has notified Lenders of such a lien and has provided Lenders with all relevant documentation and related correspondence, including all ongoing correspondence related to a resolution of the matter.
1.59 “Person” shall mean an individual, partnership, limited liability company, limited liability partnership, corporation, joint venture, joint stock company, land trust, business trust or unincorporated organization, or a government or agency or political subdivision thereof.
1.60 “Plan” shall mean an employee benefit plan or other plan now or hereafter maintained for employees of Borrower or any subsidiary of Borrower and covered by Title IV of ERISA.
1.61 “Pledged Debt” shall mean all indebtedness for borrowed money owed to any Loan Party, whether or not evidenced by any instrument, including, without limitation, all indebtedness described on Schedule 9.19 under the heading “Pledged Debt” (as such schedule may be amended or supplemented from time to time), issued by the obligors named therein, the instruments, if any, evidencing such any of the foregoing, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing.
1.62 “Pledged Equity Interests” shall mean, in each case as owned by any Loan Party and pledged as Collateral hereunder, all Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and any other participation or interests in any equity or profits of any entity including, without limitation, any trust and all management rights relating to any entity whose equity interests are included as Pledged Equity Interests.
1.63 “Pledged LLC Interests” shall mean all interests in any limited liability company and each series thereof including, without limitation, all limited liability company interests listed on Schedule 9.19 (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such limited liability company interests and any interest of any Loan Party on the books and records of such limited liability company or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such limited liability company interests and all rights as a member of the related limited liability company.
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1.64 “Pledged Partnership Interests” shall mean all interests in any general partnership, limited partnership, limited liability partnership or other partnership including, without limitation, all partnership interests listed on Schedule 9.19 (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such partnership interests and any interest of any Loan Party on the books and records of such partnership or on the books and records of any securities intermediary pertaining to such interest, all voting rights, management rights and economic rights with respect to limited liability companies or limited partnerships and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such partnership interests and all rights as a partner of the related partnership.
1.65 “Pledged Stock” shall mean all shares of capital stock owned by such Grantor, including, without limitation, all shares of capital stock described on Schedule 6.3 (as such schedule may be amended or supplemented from time to time), and the certificates, if any, representing such shares and any interest of any Loan Party in the entries on the books of the issuer of such shares or on the books of any securities intermediary pertaining to such shares, all voting rights, management rights and economic rights with respect to corporations, and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares.
1.66 “Preferred Equity” means a direct or indirect equity ownership interest in, economic interests in, or rights with respect to, the Borrower that provide an equity owner preferred dividend, distribution, payment, or return treatment relative to other equity owners.
1.67 “Reportable Event” shall have the meaning assigned to that term in Title IV of ERISA.
1.68 “Requirement of Law” shall mean, as to any Person, such Person’s Organizational Documents, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
1.69 “Restricted Junior Payment” shall mean (i) any cash dividend or other distribution, direct or indirect, on account of any shares of any class of capital stock of any Loan Party or any of its subsidiaries now or hereafter outstanding (other than any such dividend or distribution from a Loan Party to another Loan Party); (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of capital stock of any Loan Party or any of its Subsidiaries now or hereafter outstanding; (iii) payments with respect to any earn-out obligation or deferred purchase price in connection with any acquisition agreement (other than working capital adjustments) and (iv) any payments of principal, interest, premium or other amounts payable with respect to Subordinate Indebtedness.
1.70 “Sanctioned Country” shall mean any country subject to the sanctions program identified on the most current list maintained by OFAC.
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1.71 “Sanctioned Person” shall mean, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or by the United Nations Security Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person.
1.72 “Sanctions” shall mean economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.
1.73 “Solvent” shall mean when used with respect to any Person, such Person (a) owns property the fair value of which is greater than the amount required to pay all of such Person’s Indebtedness (including contingent debts), (b) owns property the present fair salable value of which is greater than the amount that will be required to pay the probable liabilities of such Person on its then existing Indebtedness as such become absolute and matured, (c) is able to pay all of its Indebtedness as such Indebtedness matures, and (d) has capital sufficient to carry on its then existing business.
1.74 “Subordinate Indebtedness” shall mean any Indebtedness which is unsecured, secured by a Lien that is junior in priority to the Lien securing the Obligations, subordinated or junior in right of payment to the Loan and, with respect to the Guarantors, the guarantees of the Loan hereunder.
1.75 “Subsidiary” shall mean with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.
1.76 “Term Loan Note” shall mean the promissory notes, in form and substance satisfactory to each Lender, to be given by Borrower to Lenders to evidence the Loan.
1.77 “Trademark Licenses” shall mean any and all agreements, licenses and covenants providing for the granting of any right in or to any Trademark or otherwise providing for a covenant not to sue for infringement dilution or other violation of any Trademark or permitting co-existence with respect to a Trademark (whether any Loan Party is licensee or licensor thereunder) including, without limitation, each agreement required to be listed in Schedule 9.19 (as such schedule may be amended or supplemented from time to time).
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1.78 “Trademarks” shall mean all United States, and foreign trademarks, trade names, trade dress, corporate names, company names, business names, fictitious business names, Internet domain names, service marks, certification marks, collective marks, logos, other source or business identifiers, designs and general intangibles of a like nature, whether or not registered, and with respect to any and all of the foregoing: (i) all registrations and applications therefor including, without limitation, the registrations and applications required to be listed in Schedule 9.19 (as such schedule may be amended or supplemented from time to time), (ii) all extensions or renewals of any of the foregoing, (iii) all of the goodwill of the business connected with the use of and symbolized by any of the foregoing, (iv) the right to sue or otherwise recover for any past, present and future infringement, dilution or other violation of any of the foregoing or for any injury to the related goodwill, (v) all Proceeds of the foregoing, including, without limitation, license fees, royalties, income, payments, claims, damages, and proceeds of suit now or hereafter due and/or payable with respect thereto, and (vi) all other rights of any kind accruing thereunder or pertaining thereto throughout the world.
1.79 “Trade Secret Licenses” shall mean any and all agreements providing for the granting of any right in or to Trade Secrets (whether any Loan Party is licensee or licensor thereunder) including, without limitation, each agreement required to be listed in Schedule 9.19 (as such schedule may be amended or supplemented from time to time).
1.80 “Trade Secrets” shall mean all trade secrets and all other confidential or proprietary information and know-how whether or not the foregoing has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating, or referring in any way to the foregoing, and with respect to any and all of the foregoing: (i) the right to sue or otherwise recover for any past, present and future misappropriation or other violation thereof, (ii) all Proceeds of the foregoing, including, without limitation, license fees, royalties, income, payments, claims, damages, and proceeds of suit now or hereafter due and/or payable with respect thereto; and (iii) all other rights of any kind accruing thereunder or pertaining thereto throughout the world.
1.81 “Transaction Costs” shall mean the fees, costs and expenses payable by the Borrower on or before the Closing Date in connection with the transactions contemplated by the Loan Documents.
1.82 “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York from time to time; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the perfection or priority of, or remedies with respect to, any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions hereof relating to such perfection, priority or remedies.
1.83 UCC Definitions. References to terms that are not defined herein, but are defined in the UCC, shall have the meanings given them in the UCC (and, if defined in more than one Article of the UCC, shall have the meaning given in Article 9 thereof), including the meanings of Commercial Tort Claims, Commodity Account, Commodity Contract, Deposit Account, Equipment, General Intangibles, Goods, Instrument, Inventory, Letter of Credit Right, Payment Intangible, Proceeds, and Securities Account.
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1.84 “Warrant” means that certain Warrant, dated as of January 29, 2019, by and between the Borrower and each of the Lenders, in the form of Exhibit C, whether in one or more warrant agreements.
2. THE LOAN.
2.1 Draw of Loan. Subject to the terms and conditions of this Agreement and relying upon the representations and warranties set forth in this Agreement, each Lender agrees to make the Loan in a single draw to the Borrower on the Closing Date in the amount of such Lender’s Commitment. The Loan is a term loan and once borrowed, may not be re-borrowed.
2.2 Manner of Borrowing. The Loan shall be requested in writing sent via facsimile or electronic transmission by a Notice of Borrowing executed by an authorized officer of the Borrower not later than 4:00 p.m. Eastern Time on any Business Day. The Lenders will make the Loan within one (1) Business Day after Lenders’ receipt of such Notice of Borrowing, if such Notice of Borrowing has been received by the Lenders no later than 3:00 P.M. the prior day, to an account specified by the Borrower.
2.3 Evidence of Borrower’s Obligations. Borrower’s obligation to pay the principal of, and interest on, the Loan made to Borrower shall be evidenced by the Term Loan Note executed by Borrower and delivered to Lenders.
2.4 Payment on Maturity Date. Notwithstanding anything herein to the contrary, on the Maturity Date Borrower shall pay to Lenders in full, in cash, the entire outstanding principal balance of the Loan, plus all accrued and unpaid interest thereon and all other Obligations. Any Obligations that are not paid on the Maturity Date shall bear interest at the Default Rate until paid in full.
3. LENDERS’ COMPENSATION.
3.1 Interest on Loan. Borrower shall pay interest quarterly, in arrears, on the fifth day after the end of each fiscal quarter of the Borrower, on the outstanding principal amount of the Loan at the Loan Interest Rate. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing, Borrower shall pay interest on the Loan at a rate which is five percent (5.0%) per annum above the Loan Interest Rate (the “Default Rate”). Notwithstanding anything contained herein to the contrary, in no event shall any interest to be paid under this Agreement or under any Loan Document exceed the maximum rate permitted by law.
3.2 Make-Whole Amount. If the Borrower repays, prepays, refinances or replaces a portion or all of the Loan (i) on or prior to the date that is thirty (30) days following the Closing Date or with respect to the principal of the Loan of which has become due or has been declared to be immediately due and payable prior to the date that is thirty (30) days following the Closing Date (the amount of any such repayment, prepayment, refinancing replacement or due amount, the “Repaid Amount”), the Borrower shall pay to the Lenders an amount equal to the sum of all of the remaining scheduled payments of interest payable on the Repaid Amount from the date of such repayment or prepayment (or the date of such acceleration as applicable) up to but not including the date that is four months (4) following the Closing Date, or (ii) at any time after the date that is thirty (30) days following the Closing Date, but on or prior to the date that is six (6) months following the Closing Date or with respect to the principal of the Loan of which has become due or has been declared to be immediately due and payable at any time after the date that is thirty (30) days following the Closing Date, but on or prior to the date that is six (6) months following the Closing Date, the Borrower shall pay to the Lenders an amount equal to the sum of all of the remaining scheduled payments of interest payable on the Repaid Amount from the date of such repayment or prepayment (or the date of such acceleration as applicable) up to but not including the date that is six (6) months following the Closing Date, (any such amount payable pursuant to clause (i) or clause (ii) of this Section 3.2, the “Make-Whole Amount”). If not paid when due, such Make-Whole Amount shall be added to the outstanding Loan amount and thereafter accrue interest as the default rate.
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3.3 Computation of Interest and Fees. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year, in each case, for the actual number of days elapsed in the period during which the interest or fees accrue.
3.4 Payments. All payments with respect to the Obligations shall be paid, without any defense, offset or counterclaim of any kind, at 17802 IH 10 West, Suite 400, San Antonio, TX 78257, or to such other address as the Lenders shall specify, in accordance with wire instructions to be provided by the Lenders, and as the Lenders may update such instructions from time to time. Whenever any payment to be made shall be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest in connection with any such payment.
3.5 Optional Prepayment. The Borrower may prepay the principal of the Loan, in whole or in part, at any time upon written notice to the Lenders. Each such prepayment of the Loan shall be accompanied by the payment of all accrued and unpaid interest thereon. Partial prepayments must be in multiples of one million dollars of principal.
3.6 Mandatory Prepayment. Except as set forth herein, the following mandatory prepayments of the Loan shall be accompanied by the payment of all accrued and unpaid interest thereon:
(a) Dispositions. Within ten (10) Business Days of the date of receipt by the Loan Parties of the Net Cash Proceeds of any voluntary or involuntary sale or disposition by the Loan Parties of assets (including, the loss, destruction or damage of any thereof or any actual or threatened (in writing to any Loan Party or Subsidiary thereof) condemnation, confiscation, requisition, seizure or taking thereof), the Loan Parties shall prepay the outstanding principal amount of the Loan in an amount equal to one hundred percent (100%) of such Net Cash Proceeds received by such Person in connection with such sales or dispositions.
(b) Indebtedness. Within ten (10) Business Days of the date of incurrence by the Loan Parties of any Indebtedness (other than any Indebtedness expressly permitted under Section 10.1), the Loan Parties shall prepay the outstanding principal amount of the Loan in an amount equal to one hundred percent (100%) of the Net Cash Proceeds received by such Person in connection with such incurrence. The provisions of this Section 3.6(b) shall not be deemed to be implied consent to any such incurrence otherwise prohibited by the terms of this Agreement.
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(c) Equity. Within ten (10) Business Days of the date of the issuance by any Loan Party of any Equity Interests for cash (other than the issuance of (x) Permitted Preferred Equity and (y) Equity Interests of the Borrower to directors, officers and employees of the Borrower pursuant to employee stock option plans (or other employee incentive plans or other compensation arrangements) approved by the Board), the Loan Parties shall prepay the outstanding principal amount of the Loan in an amount equal to one hundred percent (100%) of the Net Cash Proceeds received by such Person in connection with such issuance. The provisions of this Section 3.6(c) shall not be deemed to be implied consent to any such issuance otherwise prohibited by the terms of this Agreement.
(d) Change of Control. Upon the occurrence of a Change of Control, the Loan Parties shall prepay the Obligations in full.
(e) Extraordinary Receipts. As soon as reasonably practicable (but in any event within ten (10) Business Days) following with the receipt by any Loan Party or Subsidiary thereof of any Net Cash Proceeds of Extraordinary Receipts, the Loan Parties shall prepay the outstanding principal amount of the Term Loans in an amount equal to 100% of such Net Cash Proceeds.
