<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 2, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
-------------------- -----------------
Commission file number 0-21625
FAMOUS DAVE'S OF AMERICA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota 41-1782300
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
7657 Anagram Drive, Eden Prairie, MN 55344
(Address of Principal Executive Offices)
(952) 294-1300
(Registrant's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Indicate by check whether the registrant: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
At May 10, 2000 there were 9,098,693 shares of common stock, $.01 par
value, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
1
<PAGE> 2
FAMOUS DAVE'S OF AMERICA, INC.
Form 10-Q Index
April 2, 2000
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - 3
April 2, 2000 and January 2,2000
Condensed Consolidated Statements of Operations - 4
For the thirteen weeks ended April 2, 2000 and
April 4,1999
Condensed Consolidated Statements of Cash Flows - 5
For the thirteen weeks ended April 2, 2000 and
April 4, 2000
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Part II OTHER INFORMATION
Items 1,5 and 6. 13
Signatures 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 2, JANUARY 2,
2000 2000
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .................................... $ 987,000 $ 1,712,000
Inventories .................................................. 1,259,000 1,108,000
Prepaids and other current assets ............................ 1,291,000 1,249,000
------------ ------------
Total current assets ...................................... 3,537,000 4,069,000
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET ........................................... 40,878,000 38,742,000
OTHER ASSETS:
Deposits ..................................................... 367,000 315,000
Debt issuance costs, net ..................................... 376,000 200,000
------------ ------------
$ 45,158,000 $ 43,326,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit ............................................... $ 1,544,000 $ 3,050,000
Current portion of capital lease obligations ................. 1,039,000 1,026,000
Accounts payable ............................................. 3,144,000 4,220,000
Accrued payroll and related taxes ............................ 794,000 807,000
Other current liabilities .................................... 2,045,000 2,136,000
------------ ------------
Total current liabilities ................................. 8,566,000 11,239,000
NOTE PAYABLE ................................................... 750,000 0
FINANCING LEASE OBLIGATIONS .................................... 8,290,000 4,500,000
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT
PORTION ..................................................... 456,000 577,000
------------ ------------
Total liabilities ......................................... 18,062,000 16,316,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
9,070,360 and 9,055,139 shares issued and outstanding ...... 91,000 91,000
Additional paid-in capital ................................... 43,300,000 43,265,000
Accumulated deficit .......................................... (16,295,000) (16,346,000)
------------ ------------
Total shareholders' equity ................................ 27,096,000 27,010,000
------------ ------------
$ 45,158,000 $ 43,326,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------
April 2, April 4,
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES, NET $ 15,091,000 $ 10,388,000
------------ ------------
COSTS AND EXPENSES:
Food and beverage costs 4,980,000 3,546,000
Labor and benefits 4,250,000 2,924,000
Operating expenses 3,514,000 2,449,000
Depreciation and amortization 814,000 609,000
Pre-opening expenses 192,000 103,000
General and administrative 1,079,000 1,069,000
------------ ------------
Total costs and expenses 14,829,000 10,700,000
------------ ------------
INCOME (LOSS) FROM OPERATIONS 262,000 (312,000)
OTHER INCOME (EXPENSE):
Interest income 0 33,000
Interest expense (225,000) (48,000)
Franchise income 14,000 11,000
------------ ------------
Total other income (expense) (211,000) (4,000)
------------ ------------
NET INCOME (LOSS) $ 51,000 $ (316,000)
============ ============
BASIC NET INCOME (LOSS) PER COMMON SHARE $ 0.01 $ (0.04)
============ ============
DILUTED NET INCOME (LOSS) PER COMMON SHARE $ 0.01 $ (0.04)
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC 9,069,371 8,837,590
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 9,168,689 8,837,590
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
April 2, April 4,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 51,000 $ (316,000)
Adjustments to reconcile net income (loss) to
cash flows from operating activities:
Depreciation and amortization 872,000 688,000
Impairment reserve for restaurants and other assets (35,000) (32,000)
Changes in working capital items -
Inventories (151,000) (16,000)
Prepaids and other current assets (42,000) (185,000)
Deposits (52,000) (9,000)
Accounts payable (1,076,000) (2,311,000)
Accrued payroll and other taxes (13,000) 83,000
Other current liabilities (62,000) (61,000)
----------- -----------
Cash flows from operating activities (508,000) (2,159,000)
----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from available-for-sale securities 0 75,000
Purchase of property, equipment
and leasehold improvements (2,217,000) (1,481,000)
----------- -----------
Cash flows from investing activities (2,217,000) (1,406,000)
----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments on debt issuance costs (181,000) 0
Net payments on line of credit (1,506,000) (683,000)
Proceeds from financing lease obligation 3,790,000 4,500,000
Payments on capital lease obligations (108,000) (86,000)
Proceeds from exercise of stock options 5,000 0
----------- -----------
Cash flows from financing activities 2,000,000 3,731,000
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (725,000) 166,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,712,000 1,951,000
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 987,000 $ 2,117,000
=========== ===========
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Note payable issued in connection with
land acquired $ 750,000 $ 0
----------- -----------
Common shares issued in lieu of other
current liabilities $ 29,000 $ 0
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 2, 2000
(Unaudited)
(1) GENERAL
Famous Dave's of America, Inc. ("Famous Dave's" or the "Company") currently
operates or franchises twenty-nine restaurants under the name "Famous Dave's"
and three under the name "Red River Barbeque & Grille" in the Midwestern and
Eastern regions of the United States. The three owned Red River restaurants are
to be converted to Famous Dave's. Our restaurants, the majority of which offer
full table service, feature hickory smoked off-the-grill meat entree favorites
served in one of our three casual formats: a "Northwoods" style lodge, a
nostalgic roadhouse "shack", or a Blues Club featuring nightly musical
entertainment. We seek to differentiate ourselves by providing high quality food
in these distinctive and comfortable environments. As of April 2, 2000 we
operated or franchised thirty-two restaurants with one additional owned unit and
three franchise units in development. The owned unit is in Illinois, and the
three franchise units are in Illinois, Minnesota, and Wisconsin. As of April 4,
1999 we operated or franchised twenty-four restaurants, with one additional unit
in development.
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by us following the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although we believe that the disclosures are adequate to make the
information presented not misleading, it is suggested that these interim
condensed consolidated financial statements be read in conjunction with our most
recent audited consolidated financial statements and notes thereto included in
our Annual Report on Form 10-KSB for the fiscal year ended January 2, 2000. In
our opinion, all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented have been made.
Operating results for the thirteen-week period ended April 2, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000.
Certain amounts in the fiscal 1999 financial statements have been reclassified
to conform to the fiscal 2000 presentation with no impact on previously reported
net loss or shareholders' equity.
(3) INCOME (LOSS) PER COMMON SHARE
Basic earnings (loss) per share (EPS) is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
quarter. Diluted EPS is computed by dividing net income (loss) by the weighted
average common shares outstanding and dilutive common equivalent shares assumed
to be outstanding during each period. Dilutive common equivalent shares have not
been included in the computation of diluted EPS for 1999 because their inclusion
would be anti-dilutive.
(4) INCOME FROM FRANCHISEES
As of April 2, 2000 we had two franchise units in operation, one each in
Minnesota and Wisconsin. The franchise agreements provide that in exchange for
the payment of certain fees, the franchisee may open up to three units under the
Famous Dave's brand, along with receiving other benefits. The revenue generated
by this arrangement is not recognized until the franchised restaurant is open
and the Company has provided all services. We anticipate that three additional
units will open during the second quarter of 2000. The developments are in
Illinois, Minnesota, and Wisconsin.
6
<PAGE> 7
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
April 2, 2000
(Unaudited)
(5) SEVERANCE
In December 1999, we recorded a provision totaling $147,000 for executive
severance expense. During the quarter ended April 2, 2000, we charged $65,000 to
this provision.
(6) IMPAIRMENT RESERVE FOR RESTAURANTS TO BE DISPOSED
In March 1998, we implemented a plan to close two restaurants. As part of
this plan, we recorded a provision, which was adjusted in December 1999. The
write-offs against this provision totaled $35,000 for the 13 weeks ended April
2, 2000 and $32,000 for the comparable period in 1999.
(7) RELATED PARTY TRANSACTIONS
S&D Land Holdings, Inc. - We lease the real estate for three of our units
from S&D Land Holdings, Inc., a company wholly owned by the Company's founding
shareholder and Chairman.
(8) INCOME TAXES
The Company has generated net operating losses of approximately $16,295,000
which, if not used, will begin to expire in 2011. Future changes in ownership
may place limitations on the use of these net operating loss carry-forwards. We
have recorded a full valuation allowance against the deferred tax asset due to
the uncertainty of realizing the related benefit.
(9) NOTE PAYABLE
On January 21, 2000 a note payable was signed with S&D Land Holdings Inc., a
company wholly owned by the Company Chairman, for $750,000 to facilitate
mortgage financing. The entire principal balance and accrued interest is payable
twenty four months from the date of the note.
(10) FINANCING LEASE OBLIGATIONS
In March 1999, we completed a sale-leaseback transaction involving three of
our existing units that provided net proceeds of approximately $4.4 million.
Under this financing we are obligated to make monthly payments of approximately
$41,250 (which increases 4.04% every two years) for a minimum of twenty years.
During January 2000, the Company completed mortgage financing for two of its
existing units. The proceeds of this financing were $3.7 million. The Company is
obligated under these agreements to make monthly payments of approximately
$38,015 for a period of twenty years.
(11) COMMITMENTS AND CONTINGENCIES
CONSTRUCTION AND DEVELOPMENT CONTRACTS
In conjunction with our expansion activity, we enter into fixed price
construction contracts from time to time. At April 2, 2000, we had commitments
outstanding under two contracts for construction of lodges in Vernon Hills and
Addison Illinois. As of April 2, 2000, the balance remaining to be paid under
these contracts was approximately $600,000.
7
<PAGE> 8
Item 2.
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
The business of Famous Dave's of America, Inc. is to develop, own and
operate casual dining restaurants under the name "Famous Dave's." As of April 2,
2000 we owned and operated thirty restaurants: fourteen in Minnesota, four in
Wisconsin, three in Iowa, two in Illinois, three in Maryland and one each in
Nebraska and Virginia. In addition, there were two restaurants located in
Minnesota and Wisconsin operating under franchise agreements.
Famous Dave's was formed in March 1994 and we opened our first restaurant in
the Linden Hills neighborhood of Minneapolis in June 1995. We currently operate
three lodge restaurants featuring hickory smoked off-the-grill entrees, a rustic
Northwoods decor and big band music. In addition, we operate twenty-one
nostalgic roadhouse barbecue shacks of which fourteen have been opened as, or
converted to, a full service format that resembles the Lodge concept. We also
operate two Blues Clubs (featuring authentic Chicago Blues Club decor and live
music seven nights a week) and a Take-Out and Catering facility. All of our
restaurants feature similar menu items, consistent preparation methods and
uniform kitchen layouts.
Future revenues and profits, if any, will depend upon various factors,
including continued market acceptance of the Famous Dave's concept, the quality
of our restaurant operations, our ability to successfully expand into new
markets, the acceptance of our franchise concept, our ability to raise
additional financing as needed and general economic conditions. There can be no
assurance that we will successfully implement our expansion plans, in which case
we will continue to be dependent on the revenues from existing operations. We
also face all of the risks, expenses and difficulties frequently encountered in
connection with the expansion and development of an expanding business.
Furthermore, to the extent that our expansion strategy is successful, we must
manage the transition to multiple-site and higher-volume operations, the control
of overhead expenses and the addition of necessary personnel.
Components of operating expenses include operating payroll and fringe
benefits, occupancy costs, repairs and maintenance, and advertising and
promotion. Certain of these costs are variable and will fluctuate as sales
fluctuate. The primary fixed costs are corporate and restaurant management and
occupancy costs. Our experience is that when a new restaurant opens, it incurs
higher than normal levels of labor and food costs until operations stabilize,
usually during the first three months of operation. We believe, however, that as
restaurant management and staff gain experience, labor scheduling, food cost
management and operating expense control are improved to levels similar to those
at our more established restaurants.
General and administrative expenses include all corporate and administrative
functions that serve to support existing operations and provide an
infrastructure to support future growth. Management, supervisory and staff
salaries, employee benefits, travel, rent, depreciation, general insurance and
marketing expenses are major items in this category.
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and notes thereto and the audited
consolidated financial statements and notes thereto included in the Company's
Form 10-KSB for the fiscal year ended January 2, 2000.
8
<PAGE> 9
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Our overall operating results expressed as a percentage of net revenue were as
follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
April 2, April 4,
2000 1999
(unaudited) (unaudited)
---------- -----------
<S> <C> <C>
REVENUES, NET 100.0% 100.0%
---------- -----------
UNIT-LEVEL COSTS AND EXPENSES:
Food and beverage costs 33.0% 34.1%
Labor and benefits 28.2% 28.1%
Operating expenses 23.3% 23.6%
Depreciation and amortization 5.4% 5.9%
Pre-opening expenses 1.3% 1.0%
---- ----
Total costs and expenses 91.1% 92.7%
---- ----
INCOME FROM UNIT-LEVEL OPERATIONS 8.9% 7.3%
General and administrative 7.2% 10.3%
Reserve for loss on closed sites 0.0% 0.0%
---- ----
INCOME (LOSS) FROM OPERATIONS 1.7% (3.0%)
Other income (expense), net (1.4%) 0.0%
---- ----
NET INCOME (LOSS) 0.3% (3.0%)
---- ----
</TABLE>
REVENUE, NET
Net revenue for the thirteen weeks ended April 2, 2000 was $15,091,000
compared to $10,388,000 for the same period in 1999, a 45.3% increase. The
increase in net revenue is primarily due to the addition of four restaurants
opened during the four quarters subsequent to April 4, 1999, the purchase of
four Red River Barbeque & Grille restaurants on the East coast, and an increase
in same store sales. The Company has nineteen restaurants that have been open
for more than eighteen months and these restaurants reported increases in same
store sales of approximately 8.1% in the thirteen weeks ended April 2, 2000.
