Exhibit 10.2
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this “Agreement”), dated as of May 5, 2010, is entered
into by and between the borrowing entities identified on Exhibit A attached
hereto (jointly and severally, the “Borrower”), DIVERSIFIED RESTAURANT HOLDINGS,
INC., a Nevada corporation, acting as “Borrowing Agent” for Borrower, and RBS
CITIZENS, N.A. a national banking association, and its successors and assigns
(the “Lender”).
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Agreement agree as follows:
1. Loan Terms.
(a) Amount of Loan. Subject to the terms and conditions set forth in this
Agreement, Lender shall make a loan to Borrower in the maximum principal amount
of Nine Million and no/100 Dollars ($9,000,000.00 (the “Loan”), the proceeds of
which shall be disbursed by Lender to Borrower on the Closing Date. Borrower’s
obligation to repay the Loan shall be evidenced by a promissory note
substantially in the form attached hereto as Exhibit B (the “Note”), with a
maturity date that is the date eighty-four (84) months after the Closing Date
(the “Maturity Date”).
(b) Payments. Borrower shall pay eighty-four (84) payments in the amount of One
Hundred Thirty-Six Thousand Two Hundred Seventy-Five and 00/100 Dollars
($136,275.00), payable on or before the 5th day of each month, with the
outstanding principal sum and all accrued and unpaid interest on the Loan to be
paid in full on the Maturity Date. Borrower hereby authorizes Lender to
automatically deduct from any deposit account of Borrower the amount of any
payment due hereunder or under the Note, including payments of interest,
principal, and other sums. If the funds in the account are insufficient to cover
any payment due to Lender, Lender will not be obligated to advance funds to
cover the payment. Failure of Lender to charge any account or to give any notice
shall not affect the obligation of Borrower to pay all amounts due hereunder or
under the Note.
(c) Interest.
(i) The principal sum outstanding on the Loan shall bear interest at the
Interest Rate. All computations of interest shall be computed upon the basis of
the actual number of days elapsed in a year consisting of 360 days.
(ii) Upon the occurrence of an Event of Default and while such Event of Default
is continuing, the Interest Rate on the Loan shall increase by five percent
(5.0%) per annum over the existing Interest Rate, compounded annually (the
“Default Rate”).
(iii) Notwithstanding any provision to the contrary in this Agreement, in no
event shall the Interest Rate charged on the Loan exceed the maximum rate of
interest permitted under applicable state and/or federal usury law. Any payment
of interest that would be deemed unlawful under applicable law for any reason
shall be deemed received on account of, and will automatically be applied

 

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to reduce, the principal sum outstanding on the Loan and any other sums (other
than interest) due and payable to Lender under this Agreement, and the
provisions of this Agreement shall be deemed amended to provide for the highest
rate of interest permitted under applicable law.
(d) Use of Proceeds. Borrower shall use the proceeds of the Loan to satisfy in
full debt obligations incurred in connection with the development and operation
of Buffalo Wild Wings franchised locations and the development and operation of
Bagger Dave’s locations. No amount advanced under the Note shall be used for
personal, family, or household purposes.
(e) Transaction Costs; Reimbursement of Expenses. On the Closing Date, Borrower
shall pay Lender a sum equal to all of Lender’s transaction-related expenses,
including attorneys’ fees and costs and fees for real estate evaluations,
background checks, transaction related travel, any and all required due
diligence and Lender’s closing fee, all of which will be in addition to any
commitment or related fees due to Lender. In addition, Borrower shall reimburse
Lender for all fees, costs and expenses incurred by Lender in connection with
the exercise of Lender’s rights and duties under this Agreement and the other
Loan Documents, the preservation and protection of the Collateral, and the
enforcement or attempted enforcement of Borrower’s obligations under the Loan
Documents, including, without limitation, attorneys’ fees. Further, Borrower
shall reimburse Lender for all trustee, receiver and property manager fees and
commissions and all costs, expenses and charges incurred by those parties in
connection with this Agreement, the other Loan Documents, and the Collateral.
Unless specified otherwise in this Section, all of Lender’s costs, expenses and
charges (collectively, the “Reimbursement Expenses”) shall be payable by
Borrower to Lender within five (5) days after demand from Lender and, if not
paid when due, shall accrue interest at the Default Rate. The Reimbursement
Expenses shall be Obligations under this Agreement and shall be secured by the
Lien of this Agreement and the Security Agreement.
2. Prepayment. Borrower may, at any time prepay all of the outstanding principal
of the Loan in full, but not in part. Concurrently with such prepayment in full,
Borrower shall pay all accrued interest on such principal amount being prepaid
as of the date of prepayment, any other amounts payable under this Agreement,
and an amount equal to any breakage costs incurred in connection with the
termination of any interest rate swap agreement, interest rate cap agreement and
interest rate collar agreement, or any other agreement or arrangement entered
into between Borrower and Lender and designed to protect Borrower against
fluctuations in interest rates or currency exchange rates.
3. Representations and Warranties. Borrower hereby warrants and represents to
Lender the following:
(a) Organization and Qualification. Borrower is duly organized, validly existing
and in good standing under the laws of the state in which it was incorporated,
has the power and authority to carry on its business and to enter into and
perform all documents relating to this transaction, and is qualified and
licensed to do business in each jurisdiction in which such qualification or
licensing is required. All information provided to Lender with respect to
Borrower and its operations is true and correct.

 

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(b) Due Authorization. The execution, delivery and performance by Borrower, and
Guarantor as applicable, of the Loan Documents (i) have been duly authorized by
all necessary company action, (ii) do not contravene any law, regulation,
ordinance, order, or decree of any Governmental Authority, (iii) do not
contravene any provision of the Organizational Documents of Borrower, (iv) do
not violate any agreement or instrument by which Borrower is bound (with the
permitted exception of the AMC Grand Blanc, Inc. lease), and (v) will not result
in the creation of a Lien on any assets of Borrower except the Lien granted to
Lender pursuant to this Agreement and the Security Agreement. Borrower has duly
executed and delivered to Lender the Loan Documents and they are valid and
binding obligations of Borrower enforceable according to their respective terms,
except as they may be limited by equitable principles and by bankruptcy,
insolvency or similar laws affecting the rights of creditors generally. No
notice to, or consent by, any Governmental Authority is needed in connection
with this transaction.
(c) Guaranty Agreement. Each Guarantor has duly executed and delivered to Lender
a Guaranty Agreement (the “Guaranty”) and it is a valid and binding obligation
of each Guarantor enforceable according to its terms, except as limited by
equitable principles and by bankruptcy, insolvency or similar laws affecting the
rights of creditors generally. Borrower further represents that it will provide
notice to Lender of any event resulting in the emergence of a Future Guarantor
and Borrower shall direct such Guarantor to execute and deliver to Lender a
Guaranty.
(d) Litigation. Except as set forth in Schedule 3(d), there is no claim,
litigation, proceeding, investigation or inquiry, administrative or judicial,
pending or threatened against or affecting Borrower or its shareholders,
officers, Properties or assets that is an uninsured claim.
(e) Business. Borrower is not a party to or subject to any agreement or
restriction that may have a Material Adverse Effect on the financial condition
or the prospects of the Borrower, any Guarantor, the Business or the Property.
“Material Adverse Effect” is defined as a change which (a) materially impairs or
is reasonably expected to impair the ability of Borrower or Guarantor to pay and
perform their obligations under the Loan Documents to which they are a party; or
(b) materially impairs or is reasonably expected to materially impair the
ability of Lender to enforce its rights and remedies under any Loan Document; or
(c) has or is reasonably expected to have any material adverse effect on the
Collateral, the lien of Lender in such Collateral or the priority of such lien;
or (d) is prejudicial to any Business, operations or financial condition of the
Borrower or any Guarantor.
(f) Licenses, etc. Borrower has obtained any and all licenses, permits,
franchises, authorizations from each Governmental Authority, patents,
trademarks, copyrights or other rights necessary for the ownership of the
Property and the advantageous conduct of its Business. Borrower possesses
adequate licenses, patents, patent applications, copyrights, trademarks,
trademark applications, and trade names to continue to conduct its business as
heretofore conducted by it, without any conflict with the rights of any other
person or entity. All of the foregoing is in full force and effect and none of
the foregoing are in known conflict with the rights of others.