3.7 Taxes. The Borrower will pay for and indemnify the Lenders against any stamp, court or documentary, intangible, recoding, filing or similar Taxes with respect to the Loan Documents. All payments to be made by or on behalf of the Borrower under any Loan Documents shall be made without withholding or deduction for or on account of any Taxes unless the Borrower is compelled by law to deduct or withhold such Taxes. In that event, the Borrower shall pay such additional amounts (other than with respect to net income taxes) as may be necessary in order that the net amounts received after such withholding or deduction shall equal the amounts that would have been received if no withholding or deduction had been made. The Borrower shall timely indemnify the Lender for any Taxes (other than with respect to net income taxes) with respect to a payment made by or on account of the obligation of the Borrower or arising from a change in law hereinafter and increasing the Lender’s cost of making or maintaining any Loan. The Lenders shall provide to Borrower, to the extent it is legally entitled to do so and upon reasonable request, any US tax form (and required attachments) to certify to any Tax exemption with respect to payments hereunder. The parties’ obligations under this provision shall survive any assignment, the termination of the commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
4. GRANT OF SECURITY INTEREST.
4.1 Grant of Security Interest. To induce Lenders to make the Loan hereunder, and to secure the payment, promptly when due, and the otherwise punctual performance of all of the Obligations, (a) the Borrower hereby pledges to the Collateral Agent, and grants to the Collateral Agent, and agrees that the Collateral Agent, shall have, for the benefit of the Lenders, a first priority continuing lien upon and security interest in all of the Collateral in which the Borrower has any right, title or interest; and (b) each Guarantor hereby pledges to the Collateral Agent, and grants to the Collateral Agent and agrees that the Collateral Agent shall have, for the benefit of the Lenders, a first priority continuing lien upon and security interest in, all of the Collateral in which such Loan Party has any right, title or interest.
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4.2 Authorization to File. Each Loan Party hereby authorizes the Collateral Agent to file any financing statements, continuation statements or amendments thereto that indicate the Collateral as all assets of such Loan Party or words of similar effect, and contain any other information required by Part 5 of Article 9 of the UCC. Each Loan Party acknowledges that it is not authorized to file any financing statement or amendment, termination or corrective statement with respect to any financing statement without the prior written consent of the Collateral Agent and agrees that it will not do so without the prior written consent of the Collateral Agent.
4.3 Other Perfection. Each Loan Party will execute and deliver to the Collateral Agent such security agreements, assignments and other papers as the Collateral Agent may at any time or from time to time reasonably request that are required to perfect or protect the security interest granted hereby. Each Loan Party shall also cooperate with the Lenders, if requested by the Lenders, in obtaining appropriate waivers or subordinations of interests from such third parties in any Collateral and in obtaining control of Collateral consisting of deposit accounts, investment property, letter-of-credit rights or electronic chattel paper. Each Loan Party shall promptly, and in any event within five (5) Business Days after the same is acquired by it, notify the Lenders of any commercial tort claim acquired by it and shall enter into a supplement to this Agreement granting to the Collateral Agent a security interest in such commercial tort claim.
4.4 Maintenance of Collateral. Each Loan Party shall, at its sole expense, take good care of all its Collateral and afford it suitable preventive maintenance. No Loan Party will permit anything to be done that might in any way impair the value of any of the Collateral or any of the security intended to be afforded by this Agreement. Each Loan Party shall not pledge, assign or otherwise further encumber, or permit any additional liens or security interests (other than Permitted Liens) to attach to, any of the Collateral, nor permit any of the Collateral to be levied upon under any legal process, nor permit any of the Collateral to become or be a fixture, except with the express written consent of Lenders. Upon any breach of the foregoing covenant against encumbrances, the Collateral Agent may, at the direction of the Lenders at their sole election but without obligation to do so, and without limiting the Collateral Agent’s and Lenders’ other remedies (including without limitation declaring an Event of Default), discharge the encumbrance for the account of and without notice to the relevant Loan Party, and all expenses incurred by the Collateral Agent and Lenders in so doing shall be added to the Obligations and shall be payable by the Loan Parties upon demand, together with, at Lenders’ election, interest thereon at the Default Rate.
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4.5 Attorney in Fact. Upon the occurrence and during the continuance of an Event of Default, each Loan Party hereby appoints the Collateral Agent and such Person(s) as the Collateral Agent may designate as its attorney in fact to (a) execute and deliver notices of lien, financing statements, assignments, and any other documents, notices, and agreements necessary for the perfection of the Collateral Agent’s security interests in the Collateral, (b) endorse the name of such Loan Party on any checks, notes, drafts or other forms of payment or security that may come into the possession of the Collateral Agent or any Affiliate of the Collateral Agent, (c) sign such Loan Party’s name on invoices or bills of lading, drafts against customers, notice of assignment, verifications and schedules, and with respect to invoices, sell the accounts receivable generated from such invoices, (d) continue or obtain any insurance and pay all or any part of the premiums therefor and costs thereof, and make, settle and adjust all claims under such policies of insurance, (e) pay or discharge any taxes, liens, security interests or other encumbrances levied or placed on or threatened against any Loan Party or its property, (f) instruct any third party having custody or control of any Collateral or books and records belonging or relating to any Loan Party to give the Collateral Agent the same rights of access and other rights with respect thereto as the Collateral Agent has under this Agreement and the Loan Documents, (g) notify the Post Office authorities to change the address of delivery of mail to an address designated by the Collateral Agent, and open and dispose of mail addressed to such Loan Party, and (h) generally, to do all things necessary to carry out the terms and provisions of this Agreement. The powers granted herein, being coupled with an interest, are irrevocable, and each Loan Party approves and ratifies all acts of the attorney-in-fact. Neither the Collateral Agent nor its designated Person(s) shall be liable for any act or omission, error in judgment or mistake of law so long as the same is not willful or grossly negligent. Any and all sums paid, and any and all costs, expenses, liabilities, obligations and attorneys’ fees incurred by the Collateral Agent with respect to the foregoing shall be added and become part of the Obligations, shall be payable on demand, and shall bear interest at the Loan Interest Rate, except that, any sums paid by the Collateral Agent as a result of any Loan Party’s breach of its covenants set forth in Section 4.4 shall, at the Collateral Agent’s election per direction of the Lenders, bear interest at the Default Rate. Each Loan Party agrees that the Collateral Agent’s rights under the foregoing power of attorney or any of the Collateral Agent’s other rights under this Agreement and the other Loan Documents shall not be construed to indicate that the Collateral Agent is in control of the business, management or properties of any Loan Party.
4.6 Collateral Agent. Each of the Lenders hereby irrevocably appoints The Lion Fund, L.P. to act on its behalf as the Collateral Agent hereunder and under the other Loan Documents and authorizes the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Collateral Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Section 4.6 (other than as expressly provided herein) are solely for the benefit of the Collateral Agent and the Lenders, and neither the Borrower nor any Loan Party shall have any rights as a third-party beneficiary of any such provisions (other than as expressly provided herein). It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Requirements of Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties
5. APPLICATION OF PROCEEDS. The proceeds of the Loan shall be used solely by the Borrower as set forth in the Preamble to this Agreement.
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6. INDUCING REPRESENTATIONS. In order to induce Lenders to make the Loans, each Loan Party makes the following representations and warranties to Lenders on the date hereof and on the date of issuance of the Warrant:
6.1 Organization and Qualifications. Each Loan Party (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as identified in Schedule 6.1, (b) has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby, and (c) except in jurisdictions where the failure to be so qualified or in good standing has not had, and could not be reasonably expected to have, a Material Adverse Effect, is qualified to do business and in good standing in every jurisdiction wherever necessary to carry out its business and operations.
6.2 Name and Address. Except as set forth on Schedule 6.2, during the preceding five (5) years, no Loan Party has been known by, nor has used any other name, whether corporate, fictitious or otherwise. The full legal name and address of each Loan Party’s chief executive office is set forth in Schedule 6.2.
6.3 Structure. No Loan Party has any subsidiaries or Affiliates, except as set forth on Schedule 6.3 attached hereto. All of the issued and outstanding capital stock of each Loan Party is owned by the Persons and in such amounts/percentages as set forth in Schedule 6.3 attached hereto.
6.4 Legally Enforceable Agreement. The execution, delivery and performance of this Agreement, each and all of the other Loan Documents and each and all other instruments and documents to be delivered by any Loan Party under the Loan Documents, and the creation of all liens and security interests provided for herein, are within the relevant Loan Party’s corporate or limited liability company power, have been duly authorized by all necessary or proper corporate or limited liability company action (including the consent of members or shareholders where required), are not in contravention of any agreement or indenture to which the relevant Loan Party is a party or by which it is bound, or of the charter documents (articles/certificate of incorporation, by-laws, articles/certificate of organization/formation or operating agreement, as the case may be) of the relevant Loan Party, and are not in contravention of any provision of law and the same do not require the consent or approval of any governmental body, agency, authority or any other Person which has not been obtained and a copy thereof furnished to Lenders. Each Loan Document is the legally and valid binding obligation of the Loan Parties party thereto, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.
6.5 Solvent Financial Condition. Each Loan Party is Solvent.
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6.6 Franchise Agreements. With respect to franchise agreements of the Loan Parties:
(a) Borrower has furnished to Lenders true and complete copies of all existing franchise agreements between a Loan Party and a franchisee, including all related documents and guarantees.
(b) Borrower has furnished to Lenders Borrower’s current standard form of franchise agreement and related disclosure documents.
(c) Borrower’s franchise disclosure documents furnished to potential franchisees are accurate and complete in all material respects, and do not contain any untrue statements of a material fact or omit to state material facts required to make the statements included therein not misleading.
6.7 Joint Ventures. Except as set forth in Schedule 6.7, no Loan Party is engaged in any joint venture or partnership with any other Person without prior approval from Lenders.
6.8 Real Estate. Attached hereto as Schedule 6.8 is a list showing all real property owned or leased by any Loan Party, and if leased, the correct name and address of the landlord and the date and term of the applicable lease.
6.9 Intellectual Property. Each Loan Party owns, possesses or is licensed to use all the patents, trademarks, service marks, trade names, copyrights, licenses and other intellectual property and/or propriety rights necessary for the present and planned future conduct of its business without any conflict with the rights of others. All such U.S. and foreign trademark registrations, copyright registrations, and patents, and all pending U.S. and foreign trademark, patent and copyright applications, patents, trademarks, service marks, trade names, copyrights, licenses and other similar rights are listed on Schedule 9.19 attached hereto, if any.
6.10 Existing Business Relationship. There exists no actual or threatened termination, cancellation or limitation of, or any adverse modification or change in, the business relationship of any Loan Party with any supplier, customer or group of customers whose purchases individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.
6.11 Investment Company Act: Federal Reserve Board Regulations. The Borrower is not and will not become an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. §§ 80(a)(1), et seq.). The making of the Loans under this Agreement by Lenders, the application of the proceeds and repayment thereof by Borrower and the performance of the transactions contemplated by the Loan Documents will not violate any provision of such Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder. Borrower does not own any margin security as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System and the proceeds of the Loans made pursuant to this Agreement will be used only for the purposes contemplated under this Agreement. None of the proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin security or for any other purpose which might constitute any of the Loans under this Agreement a “purpose credit” within the meaning of said Regulation U or Regulations T or X of the Federal Reserve Board. Borrower will not take, or permit any agent acting on its behalf to take, any action which might cause this Agreement or any document or instrument delivered pursuant hereto to violate any regulation of the Federal Reserve Board.
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6.12 Tax Returns. Each Loan Party has filed all tax returns (federal, state or local) required to be filed and paid all taxes shown thereon to be due including interest and penalties. No assessments have been made against any Loan Party by any taxing authority, nor has any penalty or deficiency been made by any such authority, which remains outstanding or unpaid. To the best of each Loan Party’s knowledge, no Federal income tax return of such Loan Party is presently being examined by the Internal Revenue Service nor are the results of any prior examination by the Internal Revenue Service or any State or local tax authority being contested by any Loan Party.
6.13 Litigation. Except as set forth in Schedule 6.13, no action or proceeding is now pending or, to the knowledge of each Loan Party, is threatened against such Loan Party, in equity or otherwise, before any court, board, commission, agency or instrumentality of the Federal or state government or of any municipal government or any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, and no Loan Party has accepted liability for any such action or proceeding. None of the pending proceedings listed on Schedule 6.13, individually or collectively, if adversely determined, could reasonably be expected to have a Material Adverse Effect.
6.14 Title/ Liens. Except as set forth in Section 6.26, each Loan Party has good and marketable title to the Collateral as sole owner thereof. There are no existing liens on any Collateral of any Loan Party, except for Permitted Liens. None of the Collateral is subject to any prohibition against encumbering, pledging, hypothecating or assigning the same or requires notice or consent in connection therewith.
6.15 Existing Indebtedness. No Loan Party has any existing Indebtedness except the Indebtedness permitted under Section 10.1.
6.16 ERISA Matters. If any Loan Party maintains a Plan, the present value of all accrued vested benefits under such Plan (calculated on the basis of the actuarial valuation for the Plan) did not exceed as of the sale of the most recent actuarial valuation for such Plan the fair market value of the assets of such Plan allocable to such benefits. No Loan Party is aware of any information since the date of such valuation which would affect the information contained therein. No Plan has incurred a funding shortfall, as that term is defined in Section 302 of ERISA or Section 412 and/or 430 of the Code (whether or not waived), no liability to the Pension Benefit Guaranty Corporation (other than required premiums which have become due and payable, all of which have been paid) has been incurred with respect to the Plan and there has not been any Reportable Event. No Loan Party has engaged in any transaction which would subject such Loan Party to tax, penalty or liability for prohibited transactions imposed by ERISA or the Code. No Loan Party has incurred any withdrawal liability, as that term is used in Title IV of ERISA.
