<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 4, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
------------- ---------------
Commission file number 1-12104
BACK YARD BURGERS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 64-0737163
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2768 COLONY PARK DRIVE, MEMPHIS, TENNESSEE 38118
(Address of principal executive offices)
(901) 367-0888
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class - Common stock, par value $.01 per share
Outstanding at May 1, 1998 - 4,562,047
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE> 2
BACK YARD BURGERS, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I - Financial Information
Item 1 - Unaudited Consolidated Financial Statements:
Balance Sheet as of April 4, 1998 and January 3, 1998 3
Statement of Income for the Thirteen Weeks Ended
April 4, 1998 and March 29, 1997 4
Statement of Cash Flows for the Thirteen Weeks Ended
April 4, 1998 and March 29, 1997 5
Notes to Unaudited Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-11
Part II - Other Information
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote
of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE> 3
BACK YARD BURGERS, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
APRIL 4, JANUARY 3,
1998 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 881 $ 1,328
Receivables, net 360 384
Inventories 185 176
Prepaid expenses and other current assets 161 73
-------- --------
Total current assets 1,587 1,961
Note receivable 91 68
Property and equipment, at depreciated cost 10,704 9,451
Intangible assets 1,431 1,457
Other assets 216 218
-------- --------
$ 14,029 $ 13,155
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 232 $ 653
Accrued expenses 863 786
Current installments of long-term debt 259 217
-------- --------
Total current liabilities 1,354 1,656
Long-term debt, less current installments 3,825 2,864
Other deferred liabilities 129 122
Deferred franchise fees 181 215
-------- --------
Total liabilities 5,489 4,857
-------- --------
Commitments and contingencies -- --
Stockholders' equity
Preferred stock, $.01 par value, 2,000,000 shares authorized;
40,556 shares issued and outstanding at April 4, 1998
(289,600 at January 3, 1998) -- 3
Common stock, $.01 par value, 12,000,000 shares authorized;
4,560,104 outstanding at April 4, 1998
(4,276,723 at January 3, 1998) 46 42
Paid-in capital 10,058 9,982
Retained deficit (1,564) (1,729)
-------- --------
Total stockholders' equity 8,540 8,298
-------- --------
$ 14,029 $ 13,155
-------- --------
</TABLE>
See accompanying notes to unaudited financial statements
3
<PAGE> 4
BACK YARD BURGERS, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
APRIL 4, MARCH 29,
1998 1997
---- ----
<S> <C> <C>
Revenues:
Restaurant sales $ 5,808 $ 5,461
Franchise fees 49 21
Royalty fees 303 277
Advertising fees 110 72
Other 97 58
-------- --------
Total revenues 6,367 5,889
-------- --------
Expenses:
Cost of restaurant sales 1,860 1,826
Restaurant operating expenses 2,822 2,794
General and administrative 796 740
Advertising 347 286
Depreciation and amortization 284 269
-------- --------
Total expenses 6,109 5,915
-------- --------
Operating income (loss) 258 (26)
Interest income 8 3
Interest expense (99) (54)
Other, net (2) (9)
-------- --------
Income (loss) before income taxes 165 (86)
Income taxes -- --
-------- --------
Net income (loss) $ 165 $ (86)
-------- --------
Income (loss) per share:
Basic $ .04 $ (.02)
-------- --------
Diluted $ .04 $ (.02)
-------- --------
Weighted average number of common shares
and common equivalent shares outstanding
Basic 4,370 4,244
-------- --------
Diluted 4,641 4,244
-------- --------
</TABLE>
See accompanying notes to unaudited financial statements
4
<PAGE> 5
BACK YARD BURGERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
APRIL 4, MARCH 29,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) $ 165 $ (86)
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Depreciation and amortization of property and equipment 254 238
Amortization of intangible assets 26 27
Amortization of preopening costs 4 4
Provision for losses on receivables 40 30
(Increase) decrease in assets
Receivables (16) (34)
Inventories (9) (9)
Prepaid expenses and other current assets (92) (60)
Other assets and notes receivable (21) 3
Increase (decrease) in liabilities
Accounts payable and accrued expenses (344) (162)
Other deferred liabilities 7 4
Deferred franchise and area development fees (34) 20
-------- --------
Net cash used in operating activities (20) (25)
-------- --------
Cash flows from investing activities:
Additions to property and equipment (1,507) (164)
-------- --------
Net cash used in investing activities (1,507) (164)
-------- --------
Cash flows from financing activities:
Issuance of stock 8 6
Principal payments on long-term debt and capital leases (70) (67)
Proceeds from issuance of long-term debt 1,073 --
Proceeds from exercise of stock options 69 --
-------- --------
Net cash provided by (used in) financing activities 1,080 (61)
-------- --------
Net decrease in cash and cash equivalents (447) (250)
Cash and cash equivalents
Beginning of period 1,328 1,101
-------- --------
End of period $ 881 $ 851
-------- --------
Supplemental disclosure of cash flow information
Income taxes paid $ -- $ --
-------- --------
Interest paid $ 99 $ 54
-------- --------
</TABLE>
See accompanying notes to unaudited financial statements
5
<PAGE> 6
BACK YARD BURGERS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Back Yard Burgers, Inc. (the "Company") owns and operates quick-service
restaurants and is engaged in the sale of franchises and the collection of
royalties based upon related franchise sales. The Company grants franchise
rights for the use of "Back Yard Burgers," "BYB" or "BY Burgers" trade names
and other associated trademarks, signs, emblems, logos, slogans and service
marks which have been or may be developed.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and therefore do not include
all information and notes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. The statements do reflect all adjustments
(consisting of only normal recurring accruals) which are, in the opinion of
management, necessary to present fairly the financial position and results of
operations and cash flows in conformity with generally accepted accounting
principles. The statements should be read in conjunction with the Notes to
Financial Statements for the year ended January 3, 1998 included in the
Company's 1997 Annual Report.
The financial statements include the accounts of Back Yard Burgers, Inc.
and its wholly-owned subsidiaries, Little Rock Back Yard Burgers, Inc., Atlanta
Burgers BYB Corporation and BYB Properties, Inc., as well as the Back Yard
Burgers National Advertising Fund. All significant intercompany transactions
have been eliminated.
The results of operations for the thirteen-week period are not necessarily
indicative of the results to be expected for the full year.
The Company maintains its financial records on a 52-53 week fiscal year
ending on the Saturday closest to December 31.
NOTE 2 - NET INCOME PER SHARE
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share, which requires the
presentation of basic and diluted earnings per share. Basic earnings per share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity.
NOTE 3 - DEFERRED FRANCHISE FEES
Amounts received for certain franchise and area development rights, net of
commissions paid, have been deferred. Revenues on individual franchise fees are
recognized when substantially all of the initial services required of the
Company have been performed, which generally coincides with the opening of the
franchises. Under the terms of the franchise agreements, these fees are
non-refundable, and may be recognized as income should the franchisee fail to
perform as agreed. Area development fees are recognized on a pro-rata basis as
each unit opens. At April 4, 1998, deferred fees include franchise and area
development rights sold during the following years:
<TABLE>
<S> <C>
1998 $ 13
1997 78
Previous Years 90
----------
$ 181
----------
</TABLE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company is party to several pending legal proceedings and claims. Although
the outcome of the proceedings and claims cannot be determined with certainty,
management of the Company is of the opinion that it is unlikely that these
proceedings and claims will have a material adverse effect on the financial
condition or results of operations of the Company.
6
<PAGE> 7
FORWARD-LOOKING INFORMATION
Certain information included herein may contain statements that are
forward-looking, such as statements related to financial items and results,
plans for future expansion and other business development activities, capital
spending or financing sources, capital structure and the effects of regulation
and competition. Forward-looking statements made by the Company are based upon
estimates, projections, beliefs and assumptions of management at the time of
such statements and should not be viewed as guarantees of future performance.
Such forward-looking information involves important risks and uncertainties that
could significantly impact anticipated results in the future and, accordingly,
such results may differ materially from those expressed in any forward-looking
statements by or on behalf of the Company. These risks and uncertainties
include, but are not limited to, increased competition within the industry for
customers, qualified labor and desirable locations, increased costs for beef,
chicken or other food products and management decisions related to construction,
financing, franchising and new product development, as well as items described
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" below.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
As of April 4, 1998, the Back Yard Burgers system included 75 restaurants, of
which 30 were Company-operated and 45 were franchised. The Company's revenues
are derived primarily from Company-operated restaurant sales, franchise and area
development fees and royalty fees. Certain expenses (cost of restaurant sales,
restaurant operating expenses, depreciation and amortization and advertising)
relate directly to Company-operated restaurants, while general and
administrative expenses relate to both Company-operated restaurants and
franchise operations. The Company's revenues and expenses are affected by the
number and timing of the opening of additional restaurants. Sales for new
restaurants in the period immediately following their opening tend to be high
because of trial by public and promotional activities. As a result, the timing
of openings can affect the average volume and other period-to-period
comparisons.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total revenue,
unless otherwise indicated, of certain items included in the Company's
historical operations and operating data for the periods indicated.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
APRIL 4, MARCH 29,
1998 1997
-------- ---------
<S> <C> <C>
Revenues
Restaurant sales 91.2% 92.7%
Franchise fees .8 .4
Royalty fees 4.8 4.7
Advertising fees 1.7 1.2
Other operating revenue 1.5 1.0
----- -----
Total revenue 100.0% 100.0%
----- -----
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
APRIL 4, MARCH 29,
1998 1997
-------- ---------
<S> <C> <C>
Costs and Expenses
Cost of restaurant sales (1) 32.0% 33.4%
Restaurant operating expenses (1) 48.6 51.2
General and administrative 12.5 12.6
Advertising 5.4 4.9
Depreciation and amortization 4.5 4.6
Operating income (loss) 4.1 (.4)
Interest income .1 --
Interest expense (1.6) (.9)
Other, net -- (.2)
Income (loss) before income taxes 2.6 (1.5)
Income taxes -- --
Net income (loss) 2.6 (1.5)
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
APRIL 4, MARCH 29,
1998 1997
-------- ---------
($000'S)
<S> <C> <C>
System-wide restaurant sales
Company-operated $ 5,808 $ 5,461
Franchised 8,045 7,573
------- -------
Total $13,853 $13,034
======= =======
Average annual sales per restaurant open for a
full year (2)
Company-operated $ 780 $ 712
Franchised $ 735 $ 665
System-wide $ 753 $ 682
Number of restaurants
Company-operated 30 32
Franchised 45 46
------- -------
Total 75 78
======= =======
</TABLE>
(1) As a percentage of restaurant sales.
(2) Includes sales for restaurants open for entire trailing twelve-month
period. Restaurants are included in the calculation after the completion
of eighteen months of operation as sales during the six-month period
immediately after the opening tend to be higher due to promotions and
trial by public.
8
<PAGE> 9
COMPARISON OF THE COMPANY'S RESULTS FOR THE THIRTEEN WEEKS ENDED APRIL 4, 1998
AND MARCH 29, 1997.
RESTAURANT SALES increased 6.4% to $5,808,000 during the thirteen weeks
ended April 4, 1998 compared to $5,461,000 for the same 1997 period. This
increase is primarily the result of an increase in same-store sales at
restaurants open for more than one year of 11.5%, which includes menu price
increases of approximately 4.0% and 3.0% effective at the beginning May and
September of 1997, respectively. The increase in same-store sales, coupled with
new stores not included in the same-store sales calculation, accounted for
approximately $680,000 in additional sales. This increase was partially offset
by the loss of two restaurants which were closed and one restaurant which was
converted to a franchised restaurant. Management of the Company believes that
the increase in same-store sales is the result of converting four double
drive-thru units to dine-in facilities with single drive-thrus, the price
increases noted above and improvements in service, as well a focused advertising
campaign.
ROYALTY FEES increased 9.4% to $303,000 during the thirteen week period
ended April 4, 1998 compared to $277,000 during the same period in 1997. The
increase is due to an increase in franchised restaurant sales upon which the
fees are based. Comparable same-store sales at franchised restaurants open for
more than one year increased 8.9%, representing an increase in royalty fees of
approximately $20,000. Six franchised restaurants were opened, one
Company-operated restaurant was converted to a franchised unit and eight
franchised restaurants were closed since March 29, 1997.
ADVERTISING FEES increased 52.8% to $110,000 for the thirteen weeks ended
April 4, 1998 compared to $72,000 during the comparable period in 1997. The
increase is primarily due to a voluntary increase of 0.5% in the national
advertising fee by 40 of the 45 franchised restaurants to be used for a direct
mail program. The increase is also related to the increase in franchised
restaurant sales as noted above.
COST OF RESTAURANT SALES, consisting of food and paper costs, totaled
$1,860,000 for the thirteen weeks ended April 4, 1998 and $1,826,000 during the
same period in 1997, decreasing as a percentage of restaurant sales to 32.0%
from 33.4%. This percentage decrease is primarily the result of the price
increases noted above, as well as decreases in certain condiment costs and all
paper costs.
RESTAURANT OPERATING EXPENSES, consisting of labor, supplies, utilities,
rent and certain other unit level operating expenses, increased to $2,822,000
for the thirteen weeks ended April 4, 1998 from $2,794,000 in the same prior
year period. This represents a decrease as a percentage of restaurant sales to
48.6% from 51.2% for the same period in 1997. The decrease, as a percentage of
sales, relates primarily to a decrease of approximately 2.2% in promotional
activities, a decrease of approximately 0.4% in restaurant labor expense as well
as an increase in same-store sales at existing restaurants of 11.5%. This
results in expenses of a fixed and semi-variable nature, such as management
payroll, repairs, rent, utilities, taxes and insurance, representing a smaller
percentage of sales. These decreases were partially offset by increases in
reapirs and maintenance and equipment rental expense.