This is the fourth consecutive quarter of comparable store sales increases for
our company and is an improvement in comparable store sales performance from
last year's first quarter decline of approximately 5%.
FOOD AND BEVERAGE COSTS
Food and beverage costs for the thirteen weeks ended April 2, 2000 were
$4,980,000 or 33.0% of net revenue, compared to $3,546,000 or 34.1% of net
revenue for the same period in 1999. The decrease in food and beverage costs as
a percent of net revenue was primarily due to increased revenue and improved
purchasing economies, including contract pricing of certain pork items.
LABOR AND BENEFITS
Labor and benefits for the thirteen weeks ended April 2, 2000 were
$4,250,000 or 28.2% of net revenue, compared to $2,924,000 or 28.1% of net
revenue for the same period in 1999. The increase in dollar cost of labor for
2000 is caused by the growth in number of restaurants compared to 1999. Labor
costs as a percent of net revenue are higher in 2000 compared to 1999 due to the
mix of full table service to counter service restaurants, as well as a
heightened emphasis on
9
<PAGE> 10
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
training and execution company-wide. Full service restaurants that operate in
states without a "tip credit" (such as Minnesota) experience a higher wage rate
for dining room labor. The migration toward full service dining in most of the
Company's restaurants is part of management's strategy for increasing unit-level
sales.
OPERATING EXPENSES
For the thirteen weeks ended April 2, 2000, operating costs were $3,514,000
or 23.3% of net revenue, compared to $2,449,000 or 23.6% of net revenue for the
same period in 1999. The increase in dollars of operating expense is related to
the growth of restaurant units. The decrease in operating expense as a percent
of net revenue is due to emphasizing cost reduction efforts. However, the
savings as a percent of net revenue were impacted by property tax expense
revisions to fully assessed building values and entertainer expense at our
Chicago Blues Club.
DEPRECIATION AND AMORTIZATION
Unit-level depreciation and amortization for the thirteen weeks ended April
2, 2000 was $814,000 or 5.4% of net revenue compared to $609,000 or 5.9% of net
revenue during the same period in 1999. The decrease in unit-level depreciation
and amortization percentage results from lower construction costs associated
with units operating in 2000 compared to those operating in fiscal 1999. In
addition, the effect of impairment write-downs made in the fourth quarter of
fiscal 1999 contributed to the decrease of depreciation as a percentage of net
revenue.
PRE-OPENING EXPENSES
Pre-opening expenses were $192,000 or 1.3% of net revenue for the thirteen
weeks ended April 2, 2000 compared to $103,000 or 1.0% of net revenue during the
same period in 1999. Pre-opening expenses are charged to expense in the month
that they are incurred. The 2000 expenses reflect the opening of units in
Lincoln Nebraska, Vernon Hills Illinois, and Addison Illinois, compared to the
Chicago Blues Club, which was in development in the same period in 1999.
INCOME FROM UNIT-LEVEL OPERATIONS
Income from unit-level operations totaled $1,341,000 or 8.9% of net revenue
for the thirteen weeks ended April 2, 2000, compared to $757,000 or 7.3 % of net
revenue in the corresponding period of 1999, an increase of 77.1%. Income from
unit-level operations represents income from operations before general and
administrative expenses. Although income from unit-level operations should not
be considered an alternative to income/loss from operations as a measure of our
operating performance, such unit-level measurement is commonly used as an
additional measure of operating performance in the restaurant industry and
certain related industries. The change in income from unit-level operations,
both in amount and as a percent of revenue, from 1999 to 2000 is attributable to
the increase in net revenue from new and existing units and retail and other
non-restaurant revenue and the other changes in costs and expenses as discussed
previously.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the thirteen weeks ended April 2,
2000 were $1,079,000 or 7.2% of net revenue, compared to $1,069,000 or 10.3% of
net revenue for the same period in 1999. The reduction in general and
administrative expenses as a percent of net revenue reflects continued efforts
to maximize efficiency as additional locations are opened, and the improved
distribution of higher revenue spread over a controlled level of general and
administrative expenses.
10
<PAGE> 11
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
INCOME (LOSS) FROM OPERATIONS
Income from operations totaled $262,000 or 1.7% of net revenue, for the
thirteen weeks ended April 2, 2000 compared to a loss from operations of
$312,000 or 3.0% of net revenue, in the corresponding period in 1999. The
increase in income is primarily attributable to increased flow through
restaurant operations and control of general and administrative expense.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net, primarily represents interest
expense on capital lease obligations, a line of credit and financing lease
obligations. Interest expense was $225,000 or 1.5% of net revenue for the
thirteen weeks ended April 2, 2000 compared to interest expense of $48,000 or
0.4% for same period in 1999. The increase in net expense from 1999 to 2000 was
primarily due to an increase in interest expense on financing lease transactions
that occurred during March 1999 and January 2000, interest incurred on a bank
line of credit, and the elimination of short-term investments in 2000.
NET INCOME (LOSS) /NET INCOME (LOSS) PER COMMON SHARE
The net income for the thirteen weeks ended April 2, 2000 was $51,000, or
$.01 per share on 9,168,689 weighted average diluted shares outstanding,
compared to net loss of $316,000 or $.04 per share on 8,837,590 weighted average
shares outstanding, during the comparable period in 1999. The increase in net
income and net income per share is attributable to increased income from
restaurant and retail operations and emphasis on general and administrative
expenses.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of April 2, 2000 we had cash and cash equivalents of approximately
$987,000 compared to $1,712,000 as of January 2, 2000. The decrease in cash and
cash equivalents reflects the use of cash for the purchase and/or development of
property, equipment and leasehold improvements. (Approximately 2.2 million)
At April 2, 2000 we were party to a credit agreement with a financial
corporation which provides up to a $2,470,000 line of credit of which $1,544,000
is outstanding. This facility is secured by certain of our property, and in
addition is guaranteed by and partially secured by the Chairman of the Company.
The credit facility matured in April 2000 and has been extended to April 2002.
On March 31, 1999 we completed a sale-leaseback transaction involving three
of our existing units that provided net proceeds of approximately $4.4 million.
Effective January 21, 2000 we closed on mortgage financing that provided
proceeds of approximately 3.7 million for continued development of Company owned
restaurants.
We anticipate that future development and expansion will be funded primarily
through cash and short-term investments, proceeds from the sale of additional
equity and/or debt securities, and the proceeds from other forms of financing
such as lease financing or other credit facilities. However, there can be no
assurance that additional financing required will be available, or that the
terms will be acceptable or favorable to us.
11
<PAGE> 12
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
SEASONALITY
Our units typically generate higher revenues during the second and third
quarters (which are summer months for our locations) than in the first and
fourth quarters (which are winter months) as a result of our concentration of
locations in the Illinois, Minnesota and Wisconsin market areas.
MARKET RISK SENSITIVITY
The Company uses financial instruments, including fixed and variable rate
debt, to finance operations. The Company does not enter into contracts for
speculative purposes, nor is it a party to any leveraged instruments. There has
been no material change in the Company's market risks associated with debt
obligations during the quarter ended April 2, 2000.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-Q and other materials filed or to be filed with the Securities and
Exchange Commission (as well as information included in oral statements or other
written statements made or to be made by us) contain statements that are
forward-looking. A number of important factors could, individually or in the
aggregate, cause actual results to differ materially from those expressed or
implied in any forward-looking statements. Such factors include, but are not
limited to, the following: competition in the casual dining restaurant market;
continued market acceptance of our concept; availability and terms of additional
financing: our ability to open additional restaurants in a timely manner;
consumer spending trends and habits; weather conditions in the regions in which
we develop and operate restaurants; and laws and regulations affecting labor and
employee benefit costs. For further information regarding these and other
factors, see our Annual Report on Form 10-KSB for the fiscal year ended January
2, 2000.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any material litigation and is not aware of
any threatened litigation that would have a material adverse effect on its
business.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.19 Agreement, dated as of January 21, 2000, by and between S&D
Land Holdings, Inc., Grand Pines Resorts, Inc. and Famous
Dave's of America, Inc.
10.20 Promissory Note, dated January 21, 2000, by Famous Dave's of
America, Inc. and payable to S&D Land Holdings, Inc., in the
initial principal amount of $750,000.
10.21 Loan Agreement, dated as of January 21, 2000, by and between
FFCA Acquisition Corporation and MinWood Partners, Inc.
10.22 Master Lease, dated as of January 21, 2000, by and between
MinWood Partners, Inc. and Famous Dave's of America, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FAMOUS DAVE'S OF AMERICA, INC.
/s/ Martin J. O'Dowd
--------------------
Martin J. O'Dowd
President and Chief Executive Officer
/s/ Kenneth J Stanecki
----------------------
Kenneth J. Stanecki
Chief Financial Officer
Date: May 12, 2000
14
<PAGE> 1
EXHIBIT 10.19
AGREEMENT
This Agreement is made effective as of the 21st day of January, 2000 by
and between S&D Land Holdings, Inc., a Minnesota corporation ("S&D"), Grand
Pines Resorts, Inc., a Minnesota corporation ("Grand Pines") and Famous Dave's
of America, Inc., a Minnesota corporation ("Famous").
R E C I T A L S
WHEREAS, on January 15, 1996, S&D, as Landlord, entered into a 10 year
ground lease with Famous Dave's of Minneapolis, Inc., a Minnesota corporation,
n/k/a Famous, as amended by Amendment to Lease dated December 30, 1996 and as
further amended by Second Amendment to Lease dated as of July 1, 1997 for the
Minnetonka Site ("Lease") upon which Famous constructed a Famous Dave's BBQ
restaurant; and
WHEREAS, S&D has invested in excess of $1,000,000 in the Minnetonka
Site; and
WHEREAS, Famous and FFCA Acquisition Corporation ("FFCA") entered into
that certain Commitment Letter dated as of December 2, 1999 ("Commitment
Letter") wherein FFCA committed to loan Famous (or a related entity) $3,800,000
("FFCA Loan") which loan will be secured by, among other things, a mortgage on
the Famous restaurant site located at 14601 Highway 7 in Minnetonka, Minnesota
("Minnetonka Site") all as more specifically described in the Commitment Letter;
and
WHEREAS, on March 14, 1996, Famous and Grand Pines ("Grand Pines"),
entered into that certain Trademark License Agreement ("Royalty Agreement")
wherein Grand Pines, among other things, agreed to pay a fee ("Fee") equal to
four percent (4%) of gross food sales at the Grand Pines restaurant in Hayward,
Wisconsin for the right to use certain trademarks owned by Famous; and
WHEREAS, in order to facilitate the FFCA Loan, Famous desires to
purchase from S&D and S&D desires to sell to Famous the Minnetonka site and
terminate the Lease. Further, in consideration of S&D agreeing to sell the
Minnetonka site to Famous for $750,000, Famous has agreed to amend the Royalty
Agreement to terminate Grand Pines obligation to pay the Fee.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual agreements of the parties hereinafter set forth and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. Concurrently with the closing on the FFCA Loan, S&D will convey
the Minnetonka Site to Famous, or an entity designated by Famous,
by limited warranty deed in the form attached as Exhibit A;
<PAGE> 2
2. Concurrently with the closing on the FFCA Loan, Famous will
execute a Promissory Note in the form attached hereto as Exhibit B
in favor of S&D.
3. Concurrently with the closing on the FFCA Loan, S&D and Famous
agree to terminate the Lease by executing a lease termination
agreement in the form attached hereto as Exhibit C;
4. Concurrently with the closing on the FFCA Loan, Famous and Grand
Pines will execute the amendment to the Royalty Agreement in the
form attached hereto as Exhibit D;
5. In the event that the FFCA Loan is not closed on or before
February 28, 2000, this Agreement shall be deemed null and void
and neither party shall have any further obligation to the other
as it relates to the conditions contained herein. All documents
delivered in connection with this Agreement shall immediately be
returned to the executing party.
6. FURTHER ACTS AND ASSURANCES. Each party shall, at any time and
from time to time at and after the Closing, upon request of
another party and without additional consideration, take any and
all steps reasonably necessary to execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and
delivered, all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be reasonably required to
accomplish the transactions contemplated hereunder.
7. BINDING NATURE OF AGREEMENT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that no party may
assign or transfer its or his rights or obligations under this
Agreement without the prior written consent of the other party
hereto.
8. CONTROLLING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be
governed by and construed, interpreted and enforced in accordance
with the laws of the State of Minnesota.
9. MODIFICATION OR WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which
is entitled to the benefits thereof. No waiver of any of the
provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof. No delay or
failure on the part of any party hereto to exercise any right,
power or privilege hereunder shall operate as a waiver thereof;
nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other
2
<PAGE> 3
right, power or privilege hereunder; nor shall any single or
partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege hereunder.
10. HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction
hereof.
11. COUNTERPARTS; FACSIMILE. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed
to be an original and all of which shall constitute the same
instrument. The parties hereto acknowledge and agree for purposes
of this Agreement and all certificates, documents and other items
to be delivered pursuant to the terms hereof, that facsimile
signatures shall be deemed acceptable to and binding upon each
party hereto.
12. ENTIRE AGREEMENT. This Agreement and the Exhibits hereto, together
with the documents and instruments delivered pursuant hereto,
constitutes the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied,
oral or written, of any nature whatsoever with respect to the
subject matter hereof; provided, however, that this provision is
not intended to abrogate any other written agreement between the
parties executed with or after this Agreement or any written
agreement pertaining to another subject matter. This Agreement may
not be modified or amended other than by an agreement in writing
signed by the parties hereto.