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6.17 O.S.H.A. Each Loan Party has duly complied with, and its facilities, business, leaseholds, equipment and other property are in compliance in all material respects with, the provisions of the federal Occupational Safety and Health Act and all rules and regulations thereunder and all similar state and local Governmental Rules. There are no outstanding citations, notices or orders of non-compliance issued to any Loan Party or relating to its facilities, business. leaseholds, equipment or other property under any such Governmental Rules.
6.18 Environmental Matters. Each Loan Party is in compliance with all Environmental Laws.
6.19 Labor Disputes. There are no pending or, to each Loan Party’s knowledge, threatened labor disputes against such Loan Party.
6.20 Compliance With Laws. Each Loan Party is in compliance in all material respects with all Federal, state and local governmental rules, ordinances and regulations (“Governmental Rules”) applicable to its ownership or use of properties or the conduct of its business.
6.21 Anti-Money Laundering and Terrorism Regulations. Each Loan Party (a) is familiar with all applicable Anti-Terrorism Laws; (b) acknowledges that its transactions are subject to applicable Anti-Terrorism Laws; (c) will comply in all material respects with all applicable Anti-Terrorism Laws, including, if appropriate, the USA Patriot Act; (d) acknowledges that Lenders’ performance hereunder is also subject to Lenders’ compliance with all applicable Anti-Terrorism Laws, including the USA Patriot Act; (e) and, to such Loan Party’s knowledge, its Affiliates are not Blocked Persons; (f) acknowledges that Lenders will not conduct business with any Blocked Person; (g) will not (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law; (h) shall provide to Lenders all such information about such Loan Party’s ownership, officers, directors, business structure and, to the extent not prohibited by applicable law or agreement, customers, as Lenders may reasonably require; and (i) will take such other action as Lenders require to identify such Loan Party in accordance with the USA Patriot Act and as Lenders may otherwise reasonably request in connection with its obligations described in clause (d) above. In addition, each Lender has the right to periodically conduct OFAC searches and customary background checks for senior management and key principals of each Loan Party.
6.22 No Other Violations. No Loan Party is in violation of any term of its charter documents (articles/certificate of incorporation, by-laws, articles or certificate of organization/formation or operating agreement, as the case may be) and no event or condition has occurred or is continuing which constitutes or results in (or would constitute or result in, with the giving of notice, lapse of time or other condition) (a) a material breach of, or a material default under, any material agreement, undertaking or instrument to which such Loan Party is a party or by which it or any of its Collateral may be affected, or (b) the imposition of any lien (other than a Permitted Lien) on any Collateral of any Loan Party.
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6.23 No Conflicts. The transactions contemplated by the Loan Documents (i) do not require any consent, exemption, authorization or approval of, registration or filing with, or any other action by, any Governmental Authority, except (A) such as have been obtained or made and are in full force and effect, (B) filings necessary to perfect or maintain the perfection or priority of the Liens created by the Loan Documents and (C) consents, approvals, exemptions, authorizations, registrations, filings, permits or actions the failure of which to obtain or perform could not reasonably be expected to have a Material Adverse Effect, (ii) will not violate the Organizational Documents of the Borrower or any of its Subsidiaries, (iii) will not violate or result in a default or require any consent or approval under any indenture, instrument, agreement, or other document binding upon the Borrower or any of its Subsidiaries or its property or to which Borrower or any of its Subsidiaries or their property is subject, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, except for violations, defaults or the creation of such rights that could not reasonably be expected to have a Material Adverse Effect, (iv) will not violate any Requirement of Law in any material respect and (v) will not result in the creation or imposition of any Lien on any property of Borrower or any of its Subsidiaries, except Liens created by the Loan Documents.
6.24 Full Disclosure. No information contained in any Loan Document, the financial statements or any written statement furnished by or on behalf of any Loan Party under any Loan Document, or to induce Lenders and Collateral Agent to execute the Loan Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects
6.25 Warrant.
(a) The Borrower has reserved for issuance upon exercise of the Warrant 1,143,112 shares of common stock of the Borrower.
(b) The common stock, when issued upon exercise of the Warrant, shall be duly and validly issued, fully paid and non-assessable and is not and shall not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with and shall not be subject to any liens or other encumbrances. The Warrant shall be exercisable at any time or times beginning on October 1, 2019 (provided that, as of such date, any amount was outstanding hereunder and without regard to whether any such amount was subsequently repaid) and ending on the five (5) year anniversary of the Closing Date.
(c) The issue of the Warrant and the offer and sale of the common stock issuable thereunder is and will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) by reason of Section 4(a)(2) thereof or as a result of an effective registration statement in respect of the common stock.
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(d) None of the Loan Parties nor any of their affiliates, nor any person acting on their behalf (i) has, within the six-month period prior to the date hereof, offered or sold any security of the same class or series as the Warrant or (ii) has offered or will offer or sell the Warrant or any security of the same class or series as the Warrant by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act that will be integrated with the issuance and sale of the Warrant or the offer of the underlying common stock.
(e) None of the Loan Parties nor any of their affiliates, nor any person acting on their behalf has, directly or indirectly, solicited offers to buy, offered to sell or sold any security (as defined in the Securities Act), that is or will be integrated with the issuance and sale of the Warrant or the offer of the common stock in a manner that would require registration of the Warrant or the offer of the common stock under the Securities Act.
6.26 Judgment and UCC Liens.
(a) The judgment liens against Fatburger North America, Inc., as described and listed in the UCC search report dated June 15, 2018 and delivered to the Lenders, have been paid in full, except for the claim of Michael Berg DBA Media Pulse Creative in the amount of $48,967.00, with whom the Borrower intends to engage in good faith settlement negotiations.
(b) The indebtedness owed by Fatburger North America, Inc. to GE Commercial Finance Business Property Corporation, GE Commercial Finance Business Property Corporation and GE Capital Franchise Finance Corporation, as shown on the UCC Search Report dated June 15, 2018 delivered to the Lenders, has been settled and paid in full.
6.27 Survival of Representations and Warranties. Each Loan Party covenants, warrants and represents to Lenders that all representations and warranties of such Loan Party contained in this Agreement or in any other Loan Documents shall be true at the time of such Loan Party’s execution of this Agreement and the other Loan Documents, and Lenders’ right to bring an action for breach of any such representation or warranty or to exercise any remedy under this Agreement based upon the breach of such representation or warranty shall survive the execution, delivery and acceptance hereof by Lenders and the closing of the transactions described herein or related hereto until the Obligations are finally and irrevocably paid in full.
6.28 Use of Proceeds. The Borrower will use the proceeds of the Loan only for the purposes specified in the Preamble to this Agreement. The proceeds of the Loan will not be used in violation of Anti-Corruption Laws or applicable Sanctions or in violation of Regulations T, U or X of the Board of Governors of the Federal Reserve.
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7. FINANCIAL STATEMENTS AND INFORMATION; CERTAIN NOTICES TO LENDER. So long as any Loan Party shall have any Obligations to Lenders under this Agreement, the Loan Parties shall deliver to Lenders, or shall cause to be delivered to Lenders, which may be satisfied by delivery via electronic mail to individuals who are specified from time-to-time by Lenders:
7.1 Annual Financial Statements. Within ninety (90) days after the close of each Fiscal Year of Borrower, the audited consolidated balance sheet of Borrower as at the end of, and the related audited statements of income, stockholder or member equity and cash flows for, such Fiscal Year (or, if audited financial statements are not available, unaudited consolidated balance sheet and unaudited consolidated statements of income, stockholder or member equity and cash flows of Borrower), which may be satisfied by delivery of the Borrower’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.
7.2 Quarterly/Other Financial Statements. Within forty five (45) days after the end of each of the first three fiscal quarters of each Fiscal Year of Borrower, financial statements consisting of a consolidated balance sheet, statements of operations and retained earnings and statements of cash flow, prepared by management of Borrower in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes), which may be satisfied by delivery of the Borrower’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. At their discretion, Lenders may request consolidated financial statements on a monthly basis as well to the extent it is reasonably practicable for the Borrower to prepare or deliver such monthly financial statements.
7.3 Compliance Certificate. Each time the financial statements of Borrower and its subsidiaries are required to be delivered pursuant to Sections 7.1 and 7.2, Borrower shall deliver to Lenders a duly executed and completed Compliance Certificate.
7.4 Notice Regarding Material Contracts. Promptly, and in any event within ten (10) Business Days (i) after any Material Contract is terminated or amended in a manner that is materially adverse to the Borrower or the applicable Subsidiary, as the case may be, (ii) the occurrence of a default under any Material Contract, to the extent that such default would have a Material Adverse Effect or (iii) any new Material Contract is entered into, the relevant Loan Party shall deliver to the Lenders (x) a written statement describing such event, with copies of such material amendments or new contracts (to the extent such delivery is permitted by the terms of any such Material Contract, provided no such prohibition on delivery shall be effective if it were bargained for by a Loan Party with the intent of avoiding compliance with this Section 7.3), and an explanation of any actions being taken with respect thereto. The Borrower may deliver its Current Report on Form 8-K filed with the Securities and Exchange Commission in satisfaction of the above requirement, provided that such filing satisfies the requirements set forth above.
7.5 Insurance. Within thirty (30) days of the renewal date of each insurance policy, evidence of renewal of insurance in form and content satisfactory to Lenders and otherwise in compliance with Section 9.6 of this Agreement, together with the original insurance policy.
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7.6 Notice of Event of Default and Adverse Business Developments. Within three (3) Business Days after becoming aware of the existence of a Default or an Event of Default or any of the following:
(a) any material dispute that may arise between any Loan Party and any governmental regulatory body or law enforcement authority, including any action relating to any tax liability of such Loan Party;
(b) any labor controversy resulting in or threatening to result in a strike or work stoppage against any Loan Party;
(c) any proposal by any public authority to acquire the assets or business of any Loan Party;
(d) the location of any Collateral other than at any Loan Party’s place of business or as permitted under this Agreement;
(e) any proposed or actual change of any Loan Party’s name, identity, state of organization or corporate/limited liability company structure; or
(f) any other matter which has resulted or may reasonably be expected to result in a Material Adverse Effect.
In each case, Borrower or the relevant Loan Party will provide Lenders with telephonic notice followed by written notice specifying and describing the nature of such Default, Event of Default or development or information, and such anticipated effect.
7.7 Other Information. Such other information respecting the payment of payroll taxes, the financial condition of any Loan Party, or any Collateral of any Loan Party as Lenders may, from time to time, reasonably request. Each Loan Party authorizes each Lender to communicate directly with such Loan Party’s independent certified public accountants and authorizes those accountants to disclose to Lenders any and all financial statements and other information of any kind that they may have with respect to such Loan Party and its business and financial and other affairs.
8. ACCOUNTING. Lenders will account quarterly to Borrower. Each and every account shall be deemed final, binding and conclusive upon Borrower in all respects (absent manifest error), as to all matters reflected therein, unless Borrower, within sixty (60) days after the date the account was rendered, delivers to Lenders written notice of any objections which Borrower may have to any such account and in that event only those items expressly objected to in such notice shall be deemed to be disputed by Borrower. If Borrower disputes the correctness of any statement, Borrower’s notice shall specify in detail the particulars of its basis for contending that such statement is incorrect.
9. AFFIRMATIVE COVENANTS. Each Loan Party (unless otherwise indicated below) covenants and agrees that, so long as any Obligations to Lenders are outstanding under this Agreement, such Loan Party will:
9.1 Business and Existence. Preserve and maintain such Loan Party’s separate existence and rights, privileges and franchises.
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9.2 Trade Names. Transact business in such Loan Party’s own name and Borrower shall invoice all of Borrower’s receivables in Borrower’s own name.
9.3 Transactions with Affiliates. Whenever such Loan Party engages in transactions with any of its Affiliates, conduct such transactions on an arms-length basis.
9.4 Taxes. Pay and discharge all taxes, assessments, government charges and levies imposed upon such Loan Party, upon such Loan Party’s income, profits or employees or upon any Collateral belonging to such Loan Party prior to the due date thereof, unless such item is being contested by such Loan Party in good faith by appropriate proceedings being diligently conducted and reserves in accordance with GAAP have been established and maintained.
9.5 Compliance with Laws. Comply in all material respects with all Governmental Rules applicable to such Loan Party including, without limitation, all laws and regulations regarding the collection and payment of employees’ income, payroll, unemployment and Social Security taxes.
9.6 Maintain Properties; Insurance; Compliance with Material Contracts. Safeguard and protect all Collateral used in the conduct of such Loan Party’s business and keep all of such Loan Party’s Collateral insured with insurance companies licensed to do business in the states where the Collateral is located against loss or damage by fire or other risk under extended coverage endorsement and against theft, burglary, and pilferage together with such other hazards as is customary in the case of companies engaged in businesses similar to the business of such Loan Party. Such Loan Party shall deliver the policy or policies of such insurance or certificates of insurance to Lenders containing endorsements in form satisfactory to Lenders naming the Collateral Agent as lender loss payee and additional insured and providing that the insurance shall not be canceled, amended or terminated except upon thirty (30) days’ prior written notice to Lenders. All insurance proceeds received by the Collateral Agent shall be retained by the Collateral Agent for application to the payment of such portion of the Obligations as Lenders may determine in Lenders’ sole discretion. Such Loan Party shall promptly notify Lenders of any event or occurrence causing a loss or decline in the value of Collateral insured or the existence of an event justifying a claim under any insurance and the estimated amount thereof. Each Loan Party shall perform and comply with its obligations under, and enforce its rights in respect of, all Material Contracts, except where failure to perform and comply with such obligations or to enforce such rights would not reasonably have a Material Adverse Effect.
9.7 Business Records. Keep adequate records and books of account with respect to such Loan Party’s business activities in which proper entries are made in accordance with sound bookkeeping practices reflecting all financial transactions of such Loan Party.