GENERAL AND ADMINISTRATIVE COSTS which increased to $796,000 for the
thirteen weeks ended April 4, 1998 from $740,000 in the same year earlier
period, decreased as a percentage of total revenue for the thirteen weeks ended
April 4, 1998 to 12.5% from 12.6% in the same period in 1997. The increase of
$56,000 is primarily the result of the Company retaining a MIS specialist to
direct point of sale maintenance and upgrade programs, as well as personnel
costs related to an increased level of restaurant management training programs
to facilitate superior customer service.
ADVERTISING EXPENSE which increased to $347,000 for the thirteen weeks
ended April 4, 1998 from $286,000 in the same period in 1997, increased as a
percentage of total revenues to 5.4% from 4.9%. This is the result of an
increase in advertising fees, as described above, which are used for the
development and production of marketing campaigns and collateral material.
9
<PAGE> 10
INTEREST EXPENSE increased 83.3% to $99,000 for the thirteen weeks ended April
4, 1998 from $54,000 in the same year earlier period. This is due to a net
increase in long-term debt of $1,992,000, or 95.2%, since the end of the prior
year first quarter.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews the carrying value of its long-lived and intangible assets
for possible impairment whenever events or changes in circumstances indicate
that the carrying amount of assets may not be recoverable. A new cost basis is
established for impaired assets based on the fair value of these assets as of
the date the assets are determined to be impaired.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures totaled $1,507,000 for the thirteen weeks ended April 4,
1998 and $164,000 for the same period of 1997. Generally, the Company purchases
its restaurant buildings and leases the properties for its Company-operated
restaurants. The average monthly lease cost for the 19 Company-operated
restaurants on leased sites at April 4, 1998 is approximately $3,000 per month.
For the eight restaurants where the Company leases the building as well as the
site, the average monthly lease cost is approximately $4,800.
Cash from operations for the Company is primarily affected by net earnings
adjusted for deferred franchise fees and non-cash expenses which consist
primarily of depreciation and amortization. Depreciation and amortization
totaled $284,000 for the thirteen weeks ended April 4, 1998 and $269,000 for the
same 1997 period. This increase is primarily the result of the addition of
dine-in facilities and the related furniture and equipment equipment at certain
Company-operated restaurants since March 29, 1997. Receivables, net, decreased
$24,000 during the thirteen weeks ended April 4, 1998, primarily due to the
timing of collections from franchisees.
Cash used in operations for the thirteen week period ended April 4, 1998
and March 29, 1997 totaled $20,000 and $25,000, respectively. Since January 1,
1995, the addition of restaurants and equipment has been financed primarily
through cash from operations and debt.
The Company maintains a commitment with a leasing company that provides the
Company with up to $2,000,000 and bears interest of approximately 14.1%.
Borrowings in the amount of $784,000 were outstanding under the above commitment
at April 4, 1998.
During the first quarter of 1998, the Company entered into loan agreements
with various financial institutions for an aggregate amount of $1,525,000 at
interest rates from 9.0% to 9.5%. These loans are secured by real and personal
property to be constructed and/or purchased with the proceeds, certain accounts
receivable and a certficate of deposit in the amount of $50,000.
The Company believes that it currently has sufficient resources to fund
anticipated capital expenditures of approximately $2,000,000 during 1998. These
resources include the borrowing commitments described above in addition to the
Company's internally generated cash flow. Additional growth in 1999 may require
the Company to obtain additional debt or equity financing.
SEASONALITY AND INFLATION
While the Company does not believe that seasonality affects its operations in a
material manner, first quarter results will generally be lower than other
quarters due to seasonal climate conditions in the locations of many of its
restaurants. Management does not believe that inflation has had a material
effect on income during the thirteen weeks ended April 4, 1998. Increases in
food, labor or other operating costs could adversely affect the Company's
operations. In the past, however, the Company generally has been able to
increase menu prices or modify its operating procedures to substantially offset
increases in operating costs.
10
<PAGE> 11
CONVERSION OF PREFERRED STOCK
In accordance with the provisions of the Company's Certificate of Incorporation
regarding preferred stock, as a result of the Company's having attained after
tax net income in excess of $600,000 during 1994, each share of preferred stock
is convertible into one share of common stock, at the option of the holder. The
Company notified preferred stockholders of their right to convert preferred
stock to common stock, and anticipates that all shares of preferred stock will
eventually be converted. Such conversion began on April 5, 1995, at which time
there were 1,199,979 shares of preferred stock outstanding. As of April 4, 1998,
1,159,423 shares had been converted.
KNOWN TRENDS AND UNCERTAINTIES
Labor supply will continue to be a critical factor for the Company in the
foreseeable future. In most areas where the Company operates restaurants, there
is a shortage of suitable labor. This, in itself, could result in higher wages
as the competition for employees intensifies, not only in the quick-service
restaurant industry, but in practically all retail and service industries. It
will be crucial for the Company to develop programs to attract and retain
quality employees. The Clinton Administration is advocating an additional
increase of $1.00 per hour in the minimum wage in two phases over a set period
of time. This increase could have a negative impact on operating margins.
During the thirteen weeks ended April 4, 1998, the cost of beef and chicken
was relatively stable; however, management of the Company anticpates increases
in these costs in the future and believes that it will be difficult to raise
menu prices to fully cover these anticipated increases due to the competitive
state of the quick-service restaurant industry. Additional margin improvements
would have to be made through operational improvements, equipment advances and
increased volumes to help offset these potential increases.
Due to the competitive nature of the restaurant industry, site selection
will become more difficult as an increasing number of businesses will be vying
for locations with similar characteristics. This could result in higher
occupancy costs for prime locations.
Same-store sales increased 11.5% during the first quarter of 1998. This
increase is an indication that the improved addition of dine-in facilities and
balanced marketing strategy are effective. The Company will continue this
strategy in 1998, however, there are no assurances the increases in same-store
sales will continue.
The future success of the Company will be determined, to a great extent, by
its ability to positively address these issues.
11
<PAGE> 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings
The Company is involved in litigation incidental to its business, including, but
not necessarily limited to, claims alleging violations of the Civil Rights Act
of 1964 and/or discrimination. Aside from the cost of defense, such litigation
is not presently considered by management to be material to the financial
condition or results of operations of the Company.
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
Exhibits
<S> <C>
11 - Calculation of Income Per Share
10.22 - Business Loan Agreement by and between
Cavalry Banking and Back Yard Burgers,
Inc., dated January 26, 1998.
10.23 - Promissory Note by and between Cavalry
Banking and Back Yard Burgers Inc., dated
January 26, 1998.
10.24 - Loan Agreement by and between Trust One
Bank and Back Yard Burgers, Inc., dated
February 4, 1998.
10.25 - Promissory Note by and between Trust One
Bank and Back Yard Burgers Inc., dated
February 4, 1998.
10.26 - Promissory Note by and between Trust One
Bank and Back Yard Burgers Inc., dated
February 4, 1998.
10.27 - Promissory Note by and between Eagle Bank
& Trust Company and Back Yard Burgers,
Inc., dated March 18, 1998.
27 - Financial Data Schedule, which is
submitted electronically to the Securities
and Exchange Commission for information
only and not filed.
Reports on Form 8-K
None
</TABLE>
12
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
BACK YARD BURGERS, INC.
Date: May 18, 1998 By:/s/Lattimore M. Michael
- ------------------ -----------------------
Lattimore M. Michael
Chairman and Chief Executive Officer
Date: May 18, 1998 By:/s/Stephen J. King
- ------------------ -----------------------
Stephen J. King
Chief Financial Officer
13
<PAGE> 1
EXHIBIT 10.22
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$260,000.00 01-26-1998 02-01-2001 65-100896-0 62 65-100896-0 PDE
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower: BACK YARD BURGERS INC. Lender: Cavalry Banking
2768 Colony Park Drive Main Office
MEMPHIS, TN 38118 114 WEST COLLEGE STREET
P. O. BOX 188
MURFREESBORO, TN 37130
- -------------------------------------------------------------------------------
THIS BUSINESS LOAN AGREEMENT BETWEEN BACK YARD BURGERS, INC. ('BORROWER') AND
CAVALRY BANKING ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND
CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS
APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL
ACCOMMODATION, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR SCHEDULE
ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL ACCOMMODATIONS.
TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM LENDER TO
BORROWER, ARE REFEREED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN" AND
COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT (A) IN
GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (B)
THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL HE
SUBJECT TO LENDER'S SOLE JUDGEMENT AND DISCRETION; AND (C) ALL SUCH LOANS SHALL
BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS
AGREEMENT.
TERM. This Agreement shall be effective as of January 21,1998, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meaning, when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts o shall mean amounts in lawful money of the United Stales of
America.
AGREEMENT. The word "Agreement" means their Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time. together with all exhibits and schedules attached to this
Business Loan Agreement from time to time. BORROWER. The word
"Borrower" means BACK YARD BURGERS, INC. The word "'Borrower" also
includes, as applicable. all subsidiaries and affiliates of Borrower as
provided below in the paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether for real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted
in the form of a security, interest. mortgage, deed of trust.
assignment. pledge, chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale. trust receipt lien, charge. lien or
title retention contract. lease or consignment intended as a security
device, or any other security or lien interest whatsoever whether
created by law. contract, or otherwise. ERISA. The word "ERISA" means
the Employee Retirement Income Security Act of 1974, as amended, EVENT
OF DEFAULT. The words "Event of default" mean and include without
limitation any of the Events of Default set forth below in this section
EVENTS OF DEFAULT
GRANTOR. The word "Grantor" means and Includes without limitation each
and ail of the persons or entities granting a Security interest
Collateral for the indebtedness. including without limitation all
Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties
connection with any indebtedness.
INDEBTEDNESS. The word "indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing. voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor. surety, or otherwise; whether
recovery upon such indebtedness may be or hereafter may become barred
by any statute of limitations; and whether such indebtedness may be or
hereafter become otherwise unenforceable
LENDER. The word "Lender" means CAVALRY BANKING, its successors and
assigns.
<PAGE> 2
LOAN. The word "Loan" or "Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender
to Borrower, whether now or hereafter existing. and however evidenced.
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
NOTE. The word "Note" means and includes without limitation Borrower
promissory note or notes, if any, evidencing Borrower's Loan
obligations in favor of Lender, as well as any substitute, replacement
or refinancing note or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interests securing indebtedness owed by Borrower to Lender;
(b) liens for taxes. assessments, or similar charges either not yet due
or being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "lndebtedness and Liens"; (e) liens and
security interests which, as of the date of this Agreement, have been
disclosed to approved by the Lender in writing; and (f) those liens and
security interests in which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of
Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements. environmental agreements, guaranties, security agreements.
mortgages, deeds of trust, and all other instruments agreements and
documents, whether now or hereafter existing, executed in connection
with the indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenant, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing. representing, or creating a
Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form
of a lien charge, mortgage. deed of trust, assignment. pledge, chattel
mortgage. chattel trust, factor's lien, equipment trust, conditional
sale, trust receipt lien or title retention contract, lease or
consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or
otherwise. SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender the following
documents for the Loan: (a) the Note, (b) Security Agreements granting to Lender
security interests in the Collateral, (c) Financing Statements perfecting
Lender's Security Interests; (d) evidence of insurance as required below; and
(e)any other documents required under this Agreement or by Lender or its
counsel.
BORROWER'S AUTHORIZATION. Borrower shall provide to Lender in form
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizes and other documents and instruments as Lender or its
counsel, in their sole discretion, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Documents.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in an y document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
Tennessee and is validly existing end in good standing in all states in
which Borrower is doing business. Borrower has the full power and
authority to own Its properties and to transact the businesses in which
it is presently engaged or presently proposes to engage. Borrower also
is duly qualified as a foreign corporation and is in good standing in
all states in which the failure to so qualify would have a material
adverse effect on its businesses or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute
a default under (a) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other Instrument binding
upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
<PAGE> 3
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due end payable, Borrower owns and has good title to all
of Borrower's properties free end clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in
this Agreement, shall have the same meanings as set forth In the
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, at seq., the Tennessee Hazardous Substances Act,
T.C.A., 68-27-101,81 seq., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the foregoing. Except
as disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste Or substance by any person on, under,
about or from any of the properties. (b) Borrower has no knowledge of,
or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened
release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims or
any kind by any person relating to such matters. (c) Neither Borrower
nor any tenant, contractor, agent or other authorized user of any of
the properties shall use, generate, manufacture, store, treat, dispose
of, or release any hazardous waste or substance on, under, about or
from any ct the properties; and any such activity shall be conducted in
compliance with all applicable federal, state, end local laws,
regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender
and Its agents to enter upon the properties to make such inspections
and tests as Lender may`deem appropriate to determine compliance of the
properties with this section of the Agreement. Any inspections or tests
made by Lender shall be at Borrower's expense and for Lender's purposes
only and shall not be construed to create any responsibility or
liability on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's
due diligence in investigating the properties for hazardous waste and
hazardous substances. Borrower hereby (a) releases end waives any
future claims against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup 61 other costs under any such laws,
and (b) agrees to indemnify and hold harmless Lender against any end
all claims, losses, liabilities, damages, penalties, end expenses which
Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the Agreement or ass consequence of any use,
generation, manufacture, storage, disposal, release or threatened
release occurring prior to Borrower's ownership or interest in the
properties, whether or not the same was or should have been known to
Borrower. The provisions of this section of the Agreement including the
obligation to indemnify, shall survive the payment of the Indebtedness
and the termination or expiration of this Agreement and shall not be
effected by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender
in writing. TAXES. To the best of Borrower's knowledge, all tax returns
and reports of Borrower that are or were required to be filed, have
been filed, and all taxes, assessments and other governmental charges
have been paid in full, except those presently being or to be contested
by Borrower in good faith in the ordinary course of business and for
which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests end
rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan end Note
and all of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
<PAGE> 4
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies In all material respects with el
applicable requirements of law end regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred
with respect to any such plan, (ii) Borrower has not withdrawn from any
such plan or initiated steps to do so, (iii) no steps have been taken
to terminate any such plan, and (iv) there are re unfunded liabilities
other than those previously disclosed to Lender In writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located at 2768 COLONY PARK DRIVE,
MEMPHIS, TN 38118. Unless Borrower has designated otherwise in writing
this location is also the office or offices where Borrower keeps its
records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be true and accurate in every material respect on the date as of
which such information is dated or certified; end none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands end
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in making the above referenced
Loan to Borrower. Borrower further agrees that the foregoing(
representations and warranties shall be continuing in nature and shall
remain In full force end effect until such time as Borrower's
Indebtedness: shall be paid in full, or until this Agreement shall be
terminated in the manner provided above, whichever is the last to
occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all existing
end all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor
which could materially affect the financial condition of Borrower or
the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis
and permit Lender to examine and audit Borrower's books and records at
all reasonable times.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payable inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations a Lender may request from time to time.