[The remainder of this page has been left blank intentionally.]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
S&D LAND HOLDINGS, INC.,
a Minnesota corporation
By: /s/ David W. Anderson
-------------------------------------
Name: David W. Anderson
-----------------------------------
Its: Chief Executive Officer
-----------------------------------
GRAND PINES RESORTS, INC.,
a Minnesota corporation
By: /s/ David W. Anderson
-------------------------------------
Name: David W. Anderson
-----------------------------------
Its: President
-----------------------------------
FAMOUS DAVE'S OF AMERICA, INC.,
a Minnesota corporation
By: /s/ Martin J. O'Dowd
---------------------------------------
Name: Martin J. O'Dowd
-----------------------------------
Its: President
-----------------------------------
<PAGE> 1
EXHIBIT 10.20
PROMISSORY NOTE
Date: January 21, 2000
Minneapolis, Minnesota $750,000.00
FOR VALUE RECEIVED, the undersigned (hereinafter called the "Maker"),
hereby agrees and promises to pay to S&D LAND HOLDINGS, INC., a Minnesota
corporation, (hereinafter called the "Holder"), at 7657 Anagram Drive, Eden
Prairie, MN 55344, the principal sum of Seven Hundred Fifty Thousand and no/100
Dollars ($750,000.00), (the "Principal Balance") together with interest from the
date hereof on the unpaid Principal Balance hereof at a rate of twelve percent
(12%) per annum payable in lawful money of the United States, as follows:
Interest accrued on the then existing unpaid principal balance monthly
commencing on February 21, 2000 and continuing on the 21st day of each
month thereafter. Repayment of the Principal Balance shall be due in
three (3) installments of Two Hundred Fifty Thousand and no/100 Dollars
($250,000.00) each payable on January 21, 2001; July 21, 2001; and
January 21, 2002.
The entire unpaid Principal Balance and all accrued interest thereon
shall be fully due and payable on January 21, 2002.
Notwithstanding anything to the contrary herein, if the Maker fails to
make any payment within five (5) days after such payment is due hereunder, the
Maker shall be obligated to pay the Holder hereof a late payment fee in an
amount equal to five percent (5%) of the amount of such delinquent installment.
The Holder may, without notice, extend the time for payment, whether of
principal or interest. The Maker may, at any time, and from time to time, prepay
all or any portion of the unpaid principal or interest, without prior notice to
the Holder, and without penalty.
The Maker hereby waives presentment for payment, notice of dishonor,
notice of nonpayment, protest, and notice of protest with respect to this
Promissory Note.
All payments when made, including any prepayments, shall be first
applied against accrued but unpaid interest and then against the Principal
Balance. Interest shall be computed on the basis of days elapsed in a 365 day
year.
Upon default in the performance of this Promissory Note, this
Promissory Note and all liability of the Maker shall immediately become due and
payable without demand or notice of any kind. If the Holder hereof is required
to take any action to collect this Promissory Note, the Maker further agrees to
pay reasonable costs, disbursements and attorney's fees incurred by the Holder
hereof in connection with such collection.
<PAGE> 2
The Maker hereby consents to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related in any way to this Promissory Note or any security for this
Promissory Note and waives any argument that venue in such forum is not
convenient, and agrees that any litigation initiated by the Maker against the
payee or any other holder of this Promissory Note relating in any way to this
Promissory Note or any security for this Promissory Note shall be venued in
either the District Court of Hennepin County, Minnesota or the United States
District Court, District of Minnesota, Fourth Division.
No waiver of any right or remedy under this Promissory Note shall be
valid unless in a writing executed by the Holder of this Promissory Note and any
such waiver shall be effective only in the specific instance and for the
specific purpose given. All rights and remedies of the Holder of this Promissory
Note shall be cumulative and may be exercised singly, concurrently or
successively.
This Promissory Note shall be construed and interpreted in accordance
with the laws of the State of Minnesota.
MAKER:
FAMOUS DAVE'S OF AMERICA, INC.,
a Minnesota corporation
By: /s/ Martin J. O'Dowd
--------------------------------------
Its: President
--------------------------------------
2
<PAGE> 1
EXHIBIT 10.21
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of January 21, 2000, by
and between FFCA ACQUISITION CORPORATION, a Delaware corporation ("FFCA"), whose
address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, and MINWOOD
PARTNERS, INC., a Delaware corporation ("Debtor"), whose address is 7657 Anagram
Drive, Eden Prairie, Minnesota 55344.
PRELIMINARY STATEMENT:
Unless otherwise expressly provided herein, all defined terms used in this
Agreement shall have the meanings set forth in Section 1. Debtor has requested
from FFCA, and applied for, the Loans to provide refinancing for the Premises,
and for no other purpose whatsoever. Each Loan will be evidenced by a Note and
secured by a first priority security interest in the corresponding Premises
pursuant to a Mortgage. FFCA has committed to make the Loans pursuant to the
terms and conditions of the Commitment, this Agreement and the other Loan
Documents.
AGREEMENT:
In consideration of the mutual covenants and provisions of this Agreement,
the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings for
all purposes of this Agreement:
"Action" has the meaning set forth in Section 10.A(4).
"Affiliate" means any Person which directly or indirectly controls, is
under common control with, or is controlled by any other Person. For purposes of
this definition, "controls", "under common control with" and "controlled by"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities or otherwise.
"Business Day" means any day on which banks located in Phoenix, Arizona are
open for business other than a Saturday, Sunday or a legal holiday, ending at
5:00 PM Phoenix, Arizona time.
"Capital Lease" has the meaning set forth in Section 7.B.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et seq.,
as amended.
<PAGE> 2
"Commitment" means that certain Commitment Letter dated December 2, 1999
between FFCA and Debtor, and any amendments or supplements thereto.
"Counsel" means legal counsel to Debtor and Lessee, licensed in the
state(s) in which (i) the Premises are located, (ii) Debtor and/or Lessee is
incorporated or formed and (iii) Debtor and/or Lessee resides or maintains its
chief executive offices, as selected by Debtor and Lessee, as the case may be,
and approved by FFCA.
"Debt" has the meaning set forth in Section 7.B.
"Debtor Entities" means, collectively, Debtor, Lessee and any Affiliate of
Debtor or Lessee.
"De Minimis Amounts" means, with respect to any given level of Hazardous
Materials, that level or quantity of Hazardous Materials in any form or
combination of forms the use, storage or release of which does not constitute a
violation of or require regulation under any Environmental Laws and is
customarily employed in the ordinary course of, or associated with, similar
businesses located in the states in which the Premises are located.
"Depreciation and Amortization" has the meaning set forth in Section 7.B.
"Disclosures" has the meaning set forth in Section 14.P.
"Environmental Condition" means any condition with respect to soil, surface
waters, groundwaters, land, stream sediments, surface or subsurface strata,
ambient air and any environmental medium comprising or surrounding any of the
Premises, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order or liability to or against
Debtor, Lessee or FFCA by any third party (including, without limitation, any
Governmental Authority), including, without limitation, any condition resulting
from the operation of Debtor's or Lessee's business at the Premises and/or the
operation of the business of any other property owner or operator in the
vicinity of the Premises and/or any activity or operation formerly conducted by
any person or entity on or off the Premises.
"Environmental Indemnity Agreement" or "Environmental Indemnity Agreements"
means, as the context may require, the environmental indemnity agreement dated
as of the date of this Agreement to be executed by Debtor for the benefit of the
Indemnified Parties and such other parties as are identified in such agreement
with respect to a Premises or the environmental indemnity agreements dated as of
the date of this Agreement to be executed by Debtor for the benefit of the
Indemnified Parties and such other parties as are identified in such agreement
with respect to all of the Premises, as the same may be amended from time to
time. An Environmental Indemnity Agreement will be executed for each Premises.
"Environmental Insurer" means American International Specialty Lines
Insurance Company or such other environmental insurance company as FFCA may
select, in its sole discretion.
2
<PAGE> 3
"Environmental Laws" means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to Hazardous Materials and/or the protection of human health or
the environment by reason of a Release or a Threatened Release of Hazardous
Materials or relating to liability for or costs of Remediation or prevention of
Releases. "Environmental Laws" includes, but is not limited to, the following
statutes, as amended, any successor thereto, and any regulations, rulings,
orders or decrees promulgated pursuant thereto, and any state or local statutes,
ordinances, rules, regulations and the like addressing similar issues: the
Comprehensive Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground storage tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; the Safe Drinking Water Act; the Occupational Safety and Health
Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide
and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act. "Environmental Laws"
also includes, but is not limited to, any present and future federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law: conditioning transfer of property upon a negative declaration or
other approval of a Governmental Authority of the environmental condition of the
property; requiring notification or disclosure of Releases or other
environmental condition of the Premises to any Governmental Authority or other
person or entity, whether or not in connection with transfer of title to or
interest in property; imposing conditions or requirements relating to Hazardous
Materials in connection with permits or other authorization for lawful activity;
relating to nuisance, trespass or other causes of action related to Hazardous
Materials; and relating to wrongful death, personal injury, or property or other
damage in connection with the physical condition or use of the Premises by
reason of the presence of Hazardous Materials in, on, under or above the
Premises.
"Environmental Policies" means environmental insurance policies issued by
Environmental Insurer to FFCA with respect to the Premises, which Environmental
Policies shall be in form and substance satisfactory to FFCA in its sole
discretion.
"Equipment Payment Amount" has the meaning set forth in Section 7.B.
"Event of Default" has the meaning set forth in Section 10.
"FCCR Amount" has the meaning set forth in Section 10.A(6).
"Fee" means an underwriting, site assessment, valuation, processing and
commitment fee equal to 1.0% of the sum of the Loan Amount for the Premises,
which Fee shall be payable as set forth in Section 3.
"FFCA Payments" has the meaning set forth in Section 7.B.
"FFCA Entities" means, collectively, FFCA, Franchise Finance and any
Affiliate of FFCA or Franchise Finance.
"Fixed Charge Coverage Ratio" has the meaning set forth in Section 7.B.
3
<PAGE> 4
"Franchise Finance" means Franchise Finance Corporation of America, a
Delaware corporation, and its successors.
"GAAP" means generally accepted accounting principles consistently applied.
"Governmental Authority" means any governmental authority, agency,
department, commission, bureau, board, instrumentality, court or
quasi-governmental authority of the United States, the state(s) where the
Premises are located or any political subdivision thereof.
"Gross Sales" has the meaning set forth in Section 7.B.
"Hazardous Materials" means (a) any toxic substance or hazardous waste,
substance, solid waste or related material, or any pollutant or contaminant; (b)
radon gas, asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment which contains
dielectric fluid containing levels of polychlorinated biphenyls in excess of
federal, state or local safety guidelines, whichever are more stringent, or any
petroleum product; (c) any substance, gas, material or chemical which is or may
be defined as or included in the definition of "hazardous substances," "toxic
substances," "hazardous materials," "hazardous wastes," "regulated substances"
or words of similar import under any Environmental Laws; and (d) any other
chemical, material, gas or substance the exposure to or release of which is or
may be prohibited, limited or regulated by any Governmental Authority that
asserts or may assert jurisdiction over the Premises or the operations or
activity at the Premises, or any chemical, material, gas or substance that does
or may pose a hazard to the health and/or safety of the occupants of the
Premises or the owners and/or occupants of property adjacent to or surrounding
the Premises.
"Indemnified Parties" has the meaning set forth in Section 12.
"Interest Expense" has the meaning set forth in Section 7.B.
"Lease" means the master lease between Debtor, as lessor, and Lessee, as
lessee, with respect to, with respect to all of the Premises, as the same may be
amended from time to time.
"Lessee" means Famous Dave's of America, Inc., a Minnesota corporation, and
its successors.
"Loan" or "Loans" means, as the context may require, the loan for each
Premises, or the loans for all of the Premises, described in Section 2.
"Loan Amount" or "Loan Amounts" means, as the context may require, the
aggregate amount set forth in Section 2 or, with respect to each Premises, the
individual amount set forth in Exhibit A.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Mortgages, the Environmental Indemnity Agreements, the UCC-1 Financing
Statements and all other documents, instruments and agreements executed in
connection therewith or contemplated thereby.
4
<PAGE> 5
"Lost Note" has the meaning set forth in Section 7.C.
"Memoranda" has the meaning set forth in Section 9.K.
"Modified FCCR Amount" has the meaning set forth in Section 10.A(6).
"Mortgage" or "Mortgages" means, as the context may require, the deed of
trust or mortgage dated as of the date of this Agreement to be executed by
Debtor for the benefit of FFCA with respect to a Premises or the deeds of trust
or mortgages dated as of the date of this Agreement to be executed by Debtor for
the benefit of FFCA with respect to all of the Premises, as the same may be
amended from time to time. A Mortgage will be executed for each Premises.
"Net Income" has the meaning set forth in Section 7.B.
"Note" or "Notes" means, as the context may require, the promissory note
dated as of the date of this Agreement to be executed by Debtor in favor of FFCA
evidencing a Loan with respect to a Premises or the promissory notes dated as of
the date of this Agreement to be executed by Debtor in favor of FFCA evidencing
the Loans with respect to all of the Premises, as the same may be amended,
restated and/or substituted from time to time, including, without limitation, as
a result of the payment of the FCCR Amount or the Modified FCCR Amount pursuant
to Section 10. A Note will be executed for each Premises in the Loan Amount
corresponding to such Premises.
"Operating Lease Expense" has the meaning set forth in Section 7.B.
"Other Agreements" means, collectively, all agreements and instruments
between, among or by (1) any of the Debtor Entities, and, or for the benefit of,
(2) any of the FFCA Entities, including, without limitation, promissory notes
and guaranties; provided, however, the term "Other Agreements" shall not include
the agreements and instruments defined as the Loan Documents.
"Participation" has the meaning set forth in Section 14.P.
"Permitted Concept" means a Famous Dave's restaurant or other restaurant or
retail concept approved in writing by FFCA in its reasonable discretion.
"Permitted Exceptions" means those recorded easements, restrictions, liens
and encumbrances set forth as exceptions in the title insurance policies issued
by Title Company to FFCA and approved by FFCA in its sole discretion in
connection with the closing of the Loans.
"Person" means any individual, corporation, partnership, limited liability
company, trust, unincorporated organization, Governmental Authority or any other
form of entity.