9.8 Litigation. Give Lenders prompt notice of any suit at law or in equity against such Loan Party involving money or property valued in excess of $10,000 and advise Lenders in such notice as to whether the same is fully covered by insurance and the insurer has accepted liability therefor in writing.
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9.9 Damage or Destruction of Collateral. Maintain or cause to be maintained the Collateral in good condition and repair at all times (normal wear and tear excepted), preserve the Collateral from loss, damage, or destruction of any nature whatsoever and provide Lenders with prompt written notice of any destruction or substantial damage to any Collateral and of the occurrence of any condition or event which has caused, or would reasonably be expected to cause, material loss or depreciation in the value of any Collateral.
9.10 Name Change. Provide Lenders with not fewer than thirty (30) days written notice prior to any proposed change of name or the creation of any subsidiary (subject to the prohibition on creation of subsidiaries in Section 10.15 below) and, in the case of such new subsidiary, cause such subsidiary, promptly upon request of Lenders, to become a guarantor of all of the Obligations and grant to the Collateral Agent a security interest in all of such subsidiary’s assets, as security for such guarantee.
9.11 Access to Books, Records and other Collateral. During normal business hours (unless an Event of Default has occurred and is continuing in which event at any and all times), (a) provide Lenders, or Lenders’ designee, with such reports and with such access to such Loan Party’s books and records, and permit Lenders to copy and inspect such reports and books and records, all as Lenders deem necessary or desirable to enable Lenders to monitor the Loan extended and the liens granted hereby, and (b) permit Lenders, or Lenders’ designee, to examine and inspect the inventory, equipment or other Collateral and examine, inspect and copy all books and records with respect thereto. Such Loan Party shall maintain full, accurate and complete records respecting inventory, including a perpetual inventory, and all other Collateral at all times.
9.12 Solvency. Continue to be Solvent.
9.13 Compliance With Environmental Laws. Comply in all material respects with all applicable Environmental Laws.
9.14 Compliance with ERISA and other Employment Laws. (a) Comply in all material respects with all applicable provisions of ERISA and the Code, and any other applicable laws, rules or regulations relating to the compensation of employees and funding of employee benefit plans, and (b) pay, when due, all minimum required contributions (as that term is used in Section 430 of the Code) and all amounts required to be contributed and/or paid to any Plan under such Loan Party’s collective bargaining agreement, if any.
9.15 Delivery of Control Agreement, Certificated Shares and Promissory Notes. Promptly deliver to the Lenders (i) [reserved], (ii) any certificated shares that constitute Collateral, along with corresponding stock transfer powers executed in blank and (iii) all promissory notes in favor of the Borrower, with corresponding allonges executed in blank. Each Guarantor shall promptly deliver to the Lenders (i) [reserved], (ii) any certificated shares that constitute Collateral of such Guarantor, along with corresponding stock transfer powers executed in blank and (iii) all promissory notes in favor of the Guarantor, with corresponding allonges executed in blank. No interest in any Loan Party is a “security” and no Loan Party shall permit its Equity Interests to be “securities” unless such Equity Interests are certificated and delivered to the Collateral Agent as required by this Section.
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9.16 Notice of Defaults and Events of Default. As soon as possible and, in any event, within ten days after the occurrence of each Default and Event of Default, furnish to Lender a written notice setting forth the details of such Default or Event of Default and the action that is proposed to be taken by the relevant Loan Party with respect thereto.
9.17 Management Changes. Provide Lenders with written notice within thirty (30) days of appointments to the offices of the president, chairman, chief executive officer or chief financial officer of such Loan Party.
9.18 Commercial Tort Claims. In the event that any Loan Party hereafter acquires or has any Commercial Tort Claim in excess of $250,000 individually, such Loan Party shall promptly identify such Commercial Tort Claim to the Lenders in writing, provide the Collateral Agent with an amended or supplemented Schedule 1.14 to reflect such additional commercial tort claims, and provide such supplementary and supporting information as the Lenders may reasonably request to perfect their Lien in such Commercial Tort Claim.
9.19 Collateral Identification. Schedule 9.19 (as such schedule may be amended or supplemented from time to time) sets forth under the appropriate headings all of each Loan Party’s: (1) Pledged Equity Interests, (2) Pledged Debt, (3) Securities Accounts, (4) Deposit Accounts, (5) Commodity Contracts and Commodity Accounts, (6) United States and foreign registrations and issuances of and applications for Patents, Trademarks, and Copyrights owned by each Loan Party, (7) Patent Licenses, Trademark Licenses, Trade Secret Licenses and Copyright Licenses, (8) Commercial Tort Claims other than any Commercial Tort Claims having a value of less than $250,000 individually, (9) Letter of Credit Rights for letters of credit other than any Letters of Credit Rights worth less than $100,000 individually, (10) the name and address of any warehouseman, bailee or other third party in possession of any Inventory, Equipment and other tangible personal property, and (11) Material Contracts. Each Loan Party shall supplement such schedules as necessary to ensure that such schedules are accurate at the end of each fiscal quarter of the Borrower and at such other times as the Lenders may reasonably request.
9.20 General Information. Provide Lenders with such other information respecting the condition or operations, financial or otherwise, of any Loan Party as Lenders from time to time may reasonably request.
9.21 Board Observer. With respect to meetings of the Board of Directors of the Borrower:
(a) The Borrower shall invite a person designated by the Lenders (the “Observer”) to attend and participate in meetings of the Board of Directors of the Borrower (including any meetings of committees ) in a nonvoting observer capacity; provided, however, that in no event shall the Observer (i) be deemed to be a member of the Board of Directors, (ii) without limitation of the obligations expressly set forth in this Agreement, have or be deemed to have, or otherwise be subject to, any duties (fiduciary or otherwise) to the Borrower or its stockholders; or (iii) have the right to propose or offer any motions or resolutions. The Observer shall not have any right to vote on any matter presented to the Board of Directors or any committee thereof. The Borrower shall give the Observer written notice of each meeting of the Board of Directors at the same time and in the same manner as the members of the Board of Directors, shall provide the Observer with all written materials and other information given to members of the Board of Directors at the same time such materials and information are given to such members (provided, however, that the Observer shall not be provided nor have access to any confidential supervisory information) and shall cause or, to the extent such an obligation is unenforceable, use its reasonable best efforts to cause the Observer to be permitted to attend as an observer at all meetings thereof, and in the event the Borrower proposes to take any action by written consent in lieu of a meeting, the Borrower shall give written notice thereof to the Observer prior to the effective date of such consent describing the nature and substance of such action and including the proposed text of such written consents.
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(b) The Observer shall be entitled to advancement of expenses and rights to indemnification from the Borrower to the same extent provided by the Borrower to its directors under the Borrower’s organizational documents as in effect on the date hereof. The Borrower acknowledges and agrees that the foregoing rights to indemnification and advancement of expenses constitute third-party rights extended to the Observer by the Borrower and do not constitute rights to indemnification or advancement of expenses as a result of the Observer serving as a director, officer, employee or agent of the Borrower. The Observer will agree to hold in confidence and trust all information so provided and enter into a non-disclosure agreement in customary form if requested by the Borrower. The Borrower may withhold any information and exclude the Observer from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Borrower and its legal counsel.
9.22 Post-Closing Obligations.
(a) Within three (3) Business Days after the Closing Date, the Borrower shall have delivered to the Lenders (or such later date as the Collateral Agent may otherwise agree to in writing) (i) any documents or instruments requested by the Lenders or necessary to release all Liens securing Indebtedness under the FB Lending, LLC loan facility or other obligations of the Loan Parties thereunder (including, without limitation, fully executed copies of terminations of any deposit account control agreements, intellectual property security agreements or third party subordination and/or landlord access agreements) and (ii) evidence that arrangements satisfactory to Lenders have been made with respect to the cancellation of any letters of credit outstanding under such Indebtedness for the account of any Loan Party.
(b) Within three (3) Business Days after the Closing Date, the Borrower shall have delivered to the Lenders (or such later date as the Lenders may otherwise agree to in writing) (i) copies of each Organizational Document of Fatburger Corporation, a Delaware corporation and Homestyle Dining LLC, a Delaware limited liability company, and, to the extent applicable, certified as of a recent date by the appropriate governmental official, each dated the Closing Date or a recent date prior thereto; (ii) signature and incumbency certificates of the officers of each Person executing any Loan Documents; and (iii) resolutions of the Board of Directors or similar governing body of each Loan Party approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party or by which it or its assets may be bound as of the Closing Date, certified as of the Closing Date by such Loan Party’s secretary or an assistant secretary or other authorized officer as being in full force and effect without modification or amendment.
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(c) Within three (3) Business Days after the Closing Date (or such later date as the Collateral Agent may otherwise agree to in writing), the Borrower shall have delivered to the Lenders a completed Collateral Questionnaire dated the Closing Date and executed by an authorized officer of each Loan Party, together with all attachments contemplated thereby
(d) Within three (3) Business Days after the Closing Date (or such later date as the Collateral Agent may otherwise agree to in writing), the Borrower shall have delivered to the Lenders (x) a duly executed IP Security Agreement with respect to all U.S. Patents and patent applications owned by the Borrower or the Guarantors, and evidence that the same has been filed by the Borrower or the Guarantor(s), as the case may be, with the United States Patent and Trademark Office; (y) a duly executed IP Security Agreement with respect to all federally registered U.S. trademarks and trademark applications owned by the Borrower or the Guarantors, with evidence that the same has been filed by the Borrower with the United States Patent and Trademark Office; and (z) a duly executed IP Security Agreement with respect to U.S. registered copyrights and copyright applications owned by the Borrower or Guarantor(s), as the case may be, with evidence, that the same has been filed in the United States Copyright Office; provided that any such evidence of filing shall be delivered by the Borrower promptly upon receipt of any evidence from the United States Patent and Trademark Office or the United States Copyright Office, as applicable.
(e) Within thirty (30) days after the Closing Date (or such later date as the Collateral Agent may otherwise agree to in writing), the Borrower shall file or cause to be filed with the United States Patent and Trademark Office and the United States Copyright Office appropriate documentation reasonably acceptable to the Collateral Agent in order for the ownership records at the United States Patent and Trademark Office and the United States Copyright Office to reflect that a Loan Party, in its current legal name, is the owner of record of each Trademark, Patent and Copyright set forth on the schedules hereto and the IP Security Agreements executed as of the Closing Date, or such later date as set forth in clause (d) above;
(f) Within thirty (30) days after the Closing Date (or such later date as the Collateral Agent may otherwise agree to in writing), the Borrower shall file or cause to be filed with the United States Patent and Trademark Office and the United States Copyright Office appropriate documentation reasonably acceptable to the Collateral Agent in order to release or evidence the release of any outstanding liens and security interests recorded at the United States Patent and Trademark Office and the United States Copyright Office or deliver such other documentation acceptable to the Collateral Agent evidencing that the underlying obligations have been irrevocably extinguished against the Trademarks, Patents and Copyrights set forth on the schedules to the IP Security Agreements executed as of the Closing Date, or such later date as set forth in clause (d) above.
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(g) Within thirty (30) days after the Closing Date (or such later date as the Collateral Agent may otherwise agree to in writing), the Borrower shall have delivered to the Lenders a certificate from the insurance broker of the Loan Parties or other evidence satisfactory to the Lenders that all insurance required to be maintained pursuant to this Agreement is in full force and effect, in each case, in form and substance satisfactory to the Lenders, and each of which shall be endorsed or otherwise amended to include a loss payable or mortgagee endorsement (as applicable) and shall name the Collateral Agent, for the benefit of the Lenders, as additional insured or loss payee, in form and substance satisfactory to the Lenders
9.23 Use of Proceeds. Use the proceeds of the Loan only for the purposes specified in the Preamble to this Agreement. The Borrower will not request the Loan, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of the Loan (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (c) in any manner that would result in the violation of any Sanctions applicable to any party hereto or in violation of Regulations T, U or X of the Board of Governors of the Federal Reserve.
9.24 Further Assurances. Promptly upon request by the Lenders, the Loan Parties shall (a) correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Lenders may reasonably require from time to time in order to (i) carry out more effectively the purposes of the Loan Documents, (ii) to the fullest extent permitted by applicable law, subject any Loan Party’s properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Loan Documents, (iii) perfect and maintain the validity, effectiveness and priority of any of the Loan Documents and any of the Liens intended to be created thereunder and (iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Lenders or the Collateral Agent, for the benefit of the Lenders, the rights granted or now or hereafter intended to be granted to the Lenders or the Collateral Agent, for the benefit of the Lenders, under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party.
10. NEGATIVE COVENANTS. So long as any Obligations are outstanding under this Agreement and unless Lenders have first consented thereto in writing, no Loan Party shall:
10.1 Indebtedness. Create, incur, assume or suffer to exist, voluntarily or involuntarily, any Indebtedness, except (i) Obligations to Lenders; (ii) trade payables incurred in the ordinary course of Borrower’s business that are not past due; and (iii) purchase money financing and equipment leases in an aggregate amount not to exceed $500,000.
10.2 Mergers; Consolidations; Acquisitions. Enter into any merger, acquisition, consolidation, reorganization or recapitalization with any other Person; take any steps in contemplation of dissolution or liquidation; and, except for any investment permitted under Section 10.15, acquire the stock or all or any substantial part of the properties of any Person, whether by purchase of stock or assets or otherwise. No Loan Party may utilize cash assets as consideration, in whole or in part, for any acquisition or investment in any Person without the prior written consent of the Lenders.
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10.3 Sale or Disposition. Sell or dispose of all or any Collateral or grant any Person an option to acquire any such Collateral, provided, however, that the foregoing shall not prohibit (a) sale of Inventory or accounts in the ordinary course of Borrower’s business and (b) disposals of obsolete, worn out or surplus equipment in an amount not to exceed $250,000 in the aggregate during the term of this Agreement.
