Exhibit 10.2

 

LOAN AGREEMENT

 

 

This LOAN AGREEMENT dated as of August 22, 2013, between MORGAN’S FOODS, INC.,
an Ohio corporation (the “Borrower”), and THE HUNTINGTON NATIONAL BANK, a
national banking association (the “Bank”). The parties hereto, intending to be
legally bound, hereby agree as follows:

 

Section 1.             Definitions.

 

1.1.          Capitalized Terms. For the purpose of this Agreement, the
following capitalized terms shall have the following meanings:

 

“Accounts” shall have the meaning set forth in the Security Agreements.

 

“Affiliate” means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or controlled by, such
Person. As used in this definition, “control” (including, with its correlative
meanings, “controlled by” and “under common control with”) shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event, any Person that owns directly or indirectly ten percent (10%) or more of
the securities having ordinary voting power for the election of directors or
other governing body of a corporation or warrants to purchase such securities
(whether or not currently exercisable) or ten percent (10%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person. Notwithstanding the foregoing, (a) no individual shall be
deemed to be an Affiliate of a corporation solely by reason of his or her being
an officer or director of such corporation, (b) Borrower and its Subsidiaries
shall not be Affiliates of each other and (c) Bank shall not be deemed to be an
Affiliate of Borrower or any of its Subsidiaries.

 

“Agreement” means this Loan Agreement, as amended, supplemented or otherwise
modified and in effect from time to time.

 

“Amortization Schedule” means the Amortization Schedule attached hereto as an
exhibit to the Term Note.

 

“Applicable Margin” means 425 basis points.

 

“Banking Day” means any day other than a Saturday or a Sunday on which banks are
open for business in Columbus, Ohio, and on which banks in London, England,
settle payments.

 

“Bankruptcy Code” means the United States Bankruptcy Code of 1978, as amended
from time to time, or any successor statute.

  

 
 

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“Borrower’s Certificate” means Borrower’s Certificate between Borrower and Bank
dated as of the date hereof of the rights relating to the Owned Real Property
and Ground Leased Real Property, as amended, supplemented or otherwise modified
and in effect from time to time.

 

“Capital Expenditures” means, as to any Person, for any period, expenditures
(including the aggregate amount of Capital Lease Obligations incurred during
such period) made by such Person to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements) during such
period, computed in accordance with GAAP.

 

“Capital Lease Obligations” means, as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board).

 

“Cash Equivalents” means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of the
United States, in each case maturing within two hundred seventy (270) days from
the date of acquisition thereof; (b) commercial paper maturing within two
hundred seventy (270) days from the date of acquisition thereof and, at the time
of acquisition, rated A-1 or better by Moody’s Investors Service, Inc.; (c)
deposits maturing on demand or certificates of deposit or bankers’ acceptances
maturing on demand or within two hundred seventy (270) days from the date of
acquisition thereof issued by Bank or any other commercial bank organized under
the laws of the United States or any state thereof or the District of Columbia
having a combined capital, surplus and undivided profits of at least Two Hundred
Fifty Million Dollars ($250,000,000.00); and (d) repurchase obligations issued
by Bank or any other bank described in clause (c) above with respect to
obligations described in clause (a) above.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986 as amended from time to time, or
any successor statute.

 

“Collateral” means collectively (a) the “Collateral’ as defined in the Security
Agreements, (b) the “Mortgaged Property’ as defined in the Open-End Mortgages,
and (c) the "Mortgaged Property" as defined in the Leasehold Mortgages.

 

“Company Equity” means the authorized shares of capital stock of the Borrower.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

  

 
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“Control Agreement” means the Control Agreement between Borrower and Bank dated
as of the date hereof, as amended, supplemented or otherwise modified and in
effect from time to time which secures the Controlled Deposit Account.

 

“Controlled Deposit Account” means account number 01662444896 at Bank, owned by
Borrower but subject to the Control Agreement.

 

“Covenant Compliance Certificate” means a certificate, in substantially the form
of Exhibit 6.1.1 attached hereto, that sets forth Borrower’s calculation of the
financial covenants set forth in Section 6 hereof.

 

“Credit Documents” means, collectively, this Agreement, the Notes, the
Guaranties, and the Security Documents.

 

“Credit Extension” means a borrowing of a Loan hereunder.

 

“Debt” means, as to any Person, without duplication: (a) all obligations of such
Person for borrowed money or evidenced by bonds, debentures, notes or similar
instruments; (b) all obligations of such Person for the deferred purchase price
of property or services (including, without limitation, obligations under
agreements not to compete) other than trade accounts payable and accrued
liabilities arising out of the ordinary course of business which are not overdue
by more than ninety (90) days or which are being contested in good faith; (c)
all Capital Lease Obligations of such Person; (d) all obligations of others of
the kind described in clauses (a), (b) or (c) hereof secured by a Lien on any
asset or revenues of such Person or a Subsidiary of such Person, whether or not
such obligation is assumed by such Person or the Subsidiary of such Person; (e)
all obligations of others of the kind described in clauses (a), (b) or (c)
hereof to the extent directly or indirectly Guaranteed by such Person or a
Subsidiary of such Person or in respect of which such Person or a Subsidiary of
such Person is contingently or otherwise liable; (f) all obligations of such
Person, contingent or otherwise, in respect of any letters of credit, bankers’
acceptances or similar instruments, and (g) any and all obligations, contingent
or otherwise, whether now existing or hereafter arising, of Borrower to Bank
arising under or in connection with Rate Management Transactions.

 

“Default” means any condition or event which constitutes an Event of Default or
which would become an Event of Default with the giving of notice or lapse of
time or both.

 

“Dollars” and “$” means dollars in lawful money of the United States of America.

 

“Environmental Indemnity Agreements” means the Environmental Indemnity
Agreements between Borrower, the Guarantors and Bank dated as of the date hereof
related to the Owned Real Property and Ground Leased Real Property, as amended,
supplemented or otherwise modified and in effect from time to time.

 

“Environmental Laws” means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or Governmental
restrictions relating to the environment or the release of any materials into
the environment.

  

 
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“Equipment” has the meaning set forth in the Security Agreements.

 

“Equity Rights” means subscriptions, options, warrants, calls, rights
(including, without limitation, preemptive rights) or other agreements or
commitments of any nature relating to any equity of Borrower, including without
limitation, the Company Equity.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

“ERISA Affiliate” means any corporation or trade or business which is a member
of the same controlled group (within the meaning of Section 414(b) of the Code)
as Borrower or is under common control (within the meaning of Section 414(c) of
the Code) with Borrower.

 

“Event of Default” has the meaning set forth in Section 7 hereof.

 

“Excluded Swap Obligation” means, with respect to any guarantor of a Swap
Obligation, including the grant of a security interest to secure the guaranty of
such Swap Obligation, any Swap Obligation if, and to the extent that, such Swap
Obligation is or becomes illegal under the Commodity Exchange Act or any rule,
regulation or order of the Commodity Futures Trading Commission (or the
application or official interpretation of any thereof) by virtue of such
guarantor’s failure for any reason to constitute an “eligible contract
participant” as defined in the Commodity Exchange Act and the regulations
thereunder at the time the guaranty or grant of such security interest becomes
effective with respect to such Swap Obligation.  If a Swap Obligation arises
under a master agreement governing more than one swap, such exclusion shall
apply only to the portion of such Swap Obligation that is attributable to swaps
for which such Swap Obligation or security interest is or becomes illegal.

 

“Franchise Agreements” means collectively the franchise agreements identified on
Schedule 5.21 hereto, as the same may be amended, modified or supplemented from
time to time.

 

“GAAP” means generally accepted accounting principles applied on a basis
consistent with those which, in accordance with the last sentence of Section
1.2.1 hereof, are to be used in making the calculations for purposes of
determining compliance with the provisions of this Agreement.

 

“Government” means the government of the United States of America, the
government of any other nation, any political subdivision of the United States
of America or any other nation (including, without limitation, any state,
territory, federal district, municipality or political entity).

 

 
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“Ground Leased Real Property” means the real property leased by either Borrower
or a Guarantor located at the addresses listed on Schedule 1.1A.

 

“Guarantee” means a guarantee, an endorsement, a contingent agreement to
purchase or to furnish funds for the payment or maintenance of, or otherwise to
be or become contingently liable under or with respect to, Debt, other
obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock of
any corporation, or an agreement to purchase, sell or lease (as lessee or
lessor) property, products, materials, supplies or services primarily for the
purpose of enabling a debtor to make payment of such debtors obligations or an
agreement to assure a creditor against loss, and including, without limitation,
causing a bank to open a letter of credit for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms “Guarantee” and “Guaranteed” used as a verb shall have a
correlative meaning.

 

“Guaranties” means collectively the Unconditional Continuing Guaranties issued
by the Guarantors for the benefit of Bank, each dated as of the date hereof, as
amended, supplemented or otherwise modified and in effect from time to time.

 

“Guarantor” means one of the Guarantors.

 

“Guarantors” means collectively Morgan’s Tacos of Pennsylvania, Inc., a
Pennsylvania corporation, Morgan’s Restaurants of Ohio, Inc., an Ohio
corporation, Morgan’s Restaurants of Pennsylvania, Inc., a Pennsylvania
corporation, Morgan’s Restaurants of West Virginia, Inc., a West Virginia
corporation, Morgan’s Foods of Missouri, Inc., a Missouri corporation, and
Morgan’s Restaurants of New York, Inc., a New York corporation.

 

“Guaranty” means individually one of the Guaranties.

 

“Interest Expense” means, for any period, the sum of the following for Borrower
(determined in accordance with GAAP): (a) the aggregate amount of interest paid
in cash or accrued as a liability on Debt during such period (including, without
limitation, imputed interest on Capital Lease Obligations, but excluding (i)
amortization of debt discount and expense, and (ii) any interest paid in kind,
added to the principal amount of the related Debt or otherwise capitalized
during such period); plus (b) fees or commissions payable during such period in
respect of any letters of credit or similar instruments minus (d) the net amount
payable to Borrower pursuant to Rate Management Transactions accruing during
such period.

 

“Interest Payment Dates” means the tenth calendar day of each month, provided,
that, if such date shall be a day that is not a Banking Day, the due date shall
be extended to the next succeeding Banking Day.

 

“Inventory” has the meaning set forth in the Security Agreements.

  

 
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“Investment” in any Person means: (a) the acquisition (whether for cash,
property, services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other securities of such
Person; and (b) any deposit with, or advance, loan or other extension of credit
to, such Person (other than any such advance, loan or other extension of credit
having a term not exceeding ninety (90) days representing the purchase price of
Inventory or supplies purchased in the ordinary course of business) or Guarantee
of, or other contingent obligation with respect to, Debt or other liability of
such Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.

 

“Land and Building Real Property” means the real property leased by either
Borrower or a Guarantor located at the addresses listed on Schedule 1.1D.

 

“Leasehold Mortgage” means the Open-End (Leasehold) Mortgage, Assignment of
Leases and Rents, and Security Agreements between either Borrower or a Guarantor
and Bank, as mortgagee, executed as of the date hereof, as amended, supplemented
or otherwise modified and in effect from time to time, which encumbers the
Ground Leased Real Property as security for the repayment of the Loans.

 

“Lessor Consent and Estoppel” means the Lessor Consent and Estoppels executed by
each respective landlord for the benefit of Bank regarding the Ground Leased
Real Property, each dated as of the date hereof, as amended, supplemented or
otherwise modified and in effect from time to time.

 

“LIBOR Interest Period” means, with respect to any LIBOR Loan, one (1) month,
provided that: (1) if any LIBOR Interest Period would otherwise expire on a day
which is not a Banking Day, the LIBOR Interest Period shall be extended to the
next succeeding Banking Day (provided, however, that if such next succeeding
Banking Day occurs in the following calendar month, then the LIBOR Interest
Period shall expire on the immediately preceding Banking Day).

 

“LIBOR Interest Rate” means the rate obtained by dividing: (1) the actual or
estimated per annum rate, or the arithmetic mean of the per annum rates, of
interest for deposits in U.S. dollars for the related LIBOR Interest Period, as
determined by Bank in its discretion based upon reference to information which
appears on page LIBOR01, captioned British Bankers Assoc. Interest Settlement
Rates, of the Reuters America Network, a service of Reuters America Inc. (or
such other page that may replace that page on that service for the purpose of
displaying London interbank offered rates; or, if such service ceases to be
available or ceases to be used by Bank, such other reasonably comparable money
rate service as Bank may select) or upon information obtained from any other
reasonable procedure, as of two (2) Banking Days prior to the first day of a
LIBOR Interest Period; by (2) an amount equal to one minus the stated maximum
rate (expressed as a decimal), if any, of all LIBOR Reserve Requirements.
Subject to any maximum or minimum interest rate limitation specified herein or
by applicable law, any variable rate of interest on the obligation evidenced
hereby shall change automatically without notice to Borrower on the first day of
each LIBOR Interest Period (the “Index”). The Index is not necessarily the
lowest rate charged by Bank on its loans. If the Index becomes unavailable
during the term of these loans, Bank may designate a substitute reasonably
comparable index after notice to Borrower. Bank will tell Borrower the current
Index rate upon Borrower’s request. The interest rate change will not occur more
often than each month (the “rate change event”). Borrower understands that Bank
may make loans based on other rates as well. Under no circumstances will the
interest rate on the Notes be more than the maximum rate allowed by applicable
law.

  

 
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“LIBOR Loan” means a Loan to be made by Bank which bears interest at rates based
upon the LIBOR Interest Rate.

 

“LIBOR Reserve Requirement” means, for any Interest Period for any LIBOR Loan,
the then applicable actual percentage (expressed as a decimal) prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applicable to any member
bank of the Federal Reserve System in respect of “Eurocurrency liabilities”
pursuant to Regulation D or any other then applicable regulation of the Board of
Governors which prescribes reserve requirements applicable to “Eurocurrency
liabilities” as presently defined in Regulation D.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset. For
purposes of this Agreement, a Person or any of its Subsidiaries shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.

 

“Lien Waiver” means one of the Lien Waivers.

 

“Lien Waivers” means collectively the Landlord Lien Waiver, Access Agreement and
Consents executed by each respective landlord for the benefit of Bank regarding
the Land and Building Real Property, each dated as of the date hereof, as
amended, supplemented or otherwise modified and in effect from time to time.

 

“Loan Commitments” means the (a) Term Loan Commitment and (b) Time Loan
Commitment.

 

“Loans” means the (a) Term Loan and (b) Time Loan, each made pursuant to the
terms of the Credit Documents.

 

“London Banking Days” means days on which dealings are carried out in the London
Interbank Market.

 

“Margin Stock” means securities which are “margin stock” as defined in
Regulation U.

 

“Maturity Date” means (a) August 10, 2016 for the Term Loan and (b) February 10,
2015 for the Time Loan.

  

 
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“Morgan’s Restaurant Properties” means Morgan’s Restaurant Properties, Inc., an
Ohio corporation.

 

“Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37)
of ERISA to which contributions have been made by Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.

 

“Negative Pledge Liens” means, collectively, (a) the Affidavit of Facts Relating
to Title executed by Morgan’s Restaurants of Pennsylvania, Inc., for the benefit
of Bank regarding Store No. 056 of Real Property to be Sold, (b) the Affidavit
of Facts Relating to Title executed by Morgan’s Restaurants of New York, Inc.,
for the benefit of Bank regarding Store No. 090 of Real Property to be Sold, and
(c) the Agreement regarding Real Property executed by Morgan’s Restaurants of
Missouri, Inc., for the benefit of Bank regarding Store No. 331 of Real Property
to be Sold, each dated as of the date hereof and each to be recorded in the real
property records of the County where the real estate is located, as amended,
supplemented or otherwise modified and in effect from time to time.