INSURANCE. Maintain fire end other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
t Borrower's properties and operations, in form, amounts, coverages and
with insurance companies reasonably acceptable to Lender. Borrower upon
request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be canceled or
diminished without at least ten (10) days' prior written notice to
Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default( Borrower or any other person. In
connection with all policies covering assets in which Lender holds or
is offered a security interest for the Loan Borrower will provide
Lender with such loss payable or other endorsements as Lender may
require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (a)
the name of the insurer; (b) the risks insured; (c) the amount of the
policy; (d) the properties insured; (e) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration dale of the
policy. In addition, upon request of Lender (however not more often
than annually.
Borrower will have an independent appraiser satisfactory to
Lender determine, as applicable, the actual cash value or replacement
cost of any Collateral. The cost of such appraisal shall be paid by
borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all
other agreements, wether now or hereafter existing, between Borrower
and any other party and notify lender immediately in writing of any
default in connection with any other such agreements.
LOAN PROCEEDS. Use all loan proceeds for Borrower's business
operations, unless specifically consented to the contrary by lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of
its indebtedness and obligations, including without limitation all
assessments taxes, governmental charger, levies and liens, of every
kind of nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income or profits. Provided however, Borrower
will not be required to pay and discharge any such assessment, tax,
charge, levy, lean or claim so long as (a) the legality of the claim
shall be contested in good faith by appropriate proceedings, and (b)
Borrower shall established on its books adequate reserves with respect
to such contested assessment, tax, charge, levy, lien or claim in
accordance with generally accepted accounting practices. Borrower, upon
demand of Lender, will furnish to Lender evidence of payment of the
assessments, taxes, charges, levies, leans
<PAGE> 5
and claims and will authorize the appropriate governmental official to
deliver Lender at any time a written statement of any assessments,
taxes, levies, liens and claims against Borrower's properties, income,
or profits.
PERFORMANCE. Perform and comply with all terms, conditions,
and provisions set forth in this Agreement and in the Related Documents
in a timely manner, and promptly notify Lender if Borrower learns of
the Occurrence of any event which constitutes an Event of Default under
this agreement or under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of
any change in executive and management personnel; conduct its business
affairs in a responsible and prudent manner and in compliance with all
applicable federal, state and municipal laws, ordinances, rules and
regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the Americans
With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee
benefit plans.
INSPECTION. Permit employees or agents of Lender at any
reasonable time to inspect any and all Collateral for the Loan or Loans
and Borrower's other properties and to examine or audit Borrower's
books, accounts, and records and to make copies and memoranda of
Borrower's books and accounts and records. If Borrower now or at any
time hereafter maintains any records (including without limitation
computer generated records and computer software programs for the
generation of such records) in the possession of a third party,
Borrower, upon request of Lender, shall notify such party to permit
Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at
Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender,
provide Lender at least annually and at the time of each disbursement
of Loan proceeds with a certificate executed by Borrower's chief
financial officer or person acceptable to Lender, certifying that, the
representations and warranties set forth in this Agreement are true as
of the date of the certificate, no Evident of Default exists under this
Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in
all respects with all environmental protection federal, state and local
laws statues, regulations and ordinances; not caused or permit to
exist, as a result of intentional or unintentional action or omission
on its part or of the part of any third party, on property owned and/or
occupied by Borrower, any environmental activity where damage may
result to the environment, unless such environmental activity is
pursuant to and in compliance with the conditions of a permit issued by
the appropriate federal state or local governmental authorities; shall
furnish to Lender promptly and in any event within thirty (30) days
after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency
or instrumentality concerning any intentions or unintentional action or
omission on Borrower's part in connection with any environmental
activity whether or not there is damage to the environment and/or other
natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender
such promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request and secure the loans and
to perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in
the normal course of business and indebtedness to Lender contemplated
by this Agreement, create, incur or assume indebtedness for borrowed
money, including capital leases (b) except as allowed as a Permitted
Lien, sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower's assets, or (c) sell with
recourse any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business
activities substantially different than those in which Borrower is
presently engaged, (b) cease operations, liquidate, merge, transfer,
acquire or consolidate with any other entity, change ownership, change
its name, dissolve or transfer or sell Collateral out of the ordinary
course of business, (c) pay any dividends on Borrower's stock (other
than dividends payable in stock) provided, however that not
withstanding the foregoing, but only so long that no event of Default
has occurred and is continuing or would result from the payment of
Dividends, if Borrower is a "Subchapter S Corporation" (as defined in
the Internal Revenue Code of 1986, as amended), Borrower may pay cash
dividends on its stock to its shareholders from time to time in amounts
necessary to enable shareholders to pay income taxes and make estimated
income tax payments to satisfy their liabilities under federal and
state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of stock
of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower"s capitol structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest or in
advance money or assets, (b) purchase, create or acquire any interest
in any other enterprise or entity, or (b) incur any obligation as
surety or guarantor other than in the ordinary course of business.
<PAGE> 6
CESSATION OF ADVANCES. If lender has made any commitment to make any loan to
Borrower, wether under this Agreement or any other agreement, Lender shall have
no obligation to make Loan Advances or to disburse Loan proceeds if : (a)
Borrower or Guarantor is in default under the terms of this Agreement or any
Related Documents or any other agreement that Borrower or any Guarantor has with
Lender; (b) Borrower or any Guarantor becomes insolvent, files a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a
material adverse change in Borrower's financial condition, in the financial
condition of any Guarantor, or the value of any collateral securing any loan;
(d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such Guarantor's guaranty of the Loan or any other loan with Lender; or (e)
Lender in good faith deems itself insecure, even though no event of Default
shall have occurred. RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in; and hereby assigns, conveys, delivers, pledges,
and transfers to Lender all Borrower's right, title and interest in and to,
Borrower's account with Lender (whether checking, savings, or some other
account), including without limitation all accounts Borrower may open in the
future, excluding all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Borrower authorizes
Lender, to the extent permitted by applicable law to charge or setoff all sums
owing on the Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment due on
the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or perform any other term,
obligation covenant or condition contained in any other agreement
between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially effect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of the
Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
the Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be In full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason. INSOLVENCY. The dissolution
or termination of Borrower's existence as a going business, the
insolvency of Borrower, the appointment of a receiver for any part of
Borrower's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under
any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment
performance of the Indebtedness is impaired. INSECURITY. Lender, in
good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement Immediately will terminate and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that earth case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic end not optional. Ir addition, Lender shall have all the rights end
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform are the obligation of Borrower or of any Grantor shall not affect
Lender's right to declare a default and to exercise its rights and remedies.
<PAGE> 7
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. THIS AGREEMENT, TOGETHER WITH ANY RELATED DOCUMENTS,
CONSTITUTES THE ENTIRE UNDERSTANDING AND AGREEMENT OF THE PARTIES AS TO
THE MATTERS SET FORTH IN THIS AGREEMENT. NO ALTERATION OF OR AMENDMENT
TO THIS AGREEMENT SHALL BE EFFECTIVE UNLESS GIVEN IN WRITING END SIGNED
BY THE PARTY OR PARTIES SOUGHT TO BE CHARGED OR BOUND BY THE ALTERATION
OR AMENDMENT.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND
ACCEPTED BY LENDER IN THE STATE OF TENNESSEE. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF
THE COURTS OF RUTHERFORD COUNTY, THE STATE OF TENNESSEE. LENDER AND
BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER
AGAINST THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests In the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of
any such participation interests will be considered as the absolute
owners of such interests in the Loans end will have all the rights
granted under the participation agreement or agreements governing the
sale of such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later against
Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may
enforce Its interests irrespective of any personal claims or defenses
that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification
and collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else to help collect
the Loans and to enforce this Agreement, end Borrower will pay that
amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including attorneys' fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all
other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, If there is more
than one Borrower, notice to any Borrower will constitute notice to all
Borrowers. For notice purposes, Borrower will keep Lender informed at
all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance. such finding shall not render that provision Invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken end all
other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used herein shall include all subsidiaries end affiliates
of Borrower. Notwithstanding the foregoing however, under no
circumstances shall this Agreement be construed to require Lender to
make any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind Its successors and assigns end shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
<PAGE> 8
TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender end any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of
such consent by Lender In any Instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in
all cases such consent may be granted or withheld in toe sole
discretion of Lender.
01-26-1998 BUSINESS LOAN AGREEMENT
LOAN NO 65-100896-0
BORROWER ACKNOWLEDGES HAVING REAL ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JANUARY 26, 1998.
BORROWER:
BACK YARD BURGERS, INC.
By:
--------------------------------------
LATTIMORE MICHAEL
LENDER:
CAVALRY BANKING
By:
--------------------------------------
AUTHORIZED OFFICER
<PAGE> 1
\ EXHIBIT 10.23
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$260,000.00 01-26-1998 02-01-2001 65-100896-0 62 65-100896-0 PDE
- ----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower: BACK YARD BURGERS INC. Lender: Cavalry Banking
2768 Colony Park Drive Main Office
MEMPHIS, TN 38118 114 WEST COLLEGE STREET
P. O. BOX 188
MURFREESBORO, TN 37130
===============================================================================
<TABLE>
<S> <C> <C> <C> <C> <C>
PRINCIPAL AMOUNT: $260,000.00 INTEREST RATE: 9.000% DATE OF NOTE: JANUARY 26, 1998
</TABLE>
PROMISE TO PAY, BACK YARD BURGERS, INC. ("BORROWER" ) PROMISES TO PAY TO CAVALRY
BANKING ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA,
THE PRINCIPAL AMOUNT OF TWO HUNDRED SIXTY THOUSAND & 0/100 DOLLARS
($260.000.00), TOGETHER WITH INTEREST AT THE RATE OF 9.000% PER ANNUM ON THE
UNPAID PRINCIPAL BALANCE FROM JANUARY 26, 1998, UNTIL PAID IN FULL.
PAYMENT. BORROWER WILL PAY THIS LOAN IN 35 REGULAR PAYMENTS OF $2,640.13 EACH
AND ONE IRREGULAR LAST PAYMENT ESTIMATED AT $234,705.23. BORROWER'S FIRST
PAYMENT IS DUE MARCH 1, 1998, AND ALL SUBSEQUENT PAYMENTS ARE DUE ON THE SAME
DAY OF EACH MONTH AFTER THAT. BORROWER'S FINAL PAYMENT DUE FEBRUARY 1, 2001,
WILL BE FOR ALL PRINCIPAL AND ALL ACCRUED INTEREST NOT YET PAID. PAYMENTS
INCLUDE PRINCIPAL AND INTEREST. The interest on this Note is computed on a
365/365 simple interest basis; that is, by applying the ration of the annual
interest rate over the number of days in a year (366 during leap years),
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
PRE-PAYMENT. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law. Except for the foregoing, Borrow may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due and may result in Borrower
making fewer payments.
LATE CHARGE. If a payment is 15 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. ( c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligation under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of the borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
of against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property
<PAGE> 2
on or in which Lender has a lien or security interest. This includes a
garnishment of any of Borrower's accounts with Lender. (g) Any guarantor dies or
any of the other events described in this default section occurs with respect to
any guarantor of this Note. (h) a material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the indebtedness is impaired. ( i ) Lender in good faith deems itself
insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid balance on
this Note and all accrued unpaid interest immediately due, without notice, and
then Borrower will pay that amount. Upon default, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the interest rate on this Note 4.000 percentage points, but in no
event at an effective total interest rate on this Note greater than the rate
permitted by applicable law. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable laws, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings ( including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay nay court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER
IN THE STATE OF TENNESSEE. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OR THE COURTS OF RUTHERFORD COUNTY, THE
STATE OF TENNESSEE. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER
AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TENNESSEE.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower may open in
the future, excluding however all IRA and Keogh accounts, and all trust accounts
for which the grant of a security interest would be prohibited by law. Borrower
authorizes Lender to the extent permitted by applicable law, to charge or setoff
all sums owing on this Note against any and all such accounts.
COLLATERAL. This Note is secured by real property known as 108 Mall Circle
Drive, Murfreesboro, Tn.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who sighs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to everyone. Ass
such parties also agree that Lender may modify this loan without the consent of
or notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
BORROWER:
BACK YARD BURGERS, INC.
By:
-------------------------------
LATTIMORE MICHAEL
===============================================================================
<PAGE> 1
EXHIBIT 10.24
LOAN AGREEMENT
THIS LOAN AGREEMENT, made and entered into this 4th day of February,
1998, by and between TRUST ONE BANK, a Tennessee banking corporation with its
principal office at 2171 Judicial Drive, Suite # 101, Germantown, Tennessee
38138 ("Lender") and BACK YARD BURGERS, INC., 2678 Colony Park Drive, Memphis,
Tennessee 38118 ("Borrower").
WITNESSETH:
WHEREAS, Borrower has requested that Lender extend financial
accommodations to it in order to provide funds for the purchase of certain real
property and to make improvements thereon; and
WHEREAS, Lender has agreed to extend financial accommodations for such
purposes to borrower in the form of a $765,000.00 construction loan to be
converted to a term loan, to be made in accordance with, and subject to, the
terms and conditions set forth below;
Now, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loan or other financial accommodation heretofore, now or
hereafter made by Lender to or on behalf of Borrower, the parties hereto hereby
agree as follows:
SECTION 1. CONSTRUCTION LOAN, INTEREST, AND PROCEEDS OF LOAN.