10.4 Defaults. Permit any landlord, mortgagee, trustee under deed of trust or lienholder to declare a default under any lease, mortgage, deed of trust or lien on real estate owned or leased by Borrower, which default remains uncured after any stated cure period or for a period in excess of thirty (30) days from its occurrence, whichever is less, unless such default is being contested by Borrower in good faith by appropriate proceedings being diligently conducted and reserves satisfactory to Lenders have been established and maintained.
10.5 Limitations on Liens. Suffer any lien, encumbrance, mortgage or security interest on any of its property, except Permitted Liens.
10.6 Restricted Junior Payments. (x) Declare, order, pay or make any Restricted Junior Payment or set apart any sum for any Restricted Junior Payment, or (y) agree to declare, order, pay or make any Restricted Junior Payment or set apart any sum for any Restricted Junior Payment, except for (a) quarterly common stock dividends of $0.12 per share of the Borrower, (b) dividends on Series A Cumulative Preferred Stock of up to $1,000,000 in the aggregate per Fiscal Year, and (c) dividends on Series A-1 Cumulative Preferred Stock of up to $450,000 in the aggregate per Fiscal Year.
10.7 Borrower’s Name and Offices. Change any Loan Party’s chief executive office or change its organizational name or office where it maintains its records (including computer printouts and programs) or any other Collateral.
10.8 Fiscal Year. Change its Fiscal Year.
10.9 Change of Control/Management.
(a) Cause or permit Fog Cutter Capital Group to cease to, directly or indirectly, possess the right to appoint or elect (through contract, ownership of voting securities, or otherwise) at all times the board of directors of Borrower having a majority of the voting power thereof, or cause or permit any other Change of Control.
(b) Cause or permit Borrower to cease to be the owner, directly or indirectly, of 100% of all equity interests of each Guarantor.
10.10 Guaranties; Contingent Liabilities. Assume, guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any Person, except by the endorsement of negotiable instruments for deposit or collection or similar transactions, or the incurrence of surety bonds or performance bonds and other obligations of like nature, in its ordinary course of business as currently conducted.
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10.11 Change of Business. Cause or permit a change in the nature of its business as conducted on the date of this Agreement, except that it may engage in any business that is reasonably related, similar, complementary or ancillary to such business or a reasonable extension, development or expansion of such business.
10.12 Change of Accounting Practices. Change its present accounting principles or practices in any respect, except, upon written notice to Lenders, as may be required by changes in GAAP.
10.13 Inconsistent Agreement. Enter into any agreement containing any provision which would be violated by the performance of the Obligations or other obligations under this Agreement or any other Loan Document.
10.14 Loan or Advances. Make any loans or advances to any Person.
10.15 Investments. Make any investment in any Person including, without limitation, in any Affiliates or form any Affiliates or subsidiaries not existing on the date hereof, except for investments by Borrower in a Guarantor.
10.16 Franchise Agreements. Use any form of franchise agreement materially different from the standard form furnished to the Lenders on or prior to the date of this Agreement, without Lenders’ prior written consent.
10.17 Preferred Equity. Issue any Preferred Equity other than Permitted Preferred Equity.
10.18 Burdensome Agreements. Enter into or suffer to exist or become effective any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of any Loan Party to create, incur, assume or suffer to exist any Lien upon any of its properties or revenues, whether now owned or hereafter acquired, to secure the Obligations or (b) the ability of any Subsidiary to (i) make Restricted Payments in respect of any Equity Interests of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary, (ii) make loans or advances to, or other Investments in the Borrower or any other Subsidiary or (iii) transfer any of its properties to the Borrower or any other Subsidiary.
10.19 None of the Loan Parties nor any of their affiliates will, directly or indirectly, solicit offers to buy, offer for sale, or sell any security (as defined in the Securities Act), that is or will be integrated with the issuance and sale of the Warrant or the offer of the common stock in a manner that would require registration of the Warrant or the offer of the common stock under the Securities Act.
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10.20 None of the Loan Parties nor any of their affiliates or any other person acting on its or their behalf will solicit offers for, or offer or sell, the Warrant or common stock (i) by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act that will be integrated with the issuance and sale of the Warrant or the offer of the underlying common stock, or (ii) in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act, other than pursuant to an effective registration statement or offering circular qualified under Regulation A under the Securities Act.
11. CONDITIONS PRECEDENT. The obligation of the Lenders to make the Loan hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived) as determined by the Lenders in their sole discretion:
11.1 Loan Documents. The Lenders shall have received copies of this Agreement and each other Loan Document executed and delivered by each applicable Loan Party and each other Person party thereto.
11.2 USA Patriot Act. The Lenders shall have received, and be reasonably satisfied in form and substance with, all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including, but not restricted to, the Patriot Act.
11.3 Beneficial Ownership Certification. At least five days prior to the Closing Date, if Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, the Borrower shall deliver to the Lenders a Beneficial Ownership Certification in relation thereto.
11.4 Evidence of Payoff of Certain Existing Indebtedness and Termination of Liens. The Lenders shall have received (i) evidence that all Indebtedness under the FB Lending, LLC loan facility owed by the Loan Parties has been paid in full or will be paid in full from the proceeds of the Loan, (ii) all documents or instruments requested by the Lenders or necessary to release all Liens securing such Indebtedness or other obligations of the Loan Parties thereunder (including, without limitation, (A) a fully executed copy of a payoff letter in respect of such Indebtedness in form and substance reasonably acceptable to the Lenders, (B) UCC-3 financing statements in each case, in proper form for filing, and (C) fully executed copies of terminations of any deposit account control agreements, intellectual property security agreements or third party subordination and/or landlord access agreements) and (iii) evidence that arrangements satisfactory to Lenders have been made with respect to the cancellation of any letters of credit outstanding under such Indebtedness for the account of any Loan Party.
11.5 Warrant. Each of the Lenders shall have received a Warrant in the form attached hereto as Exhibit C to purchase an aggregate of 1,143,112 shares of common stock of the Borrower (allocated between the Lenders as their sole discretion), at an exercise price of $0.01 per share of common stock (with the number of shares and exercise price subject to adjustment as set forth therein), exercisable at any time or times beginning on October 1, 2019 (provided that, as of such date, any amount was outstanding hereunder and without regard to whether any such amount was subsequently repaid) and ending on the five (5) year anniversary of the Closing Date.
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11.6 Notice of Borrowing. The Lenders shall have received a fully executed Notice of Borrowing.
11.7 Organizational Documents; Incumbency. The Lenders shall have received (i) copies of each Organizational Document of each Loan Party and, to the extent applicable, certified as of a recent date by the appropriate governmental official, each dated the Closing Date or a recent date prior thereto; (ii) signature and incumbency certificates of the officers of each Person executing any Loan Documents; (iii) resolutions of the Board of Directors or similar governing body of each Loan Party approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party or by which it or its assets may be bound as of the Closing Date, certified as of the Closing Date by such Loan Party’s secretary or an assistant secretary or other authorized officer as being in full force and effect without modification or amendment; (iv) a good standing certificate from the applicable governmental authority (x) of each Loan Party’s jurisdiction of incorporation, organization or formation and (y) in each jurisdiction in which it is qualified as a foreign corporation or other entity to do business, each dated a recent date prior to the Closing Date, except, in the case of subclause (y) where failure to so qualify would not reasonably be expected to result in a Material Adverse Effect.
11.8 Governmental Authorizations and Consents. Each Loan Party shall have obtained all governmental authorizations and all consents of other Persons, in each case that are necessary or reasonably advisable in connection with the transactions contemplated by the Loan Documents and each of the foregoing shall be in full force and effect and in form and substance satisfactory to the Lenders.
11.9 Personal Property Collateral. In order to create in favor of the Collateral Agent a valid, perfected and continuing first priority security interest in the Collateral of the Borrower and a first priority security interest in the Collateral of each Guarantor, the Lenders shall have received:
(a) a completed Collateral Questionnaire dated the Closing Date and executed by an authorized officer of each Loan Party, together with all attachments contemplated thereby;
(b) copies of UCC-1 financing statements to be filed against each Loan Party in the applicable filing office immediately after the effectiveness of this Agreement;
(c) tax and judgment lien searches, bankruptcy and pending lawsuit searches or equivalent reports or searches, each of a recent date listing all effective financing statements, lien notices or comparable documents that name any Loan Party as debtor and that are filed in those state and county jurisdictions in which any Loan Party is organized or maintains its chief executive office and such other searches that are required by the Collateral Questionnaire or that the Lenders deems necessary or appropriate, none of which encumber the Collateral covered or intended to be covered by the Loan Documents (other than Permitted Liens or any other Liens acceptable to the Lenders); and
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(d) (i) all promissory notes in favor of any Guarantor, with corresponding allonges executed in blank and (ii) in the event that any Guarantor owns capital stock of a Subsidiary and such stock constitutes Collateral, any certificated shares of such Subsidiary, with corresponding stock transfer powers.
11.10 IP Collateral. Lenders shall have received (x) a duly executed IP Security Agreement with respect to all U.S. Patents and patent applications owned by the Borrower or the Guarantors, with evidence that the same has been filed by the Borrower or the Guarantor(s), as the case may be, with the United States Patent and Trademark Office; (y) a duly executed IP Security Agreement with respect to all federally registered U.S. trademarks and trademark applications owned by the Borrower or the Guarantors, with evidence that the same has been filed by the Borrower with the United States Patent and Trademark Office; and (z) a duly executed IP Security Agreement with respect to U.S. registered copyrights and copyright applications owned by the Borrower or Guarantor(s), as the case may be,, with evidence that the same has been filed in the United States Copyright Office.
11.11 Evidence of Insurance. The Lenders shall have received a certificate from the insurance broker of the Loan Parties or other evidence satisfactory to the Lenders that all insurance required to be maintained pursuant to this Agreement is in full force and effect, in each case, in form and substance satisfactory to the Lenders, and each of which shall be endorsed or otherwise amended to include a loss payable or mortgagee endorsement (as applicable) and shall name the Collateral Agent as additional insured or loss payee, in form and substance satisfactory to the Lenders.
11.12 No Litigation. There shall not exist any action, suit, investigation, litigation or proceeding or other legal or regulatory developments, pending or, to the knowledge of any Loan Party, threatened in writing in any court or before any arbitrator or governmental authority that, in the reasonable discretion of the Lenders, singly or in the aggregate: (i) prohibits, limits, restrains or impairs the making of the Loan or the rights of the Lenders under this Agreement or any of the other transactions contemplated by the Loan Documents, (ii) prohibits, limits, retains or impairs the grant by the Loan Parties of a first priority Lien on the Collateral in favor of the Collateral Agent, or (iii) that could have a Material Adverse Effect.
11.13 No Material Adverse Effect. Since December 31, 2017, no event, circumstance or change shall have occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect.
11.14 Representations and Warranties. Immediately before and immediately after giving effect to the Loan, the representations and warranties contained herein and in the other Loan Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representation or warranty that is already qualified or modified as to “materiality” or “Material Adverse Effect” in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) on and as of the Closing Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representation or warranty that is already qualified or modified as to “materiality” or “Material Adverse Effect” in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) on and as of such earlier date.
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11.15 No Default. As of the Closing Date, no event shall have occurred and be continuing or would immediately result from the consummation of the Loan that would constitute an Event of Default or a Default.
11.16 Work Fee. Borrower shall have paid to the Lenders, for their benefit, a work fee equal to $100,000.00, which fee (i) will not be refundable under any circumstances, (ii) will be paid in immediately available funds, (ii) shall be in addition to any payment or reimbursement of the Lenders’ and Collateral Agent’s fees and expenses to the extent reimbursable pursuant to this Agreement and the other Loan Documents, and (iv) shall be paid without any deduction or withholding for any and all present or future applicable taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (with appropriate gross-up for any such deduction or withholding required under law).
11.17 Expenses. Borrower shall have paid or reimbursed to the Lenders for their reasonable due diligence expenses, including the fees and disbursements of its legal counsel, incurred in connection with preparation, execution and delivery of this Agreement.