 

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(g) Laws and Taxes. Borrower is in material compliance with all laws,
regulations, rulings, orders, injunctions, decrees, conditions or other
requirements applicable to or imposed upon Borrower by any law or by any
Governmental Authority, court or agency. Borrower has filed all required tax
returns and reports that are now required to be filed by it or obtained
extensions thereto, in connection with any federal, state and local tax, duty or
charge levied, assessed or imposed upon Borrower or its assets, including
unemployment, social security, and real estate taxes. Borrower has paid all
taxes which are now due and payable. No taxing authority has asserted or
assessed any additional tax liabilities against Borrower which are outstanding
on this date.
(h) Title. Borrower has good and marketable title to the assets reflected on the
most recent balance sheet submitted to Lender prior to the Closing Date and the
Collateral, free and clear from all liens and encumbrances of any kind, except
for (collectively, the “Permitted Liens”) (a) current taxes and assessments not
yet due and payable, (b) liens and encumbrances, if any, reflected or noted on
such balance sheet submitted to Lender prior to the Closing Date or notes
thereto, (c) assets disposed of in the ordinary course of business, (d) any
security interests, pledges, assignments or mortgages granted to Lender to
secure the repayment or performance of the Obligations; (e) pledges and deposits
of money securing statutory obligations under workmen’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding liens under ERISA); (f) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which Borrower is a party as lessee made in the ordinary
course of business; (g) inchoate and unperfected workers, mechanics’ or similar
Liens arising in the ordinary course of business; and (h) the liens and
encumbrances listed on Schedule 3(h).
(i) Subsidiaries and Partnerships. Except as set forth on Schedule 3(i),
Borrower has no Subsidiaries and is not a party to any partnership agreement or
joint venture agreement.
(j) Defaults. Borrower is in compliance with all Franchise Agreements, Lease
Agreements, and other material agreements applicable to it and there does not
now exist any default or violation of or under any of the terms, conditions or
obligations of (a) its Organizational Documents, or (b) any indenture, mortgage,
deed of trust, franchise, lease, permit, contract agreement or other instrument
to which Borrower is a party or by which it is bound, and the consummation of
the transactions contemplated hereunder will not result in such default or
violation.
(k) ERISA. Borrower and all individuals or entities who along with Borrower
would be treated as a single employer under ERISA or the Internal Revenue Code
of 1986, as amended (an “ERISA Affiliate”), are in compliance with all of their
obligations to contribute to any “employee benefit plan” as that term is defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, and any
regulations promulgated thereunder from time to time (“ERISA”). Borrower and
each of its ERISA Affiliates are in full compliance with ERISA, and there exists
no event described in Section 4043(b) thereof (“Reportable Event”).
(l) Insurance. Borrower has obtained, shall maintain or cause to be maintained
at all times, insurance for Borrower, the Property, the Business and Collateral
as set forth in Section 4(b) of this Agreement.

 

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(m) Environmental Laws. Borrower, its Business operations (including, but not
limited to, the business and franchises) and its assets (including, but not
limited to the Collateral, the Business and the Property) are and shall be in
compliance with all Environmental Laws. “Environmental Laws” means all present
and future federal, state and local laws (including common law) and ordinances
and rules, regulations, requirements, orders, directives, injunctions and
decrees of any Governmental Authority, relating to Hazardous Materials or the
protection of public and worker health and safety or the environment in the
jurisdictions where the Properties are located or where any Hazardous Materials
used, generated or disposed of with respect to the Properties by Borrower are
located. “Hazardous Materials” means any substance, material or waste that is
classified, regulated or otherwise characterized under any Environmental Law as
hazardous, toxic, a contaminant or a pollutant or by other words of similar
meaning or regulatory effect, including petroleum or any fraction thereof,
asbestos, polychlorinated biphenyls and radioactive substances.
(n) Financial Statements. Borrower represents that all financial statements
provided to Lender, either prior to or contemporaneously herewith, are true,
correct and complete in all material respects, and that there has been no
material adverse change in the financial condition or prospects of Borrower, any
Guarantor or the Business since the date of such financial statements. Borrower
shall provide to Lender any and all additional financial information and
materials as Lender may request concerning Borrower, the Guarantor, the
Collateral, the Property or the Business, all of which shall be in form and
substance satisfactory to Lender in all respects. All of the financial
statements and other information and materials delivered or caused to be
delivered by Borrower to Lender have been and shall be prepared in accordance
with GAAP and shall be accurate and complete in all respects.
(o) Persons with Disabilities; Accessibility. The Collateral and the Property
presently do, and the Collateral and Property at all times shall, strictly
comply to the extent applicable with the requirements of the Americans with
Disabilities Act of 1990 as may be amended, all state and local laws and
ordinances related to accessibility for persons with disabilities and all rules,
regulations, and orders issued pursuant thereto including, without limitation,
the Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities (collectively, “Access Laws”). Notwithstanding any provisions set
forth herein or in any other document regarding Lender’s approval of alterations
of the Property, Borrower shall not alter the Property in any manner which would
increase Borrower’s responsibilities for compliance with the applicable Access
Laws without the prior written approval of Lender. The foregoing shall apply to
tenant improvements constructed by Borrower or by any of their tenants. Lender
may condition any such approval upon receipt of a certificate of Access Law
compliance from an architect, engineer or other person acceptable to Lender.
Further, Borrower agrees to give prompt written notice to Lender of the receipt
by Borrower of any complaints related to violation of any Access Laws and of the
commencement of any proceedings or investigations which relate to compliance
with applicable Access Laws.
(p) Lease Agreements and Franchise Agreements. The Lease Agreements and the
Franchise Agreements each have an initial term, without exercised options,
greater than or equal to the term of the Loan, except as identified on
Schedule 3(p). Borrower agrees to seek the prior consent of Lender prior to
choosing not to exercise an available option to extend a Lease Agreement or
Franchise Agreement.

 

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The representations and warranties contained in this Section 3 are true, correct
and complete in all material respects, and do not contain any untrue statement
of a material fact or omit to state any material fact necessary to make such
representation or warranty not misleading.
4. Affirmative Covenants. Borrower covenants with, and represents and warrants
to, Lender that, from and after the execution date of this Agreement until the
Obligations are paid and satisfied in full:
(a) Financial Statements.
(i) Borrower will maintain a standard and modern system for accounting in
accordance with GAAP and will prepare and furnish to lender:
(1) within one hundred twenty (120) days after each fiscal year end, audited
consolidated and consolidating year-end financial statements for Borrower and
any Affiliates prepared by an independent certified public accountant in
accordance with GAAP (subject to standard exceptions) in the United States,
consistently applied, in form and substance reasonably satisfactory to Lender,
along with a Compliance Certificate, the form of which is attached hereto as
Exhibit C;
(2) within sixty (60) days after each quarter year end, compiled quarterly
financial statements for Borrower and any Affiliates prepared in accordance with
GAAP (subject to standard exceptions) in the United States, consistently
applied, including year-to-date financial results, and comparisons to the
previous year’s financial results for such period, in form and substance
reasonably satisfactory to Lender, together with a Compliance Certificate, the
form of which is attached hereto as Exhibit C;
(3) within sixty (60) days after each quarter end, individual Property store
sales reports;
(4) within thirty (30) days after filing but no later than October 31 of any
year, copies of federal tax returns filed by the Personal Guarantor, along with
a personal financial statement in form and substance reasonably acceptable to
Lender for such Personal Guarantor.
(ii) Borrower shall give representatives of Lender access to its books and
records at all reasonable times, including permission to examine, copy and make
abstracts from any such books and records and such other information which might
be helpful to Lender in evaluating the status of the Loan as it may reasonably
request from time to time.
(iii) If at any time Borrower has any subsidiaries which have financial
statements that could be consolidated with those of Borrower under GAAP, the
financial statements required above shall be the financial statements of
Borrower and all such subsidiaries prepared on a consolidated and consolidating
basis.

