Credit facility	6 Months Ended
Jul. 02, 2013
Credit facility
Credit facility	2. Credit facility On May 31, 2013, the Company entered into an amended and restated credit agreement with Fifth Third Bank (the “Bank”). The agreement amended and restated the credit agreement between the Company and the Bank dated May 10, 2011, as amended, and now provides for a term loan in the amount of $16.0 million that refinances all existing indebtedness with the Bank; an acquisition line of up to $10.0 million (“ALOC”); a $100,000 line of credit to issue standby letters of credit; and a delayed draw term loan (“DDTL”) in the amount of $4.0 million to acquire the improvements and assume the related ground leases for six of the Company’s existing restaurant properties from entities related to or managed by Dunham Capital Management L.L.C. The Company’s pre-existing term and line of credit loans were converted into a portion of the new term loan. The Bank’s commitment to issue the standby letters of credit is subject to reduction or modification as provided in the credit agreement. These credit facilities mature on May 31, 2018. Pursuant to the terms of a guaranty, pledge and security agreement, the Company’s obligations under the credit agreement are secured by liens on its subsidiaries, personal property, fixtures and real estate owned or to be acquired. Payment and performance of the Company’s obligations to the Bank are jointly and severally guaranteed by its subsidiaries. The loans bear interest at the Company’s option at a fluctuating per annum rate equal to (i) a base rate plus a margin which is tied to the Company’s senior leverage ratio or (ii) LIBOR plus a margin which is tied to the Company’s senior leverage ratio. With respect to the term loan only, the Company may also pay interest at a fixed rate of 6.75% per annum. Interest is payable on either a monthly basis (with respect to base rate or fixed rate loans) or at the end of each 30, 60 or 90 day LIBOR period (with respect to LIBOR loans) and at maturity. The Company pays an unused line fee in the amount of 0.50% of the unused line on both the ALOC and the DDTL equal to the difference between the total commitment for each of the ALOC and the DDTL and the amount outstanding under each of the ALOC and DDTL. The Company is obligated to make principal payments on the term loan in quarterly installments commencing with September 30, 2013 each in the amount of $200,000 through June 30, 2014; $300,000 through June 30, 2015; and $400,000 in every quarter thereafter with a final payment of principal and interest on May 31, 2018. The DDTL will be payable in quarterly installments commencing December 31, 2013 in amounts equal to a percentage of outstanding principal of 1.25% through September 30, 2014; increasing to 1.875% on and after December 31, 2014; and increasing to 2.50% on and after December 31, 2015, with a final payment of interest and principal due on May 31, 2018. The Company may voluntarily prepay the loans in whole or part subject to notice and other requirements of the credit agreement and is obligated to make prepayments from time to time: · if the Company makes certain dispositions or suffers events of loss resulting in cash proceeds, subject to the right to reinvest such proceeds (to be applied first to term loans until paid in full and then to the line of credit loan until paid in full); · if at any time the Company issues new equity securities, an amount equal to 25% of the net cash proceeds from such new equity securities and 100% of the net cash proceeds from the incurrence of indebtedness (to be applied first to term loans until paid in full and then to the line of credit loan until paid in full); and · by amounts equal to specified ratios of total funded debt less capital leases to adjusted EBITDA for any most recently completed fiscal year multiplied by the Company’s cash flow for such fiscal year (to be applied first to term loans until paid in full and then to the line of credit loan until paid in full). The credit agreement contains customary covenants, representations and warranties and the following financial covenants: · as of the last day of any fiscal quarter, the Company may not permit its leverage ratio to be greater than 4.50; · the maintenance of senior leverage ratios, with maximum senior leverage ratios ranging from 3.30 for the quarter ending June 30, 2013 to 2.50 for the quarter ending March 31, 2016 and each fiscal quarter ending thereafter; · as of the last day of each fiscal quarter, the Company must maintain a ratio of (i) adjusted EBITDA for the four fiscal quarters then ended to (ii) fixed charges of not less than 1.20; and · the Company and its subsidiaries may not make capital expenditures (other than capital expenditures financed with the proceeds of the ALOC) in excess of $5.0 million for the fiscal year ending December 31, 2013 and any fiscal year thereafter, subject to carryovers of up to $2.5 million of an unutilized portion of the prior year limitation. The Company had a balance outstanding on the ALOC of $3.0 million at July 2, 2013. Per the terms of the credit agreement, the Company entered into a three-year interest rate swap agreement to fix interest rates on a portion of this debt (Notes 1 and 7). Under the swap agreement, the Company pays a fixed rate of 1.02% and receives interest at the one-month LIBOR on a notional amount of $12.0 million. This effectively makes the Company’s interest rate 5.77% on $12.0 million of its debt. The Company did not elect to apply hedge accounting for this interest rate swap agreement. As such, the fair value of the interest rate swap is recorded on the condensed consolidated balance sheet in other assets or other liabilities, depending on the fair value of the swap, and any changes in the fair value of the swap agreement will be accounted for as non-cash adjustments to interest expense and recognized in current earnings. The decrease in the fair value of the swap agreement was $118,561 for the quarter ended July 2, 2013 and was recorded in other interest expense in the condensed consolidated statements of operations.