1.1 Loan. Subject to all of the terms and conditions set forth in this
Agreement and another agreement, instrument or document executed by Borrower and
delivered to Lender (the "Loan Documents"), Lender shall lend Seven Hundred
Sixty-Five Thousand Dollars ($765,000.00) (the "Construction Loan") to Borrower
for the purchase by Borrower of that certain real property (the "Property")
described in Exhibit "A" attached hereto and for Borrower to thereafter complete
the construction of a restaurant thereon (the "Improvements").
1.2 Interest. Subject to the provisions of Section 11.3 below, Borrower
shall pay to lender interest on the Note (as defined in Section 1.4 below) and
any draw note at a rate per annum equal to one percent (1%) above Lender's
floating Prime Rate. As used herein the term "Prime Rate" shall mean the
interest rate announced from time to time by Lender to be its prime rate, which
may not necessarily be its best lending rate. In the event Lender shall abolish
or abandon the practice of announcing its Prime Rate or should the same be
unascertainable, Lender shall designate a comparable referenced rate which shall
be deemed to be the Prime Rate under this Agreement and the Loan Documents. All
changes in the rate of interest due to a change in the Prime Rate shall take
effect on the same day on which the Prime Rate changes. Interest will be
calculated on a daily basis (computed on the basis of actual days elapsed over a
year of 360 days) and shall be calculated and be due and payable monthly in
arrears on the first day of each month, commencing on the st day of December,
1998.
1.3 Loan Purposes. Borrower shall use the proceeds of the Construction
Loan to purchase of the Property and make the Improvements, which use shall be a
legal and proper corporate purpose of Borrower (duly authorized by Borrower's
Board of Directors) and consistent with all applicable laws and statutes.
1.4 Construction Note and Draw Notes. The Construction Loan shall be
evidenced by a note (the "Note") in the principal sum of Seven Hundred
Sixty-Five Thousand Dollars($765,000.00). Each draw under the Note may, if
required by Lender, be evidenced by a draw note. The terms of the Note and each
draw note shall be as set forth herein.
<PAGE> 2
SECTION 2. PAYMENTS.
2.1 Payments. All Payments of Borrower to Lender shall be repayable at
Lender's address set forth above or at such other place or places as Lender may
designate from time to time.
2.2 Term. Interest only shall be due under the Note, payable monthly
until its due date, which shall be the earlier of the date of completion of the
Improvements or nine months from the date of the Note, at which time (the
"Conversion Date") all interest on the Construction Loan shall be brought
current, and provided there exists no event of default under the terms of the
Note, this Agreement or any Loan Document and interest on the Construction Loan
is current, the Construction Loan shall convert to a term loan.
2.3 Completion. As used herein the terms "completion of the
Improvements or complete the Improvements" shall mean Borrower's having received
a certification from the architect that the Improvements are complete and a
Certificate of Occupancy from Shelby County, Tennessee.
SECTION 3. OBLIGATIONS UNDER CONSTRUCTION LOAN.
3.1 Requirements. As a condition of Lender to extending credit under
the Construction Loan, Borrower agrees to execute, procure, pay for and deliver
to Lender the following:
(a) Such documents and instruments as Lender may require to evidence
the status, organization or authority of Borrower and to evidence, govern or
secure payment of the Construction Loan.
(b) Deed of Trust and Security Agreement ("Mortgage") in a form
acceptable to Lender, evidencing a first lien on the real Property described in
Exhibit "A" and all improvements now or hereafter constructed thereon, as well
as a first lien on the furniture, fixtures and equipment on the Property.
(c) Title insurance policy or binder, as required by Lender, in form
and content and issued by a company or companies acceptable to Lender, insuring
or agreeing to insure Lender in the amount of the Loan that said Mortgage and
any other lien securing the payment of the Construction Note has the dignity and
priority required by Lender. If required by Lender, such policy or binder shall
be extended to cover each and every advance at the time of making such advance.
(d) Hazard insurance policy or policies, in form and content and issued
by a company or companies and with loss payable endorsements acceptable to
Lender, insuring said improvements and all materials and supplies on the
Property against loss or damage by fire and the risks and hazards insured
against by the standard form of extended coverage, and against vandalism and
malicious mischief, and such other risks and hazards as Lender may request, in
an amount not less than the amount of the Loan.
(e) Such certificates, approvals and evidence of completion of work in
place, in whole or in part, bills and invoices as Lender may request prior to
making any disbursement hereunder.
(f) Payment and performance bonds, in form and content issued by a
company or companies acceptable to Lender, insuring the performance and payments
by the general contractor, with dual obliger riders, and in such amounts as
shall be acceptable to Lender.
(g) The items indicated below:
(1.) Original or fully executed copy of the contract for the
construction of the Improvements.
(2) Copy of the plans and specifications for the Improvements,
approved by lender.
(3) At the option of Lender, waiver of liens executed by the
contractor and/or subcontractors at each request for disbursement and at
completion of contract and notice of completion of the Improvements.
<PAGE> 3
(4) Survey of Property.
(5) Building permits.
(6) Evidence that all applicable zoning ordinances and
restrictive covenants affecting the Property permit the use for which the
improvements are intended.
(7) Certificate from an Engineer acceptable to the Lender
stating that construction has not commenced prior to recording of the Mortgage.
(8) At the option of Lender, independent AIA appraisals
sufficient to support the loan amounts acceptable to the Lender.
(h) General liability policy or policies, in form and content and
issued by a company or companies acceptable to Lender, insuring against the
negligence acts of Borrower or its agents in connection with the construction of
the Improvements, in such amounts as shall be acceptable to Lender.
(i) Workmen's compensation policy or policies, in form and content and
issued by a company or companies acceptable to Lender, insuring against injuries
incurred in connection with the construction of the Property, in such amounts as
shall be acceptable to Lender.
(j) A construction loan fee, due upon the execution of the Note, of
$3,825.00.
3.2 Funding. By Lender. Upon Borrower's compliance with the provisions
of Section 3.1 hereof, and provided that Borrower is not in default, and subject
to all other provisions of this Agreement, Lender will advance and disburse the
Construction Loan in monthly installments at the times and amounts in accordance
with Schedule "A" attached hereto. Such advances as provided by this Section 3.2
shall be in addition to any prior advance necessary to complete the purchase of
Property. However, in no event shall the total loan disbursement be greater than
$765,000.00.
3.3 Additional Funds From Borrower. Should the Lender determine that
the amount of money remaining to be disbursed under the Construction Loan is
insufficient to complete the Improvements, Borrower shall upon demand by Lender
immediately deposit with Lender such sums (which are hereinafter referred to as
"Borrower's Deposit") as Lender shall deem necessary in addition to the amount
of the Construction Loan for the completion of the Improvements and payment of
all costs in connection with the construction of such Improvements and for the
performance of any obligation of Borrower to Lender.
SECTION 4. BORROWER'S REPRESENTATIONS WITH RESPECT TO CONSTRUCTION LOAN
4.1 Warranties. Representations. Covenants and Agreements of Borrower.
(a) Prior to recordation of the Mortgage, no work of any kind
(including that of destruction or removal of any existing improvements upon the
property, the drilling of test holes, or grading) has been or will be commenced
or performed upon the Property, and no materials or equipment have been or will
be delivered to or upon the Property.
(b) Within thirty (30) days after recording of the Mortgage, Borrower
will promptly commence construction of the Improvements, and within nine (9)
months from the date hereof, will complete the same in accordance with the plans
and specifications submitted to Lender and in accordance with good building
practice and all applicable laws, ordinances, rules, regulations and
restrictions. After construction of the improvements has been commenced,
Borrower shall diligently proceed with said construction and will not permit
cessation of the work of construction for a period in excess of fifteen (15)
consecutive days without the written consent of Lender.
<PAGE> 4
(c) Without the prior written consent of Lender, Borrower will make no
change in the plans and specifications submitted to the Lender.
(d) Lender is authorized to hold, use and disburse the proceeds of the
Construction Loan and/or Borrower's Deposit to pay and provide any and all
costs, charges, expenses and deposits, whatsoever and howsoever incurred or
required, in connection with the Construction Loan, the construction and
completion of the Improvements, or in the payment or performance of any
obligation of Borrower to Lender; and at Lender's election to pay the same, or
any part thereof, to Borrower or to the contractor or any other persons
furnishing labor, supplies or services for or in connection with the
construction or completion of the Improvements, and to the holder of any lien,
charge or encumbrance on any security for the payment of the loan; and the whole
of the Construction Loan proceeds are hereby assigned, transferred and pledged
to Lender for such purposes. Lender may advance and incur such expenses as it
may deem necessary to preserve the security for the Construction Loan, which
shall be secured by said Mortgage and any other security for the Construction
Loan, and Borrower will pay the same upon demand. In the event Lender, for the
purposes specified in this subparagraph (d), shall elect to pay any of the
proceeds of the Construction Loan to parties other than Borrower, Lender may
make advances upon the Construction Loan, at any time and from time to time, to
provide funds for such purposes, irrespective of the provisions of the
applicable schedule of advances attached hereto; and the amount of advances to
which Borrower shall thereafter be entitled under this Agreement shall be
correspondingly reduced.
(e) All advances and disbursements under the Construction Loan and/or
Borrower's Deposit are subject to inspection of the improvements by Lender's
appraiser; and Lender, at its election, may require ten (10) days notice in
writing before making any advance or payment, for the purpose of making an
inspection or other determination.
(f) Borrower will accept disbursements in accordance with the
provisions hereof and, if made to Borrower, will use or cause each such
disbursement to be used solely for the payment of materials, labor, services,
costs and expenses incurred in connection with the construction of the
Improvements or for such additional costs and expenses as may be approved in
writing by Lender, and in payment or performance of any obligation of Borrower
to Lender, and for no other purpose.
(g) Borrower will permit Lender or any person designated by Lender, at
any and all times, to inspect said construction and improvements and to examine
and copy all of Borrower's books and records and all contracts and bills
pertaining to said construction and improvements .
(h) Lender has no liability or obligation whatsoever or howsoever in
connection with the construction of the Improvements or work performed thereon,
and has no obligation except to advance the Construction Loan as herein agreed,
and is not obligated to inspect the Improvements; nor is it liable for the
performance or default of any contractor or subcontractor, or for any failure to
construct, complete, protect or insure said improvements, or for the payment of
any cost or expense incurred in connection therewith, or for the performance or
nonperformance of any obligation of Borrower to Lender; and nothing, including
without limitation, any disbursement hereunder or acceptance of any document or
instrument shall be construed as a representation or warranty, express or
implied, on Lender's part.
(i) In the event of any default hereunder by Borrower, Lender may, but
shall not be obligated to, advance such of its own funds as may be necessary to
remedy such default, including the completion of the Improvements; and in such
event all such advances shall be secured by said Mortgage and any other security
for the Construction Loan and Borrower will pay same upon demand.
(j) Without the prior written consent of Lender, no materials,
equipment, fixtures or any other part of the Improvements shall be purchased or
installed under conditional sale contracts or lease agreements, or any other
arrangement wherein title to said property is retained or the right is reserved
or accrues to anyone to remove or repossess any such item or to consider same as
personal property.
<PAGE> 5
(k) Lender may, but shall not be obligated to, commence, appear in or
defend any action or proceeding purporting to affect the Property or
improvements thereon or the rights or duties of Lender or Borrower or the
payment of any funds hereunder, and in connection therewith may pay all
necessary expenses, including attorneys' fees which Borrower agrees to pay to
Lender upon demand. Borrower hereby irrevocably appoints and authorizes Lender,
as Borrower's agent, to execute, file and record any notice or any other
document which Lender deems necessary or advisable to protect its interest
hereunder or the security of the Mortgage. Lender may file and record this
Agreement.
(1) Borrower shall promptly pay or caused to be paid, when due, all
costs, charges and expenses incurred in connection with the construction and
completion of the Improvements, and shall keep the hereinabove described
Property free and clear of any and all liens other than the lien of the
Mortgage. Within seven (7) days after written demand from Lender, Borrower will
cause any lien claim filed against the Property to be released of record or, in
lieu thereof, Borrower will furnish Lender with a bond, in form and with
sureties satisfactory to Lender, indemnifying Lender against any loss, cost,
damage or expense on account of any such lien claim.
(m) Borrower will protect every part of the hereinabove described
Property, the improvements erected thereon and the materials stored thereon,
from removal, destruction and damage, and will not do or suffer to be done any
action whereby the value of any part of such Property may be lessened.
SECTION 5. FAILURE TO COMPLETE IMPROVEMENTS.
In the event that Borrower fails to complete the Improvements at the
end of nine months from the date of the execution of the Note, Lender may place
any funds due under the Note and not previously drawn by Borrower pursuant to
the Construction Loan in an escrow account with Lender to be disbursed by Lender
as and when the Improvements are completed. In such an event, the Conversion
Date shall not be extended and interest on the Note shall accrue as set forth
therein from and after the Conversion Date.
SECTION 6. TERM LOAN, INTEREST, PAYMENT
6. 1 Term Loan. Subject to all of the terms and conditions set forth in
this Agreement and the Loan Documents, Lender shall on the Conversion Date
convert the Construction Loan to a term loan in the amount of Seven Hundred
Sixty-Five Thousand Dollars & No/100 ($765,000.00) (the "Term Loan"). The Term
Loan shall be amortized over ten (10) years and be due and payable in full at
the end of five (5) years from the Conversion Date, and shall be evidenced by
the Note.
6.2 Interest on Term Loan. Subject to the provisions of Section 1 1.3
below, Borrower shall pay to Lender interest on the Term Loan at the rate of
Lender' s Prime Rate plus one percent (1%) per annum fixed as of the Conversion
Date.
6.3 Payment. All payments of Borrower to Lender under the Note after
the Conversion Date shall be repayable at Lender's address set forth above or at
such other place or places as Lender may designate from time to time. Principal
and interest shall be payable monthly, with the first payment due thirty days
from the Conversion Date, with each successive payment due on the same day of
each month thereafter until the sixtieth (60th) month, at which time the entire
remaining principal balance and all accrued interest shall be due and payable in
full.