 

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(b) Insurance. At its own expense, Borrower shall obtain and maintain:
(i) insurance against (a) loss, destruction or damage to its Property and
Business of the kinds included within the classification “All Risks of Physical
Loss” and such insurance shall be maintained in an amount which, after the
application of any deductible, shall be equal to the full insurable value of the
Property and the tangible Collateral. The term “full insurable value” shall mean
the actual replacement cost of the Property and the Collateral (without taking
into account any depreciation, and exclusive of excavations, footings and
foundations, landscaping and paving) determined annually by an insurer, a
recognized independent insurance broker or an independent appraiser selected by
Lender and paid by Borrower. Such All Risks of Physical Loss insurance shall
also include business interruption coverage for a minimum twelve (12) months’
loss of income, including coverage for all amounts due under the Note with the
Lender named as a loss payee with respect to those payments, (b) Commercial
General Liability insurance covering bodily injury, death, property damage,
products liability and liability from the sale of liquor, beer or wine (if
applicable) in such amounts as are generally available at commercially
reasonable premiums and are generally required by institutional lenders for
businesses and assets comparable to the Property, Business and Collateral but in
any event for a combined single limit of at least $1,000,000.00 per occurrence,
and $3,000,000.00 in the aggregate, (c) statutory workers’ compensation
insurance with respect to any work in connection with the Property and Business
or on or about the Collateral and Property, (d) if any Property is in an area
identified by the Federal Emergency Management Agency as having special flood
hazards, flood insurance in an amount equal to the full insurable value or the
maximum limit of coverage available for the Collateral and the Property under
the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of
1973, or the National Flood Insurance Reform Act of 1994, as each may be amended
from time to time, and (e) if any Property is in an area subject to earthquakes,
earthquake insurance equal to the full insurable value of the Property. All such
policies shall (i) be issued by financially sound and reputable insurers with a
rating of at least “A” or better by both Standard & Poor’s Ratings Service and
Moody’s Investors Service (or such other credit rating agencies as may be
designated by Lender) or a general policy rating of “A-” or better and a
financial class of VIII or better by A.M. Best Company, Inc., (ii) if required,
name Lender as a “loss payee”, “additional insured” or “mortgagee”, as
applicable, and (iii) shall provide for ten (10) days prior written notice to
Lender before such policy is altered, canceled or terminated. All of the
insurance policies required hereby shall be evidenced by one or more
Certificates of Insurance delivered to Lender by Borrower on or before the
Closing Date and at such other times as Lender may request from time to time.
(ii) any and all other insurance required under any of Borrower’s Franchise
Agreements and Lease Agreements.
(c) Taxes. Borrower shall pay when due all taxes, assessments and other
governmental charges imposed upon it or its assets, franchises, business, income
or profits before any penalty or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which by law might be a lien or charge upon any of its
assets, provided that (unless any material item or property would be lost,
forfeited or materially damaged as a result thereof) no such charge or claim
need be paid if it is being diligently contested in good faith, if Lender is
notified in advance of such contest and if Borrower establishes an adequate
reserve or other appropriate provision required by GAAP and deposits with Lender
cash or bond in an amount acceptable to Lender.

 

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(d) Compliance with Laws. Borrower shall comply with all federal, state and
local laws, regulations and orders applicable to Borrower or its assets
including but not limited to all environmental laws, in all respects material to
Borrower’s Business, assets or prospects and shall immediately notify Lender of
any violation of any rule, regulation, statute, ordinance, order or law relating
to the public health or the environment and of any complaint or notifications
received by Borrower regarding any environmental or safety and health rule,
regulation, statute, ordinance or law. Borrower shall obtain and maintain any
and all licenses, permits, franchises, authorizations from Governmental
Authorities, patents, trademarks, copyrights or other rights necessary for the
ownership of its Property and the advantageous conduct of its Business and as
may be required from time to time by applicable law.
(e) Renewal of Lease Agreements and Franchise Agreements. Borrower agrees to
take all actions necessary to renew the Lease Agreements and Franchise
Agreements that may require renewal during the term of the Loan or enter into a
comparable lease in the franchise territory, including, but not limited to those
identified on Schedule 3(p).
(f) Other Amounts Deemed Loans. If Borrower fails to pay any tax, assessment,
governmental charge or levy or to maintain insurance within the time permitted
or required by this Agreement, or to discharge any Lien prohibited hereby, or to
comply with any other Obligation, Lender may, but shall not be obligated to,
pay, satisfy, discharge or bond the same for the account of Borrower. To the
extent permitted by law and at the option of Lender, all monies so paid by
Lender on behalf of Borrower shall be deemed Obligations and Borrower’s payments
under this Agreement may be increased to provide for payment of such Obligations
plus interest thereon.
(g) Inspection Rights. Upon reasonable notice during customary business hours,
Lender or its duly authorized representative shall have the right to visit all
the facilities of Borrower, meet with managers and inspect all records and files
relevant to the operation of the Business, subject to the following limitations:
(i) Lender may conduct such inspection only one time in any twelve (12) month
period unless there is an Event of Default, in which case the Lender has the
right to conduct an unlimited number of inspections; and
(ii) the costs of such inspection shall be borne equally between Borrower and
Lender, unless the inspections occur during an Event of Default, in which case
the entire cost of such inspections shall be borne by the Borrower.
(h) Death or Permanent Disability of Operator. Upon the death or permanent
disability of Operator (and the inability of Borrower to obtain Lender’s
approval of a suitable replacement within ninety (90) days of the event of death
or disability), Lender shall have the option to require Borrower to pay all
outstanding principal, interest and any other amounts due Lender pursuant to the
Obligations.

 

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(i) Operating Accounts. Except for the Florida Entities, Borrower and all Entity
Guarantors shall maintain with Lender each of their primary operating and store
deposit accounts, so long as Lender has a branch within five (5) miles of such
store, and at the option of Lender, shall enter into agreements permitting the
Lender to deposit all advances made hereunder and debit all fees, charges and
expenses in respect of the Obligations.
(j) Further Assurances. Borrower shall execute, acknowledge and deliver, or
cause to be executed, acknowledged or delivered, any and all such further
assurances and other agreements or instruments, and take or cause to be taken
all such other action, as shall be reasonably necessary from time to time to
give full effect to the Loan Documents and the transactions contemplated
thereby. In connection with any assignment or transfer of all or any portion of
the Obligations or Collateral by Lender to any other person or entity, and such
other person or entity shall thereupon become vested with all the rights in
respect of such Obligations or Collateral, Borrower agrees to execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered any
and all other agreements, documents or instruments requested by Lender and/or
its assignee or transferee.
5. Negative Covenants. Borrower covenants with, and represents and warrants to,
Lender that, from and after the execution date of this Agreement until the
Obligations are paid and satisfied in full:
(a) Limitation on Liens. Borrower will not create or suffer to exist any Lien in
respect of any property of any character of Borrower including, but not limited
to, the Collateral (whether owned on the date hereof or hereafter acquired)
except for Permitted Liens.
(b) Limitation on Transactions. Borrower may enter into lending transactions so
long as they are between members of the Borrower, a Guarantor or any Affiliate
or with officers, shareholders, or management employees of a Borrower, Guarantor
or any Affiliate, so long as payments under any such transaction are subordinate
to the payments due to Lender under the Loan Documents.
(c) Limitation on Investments. Borrower will not form or acquire any Subsidiary
or acquire any interest in any business enterprise other than the Business.
(d) Limitation on Borrower’s Consolidation, Merger and Sales. Borrower will not
sell, lease, assign, or transfer all, substantially all or any material portion
of the assets of Borrower, or enter into or approve any liquidation,
dissolution, combination, consolidation or merger involving Borrower, or any
reclassification or recapitalization of Borrower.
(e) Limitation on Disposition of Assets. Borrower will not sell or otherwise
dispose of any assets (other than the sale of inventory in the ordinary course
of business and the disposition of obsolete or inoperable equipment) of Borrower
unless the following conditions are satisfied: (i) the assets are sold at fair
value, (ii) the assets are obsolete or are not necessary to operate the
Business, (iii) the proceeds from the sale or disposition are one hundred
percent (100%) in cash, and (iv) the proceeds are, within ten (10) days of
receipt, applied, with Lender’s written approval, to permanently reduce the
amount outstanding on the Note or are reinvested in assets used in the Business.