 

“Net Proceeds” means, with respect to any receipt of insurance proceeds or
proceeds from the sale, lease, assignment, transfer or other disposition of any
asset or assets by Borrower, the excess, if any, of: (a) the aggregate amount
received in cash (including any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with such sale or other
disposition, over (b) the sum of (i) reasonable fees and out-of-pocket expenses
incurred, and taxes paid (or reasonably estimated to be payable), in connection
therewith and (ii) contractually required repayments of Debt to the extent
secured by a Lien on such asset or assets.

 

“Notes” means (a) the Term Note and (b) the Time Note, each as amended,
supplemented or otherwise modified and in effect from time to time.

 

“Open-End Mortgages” means the Open-End Mortgage, Assignment of Leases and
Rents, and Security Agreements, each between either Borrower or a Guarantor and
Bank, as mortgagee, executed as of the date hereof, as amended, supplemented or
otherwise modified and in effect from time to time, which encumbers the Owned
Real Property as security for the repayment of the Loans.

 

“Owned Real Property” means the real property each owned in fee simple by
Borrower or a Guarantor as listed on Schedule 1.1B.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

 

“Permitted Liens” has the meaning set forth in Section 6.6.

 

 
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“Person” means any individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
Government.

 

“Plan” means, at any time, an employee benefit or other plan established or
maintained by Borrower or any ERISA Affiliate which is covered by Title IV of
ERISA or subject to funding standards under Section 412 of the Code other than a
Multiemployer Plan.

 

“Post-Default Rate” means, in respect of any principal of any Loan or any other
amount payable by Borrower under any Credit Document which is not paid when due
(whether at stated maturity, by acceleration or otherwise), a rate equal to
three hundred (300) basis points in excess of the LIBOR Interest Rate.

 

“Prime Commercial Rate” means the rate established by Bank from time to time
based on its consideration of economic, money market, business and competitive
factors, and it is not necessarily Bank’s most favored rate. Subject to any
maximum or minimum interest rate limitation specified herein or by applicable
law, any variable rate of interest on the obligation evidenced hereby based upon
the Prime Commercial Rate shall change automatically without notice to Borrower
immediately with each change in the Prime Commercial Rate.

 

“Principal Payment Dates” means the tenth calendar day of each month, provided,
that, if such date shall be a day that is not a Banking Day, the due date shall
be extended to the next succeeding Banking Day.

 

“Rate Management Agreement”“ means any Rate Management Transaction and any other
agreement, device or arrangement providing for payments which are related to
fluctuations of interest rates, exchange rates or forward rates, including, but
not limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options, puts and
warrants, and any agreement pertaining to equity derivative transactions (e.g.,
equity or equity index swaps, options, caps, floors, collars, and forwards)
including without limitation any ISDA Master Agreement between the Companies and
Bank, or any of its affiliates, and any schedules, confirmations and documents
and other confirming evidence between the parties confirming transactions
thereunder, all whether now existing or hereafter arising, and in each case as
amended, modified or supplemented from time to time.

 

“Rate Management Obligations” means any and all obligations of the Companies to
Bank, or any of affiliate of Bank, whether absolute, contingent or otherwise and
howsoever and whensoever (whether now or hereafter) created, arising, evidenced
or acquired (including all renewals, extensions and modifications thereof and
substitutions therefor), under or in connection with (i) any and all Rate
Management Agreements, and (ii) any and all cancellations, buy-backs, reversals,
terminations or assignments of any Rate Management Agreement.

  

 
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“Rate Management Transaction” means any transaction (including an agreement with
respect thereto) now existing or hereafter entered into among the Companies,
Bank, or any of its subsidiaries or affiliates or their successors, which is a
rate swap, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions) or
any combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures.

 

“Real Property for Sale” means the real property each owned in fee simple by
Borrower or a Guarantor as listed on Schedule 1.1C.

 

“Regulations D, T, U and X” means, respectively, Regulations D, T, U and X of
the Board of Governors of the Federal Reserve System (or any successor), as
amended from time to time.

 

“Remodel Agreement” means that certain Remodel Agreement dated December 9, 2011
between KFC Corporation, Borrower, Morgan Restaurants of Pennsylvania, Inc.,
Morgan Restaurants of Ohio, Inc., Morgan Restaurants of West Virginia, Inc.,
Morgan Foods of Missouri, Inc. and Morgan Restaurants of New York, Inc., as the
same is amended, modified or supplemented from time to time.

 

“Restricted Payment” is defined in Section 6.9.

 

“Secured Obligations” means (a) the principal of and interest on the Loans made
by Bank to Borrower, and the Notes held by Bank, and all other amounts from time
to time owing to Bank (or such other holder of any of the Secured Obligations
from time to time) by Borrower under or in respect of the Credit Documents, (b)
any and all obligations, contingent or otherwise, whether now existing or
hereafter arising, of Borrower to Bank and (c) any and all obligations
contingent or otherwise, whether now existing or hereafter arising of Borrower
to Bank arising under or in connection with the Rate Management Transactions,
excluding Excluded Swap Obligations by Borrower hereunder.

 

“Security Agreement” means individually one of the Security Agreements.

 

“Security Agreements” means collectively the Security Agreements between (a)
Borrower and Bank, and (b) each Guarantor and Bank, all of even date herewith
and as any may be amended, supplemented or otherwise modified and in effect from
time to time.

 

“Security Documents” means, collectively, the Control Agreement, the Security
Agreements, all UCC financing statements required to be filed with respect to
the Liens created thereby, the Environmental Indemnity Agreements, Borrower’s
Certificates, the Lessor Consents and Estoppel, the Leasehold Mortgages, the
Open-End Mortgages, each dated as of the date hereof, and as amended,
supplemented or otherwise modified and in effect from time to time.

  

 
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“Senior Officer” means, in respect of Borrower and each Guarantor, the Chief
Executive Officer, President, Vice President, Secretary-Treasurer or Chief
Financial Officer of Borrower or such Guarantor.

 

“Subordinated Debt” means all Debt owing by Borrower to any Persons other than
Bank which meets all of the following specifications: (a) no principal payments
are due or payable with respect to such Debt prior to the scheduled maturity
dates of the Notes; (b) such Debt is not payable on demand and has a maturity
date which is not prior to the scheduled maturity dates of the Notes; (c) any
Lien related to such Debt, if the Debt is secured, is subordinate to the Lien of
Bank; (d) the agreements, instruments and documents creating and evidencing such
Debt provide that the holders of such Debt agree that such Debt, and any
renewals or extensions thereof, shall at all times and in all respects be
subordinate and junior in right of payment to the obligations of Borrower under
the Credit Documents; and (e) the terms and conditions of the agreements,
instruments and documents described in clause (d) above, are satisfactory to
Bank in its reasonable discretion and have been approved by Bank in writing.

 

“Subsidiary” means, with respect to any Person, any corporation or other entity
of which at least a majority of the outstanding securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation or other entity (irrespective of whether or not at the time
securities or other ownership interests of any other class or classes of such
corporation or entity shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by such Person or one or more of its Subsidiaries or by such Person
and one or more of its Subsidiaries, provided, that, Morgan’s Restaurant
Properties will not be deemed a “Subsidiary” for purposes of this Agreement as
long as (x) no assets are transferred to Morgan’s Restaurant Properties by the
Borrower or a Subsidiary or (y) Morgan’s Restaurant Properties does not acquire
any assets.

 

“Swap Obligation” means any Rate Management Obligation that constitutes a “swap”
within the meaning of section 1a (47) of the Commodity Exchange Act, as amended
from time to time.

 

“Term Loan” means the term loan made by Bank to or on behalf of Borrower
pursuant to the terms of the Term Note and this Agreement.

 

“Term Loan Commitment” means the obligation of Bank to make a loan in the
principal amount of Seven Million Nine Hundred Thirty Thousand Dollars
($7,930,000.00) pursuant to the terms of the Credit Documents.

 

“Term Note” has the meaning pursuant to Section 2.2 hereof.

 

“Time Loan” means the term loan made by Bank to or on behalf of Borrower
pursuant to the terms of the Time Note and this Agreement.

 

 
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“Time Loan Commitment” means the obligation of Bank to make a loan in the
principal amount of One Million Dollars ($1,000,000.00) pursuant to the terms of
the Credit Documents.

 

“Time Note” has the meaning pursuant to Section 3.2 hereof.

 

“Upgrade Actions” has the meaning set forth in the Remodel Agreement.

 

“UCC” means the Uniform Commercial Code as enacted in the State of Ohio.

 

“Wholly-Owned Subsidiary” means, with respect to any Person, any Subsidiary of
such Person all of the shares of capital stock or other ownership interests (and
all rights and options to purchase such shares or other ownership interests) of
or in which, other than directors’ qualifying shares, are owned, beneficially
and of record, by such Person or one or more Wholly-Owned Subsidiaries of such
Person or by such Person and one or more Wholly-Owned Subsidiaries of such
Person.

 

 

1.2.

Accounting Terms and Determinations.

 

1.2.1.     Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to Bank hereunder
shall (unless otherwise disclosed to Bank in writing at the time of delivery
thereof in the manner described in Section 1.2.2 hereof) be prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest financial statements
furnished to Bank hereunder after the date hereof. All calculations made for the
purposes of determining compliance with the provisions of this Agreement shall
(except as otherwise expressly provided herein) be made by application of
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the financial statements furnished to Bank
under Section 6.1 hereof (or, at any time prior to the delivery of the initial
financial statements thereunder consistent with those in effect on the date
hereof).

 

1.2.2.     Borrower shall deliver to Bank at the same time as the delivery of
any annual or quarterly financial statements under Section 6.1 hereof a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statements and the application of accounting principles employed in the
preparation of the next preceding annual or monthly financial statements and
reasonable estimates of the difference between such statements arising as a
consequence thereof.

   

 
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1.2.3.     Except as otherwise provided herein, if any changes in accounting
principles from those used in the preparation of the financial statements
furnished to Bank under Section 6.1 hereof or, at any time prior to the delivery
of the initial financial statements thereunder, generally accepted accounting
principles in effect on the date hereof are hereafter required or permitted by
the rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and are adopted by
Borrower with the agreement of its independent certified public accountants and
such changes result in a change in the method of calculation of any of the
financial covenants, standards or terms in or relating to Section 6 hereof or
otherwise, the parties hereto agree to enter into discussions with a view to
amending such provisions so as to equitably reflect such changes with the
desired result that the criteria for evaluating the financial condition of
Borrower shall be the same after such change as if such change had not been
made, provided that no change in such accounting principles which would affect
the method of calculation of any of such financial covenants, standards or terms
shall be given effect in such calculations until such provisions are amended, in
a manner satisfactory to Bank and Borrower, to so reflect such change in
accounting principles.

 

 

1.3.

General Terms.

 

1.3.1.     Upon the occurrence and during the continuance of an Event of
Default, and to the extent permitted by applicable law, Bank shall have the
right, in addition to all other rights and remedies available to it, and
regardless of the sufficiency of any of the Collateral or of the other rights
and remedies so available, to setoff against all of the Secured Obligations,
whether matured or unmatured, all amounts owing to Borrower by Bank or any
Affiliate of Bank, whether then due and payable, in a deposit account with Bank
or any Affiliate of Bank and all other funds or property of Borrower on deposit
with or otherwise held by or in the custody of Bank or any Affiliate of Bank for
the beneficial account of Borrower, whether solely in the name of or for the
benefit of Borrower or jointly in the name of or for the benefit of Borrower and
any other Person, all without notice to or demand on Borrower or any other
Person, all such notices and demands being hereby expressly waived. Borrower
hereby confirms Bank’s right of bankers lien or setoff described above and
nothing herein is deemed to be a waiver or prohibition of the exercise by Bank
of such bankers lien or setoff. Borrower agrees to indemnify Bank for any cost
or expense incurred by Bank as a result of its exercise of the rights herein
granted, except to the extent arising from the gross negligence or willful
misconduct of Bank.

 

1.3.2.     Borrower shall use the proceeds of the Loans to payoff existing debt
and for other general corporate financing needs, including the funding of the
Controlled Deposit Account, and to provide for transaction costs.

 

1.3.3.     Borrower shall maintain the Controlled Deposit Account with Bank or
an Affiliate of Bank, it being acknowledged and agreed that nothing herein shall
preclude Borrower and its Subsidiaries from maintaining cash deposits or
accounts relating to investments in Cash Equivalents with other financial
institutions from time to time as long as such accounts are subject to a control
agreement in favor of the Bank.

 

1.3.4.     Except as otherwise herein expressly provided or as provided in an
Open-End Mortgage or a Leasehold Mortgage, following the proper exercise of
Bank’s remedies hereunder following and during the existence of an Event of
Default, the proceeds of any collection, sale or other realization of all or any
part of the Collateral pursuant hereto and any other cash at the time held by
Bank hereunder shall be applied by Bank:

 

 
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(a)     first, to the payment of all costs and expenses of such collection, sale
or other realization, including Bank’s reasonable attorneys’ fees and
disbursements;

 

(b)     then, to the payment in full of the Secured Obligations in accordance
with the amounts then due and owing; and

 

(c)     then, and after payment in full of the foregoing, any surplus remaining
shall be paid to Borrower or to whomsoever may be lawfully required to receive
the same. As used in this Section 1.3.4, “proceeds” of Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of Borrower or any issuer of or obligor on any
of the Collateral.

 

Section 2.             Term Loan.

 

2.1.         Term Loan.  Bank agrees, on the terms and conditions set forth in
this Agreement, to make the Term Loan to Borrower in an aggregate principal
amount equal to the amount of the Term Loan Commitment as then in effect.

 

2.2.        Term Note.   The Term Loan made by Bank shall be evidenced by the
Term Note of Borrower in substantially the form of Exhibit 2.2 hereto (the “Term
Note”), dated as of the date hereof, payable to the order of Bank in a principal
amount equal to the amount of the Term Loan Commitment and otherwise duly
completed. The date, amount, type and interest rate of each Term Loan made by
Bank to Borrower, and each payment made on account of the principal thereof,
shall be recorded by Bank on its books and records, such recordation to
constitute conclusive evidence in the absence of manifest error of the amount of
such Term Loan and payments.

 

 

2.3.         Interest Rates.

 

2.3.1.     (a) The Term Loan shall bear interest on the outstanding principal
amount, at a rate per annum, equal to the LIBOR Interest Rate plus the
Applicable Margin. Interest payable on any LIBOR Loan shall be paid by Borrower
on the Interest Payment Dates. Under no circumstances will the LIBOR Interest
Rate plus the Applicable Margin be more than the maximum rate allowed by
applicable law. This Agreement expresses a LIBOR Interest Rate and an initial
index value to two (2) places to the right of the decimal point. This expression
is done solely for convenience. The reference sources for the index used by
Bank, as stated in this Agreement, may actually quote the index on any given day
to as many as five (5) places to the right of the decimal point. Therefore, the
actual index value used to calculate the interest rate on and the amount of
interest due under this Agreement will be to five (5) places to the right of the
decimal point.