SECTION 7. SECURITY FOR THE OBLIGATIONS.
7.1 Collateral. The Construction Loan and Term Loan (the "Obligation"
and/or "Loan(s)") shall be secured by the Mortgage (which, upon the Conversion
Date shall remain in place to secure the Term Loan).
<PAGE> 6
7.2 Inspection. Lender (by any of its officer, employees and agents)
shall have the right, at any time or times during Borrower's usual business
hours, to inspect the Property. Lender may, at any time upon and after the
occurrence of an Event of Default and during the continuance thereof, employ and
maintain on Borrower's premises custodians selected by Lender who shall have
full authority to do all acts necessary to protect Lender's interest. All
expenses incurred by Lender by reason of the employment of such custodians shall
be paid by Borrower, added to the Obligation and secured by the Mortgage.
7.3 Cross-Collateralization. The Mortgage and all other collateral
which Lender may at any time acquire from any other source in connection with
the Obligation of Borrower to Lender shall constitute cross-collateral for all
indebtedness of Borrower without apportionment or designation as to particular
indebtedness, and all indebtedness, howsoever and whensoever incurred, shall be
secured by the Mortgage.
SECTION 8. CONDITIONS OF LENDING
8.1 Conditions of Loans. The obligation of Lender to make any advance
under the Construction Loan or to convert the Construction Loan to the Term Loan
is subject to: (a) the accuracy and correctness of the representations and
warranties of Borrower contained herein and in the other Loan Documents and in
any certificate delivered pursuant to this Agreement or the Loan Documents; (b)
the performance by Borrower of its agreements contained herein and in the Loan
Documents; and (C) prior to the execution of the Note and, if required as
applicable by Lender, any draw note under the Construction Loan, the
satisfaction and continued satisfaction of each of the following conditions:
8.2 Note. The Note, in form and substance satisfactory to Lender and
its counsel, shall have been duly authorized, executed and delivered by
Borrower, shall be in full force and effect and no default shall exist
thereunder, and Lender shall have received fully executed copies thereof.
8.3 Uniform Commercial Code Financing Statements. All filings of
Uniform Commercial Code financing statements and all other filings or
recordation necessary to perfect the security interest of Lender in the
Collateral shall have been filed and confirmation thereof received in a form
acceptable to Lender that such security interest constitutes a valid and
perfected first priority security interest therein subject only to liens
excepted to by Lender.
8.4 Mortgage. The Mortgage shall have been filed and a title insurance
policy commitment shall have been issued, insuring that Lender holds an first
mortgage on the Property, and the same is unencumbered except for liens excepted
to by Lender.
8.5 Taxes. All taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of any financing
statement, the Mortgage or any of the Loan Documents shall have been paid.
8.6 No Injunction. Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
or prohibit, or to obtain substantial damages in respect of, or which is related
to or arises out of this Agreement or the consummation of the transactions
contemplated hereby, or which, in Lender's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement.
8.7 No Material Adverse Change. There shall not have occurred any
material adverse change in the business or financial condition of Borrower, or
any event, condition or state of facts which would be expected materially and
adversely to affect the business or financial condition of Borrower.
8.8 Availability. The amounts which Lender is willing to lend to
Borrower hereunder, in Lender's sole discretion, shall be adequate in Lender's
judgment, for the purposes referred to herein.
<PAGE> 7
8.9 Proceedings and Documents. All certificates and other instruments
and all proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to Lender and its counsel.
Lender shall have received copies of all other instruments and other evidence as
Lender may reasonably request, in form and substance satisfactory to Lender and
its counsel, with respect to the transactions contemplated by this Agreement and
the taking of all actions in connection therewith.
8.10 Event of Default. No Event of default, nor any event or condition
which, with notice, lapse of time or the making of any Loan, would constitute an
Event of Default, shall have occurred and be continuing.
8.11 Waiver of Conditions Precedent. If Lender makes any Loan hereunder
prior to the fulfillment of any of the conditions precedent set forth in this
Section 8, hereof, the making of such Loan shall constitute only an extension of
time for the fulfillment of such condition and not a waiver thereof, and
Borrower shall thereafter use its best efforts to fulfill each such condition
promptly.
SECTION 9. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement and to make the
Loans, Borrower to the best of its knowledge, information and belief makes the
following warranties and representations to Lender:
9.1 Litigation: Government Regulation. There are no actions, suits or
proceedings pending or, to the knowledge of Borrower, threatened against or
affecting Borrower at law or in equity before any court or administrative
officer or agency which might result in a material adverse change in the
business or financial condition of Borrower or impair Borrower's ability to
perform its obligations under the Loan Documents. Borrower is not in violation
of or in default under any applicable statute, rule, order, decree, writ,
injunction or regulation of any governmental body (including any court) where
such violation would have a materially adverse effect upon the Property,
Improvements or Borrower's business, personal property, assets, operations or
condition, financial or otherwise.
9.2 Taxes. Borrower is not delinquent in the payment of any taxes which
have been levied or assessed by any governmental authority against it or its
assets. Borrower has timely filed all tax returns which are required by law to
be filed, and has paid all taxes shown on said returns and all other assessments
or fees levied upon Borrower or upon its properties to the extent that such
taxes, assessments or fees have become due. To the knowledge of Borrower, no
material controversy in respect of income taxes is pending or threatened.
9.3 Enforceability of Loan Documents: Compliance with Other
Instruments. The documents to be executed in accordance with this Agreement and
the Loan Documents are the legal, valid and binding obligations of borrower,
enforceable against Borrower in accordance with their respective terms. Borrower
is not in default with respect to any indenture, loan agreement, mortgage,
lease, deed or similar agreement related to the borrowing of monies to which
Borrower is a party or by which it is bound.
9.4 Full Disclosure. None of the documents herein contemplated, nor any
statements furnished by or on behalf of Borrower to Lender in connection with
the documents, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading. To the best of Borrower's knowledge, there is no fact which Borrower
has not disclosed to Lender in writing which materially affects adversely or, to
the best of Borrower's knowledge, will materially affect adversely the Property,
Improvements, other assets, business, profits or conditions (financial or
otherwise) of Borrower or the ability of Borrower to perform the Obligations.
9.5 Use of Proceeds. Borrower's use of the proceeds of any Loan made by
Lender to Borrower pursuant to this Agreement are, and continue to be, legal and
proper, and such uses are and will be consistent with all applicable laws and
statutes, as in effect from time to time.
<PAGE> 8
SECTION 10. AFFIRMATIVE COVENANTS.
Until payment in full of the Obligation of Borrower to Lender, Borrower
covenants and agrees that, unless Lender consents in writing:
10.1 Repayment of Obligation. Borrower will repay the Loans according
to the terms of this Agreement, the Note and the Loan Documents.
10.2 Performance Under Loan Documents. Borrower will perform the
obligations required to be performed by it under the terms of this Agreement and
the other Loan Documents and any other agreements now or hereafter existing or
entered into between Borrower and Lender.
10.3 Payment of Indebtedness: Performance of Other Obligations.
Borrower shall pay all indebtedness for borrowed money at maturity, all taxes,
assessments and other governmental charges which may be levied or assessed upon
Borrower, the Property or Improvements when due, and comply with all acts,
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to the Property, Improvements or any part thereof;
provided, however, that Borrower may, by appropriate proceedings in good faith
and with due diligence, contest any such taxes, assessments, governmental
charges, acts, rules, regulations, orders and directions that do not in Lender's
judgment materially adversely affect the value of the Property, Improvements or
the priority of Lender's lien on the Property and Improvements, and if requested
by Lender, shall establish reserves reasonably satisfactory to Lender. Borrower
shall also observe and remain in compliance with all laws, ordinances,
governmental rules and regulations to which it is subject.
10.4 Financial Information. Borrower will provide Lender with copies of
Borrower's quarterly reports (10Q's) filed with the Securities and Exchange
Commission within ten (10) days of any such filing. Borrower will provide Lender
with copies of borrower's annual audited financial statements prepared by
Borrower's independent certified accountants within one hundred twenty (120)
days of Borrower' s fiscal year end.
10.5 Deposit Account. Borrower shall maintain its operating accounts
with Lender.
SECTION 11. NEGATIVE COVENANTS.
Until payment in full of all Obligations of Borrower to Lender,
Borrower covenants and agrees that, unless Lender consents in writing within
thirty (30) days from the date of the request of the Borrower (if no written
response is received within thirty (30) days, the Lender does not consent to the
request), Borrower will not:
11.1 Liens and Encumbrances. Create, assume or suffer to exist any deed
of trust, mortgage, encumbrance or other lien (including a lien of attachment,
judgment or execution) or security interest (including the interest of a
conditional seller of goods), securing a charge or obligation, on the property
and any personal property located thereon, except for the Mortgage and security
interest in favor of Lender.
11.2 Disposition of Assets. Sell, lease, transfer, convey or otherwise
dispose of any of its assets or property.
11.3 Debt Service Ratio. Fail to maintain a debt service coverage ratio
of at least 2.0 to 1.0. This covenant shall be measured quarterly by dividing
net income, plus depreciation and interest by total bank and leasing debt
service requirements.
SECTION 12. TERMINATION OF AGREEMENT.
12.1 Term. Subject to Lender's right to cease making advances under the
Construction Loan or to accelerate the Note upon the occurrence of an Event of
Default or any event or condition which, with notice, lapse of time, would
constitute an Event of Default, the provisions of this Agreement shall continue
in full force and effect until five (5) years from the Conversion Date.
<PAGE> 9
12.2 Lender's Right to Terminate. Lender may terminate the financing
arrangements under this Agreement and the other Loan Documents at any time,
without demand, notice or legal process of any kind, upon the occurrence of an
Event of Default; provided, however, that Lender shall retain the right to
payment of the Loans; and provided further that all of Lender's rights and
remedies under this Agreement and the Loan Documents shall survive such
termination until the Loans have been paid in full. On or before the termination
date, Borrower shall pay the Loans to Lender in full in immediately available
funds.
12.3 Effect of Termination. Notwithstanding ally termination, until the
Obligation to Lender shall have been fully paid and satisfied, Lender shall be
entitled to retain its Mortgage; Borrower shall continue to comply fully with
the terms of this Agreement; and Lender shall retain all of its other rights and
remedies hereunder.
SECTION 13. EVENTS OF DEFAULT.
13.1 Event of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default:"
(a) Borrower fails to pay any portion of the Obligations when due and
payable or declared due and payable and failure continues for fifteen (15) days
after receipt of notice by Lender specifying such default;
(b) Failure of Borrower to complete the Improvements within nine (9)
months of the date of the Note;
(c) Failure of Borrower to repay the promissory note evidencing the
Line of Credit on a timely basis.
(d) Borrower fails or neglects to observe, perform or comply with any
other term, provision, condition, covenant, warranty or representation contained
in this Agreement, the Mortgage, the Loan Documents or in any other agreement
now existing or hereafter executed evidencing, securing or relating in any way
to the Obligations of borrower, which is required to be observed, performed or
complied with by Borrower;
(e) If any representation or warranty made in writing by or on behalf
of Borrower in this Agreement, the Mortgage, or in the Loan Documents or in any
other agreement now existing or hereafter executed between Borrower and Lender,
or in connection with the transactions contemplated hereby or thereby, shall
prove to have been false or incorrect in any material respect at the time as of
which such representation or warranty was made;
(f) The occurrence of any default or Event of Default on the part of
Borrower (including specifically, but without limitation, due to non-payment)
under the terms of any agreement, document or instrument pursuant to which
Borrower has incurred any indebtedness (other than the Obligation), which
default is not cured within the time, if any, permitted therefor in the
agreement governing such indebtedness;
(g) The filing by Borrower of any voluntary petition seeking
liquidation, reorganization, arrangement, readjustment of debts or for any other
relief under the Bankruptcy Code or under any other act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign, now or hereafter
existing;
(h) The filing against Borrower of any involuntary petition seeking
liquidation, reorganization, arrangement, readjustment of debts or for any other
relief under the Bankruptcy Code or under any other act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign, now or hereafter
existing, and such petition is not dismissed within thirty (30) days of the
filing thereof or within such thirty (30) day period an order for relief under
the Bankruptcy Code or any other applicable act or law shall be entered;
(i) Borrower ceases to be solvent, or Borrower ceases to conduct its
business as now conducted or is enjoined, restrained or in any way prevented by
court order from conducting all or any material part of its business affairs;
<PAGE> 10
(j) A notice of lien, levy or assessment is filed of record as to all
or any portion of Borrower's assets by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal or other
governmental agency, or if any taxes or debts owing at any time or times
hereafter to any one of them becomes a lien or encumbrance upon the Collateral
or any other asset of Borrower and the same is not dismissed, released or
discharged within thirty (30) days after the same becomes a lien or encumbrance
or, in the case of ad valorem taxes, prior to the last day when payment may be
made without penalty; provided however, the foregoing shall not apply to any
lien, levy or assessment being contested in good faith by the borrower;
(k) The entry of a final judgment or the issuance of a warrant of
attachment (other than as a part of a permitted lien), execution or similar
process against Borrower or any of its assets in excess of $5,000.00, which
shall not be dismissed, discharged or bonded within thirty (30) days; Or
(j) If a custodian, trustee, receiver or assignee for the benefit of
creditors is appointed or takes possession of the Collateral or any of
Borrower's other assets.
13.2 Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligation, upon and
after an Event of Default, all of the Obligation may, at the option of Lender,
and without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable, anything in the Note or other
contract evidencing any such Obligation or in the Loan Documents or in any other
agreement to the contrary notwithstanding.
13.3 Default Rate of Interest. Upon the occurrence and during the
continuance of an Event of Default, the Note shall continue to bear interest at
the highest rate permitted by applicable law.
SECTION 14. RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.
14.1 Rights and Remedies. Upon and after the occurrence of any Event
of Default, Lender shall have all those rights and remedies set forth in this
Agreement, the Note and the Mortgage.