 

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(f) Change in the Business. Borrower will not authorize, approve or otherwise
change in any substantive way the Business of Borrower.
(g) Limitation on Distributions. Borrower shall not distribute any Excess Cash
to the shareholders of Borrower, as shareholders, if:
(i) any Event of Default has occurred and is continuing;
(ii) any due and payable payment required to be made by Borrower to Lender under
this Agreement is outstanding;
(iii) there were any overdue payments required to be made by Borrower to Lender
within the twelve (12) month period immediately preceding the proposed date of
distribution, regardless of whether Lender declared an Event of Default;
(iv) Borrower is not in strict compliance with all obligations and covenants
contained in this Agreement; or
(v) the distribution would reduce Borrower’s liquidity to an extent that could
be reasonably expected to damage the day-to-day operations of Borrower.
(h) Limitations on Development. Neither Borrower, Guarantor nor any Affiliate of
Borrower or Guarantor shall develop any other Business locations (signing a
lease agreement or franchise agreement or acquiring the property on which a
Business will be located) without Lender’s consent, if:
(i) any Event of Default has occurred and is continuing;
(iii) Borrower is not in strict compliance with all obligations and covenants
contained in this Agreement; or
(iv) the distribution would reduce Borrower’s liquidity to an extent that could
be reasonably expected to damage the day-to-day operations of Borrower.
(i) Limitation on Payment of Management Expenses. Borrower shall not pay any
Management Expenses unless (a) each Property is open for business to the general
public and (b) Borrower is current on all of its payments and other obligations
to Lender.
(j) Limitation on Indebtedness. Borrower will not create, assume, incur, or
suffer to exist any Indebtedness other than liabilities incurred by Borrower in
the ordinary course of conducting its business and loans related to the
acquisition of real estate located at 2055 Badlands Dr., Brandon, Florida in an
amount not to exceed Two Million Five Hundred Seventy-Three Thousand and Sixty
Dollars ($2,573,000.00).
(k) Margin Securities. No amount advanced to Borrower under the Note shall be
used for the purpose of purchasing or carrying any “margin stock” or “margin
security,” as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 CFR 221 and 224.

 

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6. Financial Covenants.
(a) Debt Service Coverage Ratio. Borrower shall cause to be maintained as of the
end of each fiscal quarter a Debt Service Coverage Ratio for the trailing twelve
(12) month period of greater than or equal to 1.20 to 1.0.
(b) Lease Adjusted Leverage Ratio (tested on a quarterly basis). Borrower shall
not cause the Lease Adjusted Leverage Ratio of Borrower on a consolidated basis
to be greater than the Applicable Ratio, said ratio to be tested on a quarterly
basis for the trailing twelve (12) month period. “Applicable Ratio” shall mean
5.75:1.00 for calculations made on or before December 31, 2010; 5.50:1.00 for
calculations made on or before December 31, 2011; and 5.00:1.00 for calculations
made thereafter.
(c) Adjustments for New Businesses. The Debt Service Coverage Ratio and the
Lease Adjusted Leverage Ratio will be modified so that calculation of such
ratios will not include results from Businesses open for a period of less than
twelve (12) months. In addition all figures for Businesses in their second year
of operation will be adjusted so that such figures are tested on annualized
basis rather than a trailing twelve (12) month basis.
7. Events of Default. Upon the occurrence of any of the following events (each,
an “Event of Default”), Borrower hereby agrees to refuse any payment under an
Inter-Affiliate Loan, and Lender may, at its option, without any demand or
notice whatsoever, declare the Note and all Obligations to be fully due and
payable in their aggregate amount, together with accrued interest and all
prepayment premiums, fees, and charges applicable thereto:
(a) Except as otherwise provided in this Agreement, any failure to make any
payment when due of principal or accrued interest under this Agreement, the Note
or any other Obligation and such nonpayment remains uncured for a period of ten
(10) days thereafter;
(b) Any representation or warranty of Borrower, or Guarantor as applicable, set
forth in this Agreement, the Loan Documents or in any agreement, instrument,
document, certificate or financial statement evidencing, guarantying, securing
or otherwise related to, this Agreement or any other Obligation is materially
inaccurate or misleading;
(c) Borrower fails to observe or perform any other term or condition of this
Agreement, the Loan Documents or any other term or condition set forth in any
agreement, instrument, document, certificate or financial statement evidencing,
guarantying or otherwise related to this Agreement, the Loan Documents or any
other Obligation, or Borrower otherwise defaults in the observance or
performance of any covenant or agreement set forth in any of the foregoing for a
period of thirty (30) days after notice to Borrower of such failure or default;
(d) An Event of Default occurs under the Security Agreement, the Guaranty or any
other Loan Document;
(e) The death, permanent disability, legal incompetence or dissolution of any
Borrower, Operator or of any Guarantor of the Obligations (and the inability of
Borrower to obtain Lender’s approval of a suitable replacement within ninety
(90) days of the event of death or disability), or the merger or consolidation
of any of the foregoing with a third

 

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party, or the lease, sale or other conveyance of a material part of the assets
or business of any of the foregoing to a third party outside the ordinary course
of its business, or the lease, purchase or other acquisition of a material part
of the assets or business of a third party by any of the foregoing;
(f) The occurrence of any event that causes a Material Adverse Effect on
Borrower’s or Guarantors’ business operations (including, but not limited to,
the Businesses), financial condition, assets or Collateral;
(g) The creation of any Lien (except a lien to Lender and the Permitted Liens)
on, the institution of any garnishment proceedings by attachment, levy or
otherwise against, the entry of a judgment against, or the seizure of, any of
the property of Borrower or any Guarantor hereof including, without limitation,
the Collateral for a period of thirty (30) days after notice to of such default
to Borrower;
(h) A commencement by Borrower or any Guarantor of the Obligations of a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or the entry of a decree or order for relief in
respect of Borrower or any Guarantor of the Obligations in a case under any such
law or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Borrower or any Guarantor of the
Obligations, or for any substantial part of the property of Borrower or any
Guarantor of the Obligations, or ordering the wind-up or liquidation of the
affairs of Borrower or any Guarantor of the Obligations; or the filing of a
petition initiating an involuntary case in which Borrower or any Guarantor is
the debtor under any such bankruptcy, insolvency or similar law; or the making
by Borrower or any Guarantor of the Obligations of any general assignment for
the benefit of creditors; or the failure of Borrower or any Guarantor of the
Obligations generally to pay its debts as such debts become due; or the taking
of action by Borrower or any Guarantor of the Obligations in furtherance of any
of the foregoing;
(i) Any sale, conveyance or transfer of any rights in the Collateral securing
the Obligations, or any destruction, loss or damage of or to any material
portion of the Collateral;
(j) The occurrence of a default or an event of default under one or more of the
Franchise Agreements or Lease Agreements or any other material agreement to
which Borrower is a party for a period of thirty (30) days after notice of such
default to Borrower; or
(k) The occurrence of any Event of Default beyond any applicable grace or cure
period under any loan agreement and loan documents evidencing and/or securing
any of the Obligations owed by Borrower, an Affiliate or any Guarantor to
Lender.
8. Remedies. In addition to any other remedy permitted by law, Lender may at any
time after the occurrence and during the continuance of an Event of Default,
without notice, apply the Collateral to the Note or such other Obligations,
whether due or not, and Lender may, at its option, proceed to enforce and
protect its rights by an action at law or in equity or by any other appropriate
proceedings; provided that the Note and the Obligations shall be accelerated
automatically and immediately if the Event of Default arises under Section 7(i)
above. Borrower shall pay all costs of collection incurred by Lender, including
its reasonable attorney’s fees, if this Agreement is referred to an attorney for
collection, whether or not payment is obtained before entry of judgment, which
costs and fees are Obligations secured by the Collateral.