  

 
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(b)     For so long as Bank maintains reserves against “Eurocurrency
liabilities” (or any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR Loan is determined or any category
of extensions of credit or other assets which includes loans by a non-United
States office of Bank to United States residents), and as a result of any change
in law the cost to Bank (or any Affiliate of Bank which may be engaged in
extending a LIBOR Loan) of making or maintaining its LIBOR Loan is increased,
subject to the term of any Rate Management Agreement then in effect, then Bank
may require Borrower to pay, contemporaneously with each payment of interest on
any LIBOR Loan, additional interest on such LIBOR Loan at a rate per annum up to
but not exceeding the excess of (i) (A) the LIBOR Interest Rate divided by (B)
one minus the LIBOR Reserve Requirement minus (ii) the rate specified in the
preceding clause (i)(A); provided, however, that prior to any such increase,
Bank shall deliver a certificate to Borrower setting forth, in reasonable
detail, the amount necessary to so compensate Bank and the basis for such
increase.

 

2.3.2.      Interest at the LIBOR Interest Rate shall be calculated on a 365/360
basis; that is, by applying the ratio of interest rate over a year of three
hundred sixty (360) days, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Any reference in this Agreement to a “per annum” rate shall be based on a year
of three hundred sixty (360) days.

 

2.4.        Prepayments.  Borrower must pay all fees, costs, "breakage,"
penalties and premiums incurred by Bank, or any of Bank’s affiliates, if the
Borrower prepays any LIBOR Loan, including any and all fees, costs, “breakage,”
penalties, premiums and other costs owed to Bank, or any of Bank’s affiliates,
by the Borrower pursuant to the terms of the Rate Management Agreement,
including, without limitation, the costs associated with an “Additional
Termination Event,” “Affected Transaction,” “Early Termination Date,” “Event of
Default,” “Potential Event of Default,” “Terminated Transactions,” or a
“Termination Event,” all as defined in the Rate Management Agreement or any
other Rate Management Transaction.

 

2.5.         Payments.  All payments (including prepayments) to be made by
Borrower on account of principal, interest and facility fees or otherwise of the
Loans, shall be made without setoff or counterclaim and shall be made to Bank at
Bank’s office located at the address set forth next to the signature of Bank, in
each case in immediately available Dollars. If any payment hereunder becomes due
and payable on a day other than a Banking Day, the maturity thereof shall be
extended to the next succeeding Banking Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.

 

 

2.6.          Reduced Return.

 

2.6.1.     In the event that on any date Bank shall have reasonably determined
that accruing interest hereunder based upon the LIBOR Interest Rate has become
unlawful by compliance by Bank in good faith with any applicable law,
governmental rule, regulation or order, then, and in any such event, Bank shall
promptly give notice thereof to Borrower. In such case, accruing interest
hereunder based upon the LIBOR Interest Rate shall be terminated and Borrower
shall, at the earlier of the end of each LIBOR Interest Period then in effect or
when required by applicable law, repay the advances based upon the LIBOR
Interest Rate, together with all interest accrued thereon. In such case, when
required by applicable law, interest shall accrue hereunder at a variable rate
of interest per annum, which shall change in the manner set forth below, equal
to twenty-five (25) basis points in excess of the Prime Commercial Rate.

 

 

 
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2.6.2.     Bank will promptly notify Borrower of any event of which it has
knowledge, occurring      on or after the date of this Agreement, which will
entitle Bank to compensation pursuant to this Section 2.6 and will designate a
different lending office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the reasonable judgment of
Bank, be otherwise disadvantageous to Bank. A certificate of Bank claiming
compensation under this Section 2.6 and setting forth in reasonable detail the
reasons and the calculation for the additional amount or amounts to be paid to
Bank under this Section 2.6 shall be presumed to be correct, which presumption
may be rebutted by Borrower. In determining any such amount, Bank shall make its
calculations (which shall be set forth in the certificate) reasonably and in
good faith using any reasonable averaging and attribution methods (which shall
be set forth in the certificate).

 

2.6.3.     In the event that Bank reasonably determines that by reason of (1)
any change arising after Closing Date of the Term Loan affecting the interbank
Eurocurrency market or affecting the position of Bank with respect to such
market, adequate and fair means do not exist for ascertaining the applicable
interest rates by reference to which the LIBOR Interest Rate then being
determined is to be fixed, (2) any change arising after the Closing Date of the
Term Loan in any applicable law or governmental rule, regulation or order (or
any interpretation thereof, including the introduction of any new law or
governmental rule, regulation or order), or (3) any other circumstance affecting
Bank or the interbank market (such as, but not limited to, official reserve
requirements required by Regulation D of the Board of Governors of the Federal
Reserve System), the LIBOR Interest Rate plus the applicable spread shall not
represent the effective pricing to Bank of accruing interest hereunder based
upon the LIBOR Interest Rate, then, and in any such event, the accruing of
interest hereunder based upon the LIBOR Interest Rate shall be suspended until
Bank shall notify Borrower that the circumstances causing such suspension no
longer exist. In such case, beginning on the date of such suspension interest
shall accrue hereunder at a variable rate of interest per annum, which shall
change in the manner set forth below, equal to twenty-five (25) basis points in
excess of the Prime Commercial Rate.

 

2.7.          Principal Amortization. The principal due under the Term Note
shall be amortized as set forth on the Amortization Schedule. Principal amounts
of the Term Loan once repaid or prepaid may not be re-borrowed.

 

2.8.          Fees.  Borrower shall pay to Bank a closing fee in respect of the
Term Loan Commitment in the amount of $39,650 on the Closing Date.

 

Section 3. Time Loan.

 

3.1.          Time Loan. Bank agrees, on the terms and conditions set forth in
this Agreement, to make the Time Loan to Borrower in an aggregate principal
amount equal to the amount of the Time Loan Commitment as then in effect.

 

 
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3.2.         Time Note. The Time Loan made by Bank shall be evidenced by the
Time Promissory Note of Borrower in substantially the form of Exhibit 3.2 hereto
(the “Time Note”), dated as of the date hereof, payable to the order of Bank in
a principal amount equal to the amount of the Time Loan Commitment and otherwise
duly completed. The date, amount, type and interest rate of each Time Loan made
by Bank to Borrower, and each payment made on account of the principal thereof,
shall be recorded by Bank on its books and records, such recordation to
constitute conclusive evidence in the absence of manifest error of the amount of
such Time Loan and payments.

 

3.3.          Interest Rates.

 

3.3.1.     (a)  The Time Loan shall bear interest on the outstanding principal
amount, at a rate per annum, equal to the LIBOR Interest Rate plus the
Applicable Margin. Interest payable on any LIBOR Loan shall be paid by Borrower
on Interest Payment Dates. Under no circumstances will the LIBOR Interest Rate
be more than the maximum rate allowed by applicable law.

 

(b)     For so long as Bank maintains reserves against “Eurocurrency
liabilities” (or any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR Loan is determined or any category
of extensions of credit or other assets which includes loans by a non-United
States office of Bank to United States residents), and as a result of any change
in law the cost to Bank (or any Affiliate of Bank which may be engaged in
extending a LIBOR Loan) of making or maintaining its LIBOR Loan is increased,
subject to the term of any Rate Management Agreement then in effect, then Bank
may require Borrower to pay, contemporaneously with each payment of interest on
any LIBOR Loan, additional interest on such LIBOR Loan at a rate per annum up to
but not exceeding the excess of (i) (A) the LIBOR Interest Rate divided by (B)
one minus the LIBOR Reserve Requirement minus (ii) the rate specified in the
preceding clause (i)(A); provided, however, that prior to any such increase,
Bank shall deliver a certificate to Borrower setting forth, in reasonable
detail, the amount necessary to so compensate Bank and the basis for such
increase.

 

3.3.2.      Interest at the LIBOR Interest Rate shall be calculated on the basis
of a year of three hundred sixty (360) days and paid for the actual number of
days elapsed (including the first day but excluding the last day).

 

 
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3.4.          Prepayments. Other than prepayments made pursuant to the automated
line of credit operated by Bank, Borrower must pay all fees, costs, "breakage,"
penalties and premiums incurred by Bank, or any of Bank’s affiliates, if the
Borrower prepays any LIBOR Loan, including any and all fees, costs, “breakage,”
penalties, premiums and other costs owed to Bank, or any of Bank’s affiliates,
by the Borrower pursuant to the terms of the Rate Management Agreement,
including, without limitation, the costs associated with an “Additional
Termination Event,” “Affected Transaction,” “Early Termination Date,” “Event of
Default,” “Potential Event of Default,” “Terminated Transactions,” or a
“Termination Event,” all as defined in the Rate Management Agreement or any
other Rate Management Transaction.

 

3.5.          Payments. All payments (including prepayments) to be made by
Borrower on account of principal, interest and facility fees or otherwise of the
Loans, shall be made without setoff or counterclaim and shall be made to Bank at
Bank’s office located at the address set forth next to the signature of Bank, in
each case in immediately available Dollars. If any payment hereunder becomes due
and payable on a day other than a Banking Day, the maturity thereof shall be
extended to the next succeeding Banking Day and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.

 

3.6.          Principal and Interest Amortization. Borrower will pay to Bank the
full outstanding principal amount of the Time Note on the Maturity Date.
Principal amounts of the Time Note once repaid or prepaid may not be
re-borrowed.

 

3.7.          Fees. Borrower shall pay to Bank a closing fee in respect of the
Time Loan Commitment in the amount of Five Thousand and 00/100 Dollars
($5,000.00) on the Closing Date.

 

Section 4. Conditions Precedent.

 

4.1.          Loans. The obligation of Bank to make the Credit Extension for the
Loans hereunder is subject to each of the following conditions precedent
(including, without limitation, that each document to be received by Bank shall
be in form and substance satisfactory to Bank):

 

4.1.1.     Bank shall have received the Credit Documents duly completed,
executed, acknowledged (if necessary), and delivered by Borrower as follows:

 

 

(a)

This Agreement,

 

 

(b)

Notes,

 

 

(c)

Security Agreements,

 

 

(d)

Lessor Consent and Estoppels,

 

 

(e)

Lien Waivers,

  

 
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(f)

UCC financing statements,

 

 

(g)

Environmental Indemnity Agreements,

 

 

(h)

Settlement Statement,

 

 

(i)

Borrower’s Certificates,

 

 

(j)

Control Agreement for the Controlled Deposit Account,

 

 

(k)

Remodel Agreement, and

 

 

(l)

such other documents reasonably requested by Bank.

 

4.1.2.     Bank shall have received the Credit Documents duly completed,
executed, acknowledged (if necessary), by the respective Guarantors and
delivered by Borrower as follows:

 

 

(a)

Environmental Indemnity Agreements,

 

 

(b)

Guaranties;

 

 

(c)

Security Agreements;

 

 

(d)

Open-End Mortgages;

 

 

(e)

Leasehold Mortgages; and

 

 

(f)

The three (3) Negative Pledge Liens.

 

4.1.3.     Bank shall have received an opinion of Borrower’s counsel.

 

4.1.4.     Bank shall have received a certified copy of the By-laws or Code of
Regulations (or equivalent documents) of Borrower and each Guarantor and all
corporate action taken by Borrower and each Guarantor (including, without
limitation, resolutions of the directors of Borrower and each Guarantor)
authorizing the making and performance of each of the Credit Documents to which
each of them is a party and authorizing the borrowings hereunder.

 

4.1.5.     Bank shall have received a certificate of Borrower and each Guarantor
signed by the Senior Officers (a) who are authorized to execute on its behalf
the Credit Documents to which it is a party and (b) who will, until replaced by
another officer duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other communications in
connection therewith and the transactions contemplated thereby (and Bank may
conclusively rely on such certificate until it receives notice in writing from
Borrower to the contrary).

  

 
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4.1.6.     Bank shall have received the results of record searches, by a Person
satisfactory to Bank, of the UCC filings in the state filing offices in each of
the jurisdictions requested by Bank, and of judgment and tax liens with respect
to Borrower and Guarantors.

 

4.1.7.     Bank shall have received (a) payment of the closing fees required by
Sections 2.8 and 3.7 and (b) payment of all of Bank’s expenses pursuant to
Section 8.3 hereof.

 

4.1.8.     Borrower shall have delivered to Bank (a) certificates of insurance
or other evidence from Borrower’s insurance company or companies or insurance
broker evidencing the existence of all insurance required to be maintained by
Borrower pursuant to Section 6.4 hereof, and such information as is specified in
said Section 6.4 and (b) loss payable endorsements of all insurance policies
insuring the Collateral so maintained by Borrower in favor of Bank for the
benefit of Bank, as its interest may appear.

 

4.1.9.     Bank shall have received a certificate of a Senior Officer of
Borrower to the effect that (and Bank shall be satisfied in its good faith
judgment that) no action, suit, litigation or other proceeding shall exist or
shall be threatened which is likely to have a material adverse effect on the
assets, business, operations, financial condition, liabilities or capitalization
of Borrower, or the ability of Borrower to perform its obligations hereunder and
under the other Credit Documents to which it is a party.

 

4.1.10.   Bank shall have received evidence satisfactory to Bank that all
necessary Governmental and third party consents and approvals in connection with
the execution, delivery, performance, validity and enforceability of the Credit
Documents have been obtained.

 

4.1.11.   Bank shall have received a paid loan title insurance policy or
policies for each Owned Real Property and each Ground Leased Real Property in
the aggregate amount of Five Million Seven Hundred Fifty Thousand Dollars
($5,750,000) and in the form of American Land Title Association’s Standard Loan
Policy, 2006, insuring that fee simple title to the Owned Real Property and
leasehold title in the Ground Leased Real Property, as applicable, is in
Borrower, free and clear of all liens, claims and encumbrances except such as
Bank shall approve and subject to such endorsements as Bank may reasonably
require.

 

4.1.12.    Bank shall have received (a) such other certificates, opinions,
documents, instruments and deliveries relating to the transactions contemplated
hereby and by the project checklist prepared by counsel to Bank and (b) all
other documents and due diligence items reasonably requested by Bank.

 

4.2. Condition Subsequent.  Within ninety (90) days after the Closing Date, the
Borrower shall continue to use reasonable efforts to obtain, and deliver to
Bank, executed Lessor Consents and Estoppels and Landlord’s Lien Waiver, Access
Agreement and Consents, in a form satisfactory to the Bank, from those landlords
which did not execute one of those forms by the Closing Date.

 

 
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Section 5.               Representations and Warranties. Borrower represents and
warrants to Bank:

 

5.1.          Existence. Borrower and each Guarantor (a) is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
formation; (b) has all requisite corporate power and has all material
Governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify would have a material adverse effect on the assets,
prospects, business, operations, financial condition, liabilities or
capitalization of Borrower or a Guarantor, or on the ability of Borrower or a
Guarantor to perform its obligations hereunder or under the other Credit
Documents or the rights and remedies of Bank thereunder.

 

5.2.          Financial Condition. The unaudited balance sheets of Borrower as
of the Closing Date, fairly present in all material respects the financial
condition of Borrower as at said date and the results of its operations for the
period covered thereby, all in accordance with GAAP and in accordance with the
accounting principles described in the notes to said balance sheet. Borrower
does not have as of the initial Credit Extension any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in said balance sheet (or disclosed in
the notes thereto) as at said date.

 

5.3.          Litigation. There are no legal or arbitral proceedings or any
proceedings by or before any Governmental or regulatory authority or agency now
pending or threatened against Borrower or any Guarantor which, if adversely
determined, is reasonably likely to have a material adverse effect on the
assets, prospects, business, operations, financial condition, liabilities or
capitalization of Borrower or any Guarantor, or on the ability of Borrower or
any Guarantor to perform its obligations hereunder or under the other Credit
Documents or the rights and remedies of Bank thereunder.