14.2 Rights and Remedies Cumulative: Non-Waiver. Etc. The enumeration
of Lender's rights and remedies set forth in this Agreement is not intended to
be exhaustive and the exercise by Lender of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder, under the Loan Documents or under any other agreement between
Borrower or Lender or which may now or hereafter exist in law or in equity or by
suit or otherwise. No delay or failure to take action on the part of Lender in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default.
No course of dealing between Borrower and Lender or its agents or employees
shall be effective to change, modify or discharge any provision of this
Agreement or to constitute a waiver of any Event of Default. Lender shall not,
under any circumstances or in any event whatsoever, have any liability for any
error, omission or delay of any kind occurring in the foreclosure of the
Mortgage or for any damages resulting therefrom.
14.3 Set-Off. The Lender shall have a right of set-off, in the full
amount of the Borrower's Obligation to the Lender hereunder, against any
deposits, assets held by, or other amounts owed by the Lender to, or held by the
Lender for the Borrower, as well as a lien on any and all property of the
Borrower which is or may be in the Lender's possession, at any time or from time
to time, without notice to the Borrower or to any other person, any such notice
being hereby expressly waived.
<PAGE> 11
SECTION 15. PAYMENT OF EXPENSES.
Whether or not the transactions contemplated by this Agreement shall be
consummated, Borrower will:
15.1 Fees and Expenses. Pay or reimburse Lender upon demand for all
expenses (including, without limitation, reasonable attorneys' and paralegal'
expenses) incurred or paid by Lender in connection with: (a) the preparation,
execution, delivery, interpretation, modification or amendment of this
Agreement, the Note, the Mortgage or the other Loan Documents; (b) any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Lender, Borrower or any other person or entity) in any way relating to the
Property or Improvements, this Agreement or the Loan Documents, or Borrower's
affairs; (C) any attempt to enforce any rights of Lender against Borrower or any
other person or entity who may be obligated to Lender by virtue of this
Agreement or the other Loan Documents; (d) any attempt to inspect, verify,
protect, collect, sell, liquidate or otherwise dispose of the Property or
Improvements; or (f) the filing and recording of all documents required by
Lender to perfect Lender's liens in the Property and Improvements, including
without limitation, any taxes incurred because of such filing or recording.
SECTION 16. MISCELLANEOUS.
16.1 Governing Law. This Agreement has been executed, delivered and
accepted, and shall be deemed to have been made, in the State of Tennessee, and
shall be interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with the internal laws (as opposed to conflicts of law
provisions) of the State of Tennessee. The Loans contemplated by this Agreement
are to be funded to Borrower and this Agreement is otherwise to be performed in
the State of Tennessee. Borrower consents to the jurisdiction and venue of the
courts sitting in Shelby County, Tennessee to hear any and all disputes arising
hereunder.
16.2 Notice. Any notices or other communication hereunder shall be in
writing and shall be made by telegram, telex or electronic transmitter or
certified or registered mail, return receipt requested, and shall be deemed
received by the addressee one (1) business day after sending, if sent by
telegram, telex or electronic transmitter, and deemed to have been validly
served, given or delivered three (3) business days after mailing, if sent by
certified or registered mail. Notices shall be addressed as provided below:
If to Borrower: Back Yard Burgers, Inc.
2678 Colony Park Drive
Memphis, Tennessee 38118
If to Lender at: Trust One Bank
2171 Judicial Drive, Suite # 101
Germantown, Tennessee 38138
Attn: Julie Cutler
or to such other address as each party may designate for itself by like notice.
16.3 Waivers by Borrower. Except as otherwise provided for in this
Agreement, Borrower waives (a) presentment, demand and protest and notice of
presentment, protest, default, nonpayment, maturity and all other notices; (b)
notice prior to taking possession or control of the Property or Improvements or
any bond or security which might be required by any court prior to allowing
Lender to exercise any of Lender's remedies; and (C) the benefit of all
valuation, appraisement and exemption laws.
16.4 Lawful Charges. It being the intent of the parties that the rate
of interest and all other charges due from Borrower be lawful, if for any reason
payment of a portion of interest or charges as required by this Agreement would
exceed the limit established by applicable law, then the obligation to pay
interest or charges shall automatically be reduced to such limit and if any
amounts in excess of such limit shall have been paid, then such amounts shall be
applied to the unpaid principal amount of the Obligations of Borrower to Lender
or refunded so that under no circumstances shall interest or charges required
hereunder exceed the maximum rate allowed by law.
<PAGE> 12
16.5 Amendment. This Agreement and the other Loan Documents cannot be
amended, changed, discharged or terminated orally, but only by an instrument in
writing signed by Lender and Borrower.
16.6 Severability. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
16.7 Entire Agreement. This Agreement and the other documents,
certificates and instruments referred to herein constitute the entire agreement
between the parties and supersede and rescind any prior agreements relating to
the subject matter hereof.
16.8 Binding Effect. All of the terms of this Agreement and Loan
Documents, as the same may from time to time be amended, shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of Borrower and Lender.
16.9 Tense and Borrower. In this Agreement the singular shall include
the plural and vice versa. As used herein the term "Borrower" shall mean all or
any one of the borrowers, as the case may be.
16.10 Captions. The captions, section headings, and section references
to the various sections and subsections of this Agreement have been inserted for
convenience and reference only and shall not limit or affect any of the terms
hereof.
16.11 Disbursement of Loan Proceeds. Borrower hereby authorizes and
directs Lender to disburse, for and on behalf of Borrower and for Borrower's
account, the proceeds of the Loans made by Lender to Borrower pursuant to this
Agreement.
16.12 Conflict of Terms. The provisions of the Note, Mortgage and other
Loan Documents are incorporated in this Agreement by this reference thereto.
Except as otherwise provided in this Agreement and except as otherwise provided
in the Note, Mortgage or other Loan Documents, if any provision contained in
this Agreement is in conflict with, or inconsistent with, any such provision,
the provision contained in this Agreement shall control.
16.13 Injunctive Relief. Borrower recognizes that in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to Lender. Borrower therefore agrees that Lender, if Lender so requests,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
16.14 General conditions. The following conditions shall be applicable
throughout the term of this Agreement:
(a) Lender has no obligation except to advance the sums upon the terms
as herein set forth, and is not obligated to inspect the Property or
Improvements; nor is it liable to protect or insure the Property or Improvements
or for the payment of any cost or expense incurred in connection therewith, or
for the performance or non- performance of any obligation of Borrower to Lender;
and nothing, including without limitation any disbursement hereunder or
acceptance of any document or instrument, shall be construed as a representation
or warranty, express or implied, on Lender's part.
(b) The relationship between Borrower and Lender is, and shall at all
times remain, solely that of borrower and lender, and Lender neither undertakes
nor assumes any responsibility or duty to Borrower to select, review, inspect,
supervise, pass judgment upon or inform Borrower of the quality, adequacy or
suitability of any of the collateral for the Loans.
<PAGE> 13
(c) In no event shall the Lender's rights hereunder be deemed to
indicate that the Lender is in control of the business, management or properties
of the Borrower or has power over the daily management functions and operating
decisions made by the Borrower.
16.5 Line of Credit. The existing Two Hundred Fifty Thousand Dollars
($250,000.00) line of credit of Borrower with Lender shall be reduced to One
Hundred Fifty Thousand Dollars ($150,000.00) (the "Line of Credit"). The Line of
Credit shall be evidenced by a promissory note bearing interest at Lender s
prime plus one percent (1%) per annum. A certificate of deposit in the principal
sum of $50,000 shall secure the Line of Credit. The Line of Credit shall mature
February 3, 1999
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and sealed in their corporate names by their duly authorized corporate
officers as of the date first above written.
BACK YARD BURGERS, INC.
By:
Title:
By:
Title:
TRUST ONE BANK
By:
Title:
<PAGE> 14
STATE OF TENNESSEE
COUNTY OF SHELBY
Before me,______, of the state and county aforesaid, personally
appeared _______, with whom I personally acquainted, and, who, upon oath,
acknowledged himself to be _____of BACK YARD BURGERS, INC:, the within named
bargainor, a corporation, and that he as such _______,executed the foregoing
instrument for the purpose therein contained, by signing the name of the
corporation by himself as _______
WITNESS my hand and seal at office on this ____ day of February, 1998
Notary Public
My Commission Expires: 12/12/2001
STATE OF TENNESSEE
COUNTY OF SHELBY
Before me,______, of the state and county aforesaid, personally appeared
_______, with whom I personally acquainted, and, who, upon oath, acknowledged
himself to be _____of BACK YARD BURGERS, INC:, the within named bargainor, a
corporation, and that he as such _______,executed the foregoing instrument for
the purpose therein contained, by signing the name of the corporation by himself
as _______
WITNESS my hand and seal at office on this _24 day of February, 1998.
Notary Public
My Commission Expires:12/12/2001
STATE OF TENNESSEE
COUNTY OF SHELBY
Before me,______, of the state and county aforesaid, personally appeared
_______, with whom I personally acquainted, and, who, upon oath, acknowledged
himself to be _____of BACK YARD BURGERS, INC:, the within named bargainor, a
corporation, and that he as such _______,executed the foregoing instrument for
the purpose therein contained, by signing the name of the corporation by himself
as _______
WITNESS my hand and seal at office on this 4th day of February, 1998.
Notary Public
My Commission Expires:12/12/2001
SCHEDULE "A"
Progress Payment Plan Advances under this Agreement are to be made by Lender to
Borrower every thirty (30) days after commencement of work hereunder, for work
done during the preceding period or part thereof. As to all construction
advances, such applications shall be in writing, certified to by the contractor
and the Borrower, and shall contain such information as Lender may request. The
advance to which Borrower shall be entitled with respect to construction items
shall be the cost of the portions of work acceptably completed as approved by
Lender. Application for each advance shall be in form approved by Lender and
shall be filed a reasonable time before the date upon which the advance is
desired. Borrower shall only be entitled to payment in the amount approved by
Lender. Lender shall advance to Borrower out of the proceeds of the Loan,
provided the Construction Note is in an amount sufficient to cover such sums. If
requested by Lender, Borrower shall furnish proper receipts showing payment of
said items.
<PAGE> 15
EXHIBIT "A"
LEGAL DESCRIPTION
Land situated in Shelby County, Tennessee, to wit:
Commencing at a point in the west right-of-way of Germantown Parkway
(160 feet R.O.W.), said point being in the west right-of-way line of
Dexter Road Cutoff (60 feet R.O.W.); thence southwardly on a bearing of
South 03 degrees 34 minutes 24 seconds West a distance of 240.94 feet
to a point; thence westwardly on a bearing of North 86 degrees 02
minutes 14 seconds West a distance of 45.30 feet to the POINT OF
BEGINNING; thence southwardly on a bearing of South 03 degrees 57
minutes 46 seconds West a distance of 223.00 feet to a point; thence
westwardly on a bearing of North 86 degrees 02 minutes 14 seconds West
a distance of 132.50 feet to a point; thence northwardly on a bearing
of North 03 degrees 57 minutes 46 seconds East a distance of 223.00
feet to a point; thence eastwardly on a bearing of South 86 degrees 02
minutes 1-1 seconds East a distance of 132.50 feet to the POINT OF
BEGINNING and containing 29.548 square feet or 0.678 acres, more or
less.
<PAGE> 1
EXHIBIT 10.25
PROMISSORY NOTE
Germantown, Tennessee $765,000.00
February 4, 1998
FOR VALUE RECEIVED, the undersigned (hereinafter referred to as
"Maker") hereby promises to pay to the order of TRUST ONE BANK ("Holder"), at
the office of Holder, 2171 Judicial Drive, Suite # 101, Germantown, Tennessee,
38138, or at such other place as the Holder may from time to time designate, the
principal sum of Seven Hundred Sixty-Five Thousand and No/100 Dollars
($765,000.00) of so much of said principal sum as may be advanced by Holder to
Maker, with interest only from the date of each advance on the unpaid principal
balance at Holder's floating "Prime Rate" plus one percent (1%) per annum
payable monthly, commencing on the 30th day Following the first advance, and
continuing on the same day of each and every month thereafter until the
Conversion Date (as that term is defined in that certain Loan Agreement of even
date herewith by and between Maker and Holder), at which time all interest shall
be paid current, and after which date Maker shall pay monthly principal and
interest installments ("Amortization Payments") based on a ten (10) year
amortization with interest at Holder's Prime Rate plus one percent (1%) per
annum, fixed as of the Conversion Date. Amortization Payments shall commence
thirty (30) days after the Conversion Date, and continue on the same day of each
and every month thereafter through the sixtieth (60th) month, at which time any
unpaid principal and interest and all other sums due under this Note shall be
paid in full. As used herein, the term "Prime Rate" means the rate of interest
announced from time to time by Holder as its prime rate, which rate may not
necessarily be its best lending rate. The rate of interest provided herein shall
be calculated daily (computed on the basis of actual days elapsed over a year of
360 days) to reflect changes in the Prime Rate as such rate may change from time
to time. In the event Holder shall abolish or abandon the practice of announcing
its Prime Rate or the same shall be unascertainable, Holder shall designate a
comparable interest rate that shall be deemed to be the Prime Rate under this
Note.
PRE-PAYMENT. The indebtedness evidenced hereby may be pre-paid in whole
or in part at Maker's election at any time and from time to time. Pre-payments
hereunder shall, at Holder's option, first be applied to any accrued and unpaid
interest, with the remainder being credited to principal. Partial prepayments of
principal shall not have the effect of suspending or deferring the monthly
payments herein provided for, and the same shall continue to be due and payable
on each due date subsequent to such partial payment of principal but shall
operate to effect full payment on the principal at an earlier date.
TIME. Time is of the essence of this Note.