 

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Lender’s rights and remedies hereunder are cumulative, and may be exercised
together, separately, and in any order. No delay on the part of Lender in the
exercise of any such right or remedy shall operate as a waiver. No single or
partial exercise by Lender of any right or remedy shall preclude any other
further exercise of it or the exercise of any other right or remedy. No waiver
or indulgence by Lender of any Event of Default is effective unless in writing
and signed by Lender, nor shall a waiver on one occasion be construed as a
waiver of any other occurrence in the future.
9. Miscellaneous.
(a) Surveys and Environmental Reports. Intentionally omitted.
(b) Entire Agreement. This Agreement constitutes the complete and exclusive
agreement and understanding between Lender and Borrower, and supersedes all
prior agreements and understandings relating to the subject matter hereof. No
usage of trade, course of performance, or course of dealing evidence may be used
by a party to contradict, explain, supplement, or otherwise affect this
Agreement, and no extrinsic evidence may be used by a party to resolve or
introduce an ambiguity in the Agreement.
(c) Severability. The declaration of invalidity of any provision of this
Agreement shall not affect any part of the remainder of the provisions.
(d) Assignment. Borrower may not assign any of its rights, remedies or
obligations described in this Agreement without the prior written consent of
Lender, which consent may be withheld in Lender’s sole discretion. Lender may
assign some or all of its rights and remedies described in this Agreement
without notice to, or prior consent from, Borrower.
(e) Waiver of Borrower. Borrower, and any Guarantor hereof, hereby waives
demand, presentment, protest and notice of dishonor, notice of protest and
notice of default except as otherwise specified in this Agreement. Borrower,
including but not limited to all co-makers and accommodation makers of the Note,
hereby waives all suretyship defenses including but not limited to all defenses
based upon impairment of collateral and all suretyship defenses described in
Section 3-605 of the Uniform Commercial Code (the “UCC”). Such waiver is entered
to the full extent permitted by Section 3-605 (i) of the UCC.
(f) Waiver; Amendments.
i. No failure or delay by Lender in exercising any right or power hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of Lender under the Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or any Loan Document or consent to any departure
by Borrower therefrom shall in any event be effective unless the same shall be
permitted by Section 9(f)(ii) of this Agreement, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.

 

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ii. No Loan Document, this Agreement or provision thereof may be waived, amended
or modified except, in the case of this Agreement, by an agreement or agreements
in writing entered into by Borrower and Lender or, in the case of any other Loan
Document, by an agreement or agreements in writing entered into by the parties
thereto with the consent of Lender.
(g) Jury Waiver. BORROWER, AND ANY GUARANTOR HEREOF, WAIVES THE RIGHT TO A TRIAL
BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT,
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Illinois, without reference to
principles of conflicts of law.
(i) Notices. Except as otherwise specifically provided herein, all notices,
requests, consents, and other communications hereunder must be in writing and
delivered (i) if to Lender, RBS Citizens, N.A., 28 State Street, Boston, MA
02109, Attn: Timothy Shanahan, Senior Vice President, and (ii) if to Borrower,
to the address set forth on the signature page of this Agreement. All
communications hereunder shall be in writing and shall be deemed given upon the
earlier of receipt, one (1) business day after being sent by facsimile
transmission or by reputable overnight courier, or three (3) business days after
being sent by certified mail. Each party, by notice so given, may specify a
different notice address. Any notice of change of address shall be effective
only upon receipt.
(j) Successors and Assigns. This Agreement shall inure to the benefit of and
shall bind the parties hereto, their heirs, legal representatives, successors
and permitted assigns.
(k) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same Agreement.
(l) Lender Discussions with Franchisor. On the occurrence of an Event of Default
beyond any applicable grace or cure period, Borrower hereby authorizes Lender to
discuss with Buffalo Wild Wings International, Inc., or its successors or
assigns (“Franchisor”) Borrower’s financial condition, operations and any other
matters relating to Borrower, the Business or the Property. Borrower further
(i) consents to the release to Lender by Franchisor of any information relating
to the foregoing matters, and (ii) instructs Franchisor to release any
information relating to the foregoing matters upon the request of Lender.
(m) Loan Sales; Participations. Borrower agrees that Lender may elect, at any
time in its sole discretion, to assign, convey, sell, transfer, securitize or
grant a participation in (a “Disposition”) all or any portion of Lender’s rights
and obligations under this Agreement and the other Loan Documents, including any
and all servicing

 

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rights, and that any such Disposition may be to one or more financial
institutions, private investors, public securities marketplace, trust and/or
other entities, in Lender’s sole discretion (“Additional Creditors”). Borrower
further agrees that whether or not the Loan or any interest therein is sold or
transferred, Lender may disseminate to any actual or potential Additional
Creditors and to any servicer of the Loan, Governmental Authority, securities
rating agency, bond insurer, and any other Person in connection with a
Disposition (“Other Disposition Parties”), all financial and other information
and materials which have been or shall be provided to or known by Lender with
respect to this Agreement, the other Loan Documents, the Loan, Borrower, its
business operations (including, but not limited to, the Enterprises), or their
assets (including, but not limited to, the Collateral and Properties). Borrower
shall promptly execute and deliver to Lender any estoppel certificates or other
documents requested by Lender in connection with a Disposition of the Loan
within fifteen (15) days from the date of such request. The indemnity and hold
harmless obligations of Borrower under this Agreement and the other Loan
Documents also shall also inure to the benefit of the Additional Creditors and
the Other Disposition Parties and their respective owners, directors, managers,
officers, employees, and agents.
(n) Grammatical Interpretation; Construction. The headings of sections and
subsections and divisions in this Agreement and the other Loan Documents are
only for convenience of reference and will not govern the interpretation of any
of the provisions of this Agreement or the other Loan Documents. All grammatical
changes shall be made to this Agreement and the other Loan Documents to maximize
the rights and benefits belonging to Lender, including, without limitation, so
that the singular shall include the plural and the masculine the feminine and
vice versa.
(o) Time is of the Essence. Time is of the essence with respect to this
Agreement and the other Loan Documents.
(p) Joint and Several Liability. If more than one person is liable for any
indebtedness, liabilities and obligations to Lender described in this Agreement
or the other Loan Documents or grants Lender a Lien against their assets
(x) their liability shall be joint and several in nature and affect their
jointly and/or severally-owned assets and (y) except as prohibited by applicable
state law, each person waives (a) any right to require Lender to: (i) proceed
against any other person, (ii) proceed against or exhaust any security received
from any other person, or (iii) pursue any other remedy whatsoever; (b) any
defense arising by reason of the application by any other person of the proceeds
of any borrowing; (c) any defense resulting from the absence, impairment or loss
of any right of reimbursement, subrogation, contribution or other right or
remedy of any person against any other person, or any security, whether
resulting from an election by Lender to foreclose upon security by non-judicial
sale, or otherwise; (d) any setoff or counterclaim of any other person or any
defense which results from any disability or other defense of any other person
or the cessation or stay of enforcement from any cause whatsoever of the
liability of any other person (including, without limitation, the lack of
validity or enforceability of any Loan Document); (e) any right to exoneration
of sureties which would otherwise be applicable; (f) any right of subrogation or
reimbursement and, if there are any guarantors of the Obligations, any right of
contribution, and right to enforce any remedy which Lender now has or may
hereafter have against any other person and any benefit of, and any right to
participate in, any security now or hereafter received by Lender; (g) all
presentments, diligence, demands for performance, notices of non-performance,
notices delivered under this Agreement or