"Premises" means the parcel or parcels of real estate corresponding to the
FFCA File Numbers and addresses identified on Exhibit A attached hereto,
together with all rights, privileges and appurtenances associated therewith and
all buildings, fixtures and other improvements, equipment, trade fixtures,
appliances and other personal property now or hereafter located thereon (whether
or not affixed to such real estate). As used herein, the term
5
<PAGE> 6
"Premises" shall mean either a singular property or all of the properties
collectively, as the context may require.
"Questionnaires" means the environmental questionnaires completed by Debtor
or Lessee with respect to the Premises and submitted to Environmental Insurer in
connection with the issuance of the Environmental Policies.
"Release" means any presence, release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.
"Remediation" means any response, remedial, removal, or corrective action,
any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate
any Hazardous Material, any actions to prevent, cure or mitigate any Release,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or any evaluation
relating to any Hazardous Materials.
"Securitization" means one or more sales, dispositions, transfers or
assignments by FFCA or any of the other FFCA Entities to a special purpose
corporation, trust or other entity identified by FFCA or any of the other FFCA
Entities of notes evidencing obligations to repay secured or unsecured loans
owned by FFCA or any of the other FFCA Entities (and, to the extent applicable,
the subsequent sale, transfer or assignment of such notes to another special
purpose corporation, trust or other entity identified by FFCA or any of the
other FFCA Entities), and the issuance of bonds, certificates, notes or other
instruments evidencing interests in pools of such loans, whether in connection
with a permanent asset securitization or a sale of loans in anticipation of a
permanent asset securitization. Each Securitization shall be undertaken in
accordance with all requirements which may be imposed by the investors or the
rating agencies involved in each such sale, disposition, transfer or assignment
or which may be imposed by applicable securities, tax or other laws or
regulations, including, without limitation, laws relating to FFCA's status as a
real estate investment trust.
"Securitized Loan Pool" means any pool or group of loans that are a part of
any Securitization.
"Selected Premises" has the meaning set forth in Section 10.A(6).
"Subject Premises" has the meaning set forth in Section 10.A(6).
"Substitute Documents" has the meaning set forth in Section 13.
"Substitute Premises" means one or more parcels of real property
substituted for a Premises in accordance with the requirements of Section 13,
together with all rights, privileges and appurtenances associated therewith, and
all buildings, fixtures and other improvements, equipment, trade fixtures,
appliances and other personal property located thereon (whether or not affixed
to such real estate). For purposes of clarity, where two or more parcels of real
property
6
<PAGE> 7
comprise a Substitute Premises, such parcels or interests shall be aggregated
and deemed to constitute the Substitute Premises for all purposes of this
Agreement.
"Substitute Premises Permitted Exceptions" has the meaning set forth in
Section 13.
"Threatened Release" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air
or any other environmental medium comprising or surrounding the Premises which
may result from such Release.
"Title Company" means the title insurance company described in Section 4.
"Transfer" has the meaning set forth in Section 14.P.
"UCC-1 Financing Statements" means such UCC-1 Financing Statements as FFCA
shall require to be executed and delivered by Debtor with respect to the
transactions contemplated by this Agreement.
2. TRANSACTION. On the terms and subject to the conditions set forth in
the Loan Documents, FFCA shall make the Loans. The Loans will be evidenced by
the Notes and secured by the Mortgages. Debtor shall repay the outstanding
principal amount of the Loans together with interest thereon in the manner and
in accordance with the terms and conditions of the Notes and the other Loan
Documents. The aggregate Loan Amount shall be $3,800,000.00 allocated among the
Premises as set forth on the attached Exhibit A. The Loans shall be advanced at
the Closing in cash or otherwise immediately available funds subject to any
prorations and adjustments required by this Agreement. The Premises shall be
leased to the Lessee pursuant to the Lease and, at Closing, Debtor shall assign
the Lease to FFCA pursuant to the Mortgages.
3. UNDERWRITING, SITE ASSESSMENT, VALUATION, PROCESSING AND COMMITMENT
FEE. Debtor paid FFCA a portion of the Fee pursuant to the Commitment, and such
portion was deemed fully earned when received. The remainder of the Fee shall be
paid at the Closing and shall be deemed nonrefundable and fully earned upon the
Closing. The Fee constitutes FFCA's underwriting, site assessment, valuation,
processing and commitment fee. In the event the transaction set forth in this
Agreement fails to close due to a breach or default by Debtor under this
Agreement, FFCA shall retain the portion of the Fee received by FFCA (without
affecting or limiting FFCA's remedies set forth in this Agreement).
4. CLOSING. (a) Each Loan shall be closed (the "Closing") within 30 days
following the satisfaction of all of the terms and conditions contained in this
Agreement, but in no event shall the date of the Closing be extended beyond
January 28, 2000, unless such extension shall be approved by FFCA in its sole
discretion (the date on which the Closing shall occur is referred to herein as
the "Closing Date").
(b) FFCA has ordered a title insurance commitment for each Premises from
Lawyers Title Insurance Corporation ("Title Company"). Prior to the Closing
Date, the parties hereto shall deposit with Title Company all documents and
moneys necessary to comply with their obligations under this Agreement. All
costs of such transaction shall be borne by Debtor,
7
<PAGE> 8
including, without limitation, the cost of title insurance and all endorsements
required by FFCA, survey charges, UCC and litigation search charges, the
attorneys' fees of Debtor, attorneys' fees and expenses of FFCA, the cost of the
environmental reports or Environmental Policies to be delivered pursuant to
Section 9.E, FFCA's in-house site inspection costs and fees, stamp taxes,
mortgage taxes, transfer fees, escrow and recording fees and site inspection
fees for the Premises. All real and personal property and other applicable taxes
and assessments and other charges relating to the Premises which are due and
payable on or prior to the Closing Date as well as taxes and assessments due and
payable subsequent to the Closing Date but which Title Company requires to be
paid at Closing as a condition to the issuance of the title insurance policy
described in Section 9.C, shall be paid by Debtor at or prior to the Closing.
The Closing documents shall be dated as of the Closing Date.
Debtor and FFCA hereby employ Title Company to act as escrow agent in
connection with the transaction described in this Agreement. Title Company shall
not cause the transaction to close unless and until it has received written
instructions from FFCA and Debtor to do so. Debtor and FFCA will deliver to
Title Company all documents, pay to Title Company all sums and do or cause to be
done all other things necessary or required by this Agreement, in the reasonable
judgment of Title Company, to enable Title Company to comply herewith and to
enable any title insurance policy provided for herein to be issued. Title
Company is authorized to pay, from any funds held by it for FFCA's or Debtor's
respective credit all amounts necessary to procure the delivery of such
documents and to pay, on behalf of FFCA and Debtor, all charges and obligations
payable by them, respectively. Debtor will pay all charges payable by it to
Title Company. Title Company is authorized, in the event any conflicting demand
is made upon it concerning these instructions or the escrow, at its election, to
hold any documents and/or funds deposited hereunder until an action shall be
brought in a court of competent jurisdiction to determine the rights of Debtor
and FFCA or to interplead such documents and/or funds in an action brought in
any such court. Deposit by Title Company of such documents and funds, after
deducting therefrom its charges and its expenses and attorneys' fees incurred in
connection with any such court action, shall relieve Title Company of all
further liability and responsibility for such documents and funds. Title
Company's receipt of this Agreement and opening of an escrow pursuant to this
Agreement shall be deemed to constitute conclusive evidence of Title Company's
agreement to be bound by the terms and conditions of this Agreement pertaining
to Title Company. Disbursement of any funds shall be made by check, certified
check or wire transfer, as directed by Debtor and FFCA. Title Company shall be
under no obligation to disburse any funds represented by check or draft, and no
check or draft shall be payment to Title Company in compliance with any of the
requirements hereof, until it is advised by the bank in which such check or
draft is deposited that such check or draft has been honored. Title Company is
authorized to act upon any statement furnished by the holder or payee, or a
collection agent for the holder or payee, of any lien on or charge or assessment
in connection with the Premises, concerning the amount of such charge or
assessment or the amount secured by such lien, without liability or
responsibility for the accuracy of such statement. The employment of Title
Company as escrow agent shall not affect any rights of subrogation under the
terms of any title insurance policy issued pursuant to the provisions thereof.
5. REPRESENTATIONS AND WARRANTIES OF FFCA. The representations and
warranties of FFCA contained in this Section are being made by FFCA as of the
date of this Agreement and
8
<PAGE> 9
the Closing Date to induce Debtor to enter into this Agreement and consummate
the transactions contemplated herein, and Debtor has relied, and will continue
to rely, upon such representations and warranties from and after the execution
of this Agreement and the Closing. FFCA represents and warrants to Debtor as
follows:
A. Organization of FFCA. FFCA has been duly formed, is validly
existing and has taken all necessary action to authorize the execution,
delivery and performance by FFCA of this Agreement.
B. Authority of FFCA. The person who has executed this Agreement on
behalf of FFCA is duly authorized so to do.
C. Enforceability. Upon execution by FFCA, this Agreement shall
constitute the legal, valid and binding obligation of FFCA, enforceable
against FFCA in accordance with its terms.
All representations and warranties of FFCA made in this Agreement shall
survive the Closing.
6. REPRESENTATIONS AND WARRANTIES OF DEBTOR. The representations and
warranties of Debtor contained in this Section are being made by Debtor as of
the date of this Agreement and the Closing Date to induce FFCA to enter into
this Agreement and consummate the transactions contemplated herein, and FFCA has
relied, and will continue to rely, upon such representations and warranties from
and after the execution of this Agreement and the Closing. Debtor represents and
warrants to FFCA as follows:
A. Information and Financial Statements. Debtor has delivered to
FFCA financial statements (either audited financial statements or, if
Debtor does not have audited financial statements, certified financial
statements) and certain other information concerning itself and Lessee,
which financial statements and other information are true, correct and
complete in all material respects; and no material adverse change has
occurred with respect to any such financial statements and other
information provided to FFCA since the date such financial statements and
other information were prepared or delivered to FFCA. Debtor understands
that FFCA is relying upon such financial statements and information and
Debtor represents that such reliance is reasonable. All such financial
statements were prepared in accordance with GAAP and accurately reflect as
of the date of this Agreement and the Closing Date, the financial condition
of each individual or entity to which they pertain.
B. Organization and Authority. (1) Each of Debtor and Lessee is duly
organized or formed, validly existing and in good standing under the laws
of its state of incorporation or formation, and qualified as a foreign
corporation, partnership or limited liability company, as applicable, to do
business in any jurisdiction where such qualification is required. All
necessary corporate, partnership or limited liability company action has
been taken to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents.
9
<PAGE> 10
(2) The person(s) who have executed this Agreement on behalf of
Debtor are duly authorized so to do.
C. Enforceability of Documents. Upon execution by Debtor and Lessee
this Agreement and the other Loan Documents shall constitute the legal,
valid and binding obligations of Debtor and Lessee, respectively,
enforceable against Debtor and Lessee in accordance with their respective
terms.
D. Litigation. There are no suits, actions, proceedings or
investigations pending or to the best of Debtor's knowledge, threatened
against or involving Debtor, Lessee or the Premises before any arbitrator
or Governmental Authority which might reasonably result in any material
adverse change in the contemplated business, condition, worth or operations
of Debtor, Lessee or the Premises.
E. Absence of Breaches or Defaults. Debtor and Lessee are not, and
the authorization, execution, delivery and performance of this Agreement
and the other Loan Documents will not result, in any breach or default
under any other document, instrument or agreement to which Debtor and/or
Lessee are a party or by which Debtor, Lessee, the Premises or any of the
property of Debtor or Lessee is subject or bound. The authorization,
execution, delivery and performance of this Agreement and the other Loan
Documents will not violate any applicable law, statute, regulation, rule,
ordinance, code or order.
F. Utilities. The Premises are served by ample public utilities to
permit full utilization of the Premises for their intended purpose and all
utility connection fees and use charges will have been paid in full.
G. Intended Use and Zoning; Compliance With Laws. Debtor and Lessee
intend to use each of the Premises solely for the operation of a Permitted
Concept, and related ingress, egress and parking, and for no other
purposes. Each of the Premises is in compliance with all applicable zoning
requirements and the use of each of the Premises as a Permitted Concept
does not constitute a nonconforming use under applicable zoning
requirements. The Premises comply with all applicable statutes,
regulations, rules, ordinances, codes, licenses, permits, orders and
approvals of each Governmental Authority having jurisdiction over the
Premises, including, without limitation, all health, building, fire, safety
and other codes, ordinances and requirements, all applicable standards of
the National Board of Fire Underwriters and the Americans With Disabilities
Act of 1990 and all policies or rules of common law, in each case, as
amended, and any judicial or administrative interpretation thereof,
including any judicial order, consent, decree or judgment applicable to
Debtor or Lessee.
H. Area Development; Wetlands. No condemnation or eminent domain
proceedings affecting the Premises have been commenced or, to the best of
Debtor's knowledge, are contemplated. To the best of Debtor's knowledge,
the areas where the Premises are located have not been declared blighted by
any Governmental Authority. To the best of Debtor's knowledge, the Premises
and/or the real property bordering the Premises are not designated by any
Governmental Authority as a wetlands.
10
<PAGE> 11
I. Licenses and Permits; Access. Debtor or Lessee has all required
licenses and permits, both governmental and private, to use and operate the
Premises in the intended manner. There are adequate rights of access to
public roads and ways available to the Premises for unrestricted ingress
and egress and otherwise to permit full utilization of the Premises for
their intended purposes and all such public roads and ways have been
completed and dedicated to public use.
J. Condition of Premises. The Premises, including the equipment
located thereon, are of good workmanship and materials, fully equipped and
operational, in good condition and repair, free from structural defects,
clean, orderly and sanitary, safe, well-lit, landscaped, decorated,
attractive and well-maintained.