DEFAULT. If the Maker fails to pay when due any amount payable
hereunder and such failure shall continue for fifteen (15) days after receipt of
notice by Maker from the Holder specifying such default; fails to perform or
breaches any covenant, agreement or undertaking in any Loan Document; or
defaults under the terms of any Loan Document; then, in any such event, there
shall be deemed to be an "Event of Default" hereunder. In such event, Holder, at
its option, may declare the outstanding principal balance of the indebtedness
evidenced hereby, together with any other sums advanced hereunder, or under the
Loan Documents, together with all unpaid interest accrued thereon, without
notice to Maker, immediately due, payable and collectable regardless of the date
of maturity. Upon any Event of Default, principal and unpaid interest shall bear
interest thereafter until paid at the highest rate allowed by applicable law.
From and after any Event of Default, Holder may exercise its remedies as a
secured party under the Uniform Commercial Code as adopted in Tennessee and
cause the Trustee under the Trust Deed to sell the Mortgaged Property at a
trustee sale or otherwise foreclose all liens (including the lien of the Trust
Deed) securing the indebtedness evidenced by this Note, whether by judicial
proceeding or otherwise, ail at the Holder's option.
SECURITY FOR THIS NOTE. This Note is secured, among other things, by
(i) a certain Deed of Trust and Security Agreement of even date herewith (herein
"Trust Deed"); (ii) financing statements of even date herewith; and (iii) any
other Loan Documents which may be required by Holder.
LATE CHARGE. In the event Holder, in its sole and exclusive discretion,
determines that it shall from time to time accept a payment more than 15 days
past its due date, as a condition preceding such acceptance, Maker agrees to
hereby pay the Holder a late charge of an additional 5% of the unpaid amount of
the payment then due.
ADDITIONAL GROUNDS FOR ACCELERATION. The indebtedness evidenced by this
Note, may, at Holder's option, be declared due and payable if the Mortgaged
Property or any interest therein is leased (except in the ordinary course of
business), sold, assigned, conveyed, transferred (whether voluntary or
involuntary), further incumbered or mortgaged, unless the Holder first approves
in writing the credit worthiness of the lessee, optionee, transferee, vendor,
assignee, grantee, encumbrancer, mortgagee or partner. The Holder agrees that
such approval shall not be unreasonably withheld or delayed.
<PAGE> 2
ATTORNEY'S FEE AND EXPENSES. If an Event of Default shall have
occurred, and Holder employs an attorney or incurs other expenses for the
collection of the amounts payable under this Note or to protect the security
therefore, as described in the Loan Documents, whether suit be brought or not,
including those expenses and fees incurred in foreclosure, or court proceedings,
or any other litigation or proceeding affecting this Note or its security, or
reasonably incurred in any other way, then, in any such event, Maker shall pay
to Holder the sum of Holder's reasonable attorney's fees and collection
expenses.
ADVANCES BY HOLDER. Should Holder either before or after an Event of
Default advance any sum pursuant to the provisions of this Note or the Loan
Documents, in order to pay any sum which the Maker is required to pay, or to pay
any sum to cure any default of Maker, or to do or perform any such act on behalf
of Maker, then Holder, at Holder's option, shall make such payment, or do or
perform any such act on behalf of Maker. All such payments made by Holder and
all costs and expenses incurred by Holder in doing or performing such acts shall
become immediately due and payable and, until paid, shall be and become part of
this indebtedness and shall bear interest at the highest rate of interest per
annum allowed by applicable law.
NO WAIVER BY HOLDER. No failure to accelerate the indebtedness
evidenced hereby by reason of an Event of Default hereunder, acceptance of a
past due installment, or indulgences granted from time to time shall be
construed (i) as a novation of this Note or as reinstatement of the indebtedness
hereby evidenced or as a waiver of such right of acceleration, or the right of
Holder thereafter to insist upon strict compliance with the terms of this Note
or (ii) to prevent the exercise of such right of acceleration or any right
granted hereunder or by the laws of the State of Tennessee; and Maker hereby
expressly waives benefit of any statute or rule of law or equity now provided,
or which may hereafter be provided, which would produce a result contrary to or
in conflict with the foregoing. No extension of time for payment of this Note or
any installment hereunder, made by agreement with any person now or hereafter
liable for payment of this Note shall operate or release, discharge, modify,
change or affect the original liability of Maker under this Note, either in
whole or in part, unless Holder otherwise agrees in writing. This Note may not
be changed orally, bother way, then, in any such event, Maker shall pay to
Holder the sum of Holder's reasonable attorney's fees and collection expenses.
ADVANCES BY HOLDER. Should Holder either before or after an Event of
Default advance any sum pursuant to the provisions of this Note or the Loan
Documents, in order to pay any sum which the Maker is required to pay, or to pay
any sum to cure any default of Maker, or to do or perform any such act on behalf
of Maker, then Holder, at Holder's option, shall make such payment, or do or
perform any such act on behalf of Maker. All such payments made by Holder and
all costs and expenses incurred by Holder in doing or performing such acts shall
become immediately due and payable and, until paid, shall be and become part of
this indebtedness and shall bear interest at the highest rate of interest per
annum allowed by applicable law.
NO WAIVER BY HOLDER. No failure to accelerate the indebtedness
evidenced hereby by reason of an Event of Default hereunder, acceptance of a
past due installment, or indulgences granted from time to time shall be
construed ( i) as a novation of this Note or as reinstatement of the
indebtedness hereby evidenced or as a waiver of such right of acceleration, or
the right of Holder thereafter to insist upon strict compliance with the terms
of this Note or (ii) to prevent the exercise of such right of acceleration or
any right granted hereunder or by the laws of the State of Tennessee; and Maker
hereby expressly waives benefit of any statute or rule of law or equity now
provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing. No extension of time for payment
of this Note or any installment hereunder, made by agreement with any person now
or hereafter liable for payment of this Note shall operate or release,
discharge, modify, change or affect the original liability of Maker under this
Note, either in whole or in part, unless Holder otherwise agrees in writing.
This Note may not be changed orally, but only agreement in writing signed by the
party against whom enforcement of any waiver, change, modification or discharge
is sought.
WAIVER OF NOTICE. Maker and all who may become liable for same, jointly
and severably, waive presentment for payment, protest, notice of protest, notice
of non-payment, demand and all legal diligence in enforcing collection, and
hereby expressly agree that the Holder of this Note may defer or postpone
collection of the whole or any part thereof, either principal and/or interest,
or may extend or renew the whole or any part thereof, either principal and/or
interest, or may accept additional collateral or security for the payment of
this Note, or may release the whole or any part of any collateral security
and/or liens given to secure the payment of this Note, or may release from
liability on account of this Note, Maker or other parties, all without notice to
them or any of them; and such delay, postponement, renewal, extension,
acceptance of additional collateral or security and/or release shall not in any
way operate to release, discharge, modify, change or affect the obligation of
Maker or any other parties liable for this Note, or any who may become liable
for the payment hereof.
<PAGE> 3
LIMIT OF VALIDITY. It is the intention of the parties hereto to comply
strictly with the applicable usury laws; and, accordingly, in no event and upon
no contingency shall the Holder ever be entitled to receive, collect, or apply
as interest, any interest, fees, charges or other payments equivalent to
interest, in excess of the maximum rate which the Holder may lawfully charge
under applicable law in effect from time to time; and in the event that the
Holder ever receives, collects or applies as interest to any such excess, such
amount which, but for this provision, would be excessive interest, the same
shall be applied to the reduction of the principal amount of the indebtedness
hereby evidenced; and, if the principal amount of the indebtedness evidenced
hereby, and all lawful interest thereon, is paid in full, any remaining excess
shall forthwith be paid to the Maker, or other party lawfully entitled thereto.
In determining whether or not the interest paid or payable under any specific
contingency exceeds the highest rate which the Holder hereof may lawfully charge
under applicable laws in effect from time to time, the parties hereto shall, to
the maximum extent permitted under applicable law, characterize any
non-principal payment as a reasonable loan charge rather than as interest. Any
provision hereof, or any other agreement that operates to bind, obligate, or
compel the Maker to pay interest in excess of such maximum rate shall be
construed to require the payment of the maximum rate only. The provisions of
this paragraph shall be given precedence over any other provision contained
herein and in any other agreement that is in conflict with the provisions of
this paragraph.
GOVERNING LAW. This Note shall be governed and construed in accordance
with the laws of the State of Tennessee from time to time in effect, except to
the extent that applicable federal law may permit the charging of a higher rate
of interest than under applicable state law, in which event such applicable
federal laws, as amended and supplemented from time to time, shall govern and
control the maximum rate of interest permitted to be charged hereunder.
SUCCESSORS AND ASSIGNS. The term "Holder" shall include the party named
herein as holder and any subsequent holder or holders of this Note. The terms of
this Note shall be binding upon and inure to the benefit of the parties hereto,
their respective heirs, personal representatives, successors and assigns, as if
they were in every case named and expressed, and wherever references are made to
either of the parties hereto, the same shall be held to include and apply to
their heirs, legal executors, administrators, successors, and assigns, as if
they were in every case named an expressed.
DEFINITIONS. Whenever used in this Note the following words and terms
shall have the meanings respectfully ascribed to them.
1. "Loan Documents" shall mean any and all instruments executed by the
Maker to evidence or secure or which pertain to the payment of the indebtedness
under this Note or the performance or discharge of the obligations under this
Note, including, without limiting the generality of the foregoing, the Trust
Deed, the financing statements, that certain Loan Agreement of even date
herewith between Maker and Holder and any and all other documents related to the
Indebtedness now or hereafter executed by Maker.
2. "Mortgaged Property" shall be broadly meant to include all of the
property described in the Trust Deed of even date securing the indebtedness
evidenced by this Note.
3. "Indebtedness" shall be broadly meant to include all sums owing
under this Note, including, without limiting the generality of the foregoing,
the unpaid principal balance, together with all accrued interest, advances
hereunder and all other sums owing under this Note.
LAWFUL MONEY. Principal, interest and all other sums due or that become
due under this Note are payable in the lawful money of the United States.
NAME OF MAKER: JOINT AND SEVERAL LIABILITY. In this Note, the singular
shall include the plural. Should this Note be signed or endorsed by more than
one person (whether in one or more capacities) and/or entity, all duties and
obligations contained in this Note shall be the join and several obligations of
each maker and endorser of this Note.
TITLES. Titles of this paragraphs are for convenience only and neither
limit nor amplify the provisions of this Note.
SET-OFF. Holder shall have a right of set-off, in the full amount of
all of Maker's obligations to the Holder against any deposits, assets held by,
or other amounts owed by the Holder to, or held by the Holder for, the Maker, as
well as a lien on any and all property of the Maker which is or may be in the
Holder's possession, at any time or from time to time, without notice to the
Maker to any other person, any such notice being hereby expressly waived.
<PAGE> 4
NOTICE. Any notice required under the terms of this Note shall comply
with 8.6 of theTrust Deed.
BACK YARD BURGERS, INC.
By:
Title:
By:
Title:
<PAGE> 1
EXHIBIT 10.26
PROMISSORY NOTE
Germantown, Tennessee
February 4, 1998 $150,000.00
FOR VALUE RECEIVED, the undersigned (hereinafter referred to as
"Maker") hereby promises to pay to the order of Trust One Bank ( hereinafter
referred to as "Holder"), at the office of Holder, 2171 Judicial Drive, Suite #
101, Germantown, Tennessee 38138, or at such other place as the Holder may from
time to time designate, the principal sum of One Hundred Fifty Thousand and
No/100 Dollars ($150,00000) or so much of said principal as may be advanced by
Holder to maker, with interest only from the date hereof on the unpaid principal
balance at the rate of Holder's floating "Prime Rate" plus one percent (1%) per
annum, payable monthly, commencing on the 1st day of March, 1998, and continuing
on the same day of each and every month thereafter until February 3, 1999, at
which time any unpaid principal and accrued interest and all other sums due
under this Note shall be paid in full. As used herein, the term floating "Prime
Rate" means the rate of interest announced from time to time by Holder as its
prime rate, which rate may not necessarily be its best lending rate. The rate of
interest provided herein shall be determined daily to reflect changes in the
Prime Rate as such rate may change from time to time. In the event Holder shall
abolish or abandon the practice of announcing its Prime Rate or the same shall
be unascertainable, Holder shall designate a comparable interest rate that shall
be calculated on a daily basis (computed on the basis of actual days elapsed
over a year of 360 days.)
PRE-PAYMENT. The indebtedness evidenced hereby may be pre-paid in whole
or in part at Maker's election at any time and from time to time without penalty
or premium.
TIME. Time is of the essence of this Note.
DEFAULT. If the Maker fails to pay when due any amount payable
hereunder and such failure shall continue far fifteen (15) days after receipt of
notice by Maker from the Holder specifying such default; fails to perform,
defaults under or breaches any covenant, agreement or undertaking in any Loan
Document, and such failure shall continue beyond any grace period provided
therein; or any event of default occurs under the terms of any other promissory
note executed by the Maker, in favor of Holder; then, in any such event, there
shall be deemed to be an "Event of Default" hereunder. In such event, Holder, at
its option, may declare the outstanding principal balance of the indebtedness
evidenced hereby, together with any other sums advanced hereunder, or under the
Loan Documents, together with all unpaid interest accrued thereon, without
notice to Maker, immediately due, payable and collectable regardless of the date
of maturity. Upon any Event of Default, principal and unpaid interest shall bear
interest thereafter until paid at the highest rate allowed by applicable law.
From and after any Event of Default, Holder may exercise its remedies as a
secured party under the Uniform Commercial Code as adopted in Tennessee.
SECURITY FOR THIS NOTE. This Note is secured, among other things, by
(i) a certain Security Agreement dated January 22, 1996, executed by Maker,
among others, in favor of Holder (herein "Security Agreement"); (ii) a Pledge
Agreement of even date herewith, pledging a certificate of deposit owned by
Maker in the principal amount of $50,000 to Holder (the "Pledge"); (iii)
financing statements herewith; and (iv) any other Loan Documents which may be
required by Holder.
LATE CHARGE. In the event Holder, in its sole and exclusive discretion,
determines that it shall from time to time accept a payment more than 15 days
past its due date, as a condition preceding such acceptance, Maker agrees to
hereby pay the Holder a late charge of an additional 5% of the unpaid amount of
the payment then due.