 

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any other Loan Document, protests, notice of dishonor, and notices of acceptance
of the Note and of the existence, creation or incurring of new or additional
Obligations and notices of any public or private foreclosure sale; (h) the
benefit of any statute of limitations to the extent permitted by law; (i) any
appraisement, valuation, stay, extension, moratorium, redemption or similar law
or similar rights for marshaling; (j) any right to be informed by Lender of the
financial condition of any other person or any change therein or any other
circumstances bearing upon the risk of nonpayment or nonperformance of the
Obligations; and (k) the benefit of all principles or provisions of law,
statutory or otherwise, which are or might be in conflict with the terms of this
Agreement or any other Loan Document, and agrees that the Obligations of each
person shall not be affected by any circumstances, whether or not referred to in
this Agreement or any other Loan Document, which might otherwise constitute a
legal or equitable discharge of any person. Each person has the ability and
assumes the responsibility for keeping informed of the financial condition of
any other person and of other circumstances affecting such nonpayment and
nonperformance risks. Without limiting the generality of any of the foregoing,
each person hereby waives any right to be reimbursed by any other person for any
payment of the Obligations made directly or indirectly by either person or from
any property of any person, whether arising by way of any statutory, contractual
or other right of subrogation, contribution, indemnification or otherwise.
(q) Capital Adequacy. Borrower shall pay directly to Lender from time to time on
request such amounts as Lender may determine to be necessary to compensate
Lender or its parent or holding company for any costs which it determines are
attributable to the maintenance by Lender or its parent or holding company,
pursuant the requirement of any Governmental Authority, of capital in respect of
maintaining its loans (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of
Lender or its parent or holding company to a level below that which such Lender
or its parent or holding company could have achieved but for such requirement of
the Governmental Authority). Lender will notify Borrower that it is entitled to
compensation pursuant to this Section as promptly as practicable after it
determines to request such compensation. Such notice to Borrower will set forth
in reasonable detail the basis and amount of the request for compensation. Any
request for additional compensation under this Section shall be paid by Borrower
within thirty (30) days of the receipt by Borrower of the notice described in
this Section.
(r) Lost Note. Borrower shall, if the Note is mutilated, destroyed, lost or
stolen (a “Lost Note”), promptly deliver to Lender, upon receipt from Lender of
an affidavit in a form reasonably acceptable to Lender and Borrower stipulating
that such Note has been mutilated, destroyed, lost or stolen, in substitution
therefor, a new promissory note containing the same terms and conditions as such
Lost Note with a notation thereon of the unpaid principal and accrued and unpaid
interest. Borrower shall provide fifteen (15) days’ prior notice to Lender
before making any payments to third parties in connection with a Lost Note.
(s) Cross-Collateral. All Loans and advances by Lender to Borrower or an
Affiliate under this Agreement, the Loan Documents or any other loan agreement
or loan documents between such parties constitute one transaction, and all
Indebtedness and the Obligations of Borrower or an Affiliate to Lender under
this Agreement, the Loan Documents or any other loan agreement or loan
documents, present and future, constitute one obligation secured by the
Collateral of the Loan or the Collateral of an Affiliate loan and security held
and to be held by Lender hereunder and by virtue of all other assignments and
security agreements between Borrower and Lender now and hereafter existing, as
may be amended, restated, supplemented, extended or renewed.

 

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10. Definitions. All financial terms used herein but not defined on the
exhibits, in the Security Agreement or any other Loan Document have the meanings
given to them by GAAP. All other undefined terms have the meanings given to them
in the Uniform Commercial Code as adopted in the state whose law governs this
instrument. The following definitions are used herein:
“Access Laws” has the meaning set forth in Section 3(p) of this Agreement.
“Affiliate” means, as to Borrower, (a) any person or entity which, directly or
indirectly, is in control of, is controlled by or is under common control with,
Borrower, or (b) any person who is a director, officer or employee (i) of
Borrower or (ii) of any person described in the preceding clause (a).
“Borrower” has the meaning given to such term in the Introduction to this
Agreement.
“Borrowing Agent” means Diversified Restaurant Holdings, Inc., a Nevada
corporation, who has the authority from each Borrower to act on its behalf for
limited purposes, including but not limited to, making requests to Lender,
providing payments due under the Loan, and other communications with Lender as
necessitated by the Loan Documents.
“Business” means (i) the current and future Buffalo Wild Wings franchised
restaurants operated by Borrower or an Affiliate pursuant to a Franchise
Agreement, (ii) the current and future Bagger Dave’s restaurants operated by
Borrower or an Affiliate, and (iii) Bagger Dave’s Franchising Corporation’s
franchise and licensing business, (iv) real estate owned by the Borrower or an
Affiliate; (v) restaurant management services provided by Borrower, Guarantor or
an Affiliate; and (vi) ownership or operation of other concepts within the
hospitality industry.
“Closing Date” means the date of this Agreement.
“Collateral” means all property of Borrower in which Lender has a lien, security
interest or collateral assignment pursuant to the terms of this Agreement or any
other Loan Document.
“Debt Service Coverage Ratio” means for the period in question, on a
consolidated basis for Borrower and all Affiliates, the calculation described as
a ratio of (i) (a) EBITDA, less (b) cash taxes, less (c) maintenance capital
expenditures ($10,000 per store), less (d) distributions and less (e) changes in
Borrower shareholder notes divided by (ii) “Interest Expense” and Principal
Payments of the Indebtedness”. For purposes of this calculation, “Interest
Expense and Principal Payments of the Indebtedness” shall include payments under
all loan arrangements between Borrower and all Affiliates and its
members/shareholders, whether now existing or hereafter arising and whether or
not reflected on Borrower’s internal financial statements.
“Default Rate” has the meaning set forth in Section 1(c)(ii) of this Agreement.

 

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“Earnings Before Interest and Taxes” means for any period the sum of (i) net
income (or loss) for such period (excluding extraordinary gains and losses),
plus (ii) all interest expense for such period, plus (iii) all charges against
income for such period for federal, state and local taxes.
“EBITDA” means for any period the sum of (i) Earnings Before Interest and Taxes
for such period plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period.
“Entity Guarantor” means Diversified Restaurant Holdings, Inc., a Nevada
corporation, AMC Group, Inc., a Michigan corporation; AMC Wings, Inc., a
Michigan corporation, Bagger Dave’s Franchising Corporation, a Michigan
corporation, and AMC Burgers, Inc., a Michigan corporation.
“ERISA” has the meaning set forth in Section 3(l) of this Agreement.
“ERISA Affiliate” has the meaning set forth in Section 3(l) of this Agreement.
“Event of Default” has the meaning set forth in Section 7 of this Agreement.
“Excess Cash” means Borrower’s net income under GAAP less (a) all payments to
lenders, (b) reserves for capital improvements, replacements and contingencies,
and (c) any other amounts reasonably necessary to be retained by Borrower for
the effective maintenance of the Business as determined in good faith by
Operator.
“Florida Entities” shall include Buckeye Group, LLC, Buckeye Group II, LLC, MCA
Enterprises Brandon, Inc., AMC North Port, Inc., AMC Riverview, Inc. and any
future entities affiliated with Borrower organized or conducting business in the
State of Florida.
“Franchise Agreements” means the agreements listed on Schedule 1 between Buffalo
Wild Wings International, Inc. and an Affiliate of Borrower for the operation of
a Buffalo Wild Wings Business at a Property.
“Funded Debt” of any person as of any date means the sum of all current and
long-term obligations (including all current and long-term obligations with
respect to capital leases) of such person as of such date.
“Future Guarantor” is defined as any person who becomes a twenty-five percent
(25%) or greater owner in any Borrower or Entity Guarantor.
“GAAP” means generally accepted accounting principles as in effect from time to
time.
“Governmental Authority” means any nation, sovereign or government; any state or
other political subdivision thereof; any agency, authority or instrumentality
thereof or of any such state or political subdivision; and any entity or
authority exercising executive, legislative, taxing, judicial, regulatory or
administrative functions of or pertaining to government, including any central
bank, stock exchange, regulatory body, arbitrator, public sector entity,
supra-national entity and any self-regulatory organization.

