Exhibit 10.2

 

SECOND AMENDMENT TO CREDIT AGREEMENT

 

THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as
of May 31, 2005, by and between INTERNATIONAL HOUSE OF PANCAKES, INC., a
Delaware corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Bank”).

 

RECITALS

 

WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of June 28, 2001, as amended from time to time (“Credit Agreement”);

 

WHEREAS, Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and have agreed to amend the Credit
Agreement to reflect said changes;

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree that the Credit Agreement
shall be amended as follows:

 

1.                                       The definition of “Consolidated Income
Available for Fixed Charges” in Section 1.1 is hereby amended and restated in
its entirety to read as follows:

 

“Consolidated Income Available for Fixed Charges” means the sum of
(a) Consolidated Net Income, (b) consolidated income tax expense of IHOP and its
Subsidiaries in accordance with GAAP, (c) depreciation and amortization expense,
(d) Interest Expense, and (e) rental expense under operating leases, less
capital expenditures.

 

2.                                       The definition of “Consolidated
Tangible Net Worth” in Section 1.1 is hereby amended and restated in its
entirety to read as follows:

 

“Consolidated Tangible Net Worth” means shareholders’ equity of IHOP and its
Subsidiaries less intangible assets, less Restricted Investments in excess of
10% of shareholders’ equity of IHOP and its Subsidiaries at any date of
determination, all as determined for IHOP and its Subsidiaries on a consolidated
basis in accordance with GAAP.

 

3.                                       The definition of “Fixed Charges” in
Section 1.1 is hereby amended and restated in its entirety to read as follows:

 

“Fixed Charges” means the sum of (a) Interest Expense, (b) rental expense under
operating leases, (c) the current portion of long term debt, plus (d) the
current portion of Capitalized Lease Obligations, all as determined

 

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for IHOP and its Subsidiaries on a consolidated basis in accordance with GAAP.

 

4.                                       The definition of “Line of Credit
Maturity Date” in Section 1.1 is hereby amended and restated in its entirety to
read as follows:

 

“Line of Credit Maturity Date” means May 31, 2008, or such later date as may
then be in effect pursuant to Section 2.1(d).

 

5.                                       Section 2.1(c) is hereby amended by
adding at the end thereof the following:

 

Notwithstanding the foregoing, Borrower shall maintain a zero balance on
advances under the Line of Credit for a period of at least thirty (30)
consecutive days during any given rolling eighteen (18) month period.

 

6.                                       The following provision is hereby added
to the Credit Agreement as Section 2.1(e):

 

(e)  Cancellation of the Line of Credit.  Borrower may choose to cancel the Line
of Credit upon five (5) Business Days written notice to Bank, provided
(i) Borrower repays all Advances outstanding under the Line of Credit,
(ii) Borrower pays all unused commitment fees accrued through the date of such
cancellation, and (iii) if any Letters of Credit are outstanding upon such
cancellation, then as security for the reimbursement obligations of Borrower to
Bank under such Letters of Credit, Borrower shall grant to Bank a security
interest of first priority in cash maintained in a deposit account with Bank in
an amount equal to the sum of the undrawn amount of each such Letter of Credit
plus the amount of any unreimbursed draws under each such Letter of Credit, plus
any unpaid fees relating to any such Letter of Credit, pursuant to such security
agreement and other documents as Bank may require, all in form and substance
satisfactory to Bank.  Upon satisfaction of all of the foregoing conditions, the
Line of Credit shall be deemed cancelled, and Bank shall have no further
obligation to make Advances or issue Letters of Credit thereunder, and Borrower
shall have no further obligation to pay any additional unused commitment fees in
connection therewith.

 

7.                                       Section 2.2(c) is hereby amended by
deleting the reference therein to “three-eighths of one percent (0.375) per
annum” and by substituting in its place “one-quarter of one percent (0.25%) per
annum.”

 

8.                                       Section 2.2(d) is hereby amended by
deleting the reference therein to “one and one-quarter percent (1.25%) per
annum” and by substituting in its place “one half percent (0.50%) per annum.”

 

9.                                       Section 6.3 is hereby amended by
deleting the reference therein to “0.50 to 1.00” and by substituting in its
place “0.45 to 1.00.”

 

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10.                                 Section 6.4 is hereby amended and restated
in its entirety to read as follows:

 

SECTION 6.4.  CONSOLIDATED TANGIBLE NET WORTH.  Permit Consolidated Tangible Net
Worth at any time from and after December 31, 2004 to be less than the sum of
$214,000,000 plus 25% of Consolidated Net Income on a cumulative basis from
December 31, 2004, to and including any date of determination.