 

5.4.          No Breach.

 

5.4.1.     The making and performance by Borrower and the Guarantors of the
Credit Documents to which they are a party will not conflict with or result in a
breach of, or require any consent under (a) the Code of Regulations or By-Laws,
the Articles of Incorporation of Borrower and the Guarantors, respectively (b)
any applicable law or regulation (including, without limitation, Regulation D,
T, U or X), or (c) any judgment, order, writ, injunction or decree of any court
or Governmental authority or agency applicable to or binding on Borrower and the
Guarantors, respectively.

 

5.4.2.     The making and performance by Borrower and the Guarantors of the
Credit Documents to which it is a party will not conflict in any material
respect with or result in a material breach of, or require any consent under,
any material agreement or instrument to which Borrower or any Guarantor,
respectively, are a party or by which they are bound, or constitute a default in
any material respect under any such agreement or instrument, or result in, or
require, the creation or imposition of any Lien (other than the Liens created by
the Security Documents) upon any of the properties, assets or revenues of
Borrower and the Guarantors, respectively, pursuant to the terms of any such
agreement or instrument.

  

 
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5.5.         Corporate Action. Borrower and each Guarantor has all necessary
corporate power and authority to execute, deliver and perform its obligations
under each of the Credit Documents to which it is a party and the execution,
delivery and performance thereof by Borrower and the Guarantors, respectively,
have been duly authorized by all necessary corporate or limited liability
company action on their part; and this Agreement has been duly and validly
executed and delivered by Borrower and each Guarantor, and constitutes the
legal, valid and binding obligation of Borrower and the Guarantors, enforceable
in accordance with its terms, except that the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by application of
general principles of equity (regardless of whether enforcement is considered in
proceedings at law or in equity).

 

5.6.         Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental or regulatory authority or
agency or any third party are necessary for the execution, delivery or
performance by Borrower or Guarantors of the Credit Documents to which they are
a party or for the validity or enforceability thereof, except for (i) the
filings of the Open-End Mortgages, the Leasehold Mortgages, and UCC-1 financing
statements and fixture filings relating to the Collateral and (ii) the
authorizations, approvals, consents, filings and/or registrations listed or
described in Schedule 5.6 hereto (each of which has been obtained or made and is
in full force and effect, and copies of which have been furnished to Bank).

 

5.7.         Margin Stock. Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying Margin Stock
and no part of the proceeds of any Credit Extension hereunder will be used to
buy or carry any Margin Stock. Neither the making of any of the Loans or the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation D, T, U or X.

 

5.8.         ERISA. Borrower and the ERISA Affiliates have fulfilled their
respective obligations under the minimum funding standards of ERISA and the Code
with respect to each Plan and are in compliance in all material respects with
the presently applicable provisions of ERISA and the Code, and have not incurred
any liability to the PBGC or any Plan or Multiemployer Plan (other than an
obligation to fund or make contributions to any such Plan in accordance with its
terms and in the ordinary course of business).

 

5.9.          Taxes. Borrower and each Guarantor has filed all federal income
tax returns and all other material tax returns which are required to be filed by
it and has paid and will pay all taxes due pursuant to such returns or pursuant
to any assessment received by Borrower or a Guarantor, except to the extent the
same may be contested as permitted by Section 6.6.3 hereof. The charges,
accruals and reserves on the books of Borrower in respect of taxes and other
Governmental charges are, in the opinion of Borrower, adequate.

  

 
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5.10.        Investment Company Act.  Borrower is not an “investment company,”
or a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.

 

5.11.       Security Documents.  The Security Documents shall create in favor of
Bank a legal, valid, enforceable and perfected security interest in all right,
title and interest of Borrower or Guarantor, as applicable, in the Collateral
subject to no other Lien (other than Permitted Liens).

 

5.12.        Compliance with Laws. Borrower and each Guarantor is in compliance
with, and has obtained all permits, licenses and other authorizations which are
required under all applicable federal, state and local statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements and other Governmental
restrictions, except to the extent failure to so comply, or to obtain any such
permit, license or authorization, would not have a material adverse effect on
(a) the business, operations or financial condition of Borrower or Guarantor,
respectively or (b) on the ability of Borrower or Guarantor, respectively, to
perform its obligations hereunder or under the other Credit Documents.

 

5.13.        Disclosure.

 

5.13.1.    No information, report, financial statement, exhibit, schedule or
disclosure letter furnished in writing by or on behalf of Borrower to Bank in
connection with the negotiation of this Agreement or other Credit Documents or
included therein or delivered thereto contains any untrue statement of material
fact or omits or omitted to state any material fact necessary to make the
statements therein, taken as a whole, in light of the circumstances under which
they were made, not misleading. All written information furnished after the date
hereof by Borrower to Bank in connection with this Agreement and the
transactions contemplated hereby will be true, complete and accurate in every
material respect or based on reasonable estimates on the date as of which such
information is stated or certified. No fact is known to Borrower (other than
matters of a general economic nature) which materially and adversely affects the
business, operations or financial condition of Borrower.

 

5.13.2.   The projections and financial information delivered by Borrower to
Bank prior to the date of this Agreement were based on good faith estimates and
assumptions believed by Borrower to be reasonable at the time made and no fact
is known by Borrower which would result in any material change in the most
recently provided of such projections or in any estimate reflected therein.

 

5.14.       Capitalization.  Jefferson P. Gramm beneficially owns 1,052,250
shares of the Borrower and James Pappas beneficially owns 486,972 shares of the
Borrower.

  

 
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5.15.        Assets of Borrower. Borrower or a Guarantor has good and marketable
title in fee simple to, or valid and subsisting leasehold interests in, the
Owned Real Property and the Ground Leased Real Property, and good and marketable
title to all its other property (including without limitation the Collateral),
free and clear of all Liens (other than Permitted Liens).

 

5.16.        Material Agreements.  Neither Borrower nor any Guarantor is a party
to any agreement or instrument or subject to any restriction which has or is
likely to have a material adverse effect on the assets, prospects, business,
operations, financial condition, liabilities or capitalization of Borrower or a
Guarantor.

 

5.17.        Solvency. After giving effect to the Credit Extension and other
transactions contemplated hereby:

 

5.17.1.   The fair salable value of the assets of Borrower and each Guarantor
exceeds and will, immediately following the making of each Credit Extension,
exceed the amount which will be required to be paid on or in respect of its
existing debts and other liabilities as they mature;

 

5.17.2.   Neither Borrower nor any Guarantor has, nor will have, immediately
following the making of each Credit Extension, unreasonably small capital to
carry out its business as conducted or as proposed to be conducted; and

 

5.17.3.   Neither Borrower nor any Guarantor, intends to, nor believe that it
will, incur debts beyond its ability to pay such debts as they mature.

 

5.18.        Labor Matters. Borrower has not experienced any strike, labor
dispute, slow down or work stoppage due to labor disagreements which would have
or is continuing to have a material adverse effect on the assets, prospects,
business, operations, financial condition, liabilities or capitalization of
Borrower or on the ability of Borrower to perform its obligations hereunder and
under the other Credit Documents or the rights and remedies of Bank thereunder.

 

5.19.       Environmental Laws. Borrower or a Guarantor has obtained all
permits, licenses and other authorizations which are required under all
applicable Environmental Laws, except to the extent failure to have any such
permit, license or authorization would not have a material adverse effect on the
assets, prospects, business, operations, financial condition, liabilities or
capitalization of Borrower. Borrower or a Guarantor is in compliance with the
terms and conditions of all such permits, licenses and authorizations, and is
also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a material adverse effect on the assets, business, operations,
financial condition, liabilities or capitalization of Borrower or the respective
Guarantor.

 

 
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5.20.       Copyrights, Permits and Trademarks. Borrower or a Guarantor owns, or
has a valid license or sub-license in, all domestic and foreign know-how
licenses, inventions, technology, permits, trademark registrations and
applications, trademarks, trade names, trade secrets, service marks, copyrights,
product designs, applications, formulae, processes and the industrial property
rights (“proprietary rights”) used or necessary in the operation of its
businesses in the manner in which they are currently being conducted and which
are material to the assets, prospects, business, operations, financial
condition, liabilities or capitalization of Borrower. Borrower is not aware of
any existing or threatened infringement or misappropriation of any proprietary
rights of others which is material to the assets, prospects, business,
operations, financial condition, liabilities or capitalization of Borrower.

 

5.21.         Franchise Agreements.  Borrower and each Guarantor is in
compliance in all material respects with all of the terms of the Franchise
Agreements.

 

5.22.        Freeport Rd.- Store 383.  The ground lease for the real property
located at 2725 Freeport Road, Pittsburgh, PA expired on April 30, 2013 and was
not renewed by Borrower or a Guarantor.

 

5.23.        Ground Leased Property.  Each of the Guarantors is permitted to
mortgage the Ground Leased Property in accordance with the terms of each ground
lease affecting each parcel of the Ground Leased Property. Except as related to
the leasehold interest held under the lease related to Store MF1 038 (the status
of which is currently in dispute), the interest held by the respective Guarantor
in regard to each Ground Leased Property is a ground leasehold interest.

 

5.24.        Morgan’s Restaurant Properties.  Morgan’s Restaurant Properties
owns no assets.

 

Section 6.             Covenants. So long as the Notes are in effect and until
payment in full of the principal and interest on the Loans and all other amounts
payable by the Borrower hereunder:

 

6.1.          Financial Statements, Continuing Disclosure. Borrower shall
deliver to Bank:

 

6.1.1.     as soon as available and in any event within forty-five (45) days
after the end of each fiscal quarter, consolidated statements of income of
Borrower and its Subsidiaries for such fiscal quarter and for the period from
the beginning of the respective fiscal year to the end of such fiscal quarter,
and a consolidated balance sheet of Borrower and its Subsidiaries as at the end
of such fiscal quarter in the Form 10-Q filed by Borrower with the Securities
Exchange Commission, setting forth in each case in comparative form the
corresponding figures for the corresponding fiscal quarter in the preceding
fiscal year (if any), accompanied by (i) a certificate of a Senior Officer,
which certificate shall state that said financial statements fairly present in
all material respects the financial condition and results of operations of
Borrower and each Guarantor in accordance with the accrual method of accounting
under GAAP, as at the end of, and for, such fiscal quarter (subject to normal
year-end audit adjustments which individually or in the aggregate would not be
material), (ii) a report on unit level sales and supporting income statements in
a format reasonably acceptable to Bank, and (iii) a Covenant Compliance
Certificate;

  

 
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6.1.2.     as soon as available and in any event within one hundred twenty (120)
days after the end of such fiscal year, consolidated statements of income,
retained earnings and cash flows of Borrower and its Subsidiaries for such year
and the related consolidated balance sheet as at the end of such year in such
form as set forth in the Form 10-K filed by Borrower with the Securities
Exchange Commission, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year (if any), audited by
independent certified public accountants of recognized national standing, and
including a certificate of such accountants stating that, in making their
examination necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default;

 

6.1.3.     as soon as possible, and in any event within fifteen (15) days after
Borrower knows that any of the events or conditions specified below with respect
to any Plan or Multiemployer Plan have occurred or exist, a statement signed by
a Senior Officer setting forth details respecting such event or condition and
the action, if any, that Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by Borrower or an ERISA Affiliate with respect to such event or
condition):

 

(a)       any reportable event, as defined in Section 4043(b) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not
by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within thirty (30) days of the occurrence of such event (provided that
a failure to meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA shall be a reportable event regardless of the issuance of
any waivers in accordance with Section 412(d) of the Code);

 

(b)       the filing under Section 4041(c) of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan thereunder;

 

(c)       the institution by PBGC of proceedings under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan, or
the receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by PBGC with respect to such Multiemployer
Plan;

 

(d)       the complete or partial withdrawal by Borrower or any ERISA Affiliate
under Section 4201 or 4204 of ERISA from a Multiemployer Plan, or the receipt by
Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is
in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or
that it intends to terminate or has terminated under Section 4041A of ERISA; and

 

(e)       the institution of a proceeding by a fiduciary of any Multiemployer
Plan against Borrower or any ERISA Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within thirty (30) days;

 

 
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6.1.4.     promptly after Borrower knows that any Default has occurred, a notice
of such Default describing the same in reasonable detail and, together with such
notice or as soon thereafter as possible, a description of the action taken or
proposed to be taken with respect thereto;

 

6.1.5.     promptly upon the occurrence of any event giving rise to an
obligation to make a prepayment of the Loans, or notice thereof;

 

6.1.6.     promptly upon receipt by Borrower, a copy of all management letters
submitted by such accountants to management by its independent certified public
accountants, and promptly upon completion of any response report by or on behalf
of Borrower, a copy of such response report;

 

6.1.7.     [Reserved];

 

6.1.8.     promptly after the occurrence thereof, notice of any strike, labor
dispute, slow down or work stoppage due to a material labor disagreement (or any
material development regarding any thereof) affecting Borrower, describing the
same in reasonable detail and describing the steps being taken to remedy the
same;

 

6.1.9.      promptly upon receipt thereof, a copy of each notice or other
communication from any Governmental authority with respect to those matters
covered by Section 5.19 hereof relating to the compliance by Borrower with the
Environmental Laws or the permits, licenses or authorizations referred to in
said Section 5.19, a notice of such circumstances describing the same in
reasonable detail; and

 

6.1.10.     from time to time such other information regarding (a) the business,
affairs or financial condition of Borrower (including, without limitation, any
Plan or Multiemployer Plan and any reports or other information required to be
filed under ERISA), (b) compliance by Borrower with its obligations herein or in
any other Credit Document and (c) such other matters relating to the
transactions contemplated hereby as Bank may reasonably request.

 

Borrower will furnish to Bank, at the time they furnish each set of financial
statements pursuant to Section 6.1.1 or 6.1.2, a Covenant Compliance
Certificate, duly completed and executed by a Senior Officer of Borrower, (a) to
the effect that no Default has occurred and is continuing (or, if any Default
has occurred and is continuing, describing the same in reasonable detail and
describing the action taken and proposed to be taken with respect thereto) and
(b) setting forth in reasonable detail the computations necessary to determine
whether Borrower is in compliance with Sections 6.11 and 6.12 hereof as of the
end of the respective fiscal quarter or fiscal year.

 

6.2.         Litigation. Borrower will promptly give Bank notice of:

 

6.2.l.     all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceeding, affecting Borrower or
any Guarantor, except proceedings which, if adversely determined, would not have
a material adverse effect on the assets, prospects, business, operations,
financial condition, liabilities or capitalization of Borrower or any Guarantor
or on the ability of Borrower or any Guarantor to perform the obligations
hereunder or under any other Credit Documents or the rights and remedies of Bank
thereunder; or

  

 
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6.2.2.     the issuance by any United States federal or state court or any
United States federal or state regulatory authority of any injunction, order or
other restraint prohibiting, or having the effect of prohibiting or delaying,
the making of Credit Extensions or the institution of any litigation or similar
proceedings seeking any such injunction, order or other restraint.