K. Environmental. Debtor is fully familiar with the present use of
the Premises, and, after due inquiry, Debtor has become generally familiar
with the prior uses of the Premises. Debtor has not and to the best of
Debtor's knowledge, no Hazardous Materials have been used, handled,
manufactured, generated, produced, stored, treated, processed, transferred
or disposed of at or on the Premises, except in De Minimis Amounts, and no
Release or Threatened Release has occurred at or on the Premises. The
activities, operations and business undertaken on, at or about the
Premises, including, but not limited to, any past or ongoing alterations or
improvements at the Premises, are and to the best of Debtor's knowledge
have been at all times, in compliance with all Environmental Laws. No
further action is required to remedy any Environmental Condition or
violation of, or to be in full compliance with, any Environmental Laws, and
no lien has been imposed on the Premises by any Governmental Authority in
connection with any Environmental Condition, the violation or threatened
violation of any Environmental Laws or the presence of any Hazardous
Materials on or off the Premises.
There is no pending or threatened litigation or proceeding before any
Governmental Authority in which any person or entity alleges the violation
or threatened violation of any Environmental Laws or the presence, Release,
Threatened Release or placement on or at the Premises of any Hazardous
Materials, or of any facts which would give rise to any such action, nor
has Debtor (a) received any notice (and Debtor has no actual knowledge)
that any Governmental Authority or any employee or agent thereof has
determined, threatens to determine or requires an investigation to
determine that there has been a violation of any Environmental Laws at, on
or in connection with the Premises or that there exists a presence,
Release, Threatened Release or placement of any Hazardous Materials on or
at the Premises, or the use, handling, manufacturing, generation,
production, storage, treatment, processing, transportation or disposal of
any Hazardous Materials at or on the Premises; (b) received any notice
under the citizen suit provision of any Environmental Law in connection
with the Premises or any facilities, operations or activities conducted
thereon, or any business conducted in connection therewith; or (c) received
any request for inspection, request for information, notice, demand,
administrative inquiry or any formal or informal complaint or claim with
respect to or in connection with the violation or threatened violation of
any Environmental Laws or existence of Hazardous Materials relating to the
Premises or any facilities, operations or activities conducted thereon or
any business conducted in connection therewith.
11
<PAGE> 12
The information and disclosures in the Questionnaires are true,
correct and complete in all material respects, FFCA and Environmental
Insurer may rely on such information and disclosures, and the person or
persons executing the Questionnaires were duly authorized to do so. Debtor
acknowledges and agrees that Environmental Insurer may rely on the
environmental representations and warranties set forth in the preceding
subsection K, that Environmental Insurer is an intended third-party
beneficiary of such representations and warranties and that Environmental
Insurer shall have all rights and remedies available at law or in equity as
a result of a breach of such representations and warranties, including, to
the extent applicable, the right of subrogation.
L. Title to Premises; First Priority Lien. Fee title to each of the
Premises is vested in Debtor, free and clear of all liens, encumbrances,
charges and security interests of any nature whatsoever, except the
Permitted Exceptions. Debtor is the owner of all equipment, trade fixtures,
appliances and other personal property located on or at each of the
Premises free and clear of all liens, encumbrances, charges and security
interests of any nature whatsoever except for any equipment, trade
fixtures, appliances and other personal property owned by Lessee. Upon
Closing, FFCA shall have a first priority lien upon and security interest
in Debtor's right, title and interest in and to each of the Premises
pursuant to the Mortgages and the UCC-1 Financing Statements.
M. No Other Agreements and Options. Neither Debtor, Lessee nor the
Premises are subject to any commitment, obligation, or agreement,
including, without limitation, any right of first refusal, option to
purchase or lease granted to a third party, which could or would prevent or
hinder FFCA in making the Loans or exercising any of its rights or remedies
under the Loan Documents or prevent or hinder Debtor or Lessee from
fulfilling its obligations under this Agreement or the other Loan
Documents.
N. No Mechanics' Liens. There are no outstanding accounts payable,
mechanics' liens, or rights to claim a mechanics' lien in favor of any
materialman, laborer, or any other person or entity in connection with
labor or materials furnished to or performed on any portion of the
Premises; no work has been performed or is in progress nor have materials
been supplied to the Premises or agreements entered into for work to be
performed or materials to be supplied to the Premises prior to the date
hereof, which will not have been fully paid for on or before the Closing
Date, or which might provide the basis for the filing of such liens against
the Premises or any portion thereof; Debtor shall be responsible for any
and all claims for mechanics' liens and accounts payable that have arisen
or may subsequently arise due to agreements entered into for and/or any
work performed on, or materials supplied to the Premises prior to the
Closing Date; Debtor and Lessee have made no contract or arrangement of any
kind the performance of which by the other party thereto would give rise to
a lien on the Premises; and Debtor shall and does hereby agree to defend,
indemnify and forever hold FFCA and FFCA's designees harmless for, from and
against any and all such mechanics' lien claims, accounts payable or other
commitments relating to the Premises.
O. No Reliance. Debtor acknowledges that FFCA did not prepare or
assist in the preparation of any of the projected financial information
used by Debtor in analyzing the economic viability and feasibility of the
transaction contemplated by this Agreement.
12
<PAGE> 13
Furthermore, Debtor acknowledges that it has not relied upon, nor may it
hereafter rely upon, the analysis undertaken by FFCA in determining the
Loan Amounts, and such analysis will not be made available to Debtor.
P. Nonconsolidation. (1) Debtor maintains correct and complete books
and records of account separate from all other Persons. Where necessary or
appropriate, Debtor has disclosed the nature of the transaction
contemplated by the Loan Documents and Debtor's independent status to its
creditors. The Premises represent all of the assets owned or leased by
Debtor as of the date hereof, and Debtor has not commingled its assets and
its liabilities with those of any other Person.
(2) Debtor maintains its own checking account or accounts with
commercial banking institutions separate from other Persons.
(3) To the extent that Debtor shares the same employees with other
Persons, the salaries of and the expenses related to providing benefits to
such employees have been fairly and nonarbitrarily allocated among such
Persons, with the result that each such Person bears its fair share of the
salary and benefit costs associated with all such common employees.
(4) To the extent that Debtor jointly contracts with other Persons to
do business with vendors or service providers or to share overhead
expenses, the costs incurred in so doing are, and at all times shall be,
fairly and nonarbitrarily allocated among such Persons, with the result
that each such Person bears its fair share of such costs. To the extent
that Debtor contracts or does business with vendors or service providers
where the goods or services provided are or shall be partially for the
benefit of other Persons, the costs incurred in so doing are fairly and
nonarbitrarily allocated to or among such Persons for whose benefit the
goods or services are provided, with the result that each such Person bears
its fair share of such costs.
(5) To the extent that Debtor or other Persons have offices in the
same location, there is a fair, appropriate and nonarbitrary allocation of
overhead among them, with the result that each such Person bears its fair
share of such expenses.
(6) Debtor has not incurred any indebtedness, secured or unsecured,
direct or indirect, absolute or contingent, including, without limitation,
liability for the debts of any other Person (and Debtor has not held itself
out as being liable for the debts of any other Person), other than the
Loans and trade and operational debt incurred in the ordinary course of
business with trade creditors and in amounts as are normal and reasonable
under the circumstances. Debtor is not a guarantor of any obligations.
(7) Debtor is not presently a party to a pledge of its assets for the
benefit of other Persons. Debtor has not made any loans or advances to any
third party (including any Affiliate or constituent party of Debtor).
(8) Debtor has conducted its affairs strictly in accordance with its
organizational documents including Debtor's managing member's
organizational documents and has observed all necessary, appropriate and
customary formalities.
13
<PAGE> 14
(9) Debtor does not hold itself out to the public or to any of its
individual creditors as being a unified entity with assets and liabilities
in common with any other Person.
(10) Debtor (i) is solvent, (ii) is able to pay its obligations
as they become due and (iii) is not and shall not be engaged in any
business or transaction for which its remaining capital is or may be
unreasonably small.
(11) Debtor has no actual intent to hinder, delay or defraud
creditors in connection with any of the transactions contemplated herein or
intent to incur (or belief that it is incurring) debts beyond its ability
to pay the same as they mature.
(12) Debtor has not, as to itself or as to other Persons, (a)
commenced any case, proceeding or other action under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order
for relief entered with respect to Debtor or other Persons or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to Debtor or its
debts or other Persons or their debts or (b) sought appointment of a
receiver, trustee, custodian or other similar official for Debtor or for
all or any substantial part of its or other Person's assets or made a
general assignment for the benefit of Debtor's creditors.
All representations and warranties of Debtor made in this Agreement shall
be and will remain true and complete in all respects as of and subsequent to the
Closing Date as if made and restated in full as of such time and shall survive
the Closing.
7. COVENANTS. Debtor covenants to FFCA from and after the Closing Date
as follows:
A. Inspections. Upon reasonable advance notice, Debtor shall, at all
reasonable times, (i) provide FFCA and FFCA's officers, employees, agents,
advisors, attorneys, accountants, architects, and engineers with access to
the Premises, all drawings, plans, and specifications for the Premises in
possession of Debtor or Lessee, all engineering reports relating to the
Premises in the possession of Debtor or Lessee, the files, correspondence
and documents relating to the Premises, and the financial books and
records, including lists of delinquencies, relating to the ownership,
operation, and maintenance of the Premises (including, without limitation,
any of the foregoing information stored in any computer files), and (ii)
allow such persons to make such inspections, tests, copies, and
verifications as FFCA considers necessary.
B. Fixed Charge Coverage Ratio. Until such time as all of Debtor's
obligations under the Notes and the other Loan Documents are paid,
satisfied and discharged in full, Debtor shall cause to be maintained an
aggregate Fixed Charge Coverage Ratio at all of the Premises of at least
1.50:1, as determined on the last day of each fiscal year of Debtor. For
purposes of this Section, the term "Fixed Charge Coverage Ratio" shall mean
with respect to the twelve month period of time immediately preceding the
date of determination, the ratio calculated for such period of time, each
as determined in accordance with GAAP, of (a) the
14
<PAGE> 15
sum of Net Income (including proceeds from business interruption insurance
payments, if any), Depreciation and Amortization, Interest Expense and
Operating Lease Expense, less a corporate overhead allocation in an amount
equal to 5% of Gross Sales, to (b) the sum of the FFCA Payments, Operating
Lease Expense and the Equipment Payment Amount.
For purposes of this Section, the following terms shall be defined as set
forth below:
"Capital Lease" shall mean any lease of any property (whether
real, personal or mixed) by Lessee with respect to one or more of the
Premises which lease would, in conformity with GAAP, be required to be
accounted for as a capital lease on the balance sheet of Lessee. The
term "Capital Lease" shall not include any operating lease.
"Debt" shall mean as directly related to all of the Premises and
the period of determination (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, indentures, notes or similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services, (iv) obligations under leases which should be,
in accordance with GAAP, accounted for as Capital Leases, and (v)
obligations under direct or indirect guarantees in respect of, and
obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in
clauses (i) through (iv) above.
"Depreciation and Amortization" shall mean with respect to all of
the Premises the depreciation and amortization accruing during any
period of determination with respect to Debtor as determined in
accordance with GAAP.
"Equipment Payment Amount" shall mean for any period of
determination the sum of all amounts payable during such period of
determination under all (i) leases for equipment located at one or
more of the Premises and (ii) all loans secured by equipment located
at one or more of the Premises.
"FFCA Payments" shall mean with respect to the period of
determination, the sum of all amounts payable under the Notes.
"Gross Sales" shall mean the sales or other income arising from
all business conducted at all of the Premises by Lessee during the
period of determination, less sales tax, credit card commission and
complimentary sales, as presented in Lessee's publicly disclosed
financial statements, and any amounts received from not-for-profit
sales of all non-food items approved for use in connection with
promotional campaigns, if any, for all of the Premises.
"Interest Expense" shall mean for any period of determination,
the sum of all interest accrued or which should be accrued in respect
of all Debt of Lessee allocable to one or more of the Premises and all
business operations thereon during such period (including interest
attributable to Capital Leases), as determined in accordance with
GAAP.
15
<PAGE> 16
"Net Income" shall mean with respect to the period of
determination, the aggregate net income or net loss of Lessee
allocable to all of the Premises. In determining the amount of Net
Income, (i) adjustments shall be made for nonrecurring gains and
losses allocable to the period of determination, (ii) deductions shall
be made for Depreciation and Amortization, Interest Expense and
Operating Lease Expense allocable to the period of determination, and
(iii) no deductions shall be made for (x) income taxes or charges
equivalent to income taxes allocable to the period of determination,
as determined in accordance with GAAP, or (y) corporate overhead
expense allocable to the period of determination.
"Operating Lease Expense" shall mean the sum of all payments and
expenses incurred by Lessee under any operating leases with respect to
one or more of the Premises and the business operations thereon during
the period of determination, as determined in accordance with GAAP.
Notwithstanding the foregoing, FFCA shall have the right to divide the
Loans (and the corresponding Loan Documents) into one or more Securitized
Loan Pools in connection with one or more Securitizations. If any
Securitized Loan Pool does not include all of the Loans, Debtor shall
maintain with respect to the Loans in each Securitized Loan Pool an
aggregate Fixed Charge Coverage Ratio, as determined on the date set forth
above, of at least 1.50:1 for all of the Premises corresponding to the
Loans in such Securitized Loan Pool, which Fixed Charge Coverage Ratio
requirement shall be in addition to the requirement to maintain an
aggregate Fixed Charge Coverage Ratio of at least 1:50:1 for all of the
Premises as set forth above, and shall apply until such time as all of the
Debtor's obligations under the Notes and the other Loan Documents
corresponding to such Loans are paid, satisfied and discharged in full. To
the extent that an aggregate Fixed Charge Coverage Ratio requirement is
imposed by FFCA with respect to the Loans in any Securitized Loan Pool, for
the purposes of determining whether or not such Fixed Charge Coverage Ratio
requirement has been satisfied, the definitions relating to the Fixed
Charge Coverage Ratio shall be deemed to be modified as applicable to
provide for the calculation of the aggregate Fixed Charge Coverage Ratio
for all of the Premises corresponding to such Securitized Loan Pool rather
than a calculation of the aggregate Fixed Charge Coverage Ratio for all of
the Premises.