2. Credit facility

On May 31, 2013, the Company entered into an amended and restated credit agreement with Fifth Third Bank (the “Bank”). The agreement amended and restated the credit agreement between the Company and the Bank dated May 10, 2011, as amended, and now provides for a term loan in the amount of $16.0 million that refinances all existing indebtedness with the Bank; an acquisition line of up to $10.0 million (“ALOC”); a $100,000 line of credit to issue standby letters of credit; and a delayed draw term loan (“DDTL”) in the amount of $4.0 million to acquire the improvements and assume the related ground leases for six of the Company’s existing restaurant properties from entities related to or managed by Dunham Capital Management L.L.C. The Company’s pre-existing term and line of credit loans were converted into a portion of the new term loan. The Bank’s commitment to issue the standby letters of credit is subject to reduction or modification as provided in the credit agreement. These credit facilities mature on May 31, 2018.

Pursuant to the terms of a guaranty, pledge and security agreement, the Company’s obligations under the credit agreement are secured by liens on its subsidiaries, personal property, fixtures and real estate owned or to be acquired. Payment and performance of the Company’s obligations to the Bank are jointly and severally guaranteed by its subsidiaries.

The loans bear interest at the Company’s option at a fluctuating per annum rate equal to (i) a base rate plus a margin which is tied to the Company’s senior leverage ratio or (ii) LIBOR plus a margin which is tied to the Company’s senior leverage ratio. With respect to the term loan only, the Company may also pay interest at a fixed rate of 6.75% per annum. Interest is payable on either a monthly basis (with respect to base rate or fixed rate loans) or at the end of each 30, 60 or 90 day LIBOR period (with respect to LIBOR loans) and at maturity. The Company pays an unused line fee in the amount of 0.50% of the unused line on both the ALOC and the DDTL equal to the difference between the total commitment for each of the ALOC and the DDTL and the amount outstanding under each of the ALOC and DDTL. The Company is obligated to make principal payments on the term loan in quarterly installments commencing with September 30, 2013 each in the amount of $200,000 through June 30, 2014; $300,000 through June 30, 2015; and $400,000 in every quarter thereafter with a final payment of principal and interest on May 31, 2018. The DDTL will be payable in quarterly installments commencing December 31, 2013 in amounts equal to a percentage of outstanding principal of 1.25% through September 30, 2014; increasing to 1.875% on and after December 31, 2014; and increasing to 2.50% on and after December 31, 2015, with a final payment of interest and principal due on May 31, 2018.

The Company may voluntarily prepay the loans in whole or part subject to notice and other requirements of the credit agreement and is obligated to make prepayments from time to time:

· if the Company makes certain dispositions or suffers events of loss resulting in cash proceeds, subject to the right to reinvest such proceeds (to be applied first to term loans until paid in full and then to the line of credit loan until paid in full);

· if at any time the Company issues new equity securities, an amount equal to 25% of the net cash proceeds from such new equity securities and 100% of the net cash proceeds from the incurrence of indebtedness (to be applied first to term loans until paid in full and then to the line of credit loan until paid in full); and

· by amounts equal to specified ratios of total funded debt less capital leases to adjusted EBITDA for any most recently completed fiscal year multiplied by the Company’s cash flow for such fiscal year (to be applied first to term loans until paid in full and then to the line of credit loan until paid in full).

The credit agreement contains customary covenants, representations and warranties and the following financial covenants:

· as of the last day of any fiscal quarter, the Company may not permit its leverage ratio to be greater than 4.50;

· the maintenance of senior leverage ratios, with maximum senior leverage ratios ranging from 3.30 for the quarter ending June 30, 2013 to 2.50 for the quarter ending March 31, 2016 and each fiscal quarter ending thereafter;

· as of the last day of each fiscal quarter, the Company must maintain a ratio of (i) adjusted EBITDA for the four fiscal quarters then ended to (ii) fixed charges of not less than 1.20; and

· the Company and its subsidiaries may not make capital expenditures (other than capital expenditures financed with the proceeds of the ALOC) in excess of $5.0 million for the fiscal year ending December 31, 2013 and any fiscal year thereafter, subject to carryovers of up to $2.5 million of an unutilized portion of the prior year limitation.

The Company had a balance outstanding on the ALOC of $3.0 million at July 2, 2013.

Per the terms of the credit agreement, the Company entered into a three-year interest rate swap agreement to fix interest rates on a portion of this debt (Notes 1 and 7). Under the swap agreement, the Company pays a fixed rate of 1.02% and receives interest at the one-month LIBOR on a notional amount of $12.0 million. This effectively makes the Company’s interest rate 5.77% on $12.0 million of its debt. The Company did not elect to apply hedge accounting for this interest rate swap agreement. As such, the fair value of the interest rate swap is recorded on the condensed consolidated balance sheet in other assets or other liabilities, depending on the fair value of the swap, and any changes in the fair value of the swap agreement will be accounted for as non-cash adjustments to interest expense and recognized in current earnings. The decrease in the fair value of the swap agreement was $118,561 for the quarter ended July 2, 2013 and was recorded in other interest expense in the condensed consolidated statements of operations.