 

11.                                 Section 6.6 is hereby amended and restated
in its entirety to read as follows:

 

SECTION 6.6.  RESTRICTED PAYMENTS; RESTRICTED INVESTMENTS.

 

(a)                                  Restricted Payments.  Permit IHOP, directly
or indirectly, through any Subsidiary or otherwise, to pay or declare any
dividend on any class of its capital stock (but IHOP or any such Subsidiary may
declare and pay dividends payable solely in capital stock or warrants, rights or
options to acquire capital stock) or make any other distribution on account of
any class of its capital stock; retire, redeem, repurchase or otherwise acquire,
directly or indirectly, any shares of any class of its capital stock or any
warrants, rights or options to acquire any such shares (other than any such
redemption, retirement, purchase or other acquisition in which the consideration
paid by IHOP or such Subsidiary consists solely of shares of capital stock of
IHOP); or make or provide for any mandatory sinking fund payments required in
connection with any class of its capital stock (all of the foregoing being
called “Restricted Payments”) unless at the time of any such Restricted Payment,
both immediately before and immediately after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing.  Moreover, so long as
no Default or Event of Default shall have occurred and be continuing after
giving effect to any such transaction, this Section 6.6(a) shall not prevent
(i) the payment of any dividend within 60 days after the date of its declaration
if the dividend would have been permitted on the date of its declaration, or
(ii) the acquisition, repurchase, retirement, call, put or redemption of any
shares of capital stock of IHOP out of the proceeds of the substantially
concurrent sale (other than to a Subsidiary of IHOP) of, shares of capital stock
of IHOP.

 

(b)                                 Restricted Investments.  Permit IHOP,
directly or indirectly, through any Subsidiary or otherwise, to make any
Restricted Investment, unless after giving effect to any Restricted Investment
the cumulative aggregate amount of all Restricted Investments made by IHOP and
its Subsidiaries after December 31, 2004 would not exceed the sum of
(i) $84,230,000 plus (ii) 50% of cumulative Consolidated Net Income from
December 31, 2004 through the date of determination (or if IHOP and its

 

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Subsidiaries on a consolidated basis have a cumulative Consolidated Net Loss for
such period, then minus 100% of such Consolidated Net Loss), plus (iii) the net
proceeds from the issuance or sale of any shares of any class of equity
securities of IHOP which are not mandatorily redeemable or otherwise subject to
repurchase, retirement, call, put or other reacquisition prior to or on the
respective maturity dates of the Fixed Rate Notes (and not subject to
acceleration or redemption, repurchase, retirement, call, put or other
reacquisition prior to the respective maturity dates of the Fixed Rate Notes)
received after December 31, 2004; provided that at the time of any such
Restricted Investment, both immediately before and immediately after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing.

 

12.                                 Section 6.9 is hereby amended by deleting
therefrom the reference to “1.50 to 1.00” and by substituting in its place “1.25
to 1.00.”

 

13.                                 Section 6.13(a) is hereby deleted in its
entirety, without substitution therefor.

 

14.                                 The Line of Credit Note referred to in the
Credit Agreement shall hereinafter mean and refer to the promissory note
executed by Borrower in substantially the form of Exhibit A attached to this
Amendment.

 

15.                                 Except as specifically provided herein, all
terms and conditions of the Credit Agreement remain in full force and effect,
without waiver or modification.  All terms defined in the Credit Agreement shall
have the same meaning when used in this Amendment.  This Amendment and the
Credit Agreement shall be read together, as one document.

 

16.                                 The effectiveness of this Amendment shall be
conditioned upon receipt by Bank of the following documents, each properly
executed by a responsible official of each party thereto:

 

(a)                                  An original counterpart of this Amendment
executed by Borrower;

 

(b)                                 The new Line of Credit Note executed by
Borrower in substantially the form attached to this Amendment as Exhibit A; and

 

(c)                                  Such other documents as Bank may reasonably
require in connection with this Amendment and the transactions described herein.

 

17.                                 Borrower hereby remakes all representations
and warranties contained in the Credit Agreement and reaffirms all covenants set
forth therein.  Borrower further certifies that as of the date of this Amendment
there exists no Event of Default as defined in the Credit Agreement, nor any
condition, act or event which with the giving of notice or the passage of time
or both would constitute any such Event of Default.

 

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

 

INTERNATIONAL HOUSE OF

WELLS FARGO BANK,

PANCAKES, INC.,

NATIONAL ASSOCIATION

a Delaware corporation

 

 

 

By:

/s/ Julia A. Stewart

 

By:

/s/ John N. Cate

 

 

Julia A. Stewart

 

John N. Cate

 

President and CEO

 

Vice President

 

 

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