12. EVENTS OF DEFAULT.
12.1 Defaults. The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder:
(a) if Borrower shall fail to make any payment when due on any Obligation under this Agreement or any other Loan Document; or
(b) if any Loan Party shall fail to comply with any term, condition, covenant or agreement contained in Article 7 or Article 10 of this Agreement or contained in the Warrant or Rights Agreement; or
(c) if any Loan Party shall fail to comply with any term, condition, covenant or agreement contained in this Agreement other than in Articles 7 or 10 of this Agreement, or in any other Loan Document, and such failure continues for a period of fifteen (15) days after the earlier to occur of (i) the date on which such failure to comply is known or reasonably should have become known to any officer of the relevant Loan Party, or (ii) the date on which Lenders shall have notified the relevant Loan Party of such failure; provided, however, that such fifteen (15) day period shall not apply in the case of any failure which is not capable of being cured at all or within such fifteen (15) day period or which has been the subject of a prior failure within a six (6) month period; or
(d) if any Loan Party shall cease to be Solvent, make an assignment for the benefit of its creditors, call a meeting of its creditors to obtain any general financial accommodation, or suspend business or if any case under any provision of the Bankruptcy Codes including provisions for reorganizations, shall be commenced by or against Borrower (and, in the case of any such case commenced against such Loan Party, such case shall not have been dismissed within sixty (60) days) or if a receiver, trustee or equivalent officer shall be appointed for all or any substantial part of the Collateral of such Loan Party; or
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(e) if any representation or warranty contained in this Agreement or any Loan Document, or in any written statement pursuant hereto or thereto, or in any report, financial statement or certificate delivered by any Loan Party to Lenders shall be false, in any material respect, when made; or
(f) if any federal or state tax lien is filed of record against any Loan Party, and is not bonded or discharged within fifteen (15) days of filing; or
(g) if Borrower’s independent public accountants shall refuse to deliver any financial statement required by this Agreement; or
(h) if a judgment for $100,000 or more shall be entered against any Loan Party in any action or proceeding and shall not be stayed, vacated, bonded, paid or discharged within fifteen (15) days of entry, except a judgment where the claim is fully covered by insurance (other than the deductible) and the insurance company has accepted liability therefor in writing; or
(i) if any obligation of any Loan Party in respect of any Indebtedness with a then-outstanding principal balance of one hundred thousand dollars ($100,000) or more shall be declared to be or shall become due and payable prior to its stated maturity or such obligation shall not be paid as and when the same becomes due and payable; or there shall occur any event or condition which constitutes an event of default under any note, mortgage, indenture, instrument, agreement or evidence of such Indebtedness relating to any obligation of any Loan Party in respect of any such Indebtedness the effect of which is to permit the holder or the holders of such note, mortgage, indenture, instrument, agreement or evidence of such Indebtedness, or a trustee, agent or other representative on behalf of such holder or holders, to cause the Indebtedness evidenced thereby to become due prior to its stated maturity; or
(j) upon the happening of any Reportable Event, or if Borrower terminates or withdraws (full or partial) from any Plan, or if a trustee shall be appointed by an appropriate United States District Court or other court or administrative tribunal to administer any Plan, or if the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan; or
(k) upon the occurrence and continuance of any Material Adverse Effect, which in the sole discretion of the Lenders, impairs the Lenders’ security, increases the Lenders’ risks, or impairs any Loan Party’s ability to perform under this Agreement or under any of the other Loan Documents; or
(l) if any Guarantor purports to terminate its guaranty; or
(m) if, within three (3) Business Days following the exercise of the Warrant, the Borrower fails to duly and validly issue and deliver pursuant to the terms of the Warrant the common stock thereunder, fully paid and non-assessable, without any preemptive rights or rights of first refusal and free and clear of any liens or other encumbrances; or
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(n) if the sales of the Borrower and its Subsidiaries, on a consolidated basis, decline by twenty percent (20%) in a fiscal quarter period compared to the prior fiscal quarter period, in each case, for which financial statements are delivered or required to be delivered to the Lenders.
12.2 Remedies. If an Event of Default has occurred, and is continuing, the Lenders may, without notice or demand, (a) declare all of the Obligations to be immediately due and payable, and (b) exercise any rights and remedies provided to the Collateral Agent or the Lenders under this Agreement, the other Loan Documents, or at law or equity, including all remedies provided under the UCC; provided, that upon the occurrence of any Event of Default specified in Section 12.1(d), all Obligations shall become immediately due and payable without declaration, notice or demand by the Lenders. Without limiting the foregoing, the Lenders may (a) accelerate the payment of all Obligations and demand immediate payment thereof to the Lenders, (b) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (c) require the Loan Parties, at their expense, to assemble and make available to the Collateral Agent and the Lenders any part or all of the Collateral at any place and time designated by Lenders, (d) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, and (e) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including, without limitation, entering into contracts with respect thereto, by public or private sales at any exchange, broker’s board, any office of Lenders or elsewhere) at such prices or terms as the Lenders may deem reasonable, for cash, upon credit or for future delivery, with the Lenders having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of the Loan Parties, which right or equity of redemption is hereby expressly waived and released by the Loan Parties. If any of the Collateral is sold or leased by the Collateral Agent or the Lenders upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by the Collateral Agent or the Lenders. If notice of disposition of Collateral is required by law, ten (10) days prior notice by the Lenders to the Loan Parties designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and shall constitute “authenticated notice of disposition” within the meaning of Section 9-611 of the UCC, and the Loan Parties waive any other notice. In the event the Collateral Agent or the Lenders institute an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, the Loan Parties waive the posting of any bond which might otherwise be required. Upon the occurrence and continuation of an Event of Default, the Collateral Agent or the Lenders may without, notice, demand or legal process of any kind, take possession of any or all of the Collateral, wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may at any time enter into any premises of any Loan Party where any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and the Lenders shall have the right to store and conduct a sale of the same in any premises of any Loan Party without cost or charge to the Lenders. For the purpose of enabling the Collateral Agent, after the occurrence and during the continuance of an Event of Default, to exercise rights and remedies under this Agreement as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, each Loan Party hereby grants to the Collateral Agent, an irrevocable (during the continuance of an Event of Default), non-exclusive license (exercisable without payment of royalty or other compensation to such Loan Party), subject, in the case of Trademarks, to sufficient rights to quality control and inspection in favor of such Loan Party to avoid the risk of invalidation of such Trademarks, to use or sublicense any of the intellectual property now owned or hereafter acquired by such Loan Party, wherever the same may be located. Such license shall include access to all media in Loan Party’s possession or control in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.
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12.3 Remedies Cumulative. All rights and remedies granted to the Lenders under this or any other agreement between any Loan Party and the Lenders will be deemed concurrent and cumulative and not alternative, and the Lenders may proceed with any number of remedies at the same time or at different times until all Obligations are fully satisfied. Each Loan Party hereby waives all rights of notice or dishonor, any other rights of notice or the right to require the Lenders to marshal assets. The Loan Parties shall pay to the Lenders on demand any and all expenses, including reasonable attorneys’ fees and legal expenses which may have been incurred by the Lenders, with interest at the Default Rate: (a) in the prosecution or defense of any action growing out of or connected with the subject matter of this Agreement, the Obligations, the Collateral or any of the Collateral Agent’s and Lenders’ rights therein, and (b) in connection with the custody, preservation, protection, use, operation, preparation for sale or sale of any Collateral, and enforcement of any and all of Lenders’ rights and remedies under this Agreement or any other Loan Document, the incurring of all of which are hereby authorized to the extent Lenders deem the same advisable.
12.4 Make-Whole Amount Payable upon Acceleration of Obligations. If the Obligations are accelerated due to the occurrence and continuation of an Event of Default (including, but not limited to, upon the occurrence of a bankruptcy or insolvency event (including the acceleration of claims by operation of law)), the Make-Whole Amount shall be due and payable and shall constitute part of the Obligations, in view of the impracticability and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of the Lenders’ lost profits as a result thereof. Such Make-Whole Amount shall be presumed to be the liquidated damages sustained by the Lenders as the result of the early payment of the Obligations and the Borrower agrees that it is reasonable under the circumstances currently existing.
12.5 Continuation of Security Interests. Notwithstanding any termination of this Agreement, until all Obligations shall have been fully paid and satisfied (other than any contingent indemnification obligations not due and owing), the Lenders shall retain all security in and title to all existing and future Collateral held by the Lenders hereunder or under any other Loan Document. At such time after the Maturity Date as all Obligations have been fully paid and satisfied (other than any contingent indemnification obligations not due and owing), the security interest granted hereunder shall automatically terminate and the Lenders shall promptly deliver to the relevant Loan Party any Collateral delivered by such Loan Party to the Collateral Agent or the Lenders pursuant to this Agreement and execute and deliver all UCC termination statements and/or other documents reasonably requested by such Loan Party to evidence such termination.
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13. GENERAL PROVISIONS.
13.1 Rights Cumulative. The Lenders’ rights and remedies under this Agreement shall be cumulative and non-exclusive of any other rights or remedies which the Lenders may have under any other agreement or instrument, by operation of law or otherwise.
13.2 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to conflicts of law principles of such state. Any judicial proceeding brought by or against Borrower with respect to any of the Obligations, this Agreement or any related agreement may be brought in any court of competent jurisdiction in the State of New York; provided that any judicial proceeding by Borrower against the Lenders involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the County of New York, State of New York. By execution and delivery of this Agreement, Borrower accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Borrower at its address set forth in Section 13.4 and service so made shall be deemed completed five (5) days after the same shall have been so deposited in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of the Lenders to bring proceedings against Borrower in the courts of any other jurisdiction. Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.
13.3 Successors and Assigns. This Agreement is entered into for the benefit of the parties hereto and their successors and assigns. It shall be binding upon and shall inure to the benefit of the parties, their successors and assigns. The Loan Parties may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lenders (and any such assignment without such consent shall be null and void). The Lenders shall have the right, without the necessity of any further consent or authorization by any Loan Party, to sell, assign, securitize or grant participation in all, or a portion of, the Lenders’ interest in the Loan, to other financial institutions and to any Person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in loans and extensions of credit in the ordinary course of its business, in each case, of the Lenders’ choice and on such terms as are acceptable to the Lenders in their sole discretion.
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13.4 Notice. Wherever this Agreement provides for notice to any party (except as expressly provided to the contrary), it shall be given by messenger, certified U.S. mail with return receipt requested, or nationally recognized overnight courier with receipt requested, effective when either received or receipt rejected by the party to whom addressed, and shall be addressed as follows, or to such other address as the party affected may hereafter designate:
If to Lenders:
The Lion Fund, L.P.
The Lion Fund II, L.P.
17802 IH 10 West, Suite 400
San Antonio, TX 78257
Telephone: 210-344-3400
Facsimile: 210-344-3411
With a copy (that shall not constitute notice) to:
Latham & Watins LLP
885 Third Avenue
New York, NY 10022
Telephone: 212-906-1200
Facsimile: 212-751-4864
Attn: Christopher Clark
(chris.clark@lw.com)
Attn: Paul Bonewitz
(paul.bonewitz@lw.com)
If to any Borrower:
FAT Brands, Inc.
9720 Wilshire Blvd., Suite 500
Beverly Hills, CA 90212
Attention: Andrew A. Wiederhorn
Facsimile: (310) 319-1863
Email: andy.wiederhorn@fccgi.com
With a copy (that shall not constitute notice) to:
Loeb & Loeb LLP
10100 Santa Monica Blvd., Suite 2200
Los Angeles, CA 90067
Attention: Allen Z. Sussman, Esq.
Facsimile: (310) 919-3934
Email: asussman@loeb.com
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13.5 Strict Performance. The failure, at any time or times hereafter, to require strict performance by any Loan Party of any provision of this Agreement shall not waive, affect or diminish any right of the Lenders thereafter to demand strict compliance and performance therewith. Any suspension or waiver by the Lenders of any Default or Event of Default by any Loan Party under this Agreement or any other Loan Document shall not suspend, waive or affect any other Default or Event of Default by such Loan Party under this Agreement or any other Loan Document, whether the same is prior or subsequent thereto and whether of the same or a different type.
13.6 Waiver. Each Loan Party waives presentment, protest, notice of dishonor and notice of protest upon any instrument on which it may be liable to Lenders as maker, endorser, guarantor or otherwise.
13.7 Construction of Agreement. The parties hereto agree that the terms and language of this Agreement were the result of negotiations between the parties, and, as a result, there shall be no presumption that any ambiguities in this Agreement shall be resolved against either party. Any controversy over the construction of this Agreement shall be decided mutually without regard to events of authorship or negotiation.
13.8 Expenses. If, at any time or times prior or subsequent to the date hereof, regardless of whether or not a Default or an Event of Default then exists or any of the transactions contemplated under this Agreement are concluded, Lenders employ counsel for advice or other representation, or incurs legal expenses, or consulting fees and expenses, or other costs or out-of-pocket expenses in connection with: (a) (i) the negotiation and preparation of this Agreement and the other Loan Documents or (ii) any amendment of or modification of this Agreement or any other Loan Document; (b) the administration of this Agreement or any of the other Loan Documents and the transactions contemplated hereby or thereby; (c) periodic audits and appraisals performed by Lenders as permitted hereunder; (d) any litigation, contest, dispute, suit, proceeding or action (whether instituted by the Lenders, any Loan Party or any other Person) in any way relating to the Collateral, this Agreement or any other Loan Document; (e) the perfection of any lien on the Collateral; (f) any attempt to enforce any rights or remedies of Lenders against Borrower or any other Person which may be obligated to Lenders by virtue of this Agreement or any other Loan Document; or (g) any attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate or otherwise dispose of or realize upon the Collateral; then, in any such event, the reasonable attorneys’ fees and actual expenses arising from such services and all expenses, costs, charges and other fees of such counsel of the Lenders or relating to any of the events or actions described in this Section 13.8 shall be payable by the Borrower to the Lenders, and shall be additional Obligations under this Agreement secured by the Collateral. Additionally, if any taxes (excluding taxes imposed upon or measured by the net income of the Lenders, but including any intangibles tax, stamp tax or recording tax) shall be payable on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any other Loan Document, or the creation of any of the Obligations under this Agreement, by reason of any existing or hereafter enacted federal or state statute, the Borrower will pay (or will promptly reimburse the Lenders for the payment of) all such taxes including, but not limited to, any interest and penalties thereon, and will indemnify, defend and hold the Lenders harmless from and against any liability in connection therewith. The Borrower shall also reimburse the Lenders for all other expenses incurred by the Lenders and Collateral Agent in connection with the transactions contemplated under this Agreement or the other Loan Documents, including, without limitation, all UCC filing fees and all other filing fees in connection with perfection of the Collateral Agent’s security interests in the Collateral, fees in connection with any bank account, wire charges, automatic clearing house fees and other similar costs and expenses.
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13.9 Waiver of Right to Jury Trial.
(a) The Loan Parties and the Lenders recognize that in matters related to the Loan and this Agreement, and as it may be subsequently modified and/or amended, any such party may be entitled to a trial in which matters of fact are determined by a jury (as opposed to a trial in which such matters are determined by a federal or state judge). By execution of this Agreement, the Lenders and the Loan Parties will give up their respective right to a trial by jury. Each Loan Party and the Lenders each hereby expressly acknowledges that this waiver is entered into to avoid delays, minimize trial expenses, and streamline the legal proceedings in order to accomplish a quick resolution of claims arising under or in connection with the Note and this Agreement.
(b) WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, EACH LOAN PARTY AND EACH LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT SUCH LOAN PARTY OR SUCH LENDER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, DIRECTLY OR INDIRECTLY, AT ANY TIME ARISING OUT OF, UNDER, OR IN CONNECTION WITH THE LOAN, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY TRANSACTION CONTEMPLATED THEREBY OR HEREBY, BEFORE OR AFTER MATURITY.