C. Lost Note. Debtor shall, if any Note is mutilated, destroyed,
lost or stolen (a "Lost Note"), promptly deliver to FFCA, upon receipt of
an affidavit from FFCA 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. Debtor
shall provide fifteen (15) days' prior notice to FFCA before making any
payments to third parties in connection with a Lost Note.
D. Affiliate Transactions. Unless otherwise approved by FFCA, all
transactions between Debtor and any of its Affiliates shall be on terms
substantially as advantageous to Debtor as those which could be obtained by
Debtor in a comparable arm's length transaction with a non-Affiliate of
Debtor.
16
<PAGE> 17
E. Lease Modifications. The Lease shall not be modified, amended,
terminated, cancelled or surrendered without FFCA's prior written consent.
F. Nonconsolidation. (1) Debtor shall at all times maintain correct
and complete books and records of account separate from all other Persons. Where
necessary or appropriate, Debtor shall disclose the nature of the transaction
contemplated by the Loan Documents and Debtor's independent status to its
creditors. Debtor shall not own or lease any assets other than the Premises, nor
engage in any business other than owning and leasing the Premises, including
financing the Premises with FFCA. Debtor shall not commingle its assets and its
liabilities with those of any other Person.
(2) Debtor shall maintain its own checking account or accounts with
commercial banking institutions separate from other Persons.
(3) To the extent that Debtor shares the same employees with other
Persons, the salaries of and the expenses related to providing benefits to such
employees, at all times shall be, fairly and nonarbitrarily allocated among such
Persons, with the result that each such Person shall bear its fair share of the
salary and benefit costs associated with all such common employees.
(4) To the extent that Debtor jointly contracts with other Persons to
do business with vendors or service providers or to share overhead expenses, the
costs incurred in so doing at all times shall be, fairly and nonarbitrarily
allocated among such Persons, with the result that each such Person shall bear
its fair share of such costs. To the extent that Debtor contracts or does
business with vendors or service providers where the goods or services provided
are or shall be partially for the benefit of other Persons, the costs incurred
in so doing at all times shall be, fairly and nonarbitrarily allocated to or
among such Persons for whose benefit the goods or services are provided, with
the result that each such Person shall bear its fair share of such costs. All
transactions between Debtor and other Persons shall be only on an arm's-length
basis.
(5) To the extent that Debtor or other Persons have offices in the
same location, there shall be a fair, appropriate and nonarbitrary allocation of
overhead among them, with the result that each such Person shall bear its fair
share of such expenses.
(6) Debtor shall not incur any indebtedness, secured or unsecured,
direct or indirect, absolute or contingent (including guaranteeing any
obligation or assuming liability for the debts of any other Person and Debtor
will not hold itself out as being liable for the debts of any other Person),
other than the Loans and trade and operational debt incurred in the ordinary
course of business with trade creditors and in amounts as are normal and
reasonable under the circumstances. No indebtedness other than the Loans may be
secured (subordinate or pari passu) by the Premises or any portion thereof.
(7) Debtor shall not enter into any contract or agreement with any
Affiliate of Debtor, any constituent party of Debtor or any Affiliate of any
constituent party of Debtor except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arms-length basis with third parties other than any such party.
17
<PAGE> 18
(8) Except as contemplated by the Loan Documents, Debtor shall not
pledge, grant any security interest in, hypothecate or otherwise encumber its
assets for the benefit of any other Persons.
(9) Debtor shall issue separate financial statements prepared not
less frequently than annually and prepared according to GAAP.
(10) Debtor shall maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character in light of its
contemplated business operations.
(11) Debtor shall conduct its affairs strictly in accordance with its
organizational documents, including Debtor's managing member's organizational
documents and shall observe all necessary, appropriate and customary
formalities. The books, records and accounts of Debtor shall at all times be
maintained in a manner permitting the assets and liabilities of Debtor to be
easily separated and readily ascertained from those of any other Person and
Debtor shall file its own tax returns.
(12) Debtor shall not hold itself out to the public or to any of its
individual creditors as being a unified entity with assets and liabilities in
common with any other Person. Debtor shall maintain and utilize separate
stationery, invoices and checks.
(13) Debtor shall not make any loans or advances to any third party
(including any Affiliate of Debtor or constituent party of Debtor).
(14) Debtor shall not, as to itself or as to other Persons, (i)
commence any case, proceeding or other action under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to Debtor or other Persons or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to Debtor or its debts or other Persons or their debts or (ii) seek
appointment of a receiver, trustee, custodian or other similar official for
Debtor or for all or any substantial part of its or other Person's assets or
make a general assignment for the benefit of Debtor's creditors. Debtor shall
not take any action in furtherance of, or indicating its consents to, approval
of or acquiescence in, any of the acts set forth above. Debtor shall not be
unable to, or admit in writing its inability to, pay its debts.
8. TRANSACTION CHARACTERIZATION. This Agreement is a contract to extend a
financial accommodation (as such term is used in the Code) for the benefit of
Debtor. It is the intent of the parties hereto that the business relationship
created by this Agreement, the Notes, the Mortgages and the other Loan Documents
is solely that of creditor and debtor and has been entered into by both parties
in reliance upon the economic and legal bargains contained in the Loan
Documents. None of the agreements contained in the Loan Documents is intended,
nor shall the same be deemed or construed, to create a partnership (either de
jure or de facto) between Debtor, Lessee and FFCA, to make them joint venturers,
to make Debtor or Lessee an agent, legal representative, partner, subsidiary or
employee of FFCA, nor to make FFCA in any way responsible for the debts,
obligations or losses of Debtor or Lessee.
18
<PAGE> 19
9. CONDITIONS OF CLOSING. The obligation of FFCA to consummate the
transaction contemplated by this Agreement is subject to the fulfillment or
waiver of each of the following conditions:
A. Title. Fee title to each of the Premises shall be vested in Debtor,
free of all liens, encumbrances, restrictions, encroachments and easements,
except the Permitted Exceptions and the liens created by the Mortgages and
the UCC-1 Financing Statements. Debtor shall be the owner of all of the
equipment, trade fixtures, appliances and other personal property located
on or at each of the Premises free and clear of all liens, encumbrances,
charges and security interests, except the liens created by the Mortgages
and the UCC-1 Financing Statements. Upon Closing, FFCA will obtain a valid
and perfected first priority lien upon and security interest in Debtor's
right, title and interest in and to each of the Premises.
B. Condition of Premises. FFCA shall have inspected and approved the
Premises and the equipment located thereon shall be in good condition and
repair, free from structural defects, and of good workmanship and
materials, and the Premises shall be fully equipped and operational, clean,
orderly, sanitary, safe, well-lit, landscaped, decorated, attractive and
with a suitable layout, physical plant, traffic pattern and location, all
as determined by FFCA in its sole discretion.
C. Evidence of Title. FFCA shall have received for each of the
Premises a preliminary title report and irrevocable commitment to insure
title in the amount of the Loan relating to such Premises, by means of a
mortgagee's, ALTA extended coverage policy of title insurance (or its
equivalent, in the event such form is not issued in the jurisdiction where
the Premises is located) issued by Title Company showing good and
marketable fee title, in such Premises in Debtor, committing to insure
FFCA's first priority lien upon and security interest in such Premises
subject only to Permitted Exceptions, and containing such endorsements as
FFCA may require. FFCA shall also have received evidence reasonably
satisfactory to FFCA that Debtor is the owner of all of the equipment,
trade fixtures, appliances and other personal property located on or at
each of the Premises free and clear of all liens, encumbrances, charges and
security interests, except the liens created by the Mortgages and the UCC-1
Financing Statements.
D. Survey. FFCA shall have received a current ALTA survey of each of
the Premises, the form and substance of which shall be satisfactory to FFCA
in its sole discretion. Debtor shall have provided FFCA with evidence
satisfactory to FFCA that the location of each of the Premises is not
within the 100-year flood plain or identified as a special flood hazard
area as defined by the Federal Insurance Administration, or if any Premises
is in such a flood plain or special flood hazard area, Debtor shall provide
FFCA with evidence of flood insurance maintained on such Premises in
amounts and on terms and conditions satisfactory to FFCA.
E. Environmental. FFCA shall have received (i) a Phase I environmental
report (and a Phase II environmental report, if necessary, as determined by
FFCA in its sole discretion) for each of the Premises, the form, substance
and conclusions of which shall be
19
<PAGE> 20
satisfactory to FFCA in its sole discretion, and/or (ii) an Environmental
Policy with respect to each of the Premises, as determined by FFCA in its
sole discretion.
F. Zoning. Debtor shall have provided FFCA with evidence satisfactory
to FFCA that each of the Premises is properly zoned for use as a Permitted
Concept and that such use constitutes a legal, conforming use under
applicable zoning requirements.
G. Compliance With Representations, Warranties and Covenants. All
obligations of Debtor under this Agreement shall have been fully performed
and complied with, and no event shall have occurred or condition shall
exist which would, upon the Closing Date, or, upon the giving of notice
and/or passage of time, constitute a breach or default hereunder or under
the Loan Documents or any other agreement between or among FFCA, Debtor or
Lessee pertaining to the subject matter hereof, and no event shall have
occurred or condition shall exist or information shall have been disclosed
by Debtor or discovered by FFCA which has had or would have a material
adverse effect on the Premises, Debtor, Lessee or FFCA's willingness to
consummate the transaction contemplated by this Agreement, as determined by
FFCA in its sole and absolute discretion.
H. Proof of Insurance. Debtor shall have delivered to FFCA
certificates of insurance and copies of insurance policies showing that all
insurance required by the Loan Documents and providing coverage and limits
satisfactory to FFCA are in full force and effect.
I. Opinion of Counsel to Debtor and Lessee. Debtor and Lessee shall
have caused Counsel to prepare and deliver an opinion to FFCA in form and
substance satisfactory to FFCA and its counsel.
J. Availability of Funds. FFCA presently has sufficient funds to
discharge its obligations under this Agreement. In the event that the
transaction contemplated by this Agreement does not close on or before the
date established for Closing under Section 4(a) hereof, FFCA does not
warrant that it will thereafter have sufficient funds to consummate the
transaction contemplated by this Agreement.
K. Lease; Memoranda. Debtor and Lessee shall have executed and
delivered the Lease, and provided FFCA with a copy of a recorded memorandum
of lease (collectively, the "Memoranda") for each of the Premises.
L. Closing Documents. At or prior to the Closing Date, FFCA and/or
Debtor, as may be appropriate, shall execute and deliver or cause to be
executed and delivered to Title Company or FFCA, as may be appropriate, all
documents required to be delivered by this Agreement, and such other
documents, payments, instruments and certificates, as FFCA may require in
form acceptable to FFCA, including, without limitation, the following:
20
<PAGE> 21
(1) Notes;
(2) Mortgages;
(3) Proof of Insurance;
(4) Opinion of Counsel to Debtor and Lessee;
(5) Evidence of satisfactory zoning;
(6) UCC-1 Financing Statements;
(7) Environmental Indemnity Agreements; and
(8) Lease and Memoranda.
Upon fulfillment or waiver of all of the above conditions, FFCA shall deposit
funds necessary to close this transaction with the Title Company and this
transaction shall close in accordance with the terms and conditions of this
Agreement.
10. DEFAULT AND REMEDIES. A. Each of the following shall be deemed an
event of default by Debtor (each, an "Event of Default"):
(1) If any representation or warranty of Debtor or Lessee set forth in
any of the Loan Documents is false in any material respect, or if Debtor or
Lessee renders any false statement or account.
(2) If any principal, interest or other monetary sum due under the
Notes, the Mortgages or any other Loan Document is not paid within five
days after the date when due; provided, however, notwithstanding the
occurrence of such an Event of Default, FFCA shall not be entitled to
exercise its rights and remedies set forth below unless and until FFCA
shall have given Debtor notice thereof and a period of five days from the
delivery of such notice shall have elapsed without such Event of Default
being cured.
(3) If Debtor fails to observe or perform any of the other covenants
(except with respect to a breach of the Fixed Charge Coverage Ratio, which
breach is addressed in subitem (6) below), conditions, or obligations of
this Agreement; provided, however, if any such failure does not involve the
payment of any monetary sum, is not willful or intentional, does not place
any rights or interest in collateral of FFCA in immediate jeopardy, and is
within the reasonable power of Debtor to promptly cure after receipt of
notice thereof, all as determined by FFCA in its reasonable discretion,
then such failure shall not constitute an Event of Default hereunder,
unless otherwise expressly provided herein, unless and until FFCA shall
have given Debtor notice thereof and a period of 30 days shall have
elapsed, during which period Debtor may correct or cure such failure, upon
failure of which an Event of Default shall be deemed to have occurred
hereunder without further notice or demand of any kind being required. If
such failure cannot reasonably be cured within such 30-day period, as
determined by FFCA in its reasonable discretion, and Debtor is diligently
pursuing a cure of such failure, then Debtor shall have a reasonable period
to cure such failure beyond such 30-day period, which shall not exceed 90
days after receiving notice of the failure from FFCA. If Debtor shall fail
to correct or cure such failure within such 90-day period, an Event of
Default shall be deemed to have occurred hereunder without further notice
or demand of any kind being required.
21
<PAGE> 22
(4) If Debtor or Lessee becomes insolvent within the meaning of the
Code, files or notifies FFCA that it intends to file a petition under the
Code, initiates a proceeding under any similar law or statute relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts
(collectively, an "Action"), becomes the subject of either a petition under
the Code or an Action, or is not generally paying its debts as the same
become due.
(5) If there is an "Event of Default" under any other Loan Document,
the Lease or a breach or default, after the passage of all applicable
notice and cure or grace periods, under any of the Other Agreements.