 

6.3.          Existence, Etc. Borrower and each Guarantor will:

 

6.3.1.     preserve and maintain its corporate existence and, except to the
extent the same would not materially and adversely affect the assets, business,
operations, financial condition, liabilities or capitalization of Borrower and
its subsidiaries, taken as a whole, all of its material rights, privileges and
franchises (provided that nothing in this Section 6.3 shall prohibit any
transaction permitted under Section 6.5 hereof);

 

6.3.2.     comply with the requirements of all applicable laws (including,
without limitation, Environmental Laws), rules, regulations and orders of
Governmental or regulatory authorities if failure to comply with such
requirements would materially and adversely affect the assets, business,
operations, financial condition, liabilities or capitalization of Borrower or
any Guarantor, or the ability of Borrower or any Guarantor to perform its
obligations hereunder or under the other Credit Documents, or the rights or
remedies of Bank thereunder;

 

6.3.3.     pay and discharge all taxes, assessments and governmental charges or
levies imposed on it or on its income or profits or on any of its property prior
to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained;

 

6.3.4.     maintain all of its properties used or useful in its business in good
working order and condition, ordinary wear and tear excepted; and

 

6.3.5.     keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities, and permit representatives of Bank, during normal
business hours and upon reasonable prior notice to Borrower, to examine, copy
and make extracts from its books and records, to inspect its properties, and to
discuss its business and affairs with its officers and independent public
accountants (and by this provision Borrower authorizes said accountants to
discuss the business and affairs of Borrower with such representatives), all to
the extent reasonably requested by Bank; provided that so long as no Default or
Event of Default then exists, such inspections shall be made at the expense of
Bank.

  

 
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6.4.            Insurance.

 

6.4.1.       Borrower will keep insured by financially sound insurers all
property against loss or damage of the kinds and in the amounts listed below:

 

(a)           insurance against loss or damage covering all of the tangible real
and personal property and improvements of Borrower and the Guarantors, by reason
of any Peril (as defined below) with $100,000,000 policy limit, $1,000,000 flood
limit and $5,000,000 earthquake limit.

 

(b)     automobile liability insurance for bodily injury and property damage in
respect of all vehicles (whether owned, hired or rented by Borrower) with a
$1,000,000 combined single limit.

 

(c)     comprehensive general liability insurance against claims for bodily
injury, death or property damage occurring on, in or about such properties with
a $1,000,000 per occurrence limit and a $2,000,000 aggregate, in each case,
naming Bank as additional insured.

 

(d)     workers’ compensation insurance (including employers’ liability
insurance) to the extent required by applicable law.

 

(e)     product liability insurance against claims for bodily injury, death or
property damage resulting from the use of products sold by Borrower with a
$1,000,000 per occurrence limit and a $2,000,000 aggregate, naming Bank as
additional insured.

 

(f)     business interruption insurance against loss of operating income earned
from the operations of Borrower by reason of any Peril (as defined below)
affecting the operation thereof, and insurance against any other insurable loss
of operating income by reason of any business interruption affecting Borrower to
the extent covered by standard ISO business interruption policies, which
insurance shall in each case cover gross earnings (subject to a limit on payment
of payroll expenses of not less than thirty (30) days) by reason of the
particular Peril or other insurable business interruption.

 

All insurance covering tangible property subject to a Lien in favor of Bank
granted pursuant to this Agreement or under any agreement, instrument or
document given as security pursuant hereto shall provide that, in the case of
each separate loss in excess of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) (or, if there shall be existing an Event of Default, of any
amount), the full amount of insurance proceeds with respect thereto shall be
payable to Bank as secured party or otherwise as its interests may appear, to be
applied in accordance with Section 1.3.4 hereof, and shall (i) further provide
for at least thirty (30) days prior written notice to Bank of the cancellation
and (ii) provide that, in respect of the interests of Borrower and Bank in such
insurance, such insurance shall not be invalidated by any such action or
inaction of Borrower or any other Person.

 

 
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For purposes hereof, the term “Peril” shall mean, collectively, fire, lightning,
flood, windstorm, hail, explosion, riot and civil commotion, vandalism and
malicious mischief, damage from aircraft, vehicles and smoke and all other
perils covered by the “special form” endorsement then in effect in any
jurisdiction where any property of Borrower is located.

 

6.4.2.     On the initial Credit Extension Date, Borrower will deliver to Bank
certificates of insurance preapproved by Bank evidencing the existence of all
insurance required to be maintained by Borrower hereunder and showing that such
insurance will be in effect for a period of twelve (12) months from the date
hereof, subject only to the payment of premiums as they become due. Thereafter,
not later than fifteen (15) Banking Days prior to the termination or expiry date
of any such insurance, Borrower shall deliver to Bank certificates of insurance
evidencing that such insurance has been renewed, subject only to the payment of
premiums as they become due. If, in the opinion of Borrower, any of the
insurance which it is required to maintain pursuant to this Section 6.4 is not
available on commercially reasonable terms, Borrower shall so notify Bank and,
with the consent of Bank, may elect not to purchase such insurance.

 

6.5.           Prohibition of Fundamental Changes.

 

6.5.1.     Borrower and each Guarantor will not enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
themselves (or suffer any liquidation or dissolution).

 

6.5.2.     Borrower and each Guarantor will not acquire any business or assets
from, or capital stock or other ownership interests of, or be party to any
acquisition of, any Person except for (a) purchases by Borrower or a Guarantor
of inventory and other assets to be sold or used in the ordinary course of
business, (b) acquisitions of the capital stock, or all or substantially all of
the assets, of one or more third parties to the extent (i) such acquisition
involves the purchase of a YUM! Brands, Inc. brand restaurant operation, (ii)
the aggregate amount of such acquisitions in any twelve (12) month period does
not exceed One Million Dollars ($1,000,000) and (iii) no Default or Event of
Default shall have occurred and be continuing at the time of such acquisition or
(c) Investments permitted under Section 6.8 hereof.

 

6.5.3.     Borrower or a Guarantor will not sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets (including without
limitation, receivables and leasehold interests and the equity interests of the
Guarantors) including without limitation any transfers of assets to Morgan
Restaurant Properties, whether now owned or hereafter acquired, except:

 

(a)     the disposition of obsolete or worn-out personal property, tools or
equipment no longer used or useful in Borrower’s or a Guarantor's business;

 

(b)     the sale of Inventory by Borrower or a Guarantor in the ordinary course
of business; and

  

 
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(c)     Dispositions of Investments otherwise permitted under Section 6.8 hereof
in the ordinary course of business.

 

6.6.         Limitation on Liens. Neither Borrower nor any Guarantor will
create, incur, assume or suffer to exist, any Lien upon any of its property,
assets or revenues (including, without limitation, the property covered by the
Security Documents), whether now owned or hereafter acquired, except the
following (collectively, the “Permitted Liens”):

 

6.6.l.      Liens created by the Credit Documents;

 

6.6.2.     Liens existing on the date hereof and listed on Schedule 6.6 hereto,
provided that no such Lien shall be extended to cover any additional property or
additional Debt and that the amount of Debt secured thereby is not increased;

 

6.6.3.     Liens for taxes, assessments or charges imposed on it or any of its
property by any Governmental authority not yet due or which are being contested
in good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of Borrower, in accordance with GAAP or
Liens for such taxes, assessments or charges which are otherwise permitted under
Section 6.3.3 hereof;

 

6.6.4.     statutory Liens of carriers, warehousemen, mechanics, materialmen,
repairmen, or other like Liens arising in the ordinary course of business, which
are not overdue for a period of more than thirty (30) days or which are being
contested in good faith and by appropriate proceedings;

 

6.6.5.     pledges or deposits required in connection with workers’
compensation, unemployment insurance and other social security legislation;

 

6.6.6.     Liens (other than any Lien imposed by ERISA) incurred on deposits to
secure the performance of tenders, bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and return-of-money bonds and other obligations of a like
nature incurred in the ordinary course of business;

 

6.6.7.     easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business, and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of property or
minor imperfections in title thereto, which, in the aggregate, are not material
in amount, and which do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct of the business
of Borrower, and “Permitted Liens” as defined in the Open-End Mortgages and the
Leasehold Mortgages;

 

6.6.8.     Liens securing loans and Capital Lease Obligations permitted under
Section 6.7.2 hereof;

 

 
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6.6.9.     Liens in favor of customs and revenue authorities arising as a matter
of law and to secure payment of customs duties in connection with the
importation of goods;

 

6.6.10.     Liens securing obligations of Borrower or a Guarantor in respect of
goods purchased for resale in the ordinary course of business as long as no UCC
financing statements are filed concerning such goods;

 

6.6.11. Liens of landlords or mortgagees of landlords on fixtures on premises
leased in the ordinary course of business, provided that the rental payments
secured thereby are not yet due; and

 

6.6.12.     Liens relating to judgments to the extent such judgments do not
result in a Default or Event of Default under Section 7.1.10 hereof.

 

6.7.         Debt. Neither Borrower nor the Guarantors will create, incur or
suffer to exist any Debt except:

 

6.7.1.     Debt of Borrower arising under the Credit Documents;

 

6.7.2.     Capital Lease Obligations or other financing incurred in the ordinary
course of Borrower’s business for the purchase or lease of fixed assets (and any
refinancing thereof) which loans and Capital Lease Obligations are solely
secured by the fixed assets being purchased or leased;

 

6.7.3     intercompany Debt and, to the extent provided in connection with the
payment of Debt otherwise permitted hereunder, Guarantees;

 

6.7.4     Debt existing as of the date hereof set forth on Schedule 6.7.4 (and
refinancings thereof); and

 

6.7.5     Subordinated Debt.

 

6.8.         Investments. Neither Borrower nor the Guarantors will make or
permit to remain outstanding any Investments except (a) operating deposit
accounts with Bank, (b) Investments in Cash Equivalents, (c) Investments
incidental to any acquisition permitted under Section 6.5.2(b) hereof, (d)
investments by Borrower in, or with respect to, any Subsidiaries providing
guarantees pursuant to Section 6.15 hereof including without limitation the
Guarantors, (e) loans, advances or other extensions of credit provided by (i)
the Borrower to any Subsidiaries including without limitation the Guarantors or
(ii) by any Subsidiaries to Borrower or any other Subsidiaries including without
limitation the Guarantors and (f) Guarantees provided by Borrower or any
Subsidiaries for the benefit of Borrower or any other Subsidiaries providing
guarantees permitted under Section 6.15 hereof including without limitation the
Guarantors.

  

 
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6.9.         Permitted Payments. Borrower will not make any Restricted Payment
(as defined below) (a) if at the time of such Restricted Payment a Default or
Event of Default shall have occurred and be continuing and (b) unless Borrower,
prior to making such Restricted Payment, provides Bank with pro-forma covenant
calculations demonstrating, to the reasonable satisfaction of the Bank, that,
after giving effect to such Restricted Payment, Borrower would be in compliance
with the financial covenants set forth in Sections 6.11 or 6.12 hereof.
“Restricted Payment” means any distribution (in cash, property or obligations)
on Company Equity or on Equity Rights relating to any Company Equity, or other
payments or distributions on account of Company Equity or any Equity Rights
relating to any Company Equity, or the setting apart of money for a sinking or
other analogous fund for the purchase, redemption, retirement or other
acquisition of, any shares of any Company Equity or any Equity Rights relating
to any Company Equity.

 

6.10.       Subsidiaries. Borrower will have no Subsidiaries other than the
Guarantors; provided, however, that Borrower may create Subsidiaries in the
future that comply with Section 6.14 hereof.

 

6.11.        Maximum Cash Adjusted Leverage Ratio. As calculated at the end of
each fiscal quarter on a trailing twelve (12) month basis, commencing August 31,
2013, Borrower will not permit the ratio of (a) the sum of Combined Total Funded
Indebtedness (as defined below) minus cash on hand as of the last day of such
quarterly period to (b) Combined EBITDAR (as defined below), to be greater than
the ratio 5.25:1.00.

 

“Combined Total Funded Indebtedness” means the principal balance of the Loans
and Capital Lease Obligations of the Borrower as of the last day of applicable
fiscal quarter plus third-party rental payments made in cash on operating basis
during the measurement period multiplied by eight (8).

 

“Combined EBITDAR” means the EBITDAR (as defined in Section 6.12 below) of
Borrower as determined on a consolidated basis.

 

6.12.        Minimum Fixed Charge Coverage Ratio. As calculated at the end of
each fiscal quarter, on a trailing twelve (12) month basis, commencing August
31, 2013, Borrower will not permit the ratio of (a) EBITDAR (as defined below)
for such period to the sum for such period of (b) CPLTD plus Cash Interest
Charges plus Maintenance Capex plus KFC Required Capex (but only to the extent,
if any, such costs are in excess of the Bank Capex Account) plus rent payments
(including operating lease obligations and Capital Lease Obligations) plus Cash
Distributions paid plus cash taxes paid, to be (i) less than 1.15:1.00 from
August 31, 2013 to May 30, 2015, and (ii) commencing May 31, 2015, and
thereafter to be less than 1.20:1.00.

 

 

“EBITDAR” shall mean the sum, as determined on a consolidated basis of net
income plus rent or lease expense plus Interest Expense, any provision for
federal, state and local income taxes plus all amounts deducted by the Borrower
in determining consolidated net income representing non-cash charges, including
without limitation, depreciation,  amortization and non-cash rent expenses, plus
all amounts deducted by the Borrower in determining consolidated net income
representing non-recurring losses, including fees, costs, charges and other
expenses incurred by such Persons in connection with any discontinued operation,
acquisition (including, but not limited to, the subject acquisition),
reorganization, consolidation, restructuring or changes in accounting treatment
under GAAP, as determined by Bank in its sole discretion, minus all amounts
added by the Borrower in determining consolidated net income representing
non-recurring gains, including as a result of changes in accounting treatment
under GAAP, as determined by Bank in its sole discretion.

  

 
33

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“CPLTD” means scheduled principal payments made on Debt as of the measurement
date for the immediately preceding twelve (12) months, as determined on a
consolidated basis.

 

“Cash Interest Charges” means sum of Interest Expense, as determined on a
consolidated basis.

 

“Maintenance Capex” means Ten Thousand Dollars ($10,000.00) per store site
annually.

 

“KFC Required Capex” means those costs incurred by Borrower and the Subsidiaries
in connection with Upgrade Actions under the Remodel Agreement over the previous
twelve month period.

 

“Bank Capex Account” means the amount in the Controlled Deposit Account which
must be no less than (a) Two Million Five Hundred Thousand Dollars ($2,500,000)
from the date hereof until February 10, 2015, and (b) One Million Dollars
($1,000,000) thereafter.

 

“Cash Dividends” means any amounts paid by the Borrower to its shareholders as
dividends.

 

6.13.        Field Audit. Bank shall have the right to conduct field audits of
Borrower or any Guarantor at its discretion upon at least five (5) Banking Days
prior written notice; provided, however, that, prior to the occurrence and
continuance of an Event of Default, Bank shall not conduct field audits more
often than twice per calendar year. The audit shall cover matters requested by
Bank, including without limitation, Inventory and Accounts. Borrower shall
compensate Bank for each audit in a reasonable amount determined by Bank.
Borrower shall, and shall cause its officers, employees and agents, to
reasonably cooperate with Bank in all examinations and inspections which Bank
may perform from time to time in accordance with the Credit Documents. Bank may,
upon at least five (5) Banking Days prior written notice, use personnel,
supplies and premises of Borrower or any Guarantor (including, without
limitation, all computer hardware and software used by Borrower or any
Guarantor), as may be reasonably necessary for maintaining or enforcing its Lien
in the Collateral, provided that any such use shall not disrupt the ordinary
business operations of Borrower or any Guarantor in any material respect.

 

6.14.        Subsidiary Guaranties. Any Subsidiary of Borrower, whether in
existence on the date hereof or formed or acquired subsequently, shall execute
an unconditional continuing guaranty of the Secured Obligations and deliver such
guaranty to Bank.