C. CERTIFICATIONS. EACH LOAN PARTY HEREBY CERTIFIES THAT NEITHER ANY REPRESENTATIVE NOR AGENT OF ANY LENDER NOR LENDERS’ COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT LENDERS WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. EACH LOAN PARTY ACKNOWLEDGES THAT EACH LENDER HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATION HEREIN.
13.10 Indemnification by Borrower/Waiver of Claims. The Borrower hereby covenants and agrees to indemnify, defend (with counsel selected by Lenders) and hold harmless each Lender and their respective officers, partners, directors, employees, trustees, administrators, managers, advisors, representatives, consultants, attorneys and agents (each such person, an “Indemnitee”) from and against any and all claims, damages, liabilities, costs and expenses (including, without limitation, the actual fees and expenses of counsel) which may be incurred by or asserted against any Lender or any such other Person in any way relating to or arising out of or in connection with or by reason of:
(a) any investigation, action or proceeding arising out of or in any way relating to this Agreement, the Loan, any of the other Loan Documents, any other agreement relating to any of the Obligations, any of the Collateral, or any act or omission relating to any of the foregoing; or
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(b) any taxes, liabilities, claims or damages in connection with the Loan or this Agreement and relating to any Loan Party, its employees, the Collateral or Lenders’ or Collateral Agent’s liens thereon; or
(c) the correctness, validity or genuineness of any instrument or document that may be released or endorsed to any Loan Party by the Lenders (which shall automatically be deemed to be without recourse to Lenders in any event), or the existence, character, quantity, quality, condition, value or delivery of any goods purporting to be represented by any such documents; or
(d) any broker’s commission, finder’s fee or similar charge or fee in connection with the Loan and the transactions contemplated in this Agreement, in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of such Indemnitee and regardless of whether such Indemnitee is a party thereto, and whether or not any such claim, litigation, investigation or proceeding is brought by the Borrower, its equity holders, its affiliates, its creditors or any other Person.
Notwithstanding anything contained herein to the contrary, the Borrower’s indemnification obligations under this Section 13.10 shall not apply to any claims, damages, liabilities, costs and expenses solely attributable to the Lenders’ gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment, and (ii) shall survive repayment of the Obligations and the termination of this Agreement and the other Loan Documents.
13.11 Savings Clause for Indemnification. To the extent that the undertaking to indemnify, pay and hold harmless set forth in Section 13.10 above may be unenforceable because it violates any law or public policy, the Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all matters referred to under Section 13.10.
13.12 Waiver. To the extent permitted by applicable law, no claim may be made by any Loan Party or any other Person against any Lender or any of their respective Affiliates, partners, officers, employees, agents, attorneys or consultants for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract, tort or any other theory of liability arising out of or related to the transactions contemplated by this Agreement or the other Loan Documents or any act, omission or event occurring in connection therewith; and each Loan Party hereby waives, releases and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Neither Lender nor any of its Affiliates, partners, officers, employees, agents, attorneys or consultants shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the transactions contemplated hereby, except for its or their own gross negligence or willful misconduct.
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13.13 Entire Agreement; Waiver/Lenders’ Consent; Amendment. This Agreement (including the Exhibits and Schedules thereto) and the other Loan Documents supersede, with respect to their subject matter, all prior and contemporaneous agreements, understandings, inducements or conditions between the respective parties, whether express or implied, oral or written. No waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing by the Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment of any provision of this Agreement or any other Loan Document shall in any event be effective unless the same shall be in a writing signed by the Lenders and the Loan Parties.
13.14 Cross Default; Cross Collateral. The Borrower hereby agrees that (a) all other agreements between the Borrower and the Lenders are hereby amended so that a Default or an Event of Default under this Agreement is a default under all such other agreements and a default under any one of the other agreements is a Default or an Event of Default under this Agreement, and (b) the Collateral under this Agreement secures the Obligations now or hereafter outstanding under all other agreements between the Borrower and Lenders and the Collateral Agent, and the Collateral pledged under any other agreement with Lenders or Collateral Agent secures the Obligations under this Agreement.
13.15 Execution in Counterparts. This Agreement and any other Loan Document may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement or and any other Loan Document by telecopier, facsimile machine, portable document format or other electronic means shall be as effective as delivery of a manually executed counterpart thereof.
13.16 Severability of Provisions. Any provision of this Agreement or any of the other Loan Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or the other Loan Documents or affecting the validity or enforceability of such provision in any other jurisdiction.
13.17 Headings. The headings preceding the text of this Agreement are inserted solely for convenience of reference and shall not constitute a part of this Agreement or affect its meaning, construction or effect.
13.18 Exhibits and Schedules. All of the Exhibits and Schedules to this Agreement are hereby incorporated by reference herein and made a part hereof.
13.19 No Broker’s Fee. Notwithstanding anything contained herein or in any Loan Documents, the Borrower shall be solely responsible for any broker’s commission, finder’s fee or similar charge or fee in connection with the Loans and the transactions contemplated in this Agreement.
13.20 Marketing and Advertising. Each Loan Party hereby authorizes and gives permission for the Lenders and their Affiliates to use the legal or fictional company name, logo, trademark and/or personal quotes in connection with promotional materials that Lenders may disseminate to the public relating to Lenders’ relationship with the Loan Parties. Promotional materials may include, but are not limited to, brochures, video tapes, emails, internet websites, advertising in newspapers and/or other periodicals, lucites, pictures and photographs. Lenders shall provide each Loan Party with a copy of promotional materials prepared by the Lenders or their Affiliates prior to making such promotional materials available to the public.
[Signatures Continued on Next Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers thereunto duly authorized on the day and year first above written.
| BORROWER: | ||
| Fat Brands Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
| GUARANTORS: | ||
| Fatburger North America, Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
| Ponderosa Franchising Company LLC, a Delaware limited liability company | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
| Bonanza Restaurant Company LLC, a Delaware limited liability company | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
[Signature Page to Loan and Security Agreement]
| Ponderosa International Development, Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
| Puerto Rico Ponderosa, Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
| Buffalo’s Franchise Concepts Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
| Hurricane AMT LLC, a Delaware limited liability company | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
[Signature Page to Loan and Security Agreement]
| Fatburger Corporation, a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
| Homestyle Dining LLC, a Delaware limited liability company | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Manager | |
[Signature Page to Loan and Security Agreement]
| LENDERS: | ||
| The Lion Fund, L.P., as Lender and the Collateral Agent | ||
| By: Biglari Capital Corp., it general partner | ||
| By: | /s/ Sardar Biglari | |
| Name: | Sardar Biglari | |
| Title: | Authorized Signatory | |
| The Lion Fund II, L.P., as Lender | ||
| By: Biglari Capital Corp., it general partner | ||
| By: | /s/ Sardar Biglari | |
| Name: | Sardar Biglari | |
| Title: | Authorized Signatory | |
[Signature Page to Loan and Security Agreement]
Exhibit 10.2
GUARANTY
This Guaranty, dated as of January 29, 2019 (this “Guaranty”) is made by FATBURGER NORTH AMERICA, INC., a Delaware corporation, PONDEROSA FRANCHISING COMPANY LLC, a Delaware limited liability company, BONANZA RESTAURANT COMPANY LLC, a Delaware limited liability company, PONDEROSA INTERNATIONAL DEVELOPMENT, INC., a Delaware corporation, PUERTO RICO PONDEROSA, INC., a Delaware corporation, HURRICANE AMT LLC, a Delaware limited liability company, BUFFALO’S FRANCHISE CONCEPTS INC., a Delaware corporation, FATBURGER CORPORATION, a Delaware corporation and HOMESTYLE DINING LLC, a Delaware limited liability company(together each other entity that becomes a guarantor hereunder, the “Guarantors”) in favor of THE LION FUND, L.P. and THE LION FUND II, L.P. (each a “Lender”, and together with their respective successors and assigns, collectively, the “Lenders”).
RECITALS:
WHEREAS, FAT Brands Inc., a Delaware corporation (the “Company”) and Guarantors have entered into that certain Loan and Security Agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) with the Lenders;
WHEREAS, the Guarantors will derive substantial direct and indirect benefit from the transactions contemplated by the Loan Agreement and the other Loan Documents; and
WHEREAS, it is a condition to the Lenders making any loans or otherwise extending credit or other financial accommodations under the Loan Agreement that the Guarantors shall guarantee the due payment and performance of all Guaranteed Obligations (as hereinafter defined) by entering into this Guaranty.
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, each Guarantor hereby agrees with the Lenders, for the benefit of the Lenders, as follows:
Section 1. Definitions. All capitalized terms not otherwise defined in this Guaranty that are defined in the Loan Agreement shall have the meanings assigned to such terms by the Loan Agreement.
Section 2. Guaranty of the Obligations. Each Guarantor hereby irrevocably and unconditionally guarantees to the Lenders for the benefit of the Lenders the due and punctual payment in full of all Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code (the “Bankruptcy Code”, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed Obligations”). Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower to the Lenders under the Loan Documents but for the fact that they are unenforceable or not allowable due to insolvency or the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower.
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Section 3. Payment by Guarantors. Each Guarantor hereby agrees, in furtherance of the foregoing and not in limitation of any other right which the Lenders may have at law or in equity against such Guarantor by virtue hereof, that upon the failure of the Borrower to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), such Guarantor will upon demand pay, or cause to be paid, in immediately available funds, to the Lenders, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, all accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for a Borrower becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against such Borrower for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to the Lenders as aforesaid. Each Guarantor hereby agrees that all payments under this Agreement will be paid to the Lenders, without setoff, deduction or counterclaim at the office of the Lenders located at the address specified in the Loan Agreement in U.S. dollars and in immediately available funds.
Section 4. Liability of Guarantors Absolute. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than the indefeasible payment in full in cash of the Obligations (other than contingent indemnification obligations not yet due and owing) or the termination or expiration of the Loan Agreement (“Payment in Full”). In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment and not of collectability. This Guaranty is a primary obligation of each Guarantor and not merely a contract of surety.
(b) The Lenders may enforce this Guaranty upon the occurrence of an Event of Default notwithstanding the existence of any dispute between the Borrower and the Lenders with respect to the existence of such Event of Default.
(c) The obligations of each Guarantor hereunder are independent of the obligations of the Borrower and the obligations of any other Guarantor, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not any action is brought against the Borrower or any of such other Guarantors and whether or not the Borrower is joined in any such action or actions.
(d) The Lenders, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations in accordance with the Loan Agreement; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto, or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any other Person with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of the Lenders in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Lenders may have against any such security, in each case as the Lenders in their discretion may determine consistent herewith and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against the Borrower or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Loan Documents.
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(e) This Guaranty and the obligations of each Guarantor hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than Payment in Full), including the occurrence of any of the following, whether or not such Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce, or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Loan Documents, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) of any of the other Loan Documents or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations; including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower or otherwise; (iii) the Guaranteed Obligations, or any agreement relating thereto other than this Guaranty, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Loan Documents or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though the Lenders might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) any change, restructuring or termination of the corporate structure or existence of any Loan Party, including without limitation as a result of the Lenders’ consent to the change, reorganization or termination of the corporate structure or existence of any Loan Party and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any taking, exchange, release or non-perfection of any collateral for all or any of the Guaranteed Obligations; (viii) any manner of application of collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations or any other obligations of any other Person under the Loan Documents or any other assets of Borrower or any of its Affiliates; (ix) any failure of the Lenders to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, properties or prospects of any Person now or in the future known to the Lenders (and each Guarantor hereby irrevocably waives any duty on the part of the Lenders to disclose such information); (x) any defenses, set-offs or counterclaims which Borrower may allege or assert against the Lenders in respect of the Guaranteed Obligations, other than Payment in Full, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; (xi) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of such Guarantor as an obligor in respect of the Guaranteed Obligations; and (xii) any other circumstance or any existence of or reliance on any representation by the Lenders that might otherwise constitute a defense available to, or a discharge of, the Borrower, such Guarantor or any other Guarantor, surety or other Person.
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Section 5. Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of the Lenders: (a) any right to require the Lenders, as a condition of payment or performance by such Guarantor, to (i) proceed against the Borrower, any other Guarantor or any other Person, (ii) proceed against or exhaust any security held from the Borrower, any such other Guarantor or any other Person, (iii) proceed against or have resort to any balance of any deposit account or credit on the books of the Lenders in favor of the Borrower or any other Person, or (iv) pursue any other remedy in the power of the Lenders whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Borrower or any other Guarantor, including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Borrower or any other Guarantor from any cause other than Payment in Full; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon the Lenders’ errors or omissions in the administration of the Guaranteed Obligations, except behavior which is determined by a final nonappealable judgment by a court of competent jurisdiction to have resulted from bad faith or gross negligence; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor’s obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor’s liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that the Lenders protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to the Borrower and notices of any of the matters referred to in Section 4 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.
Section 6. Waiver of Subrogation, Contribution, etc. Subject to Section 11, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against the Borrower or any other Guarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against the Borrower with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that the Lenders now have or may hereafter have against the Borrower, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by the Lenders or the Collateral Agent, for the benefit of the Lenders. In addition, until Payment in Full, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor of the Guaranteed Obligations. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against the Borrower or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights the Lenders may have against the Borrower, to all right, title and interest the Lenders or the Collateral Agent, for the benefit of the Lenders, may have in any such collateral or security, and to any right the Lenders or the Collateral Agent, for the benefit of the Lenders, may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time before Payment in Full, such amount shall be held in trust for the Lenders and shall forthwith be paid over to the Lenders to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.
Section 7. Subordination of Other Obligations. Any Indebtedness of the Borrower or any Guarantor now or hereafter held by any Guarantor is hereby subordinated in right of payment to the Guaranteed Obligations, and any such Indebtedness collected or received by any Guarantor after an Event of Default has occurred and is continuing shall be held in trust for the Lenders and shall forthwith be paid over to the Lenders to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of such Guarantor under any other provision hereof.