(6) If there is a breach of the Fixed Charge Coverage Ratio
requirement and FFCA shall have given Debtor notice thereof and Debtor
shall have failed within a period of 30 days from the delivery of such
notice to either (i) pay to FFCA the FCCR Amount (without premium or
penalty) with respect to such of the Premises (starting with the Premises
with the lowest Fixed Charge Coverage Ratio and proceeding in ascending
order to the Premises with the next lowest Fixed Charge Coverage Ratio) as
is necessary to cure the breach of the Fixed Charge Coverage Ratio
requirement and for which the then Fixed Charge Coverage Ratio (with the
definitions in Section 7.B being deemed to be modified as applicable to
provide for the calculation of the Fixed Charge Coverage Ratio for each
such Premises on an individual basis rather than on an aggregate basis with
the other Premises) is below 1.50:1 (each, a "Subject Premises"), (ii)
prepay the Note or Notes corresponding to the Subject Premises in whole but
not in part (without premium or penalty), or (iii) notify FFCA of Debtor's
election to substitute a Substitute Premises for each Subject Premises in
accordance with the terms of Section 13 (the failure of Debtor to complete
such substitution within 60 days after FFCA shall have given the notice
discussed above shall be deemed to be an Event of Default without further
notice or demand of any kind being required). For purposes of the preceding
sentence, "FCCR Amount" means that sum of money which, when subtracted from
the outstanding principal amount of the Note corresponding to a Subject
Premises, and assuming the resulting principal balance is reamortized in
equal monthly payments over the remaining term of such Note at the rate of
interest set forth therein, will result in an adjusted aggregate Fixed
Charge Coverage Ratio for all of the Premises of at least 1.50:1 based on
the prior year's operations. Promptly after Debtor's payment of the FCCR
Amount, Debtor and FFCA shall execute an amendment to each such Note in
form and substance reasonably acceptable to FFCA reducing the principal
amount payable to FFCA under such Note and reamortizing the principal
amount of such Note in equal monthly payments over the then remaining term
of such Note at the rate of interest set forth therein.
Notwithstanding the foregoing, to the extent that, in accordance with
the provisions of Section 7.B, FFCA shall have imposed an aggregate Fixed
Charge Coverage Ratio requirement with respect to all of the Premises
corresponding to the Loans in any Securitized Loan Pool, then, in order to
prevent an Event of Default from occurring by reason of a breach of such
aggregate Fixed Charge Coverage Ratio requirement, Debtor must either (i)
pay to FFCA the Modified FCCR Amount (without premium or penalty) within
the aforesaid 30 day period with respect to such of the Premises
corresponding to the Loans in such Securitized Loan Pool (starting with the
Premises with the lowest Fixed Charge Coverage Ratio and proceeding in
ascending order to the Premises with the next
22
<PAGE> 23
lowest Fixed Charge Coverage Ratio) as is necessary to cure the breach of
such aggregate Fixed Charge Coverage Ratio requirement and for which the
then Fixed Charge Coverage Ratio (with the definitions relating to the
Fixed Charge Coverage Ratio being deemed to be modified as applicable to
provide for the calculation of the Fixed Charge Coverage Ratio for each
such Premises on an individual basis rather than on an aggregate basis with
the other Premises corresponding to the Loans in such Securitized Loan
Pool) is below 1.50:1 (each a "Selected Premises"), (ii) prepay the Note or
Notes corresponding to the Selected Premises in whole but not in part
(without premium or penalty) within the aforesaid 30 day period, or (iii)
notify FFCA of Debtor's election to substitute a Substitute Premises for
each Selected Premises in accordance with the terms of Section 13 (the
failure of Debtor to complete such substitution within 60 days after FFCA
shall have given Debtor the notice discussed above shall be deemed to be an
Event of Default without further notice or demand of any kind being
required). For purposes of the preceding sentence, "Modified FCCR Amount"
means that sum of money which, when subtracted from the outstanding
principal amount of the Note corresponding to a Selected Premises, and
assuming the resulting principal balance is reamortized in equal monthly
payments over the remaining term of such Note at the rate of interest set
forth therein, will result in an adjusted aggregate Fixed Charge Coverage
Ratio for all of the Premises corresponding to the Loans in such
Securitized Loan Pool of at least 1.50:1 based on the prior year's
operations. Promptly after Debtor's payment of the Modified FCCR Amount,
Debtor and FFCA shall execute an amendment to each such Note in form and
substance reasonably acceptable to FFCA reducing the principal amount
payable to FFCA under such Note and reamortizing the principal amount of
such Note in equal monthly payments over the then remaining term of such
Note at the rate of interest set forth therein.
B. Upon the occurrence of an Event of Default, subject to the limitations
set forth in subsection A, FFCA may declare all or any part of the obligations
of Debtor under the Notes, this Agreement and any other Loan Document to be due
and payable, and the same shall thereupon become due and payable without any
presentment, demand, protest or notice of any kind except as otherwise expressly
provided herein, and Debtor hereby waives notice of intent to accelerate the
obligations secured by the Mortgages and notice of acceleration. Thereafter,
FFCA may exercise, at its option, concurrently, successively or in any
combination, all remedies available at law or in equity, including without
limitation any one or more of the remedies available under the Notes, the
Mortgages or any other Loan Document. Neither the acceptance of this Agreement
nor its enforcement shall prejudice or in any manner affect FFCA's right to
realize upon or enforce any other security now or hereafter held by FFCA, it
being agreed that FFCA shall be entitled to enforce this Agreement and any other
security now or hereafter held by FFCA in such order and manner as it may in its
absolute discretion determine. No remedy herein conferred upon or reserved to
FFCA is intended to be exclusive of any other remedy given hereunder or now or
hereafter existing at law or in equity or by statute. Every power or remedy
given by any of the Loan Documents to FFCA, or to which FFCA may be otherwise
entitled, may be exercised, concurrently or independently, from time to time and
as often as may be deemed expedient by FFCA.
11. ASSIGNMENTS. A. FFCA may assign in whole or in part its rights under
this Agreement, including, without limitation, in connection with any Transfer,
Participation and/or
23
<PAGE> 24
Securitization. Upon any unconditional assignment of FFCA's entire right and
interest hereunder, FFCA shall automatically be relieved, from and after the
date of such assignment, of liability for the performance of any obligation of
FFCA contained herein.
B. Debtor shall not, without the prior written consent of FFCA, sell,
assign, transfer, mortgage, convey, encumber or grant any easements or other
rights or interests of any kind in the Premises, any of Debtor's rights under
this Agreement or any interest in Debtor, whether voluntarily, involuntarily or
by operation of law or otherwise, including, without limitation, by merger,
consolidation, dissolution or otherwise, except, subsequent to the Closing, as
expressly permitted by the Mortgages.
12. INDEMNITY. Debtor agrees to indemnify, hold harmless and defend FFCA
and its directors, officers, shareholders, employees, successors, assigns,
agents, contractors, subcontractors, experts, licensees, affiliates, lessees,
lenders, mortgagees, trustees and invitees, as applicable (collectively, the
"Indemnified Parties"), for, from and against any and all losses, costs, claims,
liabilities, damages and expenses, including, without limitation, reasonable
attorneys' fees and court costs, arising as the result of an Environmental
Condition and/or a breach of any of the representations, warranties, covenants,
agreements or obligations of Debtor set forth in this Agreement or any other
Loan Document. Without limiting the generality of the foregoing, such indemnity
shall include, without limitation, any engineering, governmental inspection and
reasonable attorneys' fees and expenses that the Indemnified Parties may incur
by reason of any representation set forth in this Agreement being false, or by
reason of any investigation or claim of any Governmental Authority in connection
therewith.
13. SUBSTITUTION. Debtor shall have the right to obtain a release of all
liens granted in favor of FFCA with respect to a Premises by substituting a
Substitute Premises for such Premises if permitted by the terms of Section
10.A(6), subject to fulfillment of the following conditions:
(i) Debtor shall provide FFCA with notice of its intention to
substitute a Substitute Premises within the applicable 30 day period
contemplated by Section 10.A(6) and the closing of the substitution shall
take place within the applicable 60 day period contemplated by such
subsection.
(ii) Debtor must provide for the substitution of a Substitute
Premises, and the proposed Substitute Premises must:
(1) be a Permitted Concept, in good condition and repair,
ordinary wear and tear excepted;
(2) have for the twelve month period preceding the date of the
closing of such substitution a Fixed Charge Coverage Ratio (with the
definitions of Section 7.B being deemed to be modified if necessary
and as applicable to provide for a calculation of the Fixed Charge
Coverage Ratio for each of the Premises on an individual basis rather
than on an aggregate basis with the other Premises) at least equal to
the Fixed Charge Coverage Ratio for the Premises being replaced and
the substitution must not cause a breach of any Fixed Charge Coverage
Ratio requirement otherwise set forth in this Agreement;
24
<PAGE> 25
(3) be owned in fee simple by Debtor;
(4) Debtor's right, title and interest in and to each proposed
Substitute Premises shall be free and clear of all liens,
restrictions, easements and encumbrances, except such matters as are
acceptable to FFCA (the "Substitute Premises Permitted Exceptions");
and
(5) have a fair market value no less than the greater of the
then fair market value of the Premises to be replaced or the fair
market value of such Premises as of the Closing, all as reasonably
determined by FFCA's in-house inspectors and underwriters.
(iii) FFCA shall have inspected and approved the Substitute Premises
utilizing FFCA customary site inspection and underwriting approval
criteria. Debtor shall have reimbursed FFCA for all of its actual
out-of-pocket costs and expenses incurred with respect to such proposed
substitution, including, without limitation, FFCA's third-party and/or
in-house site inspectors' costs and expenses with respect to the proposed
Substitute Premises. Debtor shall be solely responsible for the payment of
all costs and expenses resulting from such proposed substitution,
including, without limitation, the cost of title insurance and
endorsements, survey charges, stamp taxes, mortgage taxes, transfer fees,
escrow and recording fees, the cost of environmental reports and/or
environmental insurance and the attorneys' fees and expenses of counsel to
Debtor and FFCA.
(iv) FFCA shall have received a preliminary title report and
irrevocable commitment to insure title in the amount of the then
outstanding principal balance of the Loan relating to the Premises to be
replaced by means of a mortgagee's ALTA extended coverage policy of title
insurance (or its equivalent, in the event such form is not issued in the
jurisdiction where the proposed Substitute Premises is located) for such
proposed Substitute Premises issued by Title Company showing good and
marketable title in Debtor and committing to insure FFCA's first priority
lien upon and security interest in the proposed Substitute Premises,
subject only to the Substitute Premises Permitted Exceptions and containing
endorsements substantially comparable to those required by FFCA at the
Closing.
(v) FFCA shall have received a current ALTA survey of such proposed
Substitute Premises, the form of which shall be comparable to those
received by FFCA at the Closing and sufficient to cause the standard survey
exceptions set forth in the title policy referred to in the preceding
subsection to be deleted, and disclosing no matters other than the
Substitute Premises Permitted Exceptions.
(vi) FFCA shall have received a Phase I environmental report (and a
Phase II environmental report, if necessary, as determined by FFCA in its
sole discretion) and/or an environmental insurance policy with respect to
such proposed Substitute Premises, which (A) environmental report(s) shall
conform in scope to the then customary standards for lenders making loans
secured by commercial real estate, which shall conclude that there is no
Environmental Condition affecting the proposed Substitute Premises, and (B)
25
<PAGE> 26
environmental insurance policy shall be in form and substance and issued by
such environmental insurance company as is acceptable to FFCA in its sole
discretion.
(vii) Debtor shall deliver, or cause to be delivered, with respect to
Debtor, Lessee and the Substitute Premises, opinions of Counsel in form and
substance comparable to those received at Closing (but also addressing such
matters unique to the Substitute Premises as may be reasonably required by
FFCA).
(viii) no Event of Default shall have occurred under any of the Loan
Documents.
(ix) Debtor and Lessee shall have executed such documents as are
comparable to the security documents executed and delivered at Closing, as
applicable (but with such revisions as may be reasonably required by FFCA
to address matters unique to the Substitute Premises) or amendments to such
documents, including, without limitation, a Mortgage; Lease and UCC-1
Financing Statements (the "Substitute Documents"), to provide FFCA with a
first priority lien on the proposed Substitute Premises (or with respect to
proposed Substitute Premises subject to ground leases, a first priority
lien on the improvements located at such proposed Substitute Premises and
Debtor's leasehold interest in the land thereunder), subject only to the
Substitute Premises Permitted Exceptions, and all other rights, remedies
and benefits with respect to the proposed Substitute Premises which FFCA
holds in the Premises to be replaced, all of which documents shall be in
form and substance reasonably satisfactory to FFCA.
(x) the representations and warranties set forth in the Substitute
Documents and Section 6 of this Agreement applicable to the proposed
Substitute Premises shall be true and correct in all material respects as
of the date of substitution (with appropriate modifications consistent with
the foregoing provisions of this Section to reflect proposed Substitute
Premises subject to ground leases), and Debtor shall have delivered to FFCA
an officer's certificate certifying to that effect.
(xi) Debtor shall have delivered to FFCA certificates of insurance
and insurance policies showing that insurance required by the Substitute
Documents is in full force and effect.
Upon satisfaction of the foregoing conditions with respect to the release of a
Premises:
(a) the proposed Substitute Premises shall be deemed substituted
for the Premises to be replaced;
(b) the Loan Amount for the Substitute Premises shall be the same
as for the replaced Premises;
(c) the Substitute Premises shall be referred to herein as a
"Premises" and included within the definition of "Premises" and shall
secure the same Obligations (as defined in the Mortgages) as were secured
by the Premises that were replaced;
26
<PAGE> 27
(d) the Substitute Documents shall be dated as of the date of the
substitution; and
(e) FFCA will release, or cause to be released, the lien of the
applicable Mortgage, UCC-1 Financing Statements and any other Loan
Documents encumbering the replaced Premises.