 

 
34

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6.15.        Transactions with Affiliates. Except as expressly permitted by this
Agreement, Borrower will not directly or indirectly: (a) make any Investment in
an Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
assets to an Affiliate; (c) merge into or consolidate with or purchase or
acquire assets from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation, guarantees and assumptions of obligations of an Affiliate);
provided that (x) any Affiliate who is an individual may serve as a director,
officer or employee of Borrower and receive reasonable compensation for his or
her services in such capacity, (y) Borrower may enter into transactions (other
than extensions of credit by Borrower to an Affiliate) providing for the leasing
of property, the rendering or receipt of services (including management,
consulting, advisory, monitoring or similar services as described on Schedule
6.15 hereto) or the purchase or sale of inventory and other assets in the
ordinary course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to Borrower as the monetary or
business consideration which would obtain in a comparable transaction with a
Person not an Affiliate and (z) Borrower may execute, deliver and perform
operating leases with any Subsidiaries and any other Subsidiary in the future
that executes a guaranty in accordance with Section 6.14 hereof.

 

6.16.        Franchise.  Borrower and each respective Guarantor shall, subject
to applicable cure periods as therein set forth, comply in all material respects
with its Franchise Agreements.

 

6.17.       Negative Pledge for Warren, PA- Store 039.  As part of the
consideration for the Loan, Morgan’s Restaurants of Pennsylvania, Inc., as fee
simple owner of the real property known as Warren, PA – Store 039, agrees with
the Bank that Morgan’s Restaurants of Pennsylvania, Inc. shall not grant any
security interest in, or mortgage of, any of the real estate and improvements
located in Warren, PA- Store 039.

 

6.18.        Sale and Leaseback.  Borrower will not enter into any arrangement
with any lender or investor or to which such lender or investor is a party
providing for the leasing by Borrower of real and/or personal property that has
been or is to be sold or transferred by Borrower to such lender or investor or
to any Person to whom funds have been or are to be advanced by such lender or
investor or the security of such property or rental obligations of Borrower.

 

6.19.        Subordinated Debt.  Borrower will not purchase, redeem, retire or
otherwise acquire for value or make any payment of the principal of, or
prepayment of interest on, any Subordinated Debt.

 

6.20.       Amendment of Certain Documents.  Neither Borrower nor any Guarantor
will, without the prior written consent of Bank (which consent cannot be
unreasonably withheld), amend or otherwise modify, or consent to any amendment
or other modification of any of the Code of Regulations or By-Laws, or Articles
of Incorporation that would have an adverse impact on the rights of Bank under
the Credit Documents or the ability of Borrower to repay the Loans in accordance
with the terms thereof.

  

 
35

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6.21.        Use of Proceeds. Borrower will use the proceeds of the Loans as
provided in Section 1.3.2, and otherwise in compliance with all applicable legal
and regulatory requirements, including, without limitation, Regulations D, T, U
and X.

 

6.22.        Interest Rate Protection. Borrower shall enter into and maintain
until payment in full of the Loans, one or more Rate Management Agreements, in
form and substance (including, without limitation, the level thereof) reasonably
acceptable to Bank and Borrower, protecting against fluctuations in interest
rates, in an aggregate notional amount of at least one hundred percent (100%) of
the outstanding principal balance under the Term Note. The principal purpose of
any such Rate Management Agreements shall be to provide Borrower with protection
from fluctuations and other changes in interest rates and not for speculative
purposes.

 

6.23.        Controlled Deposit Account. Borrow shall maintain a daily balance
in the Controlled Deposit Account of at least (a) Two Million Five Hundred
Thousand Dollars ($2,500,000.00) at all times through February 10, 2015 and (b)
One Million Dollars ($1,000,000) at all times thereafter.

 

6.24.        Real Property for Sale. Borrower shall pay to Bank at the closing
of the sale of each Real Property for Sale, in cash or immediately available
funds, an amount equal one hundred percent (100%) of the Net Proceeds received
by Borrower for the sale of such Real Property for Sale. The Net Proceeds shall
then be applied against the outstanding principal balance of the Time Note. If
at the time of the closing on the sale of a Real Property for Sale, there is no
outstanding principal or interest balance on the Time Note, and the net sale
proceeds are greater than Five Hundred Thousand Dollars ($500,000.00), then Bank
may require Borrower to pay to Bank, in cash or immediately available funds, an
amount equal to one hundred percent (100%) of the net sale proceeds received by
Borrower for the sale of such Real Property for Sale and such net sale proceeds
shall be applied against the outstanding principal balance owed by Borrower to
Bank under the Term Note.

 

6.25.        Morgan’s Restaurant Properties. Borrower shall dissolve Morgan’s
Restaurant Properties within one hundred eighty (180) days after the date of
this Agreement.

 

6.26.        McKeesport-Store 056. Within one hundred twenty (120) days after
the date of this Agreement, Borrower shall sell the real property owned in fee
simple by Borrower or a Guarantor located at 740 Lysle Boulevard, McKeesport,
PA. If Borrower fails to sell the real property located at 740 Lysle Boulevard,
McKeesport, PA within such one hundred twenty (120) day period, Borrower agrees
to execute an Open-End Mortgage, Assignment of Rents and Leases and Security
Agreement which will encumber such property as security for the repayment of the
Loans.

 

6.27.      Remodel Agreement. If the Remodel Agreement is amended, modified or
supplemented, the Borrower shall deliver to the Bank such amended, modified or
supplemented Remodel Agreement within ten (10) days of amendment, modification,
or supplementation.

  

 
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Section 7.              Events of Default.

 

7.1.    Events of Default and Remedies. If one or more of the following events
(herein individually, an “Event of Default” collectively, “Events of Default”)
shall occur and be continuing:

 

7.1.1.     Borrower shall default in the payment when due of any principal of
the Loans, and such default shall continue unremedied for a period of ten (10)
days after notice thereof to any of Borrower by Bank; or

 

7.1.2.     Borrower shall default in the payment when due of interest on any
Loan or any fee or other amount payable by it under any Credit Document, and
such default shall continue unremedied for a period of ten (10) Banking Days
after notice thereof to Borrower by Bank; or

 

7.1.3.     Any representation, warranty or certification made in any
certificate, document or other written statement by Borrower furnished to Bank
pursuant to the provisions thereof, shall prove to have been false or misleading
as of the time made or deemed made in any material respect; or

 

7.1.4.     Borrower or a Guarantor shall default in the performance of any of
its obligations under Sections 6.1.5, 6.1.6, 6.1.8, 6.3.1, 6.5 through 6.21
(inclusive); or Borrower or a Guarantor shall default in the performance of any
of its other obligations in this Agreement and such default shall continue
unremedied for a period of thirty (30) days following the occurrence thereof (in
the case of a default under any of Borrower’s obligations under Sections 6.1.1
or 6.1.2), or thirty (30) days after notice thereof to Borrower by Bank in any
other case; or

 

7.1.5.     Borrower or a Guarantor shall default in the performance of any of
its obligations under any of the Credit Documents (other than this Agreement)
after giving effect to any applicable grace period; or

 

7.1.6.     Borrower shall default in the payment when due of principal of or
interest on any of its other Debt aggregating One Hundred Fifty Thousand Dollars
($150,000) or more beyond the applicable grace period, or any event specified in
any note, agreement, indenture or other document evidencing or relating to any
such Debt shall occur if, as a result of such event, the holder or holders of
such Debt (or a trustee or agent on behalf of such holder or holders) elect to
accelerate or cause such Debt to become due prior to its stated maturity; or

 

7.1.7.     Borrower or a Guarantor shall admit in writing its inability to, or
be generally unable to, pay its debts as such debts become due; or

 

 
37

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7.1.8.     Borrower or a Guarantor shall (a) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (b)
make a general assignment for the benefit of its creditors, (c) commence a
voluntary case under Bankruptcy Code (as now or hereafter in effect), (d) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or readjustment of debts,
(e) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under
Bankruptcy Code, or (f) take any corporate action for the purpose of effecting
any of the foregoing; or

 

7.1.9.     A proceeding or case shall be commenced, without the application or
consent of Borrower or a Guarantor, in any court of competent jurisdiction,
seeking (a) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (b) the appointment of a trustee,
receiver, custodian, liquidator or the like of Borrower or all or any
substantial part of its assets, or (c) similar relief in respect of Borrower
under any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
sixty (60) or more days; or an order for relief against Borrower shall be
entered in an insolvency case under Bankruptcy Code; or

 

7.1.10.   A final judgment or judgments for the payment of money in excess of
One Hundred Fifty Thousand Dollars ($150,000) in the aggregate shall be rendered
by a court or courts against Borrower and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within sixty (60) days from the date of entry thereof and
Borrower shall not, within said period of sixty (60) days, or such longer period
during which execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or

 

7.1.11.   Borrower shall default in the performance of any of its obligations
with respect to any Plan or Multiemployer Plan and, as a result of such event or
condition, together with all other such events or conditions, Borrower or any
ERISA Affiliate shall incur or in the opinion of Bank shall be reasonably likely
to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination
of the foregoing) which is, in the determination of Bank, material in relation
to the financial condition, operations, business or prospects taken as a whole
of Borrower; or

 

7.1.12.    The Liens created by the Security Agreements or the Control Agreement
shall at any time not constitute a valid and perfected Lien on the collateral
described therein (to the extent perfection by filing, registration, recordation
or possession is required herein or therein) in favor of Bank, free and clear of
all other Liens (other than Permitted Liens), or any of the Security Documents
shall at any time cease to be in full force and effect or shall be declared null
and void or the validity or enforceability thereof shall be contested by
Borrower; or

 

7.1.13.    The dissolution of Borrower or any Guarantor; or

 

7.1.14.    The occurrence or existence of any default, event of default or other
similar condition or event (however described) with respect to Rate Management
Transactions; or

  

 
38

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7.1.15.    Borrower fails to comply with or to perform any term, obligation,
covenant or condition contained in any Rate Management Agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement
between Borrower and Bank.

 

7.1.16.    James Pappas and Jefferson P. Gramm fail to beneficially own, on a
combined basis, at least 75% of the shares of the Borrower currently held by
them as set forth in Section 5.14.

 

7.1.17.    James Pappas is no longer a member of the board of directors of
Borrower.

 

7.1.18.    Any executive officer of the Borrower is replaced; provided, however,
that no Event of Default shall occur if the Borrower gives the Bank notification
of the fact that an executive officer will be replaced at least two Banking Days
prior to the actual replacement of the executive officer.

 

THEREUPON, (a) in the case of an Event of Default (other than an Event of
Default referred to in Sections 7.1.8 or 7.1.9), Bank may, by notice to
Borrower, declare the principal owing under and the accrued interest on the
Loans, and all other amounts payable by Borrower hereunder and under the Notes
(including, without limitation, any amounts payable under Sections 2.5 and 3.5
hereof) to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by Borrower;
and (b) in the case of the occurrence of an Event of Default referred to in
Sections 7.1.8 or 7.1.9, the Loans and all other amounts payable by Borrower
hereunder and under the Notes (including, without limitation, any amounts
payable under Sections 2.5 and 3.5 hereof) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by Borrower.

 

 

Section 8.              Miscellaneous.

 

 

8.1.    Waiver. No failure on the part of Bank to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement or the Notes shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
this Agreement or the Notes operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement or the
Notes preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative and
not exclusive of any remedies provided by applicable law.

  

 
39

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8.2.    Notices. Except as otherwise expressly provided herein, all notices and
other communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made by fax, cable or in writing and faxed, cabled, mailed or delivered to
the intended recipient at the “Address for Notices” specified below its name on
the signature pages hereof or, as to any party, at such other address as shall
be designated by such party in a notice to the other party. Except as otherwise
expressly provided herein, all such communications shall be deemed to have been
duly given when transmitted by fax, delivered to the cable office or personally
delivered or, in the case of a mail notice, upon receipt, in each case given or
addressed as aforesaid.

 

8.3.    Expenses, Etc. Borrower agrees to pay or reimburse Bank for: (a) all
reasonable out-of-pocket costs and expenses of Bank (including, without
limitation, the reasonable fees and expenses of counsel to Bank, which such
legal fees shall be supported by a detailed time analysis reflecting the
identity of the working attorney or paralegal, its respective billing rates, the
amount of time billed and a description of the activity undertaken), in
connection with (i) the negotiation, preparation, execution and delivery of this
Agreement and the other Credit Documents and the extensions of credit provided
for hereby and (ii) any amendment, modification or waiver (whether made
effective or proposed) of any of the terms of this Agreement or any of the other
Credit Documents; (b) all costs and expenses of Bank (including reasonable
counsel fees and disbursements) in connection with any Event of Default and any
enforcement or collection proceeding resulting therefrom; and (c) all transfer,
stamp, documentary or other similar taxes, assessments or charges levied by any
Governmental or revenue authority in respect of this Agreement or any of the
other Credit Documents or any other document referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred in connection
with any filing or registration regarding such Loans.

 

8.4.   Survival. The obligation of Borrower under Section 8.3 hereof shall
survive the repayment of the Loans and the termination for the Loan Commitments.

 

8.5.    Captions. The captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of either provision of this Agreement.

 

8.6.    Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, taken together,
shall constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart. Delivery of an executed
counterpart to this Agreement or any other Credit Document by facsimile
transmission or by electronic mail in pdf form shall be as effective as delivery
of a manually executed counterpart hereof or thereof.

 

8.7.    Governing Law: Submission to Jurisdiction; Waiver of Jury Trial. This
Agreement and the Notes shall be governed by, and construed in accordance with,
the law of the State of Ohio. Borrower hereby submits to the exclusive
jurisdiction of the United States District Court for the Northern District of
Ohio and of any Ohio state court sitting in Cleveland, Ohio for the purposes of
all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Borrower irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum. Borrower and Bank hereby irrevocably waives, to the fullest
extent permitted by law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.

  

 
40

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8.8.    Entire Agreement. The Credit Documents set forth the entire
understanding between the parties concerning the subject matter thereof and
incorporate all prior negotiations and understandings. There are no covenants,
promises, agreements, conditions or understandings, either oral or written,
between them relating to the subject matter of the Agreement other than those
set forth in the Credit Documents. No representation or warranty has been made
by or on behalf of either party to the Agreement (or any officer, director,
employee or agent thereof) to induce the other party to enter into the Agreement
or to abide by or consummate any transactions contemplated by any term of the
Agreement, except representations and warranties, if any, expressly set forth or
referred to in the Credit Documents. Nothing expressed or implied in any of the
Credit Documents is intended or shall be construed to confer upon or give any
Person other than the parties hereto and its successors or assigns, any rights
or remedies under or by reason of the Credit Documents.

 

8.9.    Modification. No amendment, modification, termination, or waiver of any
provision of the Credit Documents or any agreement or document contemplated
herein, nor consent to any departure by Borrower herefrom or therefrom, shall in
any event be effective unless the same shall be in writing and signed by Bank,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No notice to or demand on Borrower
in any case shall entitle Borrower to any other or further notice or demand in
similar or other circumstances.

 

8.10.   Enforceability. Any provision of the Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.

 

8.11.   [RESERVED]

 

8.12.   USA Patriot Act Notice. Bank subject to the USA Patriot Act hereby
notifies Borrower that pursuant to the requirements of the USA Patriot Act, it
is required to obtain, verify and record information that identifies Borrower,
which information includes the name and address of Borrower and other
information that will allow Bank to identify Borrower in accordance with the USA
Patriot Act.

 

 

[Signature Page Follows.]