 

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“Guarantor” means, jointly and severally, the Personal Guarantor and the Entity
Guarantors.
“Guaranty” has the meaning set forth in Section 3(c) of this Agreement.
“Hedge Agreement” means any hedge agreement, interest rate swap, cap, collar or
floor agreement or any other interest rate management devise entered into by
Borrower with any Person in connection with any Indebtedness of Borrower,
“Indebtedness” means (i) all items (except items of capital stock, of capital
surplus, of general contingency reserves or of retained earnings, deferred
income taxes, and amount attributable to minority interest if any) which in
accordance with generally accepted accounting principles would be included in
determining total liabilities on a consolidated basis (if Borrower should have a
subsidiary) as shown on the liability side of a balance sheet as at the date as
of which indebtedness is to be determined, (ii) all indebtedness secured by any
mortgage, pledge, lien or conditional sale or other title retention agreement to
which any property or asset owned or held is subject, whether or not the
indebtedness secured thereby shall have been assumed (excluding non-capitalized
leases which may amount to title retention agreements but including capitalized
leases), and (iii) all indebtedness of others which Borrower or any subsidiary
has directly or indirectly guaranteed, endorse (otherwise than for collection or
deposit in the ordinary course of business), discounted or sold with recourse or
agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which Borrower or any subsidiary has agreed to apply
or advance funds (whether by way of loan, stock purchase, capital contribution
or otherwise) or otherwise to become directly or indirectly liable and all net
obligations under any interest rate swap or other interest rate management
device or any Hedge Agreement.
“Interest Period” means the period commencing on and including the date hereof
(the “Start Date”) and ending on but excluding the date which numerically
corresponds to such date one month later, and thereafter, each one month period
ending on the day of such month that numerically corresponds to the Start Date.
If an Interest Period is to end in a month for which there is no day which
numerically corresponds to the Start Date, the Interest Period will end on the
last day of such month. Notwithstanding the date of commencement of any Interest
Period, interest shall only begin to accrue as of the Closing Date.
“Interest Rate” means an amount per annum equal to the sum of the LIBOR Rate and
the LIBOR Margin.
“Lease Adjusted Leverage Ratio” as of any date means the ratio of (a) the sum of
(i) Funded Debt as of such date and (ii) Third Party Rent for the twelve
(12) month period ending on such date multiplied by eight (8), to (b) the sum of
EBITDA and Third Party Rent for the twelve (12) month period ending on such
date.
“Lease Agreements” means the Lease Agreements listed on Schedule 2, which
agreements are by and between the parties so indicated on such schedule.
“Lender” has the meaning given to such term in the introduction.
“LIBOR Margin” means four percent (4.0%).

 

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“LIBOR Rate” means, relative to any Interest Period, the offered rate for
delivery in two London Banking Days of deposits of U.S. Dollars for a term
coextensive with the designated Interest Period which the British Bankers’
Association fixes as its LIBOR rate as of 11:00 a.m. London time on the day on
which such Interest Period commences. If the first day of any Interest Period is
not a day which is both a (i) business day, and (ii) a London Banking Day, the
LIBOR Rate shall be determined by reference to the next preceding day which is
both a business day and a London Banking Day. If for any reason the LIBOR Rate
is unavailable and/or the Lender is unable to determine the LIBOR Rate for any
Interest Period, the Lender may, at its discretion, either: (a) select a
replacement index based on the arithmetic mean of the quotations, if any, of the
interbank offered rate by first class banks in London or New York for deposits
with comparable maturities or (b) accrue interest at a rate per annum equal to
the Lender’s Prime Rate as of the first day of any Interest Period for which the
LIBOR Rate is unavailable or cannot be determined.
“Lien” means any security interest, mortgage, pledge, assignment, lien or other
encumbrance of any kind, including interests of vendors or lessors under
conditional sale contracts or capital leases.
“Loan” has the meaning set forth in Section 1(a) of this Agreement.
“Loan Documents” means each and every document or agreement executed by any
party evidencing, guarantying or securing any of the Obligations, including, but
not limited to, this Agreement, the Note, the Security Agreement, any Hedge
Agreement, the Trademark Security Agreement, the Guaranty, the Undertaking
Letter and any insurance policy; “Loan Document” means any one of the Loan
Documents.
“London Banking Day” means any day on which dealings in U.S. Dollar deposits are
transacted in the London interbank market.
“Management Expenses” means any and all expenses not directly attributable to a
particular franchised store, including salaries, bonuses or other compensation
to non-store level personnel.
“Material Adverse Effect” has the meaning set forth in Section 3(e) of this
Agreement.
“Maturity Date” has the meaning set forth in Section 1(a) of this Agreement.
“Note” has the meaning set forth in Section 1(a) of this Agreement.
“Obligation(s)” means all loans, advances, indebtedness and each and every other
obligation or liability of Borrower owed to Lender, however created, of every
kind and description whether now existing or hereafter arising and whether
direct or indirect, primary or as guarantor or surety, absolute or contingent,
liquidated or unliquidated, matured or unmatured, participated in whole or in
part, created by trust agreement, lease overdraft, agreement or otherwise,
whether or not secured by additional collateral, whether originated with Lender
or owed to others and acquired by Lender by purchase, assignment or otherwise,
and including, without limitation, all loans, advances, indebtedness and each
and every obligation or liability arising under this Agreement, all obligations
to perform or forbear from performing acts, and agreements, instruments and

 

20

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documents evidencing, guarantying, securing or otherwise executed in connection
with any of the foregoing, together with any amendments, modifications and
restatements thereof, and all expenses and attorneys’ fees incurred by Lender
hereunder or any other document, instrument or agreement related to any of the
foregoing.
“Operator” means T. Michael Ansley, an individual residing in Michigan.
“Organizational Documents” means any articles, bylaws, certificates, operating
agreements, limited liability company agreements or similar organizational
documents of Borrower.
“Permitted Liens” has the meaning set forth in Section 3(h) of this Agreement.
“Personal Guarantor” means T. Michael Ansley, an individual residing in Michigan
or any Future Guarantor.
“Property” means the Buffalo Wild Wings and Bagger Dave’s properties listed on
Schedule 3 attached hereto and made a part hereof.
“Reportable Event” has the meaning set forth in Section 3(l) of this Agreement.
“Security Agreement” means that certain Security Agreement executed by Borrower
in favor of Lender of even date herewith.
“Subsidiary” means any corporation, limited liability company or other entity in
which Borrower owns a majority of the voting equity interests or has the ability
to control or direct management of the business of such entity.
“Third Party Rent” of any person for any period means all operating lease
expense for such period paid to third parties which are not Affiliates of such
person.
“Undertaking Letter” shall mean that certain Undertaking Letter dated of even
date herewith by and among Lender, Borrower and Operator.
[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Credit Agreement on
the date first written above.