ATTORNEY'S FEE AND EXPENSES. If an Event of Default shall have
occurred, and holder employs an attorney or incurs other expenses for the
collection of the amounts payable under this Note or to protect the security
therefore, as described in the Loan Documents, whether suit be brought or not,
including those expenses and fees incurred in any litigation or proceeding
affecting this Note or its security, or reasonably incurred in any other way,
then, in any such event, Maker shall pay to Holder the sum of Holder's
reasonable attorney's fees and collection expenses.
ADVANCES BY HOLDER. Should Holder, either before or after an Event of
Default, advance any sum pursuant to the provisions of this Note or the Loan
Documents, in order to pay any sum which the Maker is required to pay, or to pay
any sum to cure any default of Maker, or to do or perform any such act on behalf
of Maker, then Holder, at Holder's option, shall make such payment, or do or
perform any such act an behalf of Maker. All such payments made by Holder and
all costs and expenses incurred by Holder in doing or performing such acts shall
become immediately due and payable and, until paid, shall be and become part of
this indebtedness and shall bear interest at the highest rate of interest per
annum allowed by applicable law.
<PAGE> 2
NO WAIVER BY HOLDER. No failure to accelerate the indebtedness
evidenced hereby by reason of an Event of Default hereunder, acceptance of a
past due installment, or indulgences granted from time to time shall be
construed (I) as a novation of this Note or as reinstatement of the indebtedness
hereby evidenced or as a waiver of such right of acceleration, or the right of
Holder thereafter to insist upon strict compliance with the terms of this Note
or (ii) to prevent the exercise of such right of acceleration or any right
granted hereunder or by the laws of the State of Tennessee; and Maker hereby
expressly waives benefit of any statute or rule of law or equity now provided,
or which may hereafter be provided, which would produce a result contrary to or
in conflict with the foregoing. No extension of time for payment of this Note or
any installment hereunder, made by agreement with any person now or hereafter
liable for payment of this Note shall operate or release, discharge, modify,
change or affect the original liability of Maker under this Note, either in
whole or in part, unless Holder otherwise agrees in writing. This Note may not
be changed orally, but only by agreement in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
WAIVER OF NOTICE Maker and all who may become liable for same, jointly
and severably, waive presentment for payment, protest, notice of protest, notice
of non-payment, demand and all legal diligence in enforcing collection, and
hereby expressly agree that the Holder of this Note may defer or postpone
collection of the whole or any part thereof either principal and/or interest, or
may extend or renew the whole or any part thereof, either principal and/or
interest, or may accept additional collateral or security for the payment of
this Note, or may release the whole or any part of any collateral security
and/or liens given to secure the payment of this Note, or may release from
liability on account of this Note, Maker or other parties, all without notice to
them or any of them; and such delay, postponement, renewal, extension,
acceptance of additional collateral or security and/or release shall not in any
way operate to release, discharge, modify, change or affect the obligation of
Maker or any other parties liable for this Note, or any who may become liable
for the payment hereof.
LIMIT OF VALIDITY. It is the intention of the parties hereto to comply
strictly with the applicable usury laws; and, accordingly, in no event and upon
no contingency shall the Holder ever be entitled to receive, collect, or apply
as interest, any interest, fees, charges or other payments equivalent to
interest, in excess of the maximum rate which the Holder may lawfully charge
under applicable law in effect from time to time; and in the event that the
Holder ever receives, collects or applies as interest to any such excess, such
amount which, but for this provision, would be excessive interest, the same
shall be applied to the reduction of the principal amount of the indebtedness
hereby evidenced; and, if the principal amount of the indebtedness evidenced
hereby, and all lawful interest thereon, is paid in full, any remaining excess
shall forthwith be paid to the Maker, or other party lawfully entitled thereto
In determining whether or not the interest paid or payable under any specific
contingency exceeds the highest rate which the Holder hereof may lawfully charge
under applicable laws in effect from time to time, the parties hereto shall, to
the maximum extent permitted under applicable law, characterize any
non-principal payment as a reasonable loan charge rather than as interest. Any
provision hereof, or any other agreement that operates to bind, obligate, or
compel the Maker to pay interest in excess of such maximum rate shall be
construed to require the payment of the maximum rate only The provisions of this
paragraph shall be given precedence over any other provision contained herein
and in any other agreement that is in conflict with the provisions of this
paragraph.
GOVERNING LAW. This Note shall be governed and construed in accordance
with the laws of the State of Tennessee from time to time in effect. except to
the extent that applicable federal law may permit the charging of a higher rate
of interest than under applicable state law, in which event such applicable
federal laws, as amended and supplemented from time to time, shall govern and
control the maximum rate of interest permitted to be charged hereunder.
SUCCESSORS AND ASSIGNS. The term ,"Holder" shall include the party
named herein as holder and any subsequent holder or holders of this Note. The
terms of this Note shall be binding upon and inure to the benefit of the parties
hereto, their respective heirs, personal representatives, successors and
assigns, as if they were in every case named and expressed, and wherever
references are made to either of the parties hereto, the same shall be held to
include and apply to their heirs,legal executors, administrators, successors,
and assigns, as if they were in every case named andexpressed.
DEFINITIONS. Whenever used in this Note the following words and terms
shall have the meanings respectfully ascribed to them.
1. "Loan Documents" shall mean any and all instruments executed by the
Maker to evidence or secure or which pertain to the payment of the indebtedness
under this Note or the performance or discharge of the obligations under this
Notes, including, without limiting the generality of the foregoing, the Security
Agreement, the Pledge, any financing statements and any and all other documents
related to the indebtedness now or hereafter executed by Maker.
2. "Indebtedness" shall be broadly meant to include all sums owing
under this Note, including, without limiting the generality of the foregoing,
the unpaid principal balance, together with all accrued interest, advances
hereunder and all other sums owing under this Note.
LAWFUL MONEY. Principal, interest and all other sums due or that become
due under this Note are payable in the lawful money of the United States.
2
<PAGE> 3
NAME OF MAKER: JOINT AND SEVERAL LIABILITY in this Note, the singular
shall include the plural. Should this Note be signed or endorsed by more than
one person (whether in one or more capacities) and/or entity, all duties and
obligations contained in this Note shall be the joint and several obligations of
each maker and endorser of this Note.
TITLES. Titles of this paragraphs are for convenience only and neither
limit nor amplify the provisions of this Note.
SET-OFF. Holder shall have a right of set-off, in the full amount of
all of Maker's obligations to the Holder against any deposits, assets held by,
or other amounts owed by the Holder to, or held by the Holder for, the Maker, as
well as a lien on any and all property of the Maker which is or may be in the
Holder's possession, at any time or from time to time, without notice to the
Maker or to any other person, any such notice being hereby expressly waived.
BACK YARD BURGERS, INC.
By:
Title:
By:
Title:
3
<PAGE> 1
EXHIBIT 10.27
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY Loan No Call Collateral Account Officer Initials
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$350,000.00 03-18-1998 09-18-1999 01400008-52 30
- ----------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not
limit the applicability of this document to any particular loan or item.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Borrower: LITTLE ROCKBACK YARD BURGERS INC. Lender: Eagle Bank & Trust Company
(TIN 62-1509133) P.O. Box 22120
2768 COLONY PARK DRIVE LITTLE ROCK, AR 72221
MEMPHIS, TN 38118
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PRINCIPAL AMOUNT: $350,000.00 INTEREST RATE: 9.500% DATE OF NOTE: MARCH 18, 1998
</TABLE>
PROMISE TO PAY. LITTLE ROCK BACK YARD BURGERS, INC. ("BORROWER")
PROMISES TO PAY TO EAGLE BANK & TRUST COMPANY ("LENDER"), OR ORDER, IN
LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF
THREE HUNDRED FIFTY THOUSAND & 0/100 DOLLARS ($350.000.00), TOGETHER
WITH INTEREST AT THE RATE OF 9.500% PER ANNUM ON THE UNPAID PRINCIPAL
BALANCE FROM MARCH 18, 1998, UNTIL PAID IN FULL.
PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS
MADE, IN 17 REGULAR PAYMENTS OF $5,723.06 EACH AND ONE IRREGULAR LAST
PAYMENT ESTIMATED AT $298,991.40. BORROWER'S FIRST PAYMENT IS DUE APRIL
18, 1998, AND ALL SUBSEQUENT PAYMENTS ARE DUE ON THE SAME DAY OF EACH
MONTH AFTER THAT. BORROWER'S FINAL PAYMENT DUE SEPTEMBER 18, 1999, WILL
BE FOR ALL PRINCIPAL AND ALL ACCRUED INTEREST NOT YET PAID. PAYMENTS
INCLUDE PRINCIPAL AND INTEREST. The interest on this Note is computed
on a 365/365 simple interest basis; that is, by applying the ration of
the annual interest rate over the number of days in a year (366 during
leap years), multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above
or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
PRE-PAYMENT. Borrower agrees that all loan fees and other prepaid
finance charges are earned fully as the date of the loan and will not
be subject to refund upon early payment (whether voluntary or as a
redult of default), except as otherwise required by law. Except for the
foregoing, Borrow may pay without penalty all or a portion of the
amount owed earlier than it is due. Early payments will not, unless
agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due and may result in
Borrower making fewer payments.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be
charged 5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $15.00, WHICHEVER
IS GREATER.
DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment when due. (b) Borrower breaks
any promise Borrower has made to Lender, or Borrower fails to comply
with or to perform when due any other term, obligation, covenant, or
condition contained in this Note or any agreement related to this Note,
or in any other agreement or loan Borrower has with Lender. ( c)
Borrower defaults under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materailly afect any of
Borrower's propert or Borrower's ability to repay this Note or perform
Borrower's obligation under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (e) Borrower
becomes insolvent, a receiver is appointed for any part of the
borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower of against
Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a
lein or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (g) Any guarantor dies or any of the
other events described in this default section occurs with respect to
any guarantor of this Note. (h) a material asverse change occurs in
Borrower's financial condition, or Lender believes the prospect of
payment or performance of the indebtedness is impared. ( i ) Lendor in
good faith deems itself incecure.
<PAGE> 2
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
balance on this Note and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option,
may also, if permitted under applicable law, increase the interest rate
on this Note 4.000 percentage points, but in no event at an effective
total interest rate on this Note greater than the rate permitted by
applicable law. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, usbject to any limits under applicable laws,
Lender's attorneys' fees and Lender's legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings ( including efforts to nodify or vacate any
automatic stay or injuction), appeals, and any anticipated
post-judgement collection services. If not prohibited by applicable
law, Borrower also will pay nay court costs, in addition to all other
sums provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND
ACCEPTED BY LENDER IN THE STATE OF ARKANSAS. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OR
THE COURTS OF PULASKI COUNTY, THE STATE OF ARKANSAS. LENDER AND
BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNDERCLAIM BROUGHT BY EITHER LENDER OR BORROWER
AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if
Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possossory
security interest in, and hereby assigns, conveys, delivers, pledges,
and transfers to Lender all Borrower's right, title and interest in and
to, Borrower may open in the future, excluding however all IRA and
Keogh accounts, and all trust acccounts for which the grant of a
security interest would be prohibited by law. Borrower authorizes
Lender to the extent permitted by applicable law, to charge or setoff
all sums owing on this Note against any and all such accounts.
COLLATERAL. This Note is secured by a Mortage dated March 18, 1998, to
lender on real property located in PULASKI County, State of Arkansas,
all the terms and conditions of which are herby incorporated and made a
part of this Note.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower and
any other person who signs, quarantees or endorses this Note, to the
extent allowed by law waive presentment, demand for payment, protest
and nitice of dishonor. Upon any change in the terms of this Note, and
unless otherwise expressly stated in writing, no party who sighs this
Note, wherher as maker, guarantor, accommodation maker or endorser,
shall be released from liability. All such parties agree toat Lender
may renew or extend (repeatedly and for any length of time) this loan,
or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the collateral;
and take any other action deemed necessary by Lender withour the
consent of or notice to everyone. Ass such parties also agree that
Lender may modify this loan without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
LITTLE ROCK BACK YARD BURGERS, INC.
By:
--------------------------------------------------------------
LATTIMORE MICHAEL, CHAIRMAN & CHIEF EXECUTIVE OFFICER
By:
--------------------------------------------------------------
STEPHEN J KING, CHIEF FINANCIAL OFFICER
<PAGE> 1
EXHIBIT 11
BACK YARD BURGERS, INC.
COMPUTATION OF INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
-----
APRIL 4, MARCH 29,
1998 1997
---- ----
<S> <C> <C>
Net income (loss) $ 165 $ (86)
------ -------
Weighted average number of common shares outstanding
during the period 4,370 4,244
------ -------
Basic income (loss) per share $ .04 $ (.02)
------ -------
Basic weighted average number of common shares
outstanding during the period 4,370 4,244
Preferred shares convertible to common shares 205 --
Stock options 66 --
------ -------
4,641 4,244
------ -------
Diluted income (loss) per share $ .04 $ (.02)
------ -------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT APRIL 4, 1998 AND THE CONSOLIDATED STATEMENT OF
INCOME FOR THE THREE MONTHS ENDED APRIL 4, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-04-1998
<CASH> 881
<SECURITIES> 0
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0
<INVENTORY> 185
<CURRENT-ASSETS> 1,587
<PP&E> 10,704<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,029
<CURRENT-LIABILITIES> 1,354
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 8,494
<TOTAL-LIABILITY-AND-EQUITY> 14,029
<SALES> 5,808
<TOTAL-REVENUES> 6,367
<CGS> 1,860
<TOTAL-COSTS> 4,682
<OTHER-EXPENSES> 1,381
<LOSS-PROVISION> 40
<INTEREST-EXPENSE> 99
<INCOME-PRETAX> 165
<INCOME-TAX> 0
<INCOME-CONTINUING> 165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
<FN>
<F1> ASSET VALUE REPRESENTS NET AMOUNT.
</FN>
</TABLE>