 

 
41

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

 

THE HUNTINGTON NATIONAL BANK

 

   

 

 

   

 

 

By:  

/s/ Scott E. Obers

 

Name:  

Scott E. Obers

 

Its:  

Vice President

 

   

 

 

Address for Notices:

 

   

 

 

41 South High Street

 

Columbus, OH 43215

 

Attention: Scott E. Obers

 

Telephone: 614.480.4734

 

   

 

 

   

 

 

   

 

 

Morgan’s Foods, Inc.

 

   

 

 

By:  

/s/ James Ligouri

 

Name:    James Ligouri

 

Its:    James Ligouri

 

   

 

 

   

 

 

Address for Notices:

         

4829 Galaxy Parkway, Suite S

 

Cleveland, OH 44128

 

          

 

Loan Agreement Signature Page

 

 
42

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Guarantors:

 

Morgan’s Tacos of Pennsylvania, Inc.

 

Morgan’s Restaurants of Ohio, Inc.

 

 

 

 

 

By:

/s/ James Ligouri

 

By:

/s/ James Ligouri

Name:

James Ligouri

 

Name:

James Ligouri

Its:

President and Chief Executive Officer

 

Its:

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morgan’s Restaurants of Pennsylvania, Inc.

 

Morgan’s Restaurants of West Virginia, Inc.

 

 

 

 

 

By:

/s/ James Ligouri

 

By:

/s/ James Ligouri

Name:

James Ligouri

 

Name:

James Ligouri

Its: 

President and Chief Executive Officer

 

Its:

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morgan’s Foods of Missouri, Inc.

 

Morgan’s Restaurants of New York, Inc.

 

 

 

 

 

By:

/s/ James Ligouri

 

By:

/s/ James Ligouri

Name:

James Ligouri

 

Name:

James Ligouri

Its:

President and Chief Executive Officer

 

Its:

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan Agreement Signature Page

 

 

 
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EXHIBIT LIST

 

Exhibit 2.2

Term Note and Amortization Schedule

Exhibit 3.2

Time Note

Exhibit 6.1.1

Covenant Compliance Certificate

 

 

 

SCHEDULE LIST

 

Schedule 1.1A

Ground Leased Real Property

Schedule 1.1B

Owned Real Property

Schedule 1.1C

Real Property for Sale

Schedule 1.1D

Land and Building Real Property

Schedule 5.6

Approvals

Schedule 5.14

Company Equity Holders

Schedule 5.21

Franchise Agreements

Schedule 6.6

Permitted Liens

Schedule 6.7.4

Debt

Schedule 6.15

Transactions with Affiliates

  

 

 
44

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EXHIBIT 2.2

TERM PROMISSORY NOTE 

   

 

 Cleveland, Ohio

$7,930,000.00

August 22, 2013

     

FOR VALUE RECEIVED, on or before August 10, 2016, MORGAN’S FOODS, INC., an Ohio
corporation (the “Borrower”), hereby promises to pay to the order of THE
HUNTINGTON NATIONAL BANK, a national banking association (the “Bank”), at the
principal office of the Bank at 41 South High Street, Columbus, Ohio 43215, the
principal sum of Seven Million Nine Hundred Thirty Thousand Dollars
($7,930,000.00), with interest as herein provided, in lawful money of the United
States of America and in immediately available funds in the respective principal
amounts and on the dates provided below.

 

Section 1.   Loan Agreement.  This Term Promissory Note (the “Term Note”) is the
Term Note referred to in the Loan Agreement dated as of the date hereof (the
“Agreement”) between the Borrower and the Bank, as the same may be amended,
modified or supplemented from time to time, which Agreement, as amended, is
incorporated by reference herein. All capitalized terms used in this Term Note
shall have the same meanings as are assigned to such terms in the Agreement.
This Term Note is entitled to the benefits of and is subject to the terms,
conditions and provisions of the Agreement. The Agreement, among other things,
contains provisions for the acceleration of the maturity hereof upon the
happening of certain stated events.

 

Section 2.   Principal Payments.  The Borrower will pay to the Bank the full
outstanding principal amount of this Term Note pursuant to the Amortization
Schedule attached hereto as Exhibit A, on each Principal Payment Date provided,
however, that principal may be required to be paid earlier pursuant to Section
6.24 of the Agreement. Principal amounts of this Term Note once repaid or
prepaid may not be re-borrowed. Subject otherwise to the terms and conditions of
the Agreement, the outstanding principal balance of this Term Note may be
prepaid at any time, in whole or part, without premium or penalty.

 

Section 3.   Interest.  The outstanding principal balance of this Term Note
shall bear interest at a rate per annum, equal to the LIBOR Interest Rate plus
the Applicable Margin. Under no circumstances will the rate of interest
applicable to this Term Note be more than the maximum rate allowed by applicable
law.

 

This Term Promissory Note was executed on the date and year first set forth
above.

 

MORGAN’S FOODS, INC.

 

 

 

 

By:

/s/ James Ligouri 

 

Title:

James Ligouri

 

Its:

President and Chief Executive Officer

 

  

 
45

--------------------------------------------------------------------------------

 

 

EXHIBIT A

AMORTIZATION SCHEDULE

Morgan's Foods, Inc. Amortization Schedule

Beg. Date

End Date

Month

Principal

Period End

Principal

Payment

8/27/2013

9/10/2013

1

           7,930,000.00

                 66,113.34

9/10/2013

10/10/2013

2

           7,863,886.66

                 66,413.06

10/10/2013

11/10/2013

3

           7,797,473.60

                 66,714.13

11/10/2013

12/10/2013

4

           7,730,759.47

                 67,016.57

12/10/2013

1/10/2014

5

           7,663,742.90

 67,320.37

1/10/2014

2/10/2014

6

           7,596,422.53

                 67,625.56

2/10/2014

3/10/2014

7

           7,528,796.97

                 67,932.13

3/10/2014

4/10/2014

8

           7,460,864.84

                 68,240.09

4/10/2014

5/10/2014

9

           7,392,624.75

                 68,549.44

5/10/2014

6/10/2014

10

           7,324,075.31

                 68,860.20

6/10/2014

7/10/2014

11

           7,255,215.11

                 69,172.37

7/10/2014

8/10/2014

12

           7,186,042.74

                 69,485.95

8/10/2014

9/10/2014

13

           7,116,556.79

                 69,800.95

9/10/2014

10/10/2014

14

           7,046,755.84

                 70,117.38

10/10/2014

11/10/2014

15

           6,976,638.46

  70,435.25

11/10/2014

12/10/2014

16

           6,906,203.21

                 70,754.55

12/10/2014

1/10/2015

17

           6,835,448.66

                 71,075.31

1/10/2015

2/10/2015

18

           6,764,373.35

                 71,397.52

2/10/2015

3/10/2015

19

           6,692,975.83

                 71,721.18

3/10/2015

4/10/2015

20

           6,621,254.65

                 72,046.32

4/10/2015

5/10/2015

21

           6,549,208.33

                 72,372.93

5/10/2015

6/10/2015

22

 6,476,835.40

                 72,701.02

6/10/2015

7/10/2015

23

           6,404,134.38

                 73,030.60

7/10/2015

8/10/2015

24

           6,331,103.78

                 73,361.67

8/10/2015

9/10/2015

25

           6,257,742.11

       73,694.24

9/10/2015

10/10/2015

26

           6,184,047.87

                 74,028.32

10/10/2015

11/10/2015

27

           6,110,019.55

                 74,363.92

11/10/2015

12/10/2015

28

           6,035,655.63

                 74,701.04

12/10/2015

1/10/2016

29

           5,960,954.59

                 75,039.68

1/10/2016

2/10/2016

30

           5,885,914.91

                 75,379.86

2/10/2016

3/10/2016

31

           5,810,535.05

                 75,721.58

3/10/2016

4/10/2016

32

         5,734,813.47

                 76,064.85

4/10/2016

5/10/2016

33

           5,658,748.62

                 76,409.68

5/10/2016

6/10/2016

34

           5,582,338.94

                 76,756.07

6/10/2016

7/10/2016

35

           5,505,582.87

               77,104.03

7/10/2016

8/10/2016

36

           5,428,478.84

           5,428,478.84

 

 
46

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EXHIBIT 3.2

TIME PROMISSORY NOTE 

   

 

 Cleveland, Ohio

$1,000,000.00

August 22, 2013

 

FOR VALUE RECEIVED, on or before February 10, 2015 (the “Maturity Date”),
MORGAN’S FOODS, INC., an Ohio corporation (the “Borrower”), hereby promises to
pay to the order of THE HUNTINGTON NATIONAL BANK, a national banking association
(the “Bank”), at the principal office of the Bank at 41 South High Street,
Columbus, Ohio 43215, the principal sum of One Million Dollars ($1,000,000.00),
with interest as herein provided, in lawful money of the United States of
America and in immediately available funds in the respective principal amounts
and on the dates provided below.

 

Section 1.   Loan Agreement.  This Time Promissory Note (the “Time Note”) is the
Time Note referred to in the Loan Agreement dated as of the date hereof (the
“Agreement”), between the Borrower and the Bank, as the same may be amended,
modified or supplemented from time to time, which Agreement, as amended, is
incorporated by reference herein. All capitalized terms used in this Time Note
shall have the same meanings as are assigned to such terms in the Agreement.
This Time Note is entitled to the benefits of and is subject to the terms,
conditions and provisions of the Agreement. The Agreement, among other things,
contains provisions for the acceleration of the maturity hereof upon the
happening of certain stated events.

 

Section 2.   Principal Payments.  The Borrower will pay to the Bank the full
outstanding principal amount of this Time Note in a single lump-sum installment
on the Maturity Date; provided however, that principal may be required to be
paid earlier pursuant to Section 6.24 of the Agreement. Principal amounts of
this Time Note once repaid or prepaid may not be re-borrowed. Subject otherwise
to the terms and conditions of the Agreement, the outstanding principal balance
of this Time Note may be prepaid at any time, in whole or part, without premium
or penalty.

 

Section 3.   Interest.  The outstanding principal balance of this Time Note
shall bear interest at a rate per annum, equal to the LIBOR Interest Rate plus
the Applicable Margin. Under no circumstances will the rate of interest
applicable to this Time Note be more than the maximum rate allowed by applicable
law.

 

This Time Promissory Note was executed on the date and year first set forth
above.

 

 

MORGAN’S FOODS, INC.

 

 

 

 

By:

/s/ James Ligouri 

 

Title:

James Ligouri

 

Its:

President and Chief Executive Officer

 

 
47

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EXHIBIT 6.1.1

COVENANT COMPLIANCE CERTIFICATE

 [pic1.jpg]

 

 
48

--------------------------------------------------------------------------------

 

 

SCHEDULE 1.1A

GROUND LEASED REAL PROPERTY

 

Store No.

Name

Street Address

Ground Lessee

MF1 006

Butler

212 New Castle Road, Butler, PA 16001

Morgan's Restaurants of Pennsylvania, Inc.

MF1 031

Latrobe

590 Latrobe Thirty Plaza, Latrobe, PA 15650

Morgan's Restaurants of Pennsylvania, Inc.

MF1 032

Belle Vernon

865 Rostraver Road, Belle Vernon, PA 15012

Morgan's Restaurants of Pennsylvania, Inc.

MF1 035

Greensburg

5299 Route 30, Greensburg, PA 15601

Morgan's Restaurants of Pennsylvania, Inc.

MF1 038

Buffalo Road

4410 Buffalo Road, Erie, PA 16510

Morgan's Restaurants of Pennsylvania, Inc.

MF1 063

Pinecreek

9797 McKnight Road, Pittsburgh, PA 15237

Morgan's Restaurants of Pennsylvania, Inc.

MF1 068

Monroeville

3770 Penn Highway, Monroeville, PA 15146

Morgan's Restaurants of Pennsylvania, Inc.

MF1 069

Baum Boulevard

4915 Baum Boulevard, Pittsburgh, PA 15213

Morgan's Restaurants of Pennsylvania, Inc.

MF1 074

Wilkinsburg

509 Penn Avenue, Pittsburgh, PA 15221

Morgan's Restaurants of Pennsylvania, Inc.

MF1 332

Manchester

101 S. Weidman Road, Manchester, MO 63011

Morgan's Foods of

Missouri, Inc.

MF1 376

Edgewood

1603 Braddock Avenue, Edgewood, Pa 15218

Morgan's Restaurants of Pennsylvania, Inc.

MF1 380

Moraine Plaza

102 Moraine Pointe Plaza, Butler, PA 16001

Morgan's Restaurants of Pennsylvania, Inc.

MF1 381

Monaca

3948 Brodhead Road, Monaca, PA 15061

Morgan's Restaurants of Pennsylvania, Inc.

MF1 382

Elwood Road

2613 Ellwood Road, New Castle, PA 16101

Morgan's Restaurants of Pennsylvania, Inc.

MF1 384

Beaver Falls

2666 Constitution Boulevard, Beaver Falls, PA 15010

Morgan's Restaurants of Pennsylvania, Inc.

MF1 385

Kensington

2435 Freeport Road, Kensington, PA 15068

Morgan's Restaurants of Pennsylvania, Inc.

MF1 386

Water Works

825 Freeport Road, Pittsburgh, PA 15238

Morgan's Restaurants of Pennsylvania, Inc.

 

 

 

 
49

--------------------------------------------------------------------------------

 

 

SCHEDULE 1.1B

OWNED REAL PROPERTY

 

Store No.

Name

Street Address

Fee Simple Owner

MF1 012

Belpre

2500 Washington Blvd., Belpre, OH 45714

Morgan’s Restaurants of

Ohio, Inc.

MF1 322

Ferguson

219 N. Florissant, Ferguson, MO 63011

Morgan’s Foods of

Missouri, Inc.

MF1 378

Gibsonia

100 Northtowne Square, Gibsonia, PA 15044

Morgan’s Restaurants of

Pennsylvania, Inc.

 

 

 
50

--------------------------------------------------------------------------------

 

 

SCHEDULE 1.1C

REAL PROPERTY FOR SALE

 

 

Store No.

Name

Street Address

Fee Simple

Owner

MF1 331

Ballwin

Ballwin, MO

Morgan’s Foods of Missouri, Inc.

MF1 039

Warren

Warren, PA

Morgan’s Restaurants of Pennsylvania, Inc.

MFI 056

McKeesport

740 Lysle Blvd., Pittsburgh, PA

Morgan’s Restaurants of Pennsylvania, Inc.

MF1 052

Bethel Park

1031 Paxton Drive, Bethel Park, PA 15102

Morgan’s Restaurants of Pennsylvania, Inc.

MF1 060

Bridgeville

1098-A Washington Avenue, Bridgeville, PA 15017

Morgan’s Restaurants of Pennsylvania, Inc.

MF1 090

Jamestown

Jamestown, NY

Morgan’s Restaurants of New York, Inc.

 

 

 
51

--------------------------------------------------------------------------------

 

 

SCHEDULE 1.1D

LAND AND BUILDING REAL PROPERTY

 

Store

No.

Name

Street Address

Lessee

MF1 001

Boardman East

6636 South Avenue, Youngstown, OH 44512

Morgan’s Restaurants

of Ohio, Inc.

MF1 002

Calcutta

15644 St. Rt. 170, Calcutta, OH 43920

Morgan’s Restaurants

of Ohio, Inc.

MF1 004

Belmont

3717 Belmont Avenue, Youngstown, OH 44505

Morgan’s Restaurants

of Ohio, Inc.