          RBS CITIZENS, N.A.,
a national banking association
      By:   /s/ Timothy Shanahan         Name:   Timothy Shanahan       
Title:   Senior Vice President        FLYER ENTERPRISES, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        ANKER, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        TMA ENTERPRISES OF NOVI, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        TMA ENTERPRISES OF FERNDALE, LLC,
a Michigan limited liability company
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   Manager     

 

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          AMC WARREN, LLC,
a Michigan limited liability company
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   Manager        AMC GRAND BLANC, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        AMC PETOSKEY, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        AMC TROY, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        AMC FLINT, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        AMC PORT HURON, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President     

 

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          AMC CHESTERFIELD, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        AMC MARQUETTE, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        MCA ENTERPRISES BRANDON, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        BUCKEYE GROUP, LLC,
a Michigan limited liability company
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   Manager        BUCKEYE GROUP II, LLC,
a Michigan limited liability company
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   Manager        AMC NORTH PORT, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President     

 

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          AMC RIVERVIEW, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        BERKLEY BURGERS, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        TROY BURGERS, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        ANN ARBOR BURGERS, INC.,
a Michigan corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President        BORROWING AGENT:

DIVERSIFIED RESTAURANT HOLDINGS, INC.,
a Nevada corporation
      By:   /s/ T. Michael Ansley         Name:   T. Michael Ansley       
Title:   President       

     
ADDRESS FOR NOTICE:
Attn: T. Michael Ansley
  WITH A COPY TO (which copy is intended only as information and does not
constitute legal notice hereunder):
27680 Franklin Road
Southfield, MI 48034
  Fahey Schultz Burzych Rhodes PLC
Attn: Mark J. Burzych, Esq.
4151 Okemos Road
Okemos, MI 48864

 

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STATE OF MICHIGAN
COUNTY OF MACOMB
Acknowledged by T. Michael Ansley, as the President of Berkley Burgers, Inc.,
Ann Arbor Burgers, Inc., Troy Burgers, Inc., Flyer Enterprises, Inc., Anker,
Inc., TMA Enterprises of Novi, Inc., AMC Grand Blanc, Inc., AMC Petoskey, Inc.,
AMC Troy, Inc., AMC Flint, Inc., AMC Port Huron, Inc., AMC Chesterfield, Inc.,
AMC Marquette, Inc., MCA Enterprises Brandon, Inc., AMC North Port, Inc., AMC
Riverview, Inc., Diversified Restaurant Holdings, Inc., and as the Manager of
TMA Enterprises of Ferndale, LLC, AMC Warren, LLC, Buckeye Group, LLC and
Buckeye Group II, LLC, before me on the 5 day of May, 2010.

         
 
  Signature   /s/ Janelle Garavaglia
 
         
 
  Printed name   Janelle Garavaglia
 
       
 
            Notary public, State of Michigan, County of Macomb
My commission expires January 27, 2011
Acting in the County of Macomb

 

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Exhibit A
BORROWING ENTITIES

•  
Berkley Burgers, Inc.
  •  
Ann Arbor Burgers, Inc.
  •  
Troy Burgers, Inc.
  •  
Flyer Enterprises, Inc.
  •  
Anker, Inc.
  •  
TMA Enterprises of Novi, Inc.
  •  
TMA Enterprises of Ferndale, LLC
  •  
AMC Warren, LLC
  •  
AMC Grand Blanc, Inc.
  •  
AMC Petoskey, Inc.
  •  
AMC Troy, Inc.
  •  
AMC Flint, Inc.
  •  
AMC Port Huron, Inc.
  •  
AMC Chesterfield, Inc.
  •  
AMC Marquette, Inc.
  •  
MCA Enterprises Brandon, Inc.
  •  
Buckeye Group, LLC
  •  
Buckeye Group II, LLC
  •  
AMC North Port, Inc.
  •  
AMC Riverview, Inc.

 

 

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Exhibit B
FORM OF NOTE

      $9,000,000.00    ______________, 2010

FOR VALUE RECEIVED, the borrowing entities identified on Exhibit A attached
hereto (jointly and severally, the “Borrower”), promise to pay to the order of
RBS Citizens, N.A., a national banking association (the “Lender”), the principal
sum of Nine Million and no/100 Dollars ($9,000,000.00) or such lesser amount
that is the aggregate unpaid principal amount of the Loan made by Lender to
Borrower pursuant to Article 1 of the Credit Agreement (as hereinafter defined),
in immediately available funds at the office of Lender, 28 State Street, Boston,
MA 02109, together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Credit Agreement.
Lender is hereby authorized to record based on the loan payment schedule
attached hereto, or to otherwise record in accordance with its usual practice
(including, without limitation in Lender’s electronic data processing system),
the date and amount of each advance and the date and amount of each interest and
principal payment hereunder.
This Note is issued pursuant to, and is entitled to the benefits of, the Credit
Agreement dated of even date herewith (which, as it may be amended or modified
and in effect from time to time, is herein called the “Credit Agreement”),
between Borrower and Lender, to which Credit Agreement reference is hereby made
for a statement of the terms and conditions governing this Note, including the
terms and conditions under which this Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Credit Agreement.

           
FLYER ENTERPRISES, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
ANKER, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President   

 

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TMA ENTERPRISES OF NOVI, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
TMA ENTERPRISES OF FERNDALE, LLC,
a Michigan limited liability company
      By:           Name:   T. Michael Ansley        Title:   Manager        AMC
WARREN, LLC,
a Michigan limited liability company
      By:           Name:   T. Michael Ansley        Title:   Manager        AMC
GRAND BLANC, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
AMC PETOSKEY, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
AMC TROY, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President   

 

3

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            AMC FLINT, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
AMC PORT HURON, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
AMC CHESTERFIELD, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
AMC MARQUETTE, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
MCA ENTERPRISES BRANDON, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
BUCKEYE GROUP, LLC,
a Michigan limited liability company
      By:           Name:   T. Michael Ansley        Title:   Manager   

 

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            BUCKEYE GROUP II, LLC,
a Michigan limited liability company
      By:           Name:   T. Michael Ansley        Title:   Manager        AMC
NORTH PORT, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
AMC RIVERVIEW, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
BERKLEY BURGERS, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
TROY BURGERS, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President       
ANN ARBOR BURGERS, INC.,
a Michigan corporation
      By:           Name:   T. Michael Ansley        Title:   President   

 

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STATE OF                                         
COUNTY OF                                         
Acknowledged by T. Michael Ansley, the President of Berkley Burgers, Inc., Ann
Arbor Burgers, Inc., Troy Burgers, Inc., Flyer Enterprises, Inc., Anker, Inc.,
TMA Enterprises of Novi, Inc., AMC Grand Blanc, Inc., AMC Petoskey, Inc., AMC
Troy, Inc., AMC Flint, Inc., AMC Port Huron, Inc., AMC Chesterfield, Inc., AMC
Marquette, Inc., MCA Enterprises Brandon, Inc., AMC North Port, Inc., AMC
Riverview, Inc., as the Manager of TMA Enterprises of Ferndale, LLC, AMC Warren,
LLC, Buckeye Group, LLC and Buckeye Group II, LLC, before me on the  _____  day
of May, 2010.

         
 
  Signature  
 
         
 
  Printed name  
 
       
 
            Notary public, State of Michigan, County of
 
My commission expires
 
Acting in the County of
 

 

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Exhibit A to Note

•  
Berkley Burgers, Inc.
  •  
Ann Arbor Burgers, Inc.
  •  
Troy Burgers, Inc.
  •  
Flyer Enterprises, Inc.
  •  
Anker, Inc.
  •  
TMA Enterprises of Novi, Inc.
  •  
TMA Enterprises of Ferndale, LLC
  •  
AMC Warren, LLC
  •  
AMC Grand Blanc, Inc.
  •  
AMC Petoskey, Inc.
  •  
AMC Troy, Inc.
  •  
AMC Flint, Inc.
  •  
AMC Port Huron, Inc.
  •  
AMC Chesterfield, Inc.
  •  
AMC Marquette, Inc.
  •  
MCA Enterprises Brandon, Inc.
  •  
Buckeye Group, LLC
  •  
Buckeye Group II, LLC
  •  
AMC North Port, Inc.
  •  
AMC Riverview, Inc.