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Section 8. Authority of Guarantors or Borrower. It is not necessary for the Lenders to inquire into the capacity or powers of the Guarantors or the Borrower or the officers, directors or any agents acting or purporting to act on behalf of any of them.
Section 9. Financial Condition of Borrower. The Loan may be made to the Borrower or continued from time to time without notice to or authorization from any Guarantor, regardless of the financial or other condition of the Borrower at the time of any such grant or continuation. The Lenders shall have no obligation to disclose or discuss with any Guarantor its assessment, or any Guarantor’s assessment, of the financial condition of the Borrower. Each Guarantor acknowledges that it has adequate means to obtain information from the Borrower on a continuing basis concerning the financial condition of the Borrower and its ability to perform its obligations under the Loan Documents, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of the Borrower and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of the Lenders to disclose any matter, fact or thing relating to the business, operations or conditions of the Borrower now known or hereafter known by the Lenders.
Section 10. Bankruptcy, etc.
(a) So long as any Guaranteed Obligations remain outstanding, no Guarantor shall, without the prior written consent of the Lenders, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against the Borrower or any other Guarantor. The obligations of each Guarantor hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Borrower or any other Guarantor or by any defense which the Borrower or any other Guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of such Guarantor and the Lenders that the Guaranteed Obligations which are guaranteed by each Guarantor pursuant hereto should be determined without regard to any rule of law or order which may relieve the Borrower of any portion of such Guaranteed Obligations as a result of its bankruptcy, insolvency receivership, reorganization, liquidation or arrangement. Each Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay the Lenders, or allow the claim of the Lenders in respect of, any such interest accruing after the date on which such case or proceeding is commenced.
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(c) In the event that all or any portion of the Guaranteed Obligations are paid, the obligations of each Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from the Lenders as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder. EACH GUARANTOR SHALL DEFEND AND INDEMNIFY THE LENDERS FROM AND AGAINST ANY CLAIM, DAMAGE, LOSS, LIABILITY, COST OR EXPENSE UNDER THIS SECTION 10(c) (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) IN THE DEFENSE OF ANY SUCH ACTION OR SUIT INCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE ARISING AS A RESULT OF THE INDEMNIFIED LENDERS’ OWN NEGLIGENCE BUT EXCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE THAT IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNIFIED LENDERS’ GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Section 11. Contribution and Subrogation. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree that in the event a payment shall be made on any date under this Guaranty by any Guarantor (the “Funding Guarantor”), each other Guarantor (each a “Contributing Guarantor”) shall indemnify the Funding Guarantor in an amount equal to the amount of such payment, in each case multiplied by a fraction the numerator of which shall be the net worth of the Contributing Guarantor as of such date and the denominator of which shall be the aggregate net worth of all the Contributing Guarantors together with the net worth of the Funding Guarantor as of such date. Any Contributing Guarantor making any payment to a Funding Guarantor pursuant to this Section 11 shall be subrogated to the rights of such Funding Guarantor to the extent of such payment.
Section 12. Fraudulent Transfer Laws. Anything contained in this Guaranty to the contrary notwithstanding, the obligations of each Guarantor under this Guaranty on any date shall be limited to a maximum aggregate amount equal to the largest amount that would not, on such date, render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code of the United States or any applicable provisions of comparable laws relating to bankruptcy, insolvency, or reorganization, or relief of debtors (collectively, the “Fraudulent Transfer Laws”), but only to the extent that any Fraudulent Transfer Law has been found in a final non-appealable judgment of a court of competent jurisdiction to be applicable to such obligations as of such date, in each case
(a) after giving effect to all liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws, but specifically excluding
(i) any liabilities of such Guarantor in respect of intercompany indebtedness to the Borrower or other affiliates of the Borrower to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such Guarantor hereunder;
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(ii) any liabilities of such Guarantor under this Guaranty; and
(iii) any liabilities of such Guarantor under other guarantees of and joint and several co-borrowings of Indebtedness, entered into on the date this Guaranty becomes effective, which contain a limitation as to maximum amount substantially similar to that set forth in this Section 12 (each such other guarantee and joint and several co-borrowing entered into on the date this Guaranty becomes effective, a “Competing Guaranty”) to the extent such Guarantor’s liabilities under such Competing Guaranty exceed an amount equal to (x) the aggregate principal amount of such Guarantor’s obligations under such Competing Guaranty (notwithstanding the operation of that limitation contained in such Competing Guaranty that is substantially similar to this Section 12), multiplied by (y) a fraction (I) the numerator of which is the aggregate principal amount of such Guarantor’s obligations under such Competing Guaranty (notwithstanding the operation of that limitation contained in such Competing Guaranty that is substantially similar to this Section 12), and (II) the denominator of which is the sum of (A) the aggregate principal amount of the obligations of such Guarantor under all other Competing Guaranties (notwithstanding the operation of those limitations contained in such other Competing Guaranties that are substantially similar to this Section 12), (B) the aggregate principal amount of the obligations of such Guarantor under this Guaranty (notwithstanding the operation of this Section 12, and (C) the aggregate principal amount of the obligations of such Guarantor under such Competing Guaranty (notwithstanding the operation of that limitation contained in such Competing Guaranty that is substantially similar to this Section 12)); and
(b) after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement, indemnification or contribution of such Guarantor pursuant to applicable law or pursuant to the terms of any agreement (including any such right of contribution under Section 11).
Section 13. Representations and Warranties. Each Guarantor hereby represents and warrants as follows:
(a) There are no conditions precedent to the effectiveness of this Guaranty. Such Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements involving the Borrower contemplated by the Loan Documents and that the waivers set forth in this Guaranty are knowingly made in contemplation of such benefits.
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(b) Such Guarantor has, independently and without reliance upon the Lenders and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty.
(c) The obligations of such Guarantor under this Guaranty are the valid, binding and legally enforceable obligations of such Guarantor, and this Guaranty has been duly and validly executed and delivered by such Guarantor.
Section 14. Right of Set-Off. If an Event of Default shall have occurred and be continuing, the Lenders are hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Lenders to or for the credit or the account of any Guarantor against any and all of the obligations of such Guarantor now or hereafter existing under this Guaranty to the Lenders, irrespective of whether or not the Lenders shall have made any demand under this Guaranty and although such obligations of such Guarantor may be contingent or unmatured or are owed to a branch or office of the Lenders different from the branch or office holding such deposit or obligated on such indebtedness. The rights of the Lenders under this Section are in addition to other rights and remedies (including other rights of setoff) that the Lenders may have. The Lenders agree to notify such Guarantor promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.
Section 15. Amendments, Joinder, Etc. No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by such Guarantor and the Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. This Guaranty may be supplemented to add additional Guarantors by means of a joinder in the form of Annex I signed by the entity to be added and the Lenders, upon the execution of which such additional Guarantor shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Guaranty shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Guaranty.
Section 16. Notices, Etc. All notices and other communications provided for hereunder shall be sent to the addresses and in the manner provided for in Section 13.4 of the Loan Agreement. All such notices and communications shall be effective as provided in Section 13.4 of the Loan Agreement.
Section 17. Continuing Guaranty: Assignments under the Loan Agreement. This Guaranty is a continuing guaranty and applies to all Guaranteed Obligations, whether existing now or in the future and shall (a) remain in full force and effect until Payment in Full, (b) be binding upon each Guarantor and its successors and assigns, and (c) inure to the benefit of and be enforceable by the Lenders and its successors and permitted transferees and assigns. Without limiting the generality of the foregoing clause, when the any Lender assigns or otherwise transfers any interest held by it under the Loan Agreement or other Loan Document to any other Person pursuant to the terms of the Loan Agreement or such other Loan Document, that other Person shall thereupon become vested with all the benefits held by the Lenders under this Guaranty.
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Section 18. INDEMNITY. EACH GUARANTOR SHALL (AND HEREBY DOES) INDEMNIFY THE LENDERS AND EACH RELATED PARTY OF EACH LENDER (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, DEMANDS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS (INCLUDING ALL REASONABLE FEES, EXPENSES AND DISBURSEMENTS OF ANY LAW FIRM) OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ANY INDEMNITEE IN ANY WAY RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THE EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE, OR ADMINISTRATION OF THIS GUARANTY; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, DEMANDS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE (ALL THE FOREGOING, COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”).
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR SHALL NOT ASSERT, AND HEREBY WAIVES, ANY CLAIM AGAINST ANY INDEMNITEE, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS GUARANTY OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE TRANSACTIONS CONTEMPLATED HEREBY, ANY ADVANCE OR THE USE OF THE PROCEEDS THEREOF. NO INDEMNITEE SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY UNLESS DUE TO ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED IN A FINAL, NONAPPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION.
ALL AMOUNTS DUE UNDER THIS SECTION 18 SHALL BE PAYABLE WITHIN TEN (10) BUSINESS DAYS AFTER DEMAND THEREFOR. THE AGREEMENTS IN THIS SECTION SHALL SURVIVE THE TERMINATION OF THE LOAN DOCUMENTS AND THE REPAYMENT, SATISFACTION OR DISCHARGE OF ALL THE OTHER OBLIGATIONS.
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Section 19. Survival of Representations, Warranties and Agreements; Termination. All representations, warranties and agreements made hereunder or other documents delivered pursuant hereto or in connection herewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Lenders, regardless of any investigation made by the Lenders or on their behalf and notwithstanding that the Lenders may have had notice or knowledge of any Default at the time of any Loan under the Loan Agreement, and shall continue in full force and effect until Payment in Full. Notwithstanding anything herein or implied by law to the contrary, the agreements of the Guarantors set forth in Section 19 shall survive Payment in Full.
Section 20. No Waiver; Remedies Cumulative. No failure on the part of any Lender to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided in this Guaranty are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
Section 21. Severability. If any provision of this Guaranty is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Guaranty shall not be affected or impaired thereby and (b) the parties hereto shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22. Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.
Section 23. APPLICABLE LAW. THIS GUARANTY shall be governed by and construed in accordance with the laws of the State of New York, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
Section 24. CONSENT TO JURISDICTION.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR OTHER DOCUMENT RELATED HERETO. EACH GUARANTOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
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(b) Nothing in this Section 24 shall affect the right of the Lenders to serve legal process in any other manner permitted by law or affect the right of the Lenders to bring any action or proceeding against any Guarantor in the courts of any other jurisdiction.
Section 25. WAIVER OF JURY TRIAL. EACH PARTY TO THIS GUARANTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS GUARANTY OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS GUARANTY, OR THE TRANSACTIONS RELATED HERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 26. Usury Savings Clause. Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Guaranteed Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law, shall not exceed the maximum rate permitted by law (the “Maximum Rate”). If the rate of interest (determined without regard to the preceding sentence) under the Loan Agreement at any time exceeds the Maximum Rate, the outstanding amount of the Loan made thereunder shall bear interest at the Maximum Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in the Loan Agreement had at all times been in effect. In addition, if when the Loan made thereunder is repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in the Loan Agreement had at all times been in effect, then to the extent permitted by law, the Guarantors shall pay to the Lenders an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Maximum Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of the Lenders and each Guarantor to conform strictly to any applicable usury laws. Accordingly, if the Lenders contract for, charge, or receive any consideration which constitutes interest in excess of the Maximum Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at the Lenders’ option be applied to the outstanding amount of the Obligations under the Loan Agreement or be refunded to the Borrower.
Section 27. Payments Free of Taxes. Any and all payments by or on account of any Guaranteed Obligation hereunder shall be made free and clear of and without reduction or withholding for any taxes.
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Section 28. Counterparts. This Guaranty may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart signature page by electronic mail or facsimile is as effective as executing and delivering this Guaranty in the presence of the other parties to this Guaranty.
Section 29. USA Patriot Act Notice. The Lenders, subject to the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), hereby notifies each Guarantor that pursuant to the requirements of the Act, it is required to obtain, verify and record information and documentation that identifies each Guarantor, which information includes the name and address of such Persons and other information that will allow the Lenders to identify such Persons in accordance with the Act.
Section 30. Entire Agreement.
(a) THIS GUARANTY AND THE OTHER LOAN DOCUMENTS ARE THE FINAL EXPRESSION OF THE AGREEMENT BETWEEN THE PARTIES. THIS GUARANTY MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL AGREEMENT OR OF ANY CONTEMPORANEOUS ORAL AGREEMENT BETWEEN THE PARTIES. ANY AND ALL SUCH PRIOR OR CONTEMPORANEOUS ORAL AGREEMENTS ARE EXPRESSLY SUPERSEDED BY THIS GUARANTY.
(b) THE PARTIES TO THIS GUARANTY HEREBY ACKNOWLEDGE AND AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES EXISTS.
[Signature Page Follows]
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Each Guarantor has caused this Guaranty to be duly executed as of the date first above written.
| GUARANTORS: | ||
| Fatburger North America, Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chief Executive Officer | |
| Ponderosa Franchising Company LLC, a Delaware limited liability company | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chief Executive Officer | |
| Bonanza Restaurant Company LLC, a Delaware limited liability company | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Manager | |
| Ponderosa International Development, Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chief Executive Officer | |
| Puerto Rico Ponderosa, Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chief Executive Officer | |
[Signature Page to Guaranty]
| Buffalo’s Franchise Concepts, Inc., a Nevada corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chief Executive Officer | |
| Buffalo’s Franchise Concepts Inc., a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chief Executive Officer | |
| Hurricane AMT LLC, a Delaware limited liability company | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chef Executive Officer | |
| Fatburger Corporation, a Delaware corporation | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Chief Executive Officer | |
| Homestyle Dining LLC, a Delaware limited liability company | ||
| By: | /s/ Andrew A. Wiederhorn | |
| Name: | Andrew A. Wiederhorn | |
| Title: | Manager | |