MF1 007

Sharon

100 S. Hermitage Road, Hermitage, PA 16148

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 008

Austintown

4642 Mahoning Avenue, Youngstown, OH 44515

Morgan’s Restaurants

of Ohio, Inc.

MF1 009

Ashtabula

3100 N. Ridge Road East, Ashtabula, OH 44004

Morgan’s Restaurants

of Ohio, Inc.

MF1 014

Elm Rd

3445 Elm Road, Warren, OH 44483

Morgan’s Restaurants

of Ohio, Inc.

MF1 015

Allison Pk

4673 William Flynn Highway, Allison Park, PA 15101

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 016

Alliance

825 East State Street, Alliance, OH 44601

Morgan’s Restaurants

of Ohio, Inc.

MF1 017

Marietta

401 Greene Street, Marietta, OH 45750

Morgan’s Restaurants

of Ohio, Inc.

MF1 023

Salem

156 North Lincoln Avenue, Salem, OH 44460

Morgan’s Restaurants

of Ohio, Inc.

MF1 025

Weirton

4015 Main Street, Weirton, WV 26062

Morgan’s Restaurants

of West Virginia, Inc.

MF1 028

Steubenville

4187 Sunset Boulevard, Steubenville, OH 43952

Morgan’s Restaurants

of Ohio, Inc.

MF1 030

Irwin

9390 Route 30, Irwin, PA 15642

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 033

Canonsburg

109 Cavasina Drive, Canonsburg, PA 15317

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 036

12th Street

2656 W. 12th Street, Erie, PA 16505

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 041

Murrysville

4400 William Penn Highway, Murrysville, PA 15668

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 042

Niles

5684 Warren-Youngstown Road, Niles, OH 44446

Morgan’s Restaurants

of Ohio, Inc.

MF1 044

Peach

5933 Peach Street, Erie, PA 16509

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 045

Parade

1116 Parade Street, Erie, PA 16503

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 048

Cornersburg

3299 Canfield Road, Youngstown, OH 44511

Morgan’s Restaurants

of Ohio, Inc.

MF1 050

Coraopolis

6901 University Boulevard, Moon Township, PA 15108

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 051

Whitehall

5130 Clairton Boulevard, Pittsburgh, PA 15236

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 053

Carrick

1100 Brownsville Road, Pittsburgh, PA 15210

Morgan’s Restaurants

of Pennsylvania, Inc.

  

 
52

--------------------------------------------------------------------------------

 

 

Store

No.

Name

Street Address

Lessee

MF1 055

Homestead

222 West 8th Avenue, Homestead, PA 15120

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 059

Bellevue

4306 Ohio River Boulevard, Pittsburgh, PA 15202

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 061

Harmarville

1 Landings Drive, Pittsburgh, PA 15238

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 064

Rt. 60 / Robinson

6190 Steubenville Pike, McKeesrock, PA 15136

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 065

West View

804 W. View Park Drive, West View, PA 15229

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 066

Braddock Hills

278 Yost Boulevard, Pittsburgh, PA 15221

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 073

Penn Hills

210 Rodi Road, Pittsburgh, PA 15235

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 075

Wilmington Rd

2407 Wilmington Road, New Castle, PA 16105

Morgan’s Restaurants

of Pennsylvania, Inc.

MF1 091

Lakewood

270 E. Fairmount Avenue, Lakewood, NY 14750

Morgan’s Restaurants

of New York, Inc.

MF1 305

S Grand

3517 South Grand, St. Louis, MO 63118

Morgan’s Foods of

Missouri, Inc.

MF1 310

Granite City

1510 Johnson Road, Granite City, IL 62040

Morgan’s Foods of

Missouri, Inc.

MF1 315

Delmar

5020 Delmar, St. Louis, MO 63108

Morgan’s Foods of

Missouri, Inc.

MF1 318

Page

10557 Page, St. Louis, MO 63132

Morgan’s Foods of

Missouri, Inc.

MF1 324

Farmington

Highway 32, Route 67, Farmington, MO 63640

Morgan’s Foods of

Missouri, Inc.

MF1 325

Leadington

# 3 Chat Road, Leadington, MO 63601

Morgan’s Foods of

Missouri, Inc.

MF1 350

7th Street Parkersburg

930 Seventh Street, Parkersburg, WV 26101

Morgan’s Restaurants

of West Virginia, Inc.

MF1 351

Benwood

207 Marshall Street, Benwood, WV 26031

Morgan’s Restaurants

of West Virginia, Inc.

MF1 352

Moundsville

122 N. Lafayette Avenue, Moundsville, WV 26041

Morgan’s Restaurants

of West Virginia, Inc.

MF1 353

New Martinsville

210 N. State Route 2, New Martinsville, WV 26041

Morgan’s Restaurants

of West Virginia, Inc.

MF1 354

Traffic Circle

2604 Ohio Avenue, Parkersburg, WV 26101

Morgan’s Restaurants

of West Virginia, Inc.

MF1 355

Washington

120 Murtland Avenue, Washington, PA 15301

Morgan’s Tacos of

Pennsylvania, Inc.

MF1 356

Wheeling

120 Zane Street, Wheeling, WV 26003

Morgan’s Restaurants

of West Virginia, Inc.

MF1 379

Kittanning

14 Hilltop Plaza, Kittanning, PA 16201

Morgan’s Tacos of

Pennsylvania, Inc.

 

 
53

--------------------------------------------------------------------------------

 

 

SCHEDULE 5.6

APPROVALS

 

The Leasehold Mortgages in favor of the Bank may require consents from the
lessors of the Ground Leased Real Property.

 

 
54

--------------------------------------------------------------------------------

 

 

SCHEDULE 5.14

COMPANY EQUITY HOLDERS

 

Name:  

Shares:

Jefferson Gramm

1,052,250

 

 

James Pappas

486,972

 

                                         

                     

 
55

--------------------------------------------------------------------------------

 

 

SCHEDULE 5.21

FRANCHISE AGREEMENTS

Kentucky Fried Chicken Franchise Agreements with KFC Corporation:

Store
No.

City

State

Date

Franchisee

Amendments

001

Youngstown

OH

September 9, 1998

Morgan’s Restaurants of Ohio, Inc.

 

002

Calcutta

OH

May 4, 1999

Morgan’s Restaurants of Ohio, Inc.

 

004

Belmont

OH

June 13, 1997

Morgan’s Restaurants of Ohio, Inc.

as amended by First Amendment to Early Renewal Agreement dated June 6, 2008, as
further amended by Address Amendment dated November 5, 2008.

006

Butler

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

 

007

Hermitage

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

as amended by Address Amendment dated January 23, 2008

008

Austintown

OH

June 13, 1997

Morgan’s Restaurants of Ohio, Inc.

as amended by Address Amendment dated July 29, 1999

009

Astabula

OH

July 24, 1998

Morgan’s Restaurants of Ohio, Inc.

as amended by Second Amendment dated March 20, 2009

012

Belpre

OH

July 13, 1999

Morgan’s Restaurants of Ohio, Inc.

 

014

Warren

OH

June 13, 1997

Morgan’s Restaurants of Ohio, Inc.

 

015

Allison Park

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

 

016

Alliance

OH

June 13, 1997

Morgan’s Restaurants of Ohio, Inc.

 

017

Marietta

OH

July 13, 1999

Morgan’s Restaurants of Ohio, Inc.

 

023

Salem

OH

June 13, 1997

Morgan’s Restaurants of Ohio, Inc.

 

025

Weirton

WV

June 13, 1997

Morgan’s Restaurants of West Virginia, Inc. (f/k/a Morgan’s Weirton Foods, Inc.)

 

028

Steubenville

OH

June 13, 1997

Morgan’s Restaurants of Ohio, Inc.

as amended by Address Amendment dated August 27, 1997

  

 
56

--------------------------------------------------------------------------------

 

 

Store
No.

City

State

Date

Franchisee

Amendments

030

Irwin

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

 

031

Latrobe

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

 

032

Belle Vernon

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

 

033

Canonsburg

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

as amended by Amendment to Franchise Agreement dated ________, 1997.

034

Waynesburg

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

 

035

Greensburg

PA

July 11, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

 

036

Erie
(12th. St.)

PA

July 28, 1997

GRNN, Inc.

as assumed by Morgan’s Restaurants of Pennsylvania, Inc. pursuant to Assignment
of Franchise and Release dated July 24, 1998.

038

Erie
(Buffalo Rd.)

PA

July 28, 1997

GRNN, Inc.

[as assumed by Morgan’s Restaurants of Pennsylvania, Inc. pursuant to Assignment
of Franchise and Release dated July 24, 1998.]

041

Murrysville

PA

June 13, 1997

Morgan’s Restaurants of Pennsylvania, Inc.

 

042

Niles

OH

June 13, 1997

Morgan’s Restaurants of Ohio, Inc.

 

044

Erie

PA

November 6, 1997

Willomel, Inc.

as assumed by Morgan’s Restaurants of Pennsylvania pursuant to Assignment of
Franchise and Release dated [August 13, 1999]; amended by Address Amendment
dated August 31, 1999

045

Erie

PA

September 23, 1997

Willett, Inc.

as assumed by Morgan’s Restaurants of Pennsylvania pursuant to Assignment of
Franchise and Release dated [August 13, 1999]

048

Youngstown

OH

June 13, 1997

Morgan’s Restaurants of Ohio, Inc.

 

050

Coraopolis

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

as amended by Address Amendment dated March 27, 2008.

 

 
57

--------------------------------------------------------------------------------

 

 

Store
No.

City

State

Date

Franchisee

Amendments

051

Pittsburgh

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

052

Bethel Park

PA

October 21, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

053

Pittsburgh

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

055

Homestead

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

056

McKeesport
(Lysle Blvd.)

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

058

McKeesport
(Olympia Ctr.)

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

059

Bellevue

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

060

Bridgeville

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

061

Harmarville

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

062

Crafton

PA

December 7, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

063

Pittsburgh

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

064

McKees Rocks

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

065

West View

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

066

Pittsburgh

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

068

Monroeville

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

  

 
58

--------------------------------------------------------------------------------

 

 

Store
No.

City

State

Date

Franchisee

Amendments

069

Pittsburgh

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

073

Pittsburgh

PA

August 10, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

074

Wilkinsburg

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

075

New Castle

PA

 

[Morgan’s Restaurants of Pennsylvania, Inc.]

 

091

Lakewood

NY

September 24, 1999

Morgan’s Restaurants of New York, Inc.

 

305

St. Louis

MO

June 11, 1997

Morgan’s Foods of Missouri, Inc.

 

310

Granite City

IL

June 11, 1997

Morgan’s Foods of Missouri, Inc.

 

315

St. Louis

MO

June 11, 1997

Morgan’s Foods of Missouri, Inc.

 

318

St. Louis

MO

June 11, 1997

Morgan’s Foods of Missouri, Inc.

 

322

Ferguson

MO

June 16, 1997

Reitzel-Ross Enterprises, Inc.

as assumed by Morgan’s Foods of Missouri, Inc. pursuant to Assignment of
Franchise and Release dated September 15, 1998

324

Farmington

MO

July 13, 1999

Morgan’s Foods of Missouri, Inc.

as amended by Address Amendment dated May 6, 2009

325

Flat River

MO

July 13, 1999

Morgan’s Foods of Missouri, Inc.

 

332

Manchester

MO

September 7, 1999

Morgan’s Foods of Missouri, Inc.

 

350

Parkersburg

WV

July 13, 1999

Morgan’s Restaurants of West Virginia, Inc.

 

351

Benwood

WV

July 13, 1999

Morgan’s Restaurants of West Virginia, Inc.

 

352

Moundsville

WV

July 13, 1999

Morgan’s Restaurants of West Virginia, Inc.

 

353

New Martinsville

WV

December 7, 1999

Morgan’s Restaurants of West Virginia, Inc.

 

  

 
59

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Store
No.

City

State

Date

Franchisee

Amendments

354

Parkersburg

WV

July 13, 1999

Morgan’s Restaurants of West Virginia, Inc.

 

355

Washington

PA

July 13, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

356

Wheeling

WV

July 13, 1999

Morgan’s Restaurants of West Virginia, Inc.

 

379

Kittanning

PA

December 7, 1999

Morgan’s Restaurants of Pennsylvania, Inc.

 

 

Master License Agreement with Pizza Hut, Inc.:

Store
No.

City

State

Date

Franchisee

Amendments

380

Butler

PA

March 22, 2011

Morgan’s Tacos of Pennsylvania, Inc.

as listed on Schedule 10-01 to Master License Agreement

381

Monaca

PA

March 22, 2011

Morgan’s Tacos of Pennsylvania, Inc.

as listed on Schedule 10-02 to Master License Agreement

386

Pittsburgh

PA

March 22, 2011

Morgan’s Tacos of Pennsylvania, Inc.

 

 

Taco Bell Corp. Franchise Agreements:

Store
No.

City

State

Date

Franchisee

Amendments

063

Pittsburgh

PA

July 5, 2006

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
September 5, 2006.

064

McKees Rocks

PA

July 6, 2006

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
July 21, 2006.

075

New Castle

PA

August 2, 2007

Morgan’s Foods, Inc.

 

091

Lakewood

NY

 

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
April 27, 2000.

  

 
60

--------------------------------------------------------------------------------

 

 

Store
No.

City

State

Date

Franchisee

Amendments

351

Benwood

WV

January 9, 2007

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
January 26, 2007.

353

New Martinsville

WV

November 15, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
December 6, 1999.

376

Edgewood

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

378

Gibsonia

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

379

Kittanning

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

380

Butler

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

381

Monaca

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

382

New Castle

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

384

Beaver Falls

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

385

Kensington

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

  

 
61

--------------------------------------------------------------------------------

 

 

Store
No.

City

State

Date

Franchisee

Amendments

386

Pittsburgh

PA

July 14, 1999

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
November 22, 1999.

063

Pittsburgh

PA

July 5, 2006

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
September 5, 2006.

064

McKees Rocks

PA

July 7, 2006

Morgan’s Foods, Inc.

as assumed by Morgan’s Tacos of Pennsylvania, Inc. pursuant to Assignment dated
July 21, 2006.

 

KFC / Pizza Hut / Taco Bell Multi-Brand Unit Agreement with KFC Corporation and
Taco Bell Corp.:

Store
No.

City

State

Date

Franchisee

Amendments

075

New Castle

PA

October 23, 2007

Morgan’s Restaurants of Pennsylvania, Inc.

 

 

 
62

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SCHEDULE 6.6

PERMITTED LIENS

 

Morgan’s Restaurants of Pennsylvania, Inc.

File Type

File Number

File Date

Debtors

Secured Party

Original

2007122604700

12/24/2007

MORGAN’S RESTAURANTS OF PENNSYLVANIA, INC.4829 GALAXY PARKWAY, SUITE SCLEVELAND
OH 44128

AIG COMMERCIAL EQUIPMENT FINANCE, INC.5700 GRANITE PARKWAY, SUITE 850PLANO TX
75024

Amd/Coll

2008010701690

01/07/2008

 

 

Continuation

2012110602676

11/06/2012

 

 

 

 
63

--------------------------------------------------------------------------------

 

 

Schedule 6.7.4

DEBT 

 

 

 

Note payable by Morgan’s Restaurants of Pennsylvania, Inc. to AIG Commercial
Equipment Finance, Inc. in the remaining principal balance of approximately
$80,000 maturing February 1, 2015 (secured by equipment located at Stores 075
and 007).

 

 

 
64

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SCHEDULE 6.15

TRANSACTIONS WITH AFFILIATES

None.

 

 

 

 65