14. MISCELLANEOUS PROVISIONS.
A. Notices. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this Agreement
shall be in writing and given by (i) hand delivery, (ii) facsimile (with a copy
by overnight delivery service), (iii) express overnight delivery service or (iv)
certified or registered mail, return receipt requested, and shall be deemed to
have been delivered upon (a) receipt, if hand delivered, (b) transmission, if
delivered by facsimile, (c) the next Business Day, if delivered by express
overnight delivery service, or (d) the third Business Day following the day of
deposit of such notice with the United States Postal Service, if sent by
certified or registered mail, return receipt requested. Notices shall be
provided to the parties and addresses (or facsimile numbers, as applicable)
specified below:
If to Debtor: MinWood Partners, Inc.
7657 Anagram Drive
Eden Prairie, MN 55344
Attention: John Doll
Telephone: (612) 294-1305
Telecopy: (612) 294-1323
If to FFCA: Dennis L. Ruben, Esq.
Executive Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (480) 585-4500
Telecopy: (480) 585-2226
B. Real Estate Commission. FFCA and Debtor represent and warrant
to each other that they have dealt with no real estate or mortgage broker,
agent, finder or other intermediary in connection with the transactions
contemplated by this Agreement. FFCA and Debtor shall indemnify and hold
each other harmless from and against any costs, claims or expenses,
including attorneys' fees, arising out of the breach of their respective
representations and warranties contained within this Section.
C. Waiver and Amendment. No provisions of this Agreement shall be
deemed waived or amended except by a written instrument unambiguously
setting forth the matter waived or amended and signed by the party against
which enforcement of such waiver or amendment is sought. Waiver of any
matter shall not be deemed a waiver of the same or any other matter on any
future occasion.
17
<PAGE> 28
D. Captions. Captions are used throughout this Agreement for
convenience of reference only and shall not be considered in any manner in
the construction or interpretation hereof.
E. FFCA's Liability. Notwithstanding anything to the contrary
provided in this Agreement, it is specifically understood and agreed, such
agreement being a primary consideration for the execution of this Agreement
by FFCA, that (i) there shall be absolutely no personal liability on the
part of any shareholder, director, officer or employee of FFCA, with
respect to any of the terms, covenants and conditions of this Agreement or
the other Loan Documents, (ii) Debtor waives all claims, demands and causes
of action against FFCA's officers, directors, employees and agents in the
event of any breach by FFCA of any of the terms, covenants and conditions
of this Agreement or the other Loan Documents to be performed by FFCA and
(iii) Debtor shall look solely to the assets of FFCA for the satisfaction
of each and every remedy of Debtor in the event of any breach by FFCA of
any of the terms, covenants and conditions of this Agreement or the other
Loan Documents to be performed by FFCA, such exculpation of liability to be
absolute and without any exception whatsoever.
F. Severability. The provisions of this Agreement shall be deemed
severable. If any part of this Agreement shall be held unenforceable, the
remainder shall remain in full force and effect, and such unenforceable
provision shall be reformed by such court so as to give maximum legal
effect to the intention of the parties as expressed therein.
G. Construction Generally. This is an agreement between parties
who are experienced in sophisticated and complex matters similar to the
transaction contemplated by this Agreement and is entered into by both
parties in reliance upon the economic and legal bargains contained herein
and shall be interpreted and construed in a fair and impartial manner
without regard to such factors as the party which prepared the instrument,
the relative bargaining powers of the parties or the domicile of any party.
Debtor and FFCA were each represented by legal counsel competent in
advising them of their obligations and liabilities hereunder.
H. Other Documents. Each of the parties agrees to sign such other
and further documents as may be appropriate to carry out the intentions
expressed in this Agreement.
I. Attorneys' Fees. In the event of any judicial or other
adversarial proceeding between the parties concerning this Agreement, the
prevailing party shall be entitled to recover its attorneys' fees and other
costs in addition to any other relief to which it may be entitled.
References in this Agreement to the attorneys' fees and/or costs of FFCA
shall mean both the fees and costs of independent outside counsel retained
by FFCA with respect to this transaction and the fees and costs of FFCA's
in-house counsel incurred in connection with this transaction.
J. Entire Agreement. This Agreement and the other Loan Documents,
together with any other certificates, instruments or agreements to be
delivered in connection therewith, constitute the entire agreement between
the parties with respect to the subject matter hereof, and there are no
other representations, warranties or agreements, written or
28
<PAGE> 29
oral, between Debtor, Lessee and FFCA with respect to the subject matter of
this Agreement. Notwithstanding anything in this Agreement to the contrary,
upon the execution and delivery of this Agreement by Debtor and FFCA, the
Commitment shall be deemed null and void and of no further force and effect
and the terms and conditions of this Agreement shall control
notwithstanding that such terms and conditions may be inconsistent with or
vary from those set forth in the Commitment.
K. Forum Selection; Jurisdiction; Venue; Choice of Law. Debtor
acknowledges that this Agreement was substantially negotiated in the State
of Arizona, the Agreement was signed by FFCA in the State of Arizona and
delivered by Debtor in the State of Arizona, all payments under the Notes
will be delivered in the State of Arizona and there are substantial
contacts between the parties and the transactions contemplated herein and
the State of Arizona. For purposes of any action or proceeding arising out
of this Agreement, the parties hereto hereby expressly submit to the
jurisdiction of all federal and state courts located in the State of
Arizona and Debtor consents that it may be served with any process or paper
by registered mail or by personal service within or without the State of
Arizona in accordance with applicable law. Furthermore, Debtor waives and
agrees not to assert in any such action, suit or proceeding that it is not
personally subject to the jurisdiction of such courts, that the action,
suit or proceeding is brought in an inconvenient forum or that venue of the
action, suit or proceeding is improper. It is the intent of the parties
hereto that all provisions of this Agreement shall be governed by and
construed under the laws of the State of Arizona, without giving effect to
its principles of conflicts of law. To the extent that a court of competent
jurisdiction finds Arizona law inapplicable with respect to any provisions
hereof, then, as to those provisions only, the laws of the states where the
Premises are located shall be deemed to apply. Nothing in this Section
shall limit or restrict the right of FFCA to commence any proceeding in the
federal or state courts located in the states in which the Premises are
located to the extent FFCA deems such proceeding necessary or advisable to
exercise remedies available under this Agreement or the other Loan
Documents.
L. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
M. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of Debtor and FFCA and their respective successors and
permitted assigns, including, without limitation, any United States
trustee, any debtor in possession or any trustee appointed from a private
panel.
N. Survival. Except for the conditions of Closing set forth in
Section 9, which shall be satisfied or waived as of the Closing Date, all
representations, warranties, agreements, obligations and indemnities of
Debtor and FFCA set forth in this Agreement shall survive the Closing.
O. Waiver of Jury Trial and Punitive, Consequential, Special and
Indirect Damages. DEBTOR AND FFCA HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
29
<PAGE> 30
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN
OR RELATED HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER
MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT
OF THEIR BARGAIN. FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL,
SPECIAL AND INDIRECT DAMAGES FROM FFCA AND ANY OF FFCA'S AFFILIATES,
OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO
ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY DEBTOR AGAINST FFCA OR ANY OF FFCA'S AFFILIATES,
OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO
ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY
DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY
RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT
DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL
ASPECT OF THEIR BARGAIN.
P. Transfers, Participations and Securitization. (1) A material
inducement to FFCA's willingness to complete the transactions contemplated
by the Loan Documents is Debtor's agreement that FFCA may, at any time,
sell, transfer or assign any Note, Mortgage and/or any of the other Loan
Documents, and any or all servicing rights with respect thereto (each, a
"Transfer"), or grant participations in any Note, Mortgage and/or any of
the other Loan Documents (each, a "Participation"), or complete a
Securitization with respect to any Note, Mortgage and/or any of the other
Loan Documents.
(2) Debtor agrees to cooperate in good faith with FFCA in
connection with any such Transfer, Participation and/or Securitization of
any Note, Mortgage and/or any of the other Loan Documents, including,
without limitation, (i) providing such documents, financial and other data,
and other information and materials (the "Disclosures") which would
typically be required with respect to Debtor and Lessee by a purchaser,
transferee, assignee, servicer, participant, investor or rating agency
involved with respect to such Transfer, Participation and/or
Securitization, as applicable; provided, however, Debtor and Lessee shall
not be required to make Disclosures of any confidential information or any
information which has not previously been made public unless required by
applicable federal or state securities laws; and (ii) amending the terms of
the transactions evidenced by the Loan Documents to the extent necessary so
as to satisfy the requirements of purchasers, transferees, assignees,
servicers, participants, investors or selected rating agencies involved in
any such Transfer, Participation or Securitization, so long as such
amendments would not have a material adverse effect (financial or
otherwise) upon Debtor and Lessee or the transactions contemplated
hereunder.
(3) Debtor consents to FFCA providing the Disclosures, as well as
any other information which FFCA may now have or hereafter acquire with
respect to the Premises or
30
<PAGE> 31
the financial condition of Debtor and Lessee to each purchaser, transferee,
assignee, servicer, participant, investor or rating agency involved with
respect to such Transfer, Participation and/or Securitization, as
applicable. FFCA and Debtor (and their respective Affiliates) shall each
pay their own attorneys fees and other out-of-pocket expenses incurred in
connection with the performance of their respective obligations under this
Section.
(4) Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents:
(a) a breach or default, after the passage of all applicable
notice and cure or grace periods, under any Loan Document, Lease or
Other Agreement which relates to a loan or sale/leaseback transaction
which has not been the subject of a Securitization shall not
constitute an Event of Default or a breach or default, as applicable,
under any Loan Document or Other Agreement which relates to a loan
which has been the subject of a Securitization;
(b) a breach or default, after the passage of all applicable
notice and cure or grace periods, under any Loan Document, Lease or
Other Agreement which relates to a loan which is included in any
Securitized Loan Pool shall not constitute an Event of Default or a
breach or default, as applicable, under any Loan Document or Other
Agreement which relates to a loan which is included in any other
Securitized Loan Pool;
(c) the Loan Documents corresponding to the Notes in any
Securitized Loan Pool shall not secure the obligations of any of the
Debtor Entities contained in any Loan Document or Other Agreement
which does not correspond to a loan in such Securitized Loan Pool; and
(d) the Loan Documents and Other Agreements which do not
correspond to a loan in any Securitized Loan Pool shall not secure the
obligations of any of the Debtor Entities contained in any Loan
Document or Other Agreement which does correspond to a loan in such
Securitized Loan Pool.
31
<PAGE> 32
IN WITNESS WHEREOF, Debtor and FFCA have entered into this Agreement as of
the date first above written.
FFCA ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ Patrick J. Feltes
----------------------------------
Printed Name: Patrick J. Feltes
------------------------
Title: VP
-------------------------------
DEBTOR:
MINWOOD PARTNERS, INC.,
a Delaware corporation
By: /s/ Martin J. O'Dowd
----------------------------------
Printed Name: Martin J. O'Dowd
------------------------
Title: Director
-------------------------------
<PAGE> 33
STATE OF ARIZONA )
) SS.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me on January 18, 2000 by
Patrick J. Feltes, VP of FFCA Acquisition Corporation, a Delaware corporation,
on behalf of the corporation.
/s/ Kristi A. Lyons
-------------------------------------
Notary Public
My Commission Expires:
2/20/02
- ----------------------------
STATE OF Minnesota
-------------------)
COUNTY OF Hennepin )SS.
-------------------)
The foregoing instrument was acknowledged before me on January 17, 2000 by
Martin J. O'Dowd, Director of MinWood Partners, Inc., a Delaware corporation, on
behalf of the corporation.
/s/ Rita A. Witting
-------------------------------------
Notary Public
My Commission Expires:
1/31/05
- ----------------------------
<PAGE> 34
EXHIBIT A
DESCRIPTION OF PREMISES; ALLOCATED LOAN AMOUNT
<TABLE>
<CAPTION>
FFCA NO. ADDRESS AMOUNT
- -------- ------- ------
<S> <C> <C>
8001-0988 14601 Highway 7 $2,000,000.00
Minnetonka, MN
8001-0990 1940 Donegal Drive $1,800,000.00
Woodbury, MN
</TABLE>
<PAGE> 1
MASTER LEASE
THIS LEASE (this "Lease") is made as of January 21, 2000 (the
"Effective Date"), by and between MINWOOD PARTNERS, INC., a Delaware corporation
("Lessor"), whose address is 7657 Anagram Drive, Eden Prairie, Minnesota 55344,
and FAMOUS DAVE'S OF AMERICA, INC., a Minnesota corporation ("Lessee"), whose
address is 7657 Anagram Drive, Eden Prairie, Minnesota 55344.
WITNESSETH:
THAT, in consideration of the mutual covenants and agreements herein
contained, Lessor and Lessee hereby covenant and agree as follows:
1. CERTAIN DEFINED TERMS. The following terms shall have the following
meanings for all purposes of this Lease:
"Action" has the meaning set forth in Section 24.A(iv).
"ADA" has the meaning set forth in Section 16.C.
"Additional Rental" has the meaning set forth in Section 5.B.
"Affiliate" means any Person which directly or indirectly controls, is
under common control with or is controlled by any other Person. For purposes of
this definition, "controls", "under common control with", and "controlled by"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.
"Applicable Regulations" has the meaning set forth in Section 16.A.
"Base Annual Rental" means $456,180.60.
"Base Monthly Rental" means an amount equal to 1/12 of the applicable
Base Annual Rental.
"Business Day" means a day on which banks located in Phoenix, Arizona
are open for business other than Saturday, Sunday or a legal holiday, ending at
5:00 p.m. Phoenix, Arizona time.
"Capital Lease" has the meaning set forth in Section 57.
"Code" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et
seq., as amended.
"De Minimis Amounts" shall mean, with respect to any given level of
Hazardous Materials, that level or quantity of Hazardous Materials in any form
or combination of forms the
<PAGE> 2
use, storage or release of which does not constitute a violation of any
Environmental Laws and is customarily employed in the ordinary course of, or
associated with, similar businesses located in the state in which the Premises
is located.
"Debt" has the meaning set forth in Section 57.
"Default Rate" means 15% per annum or the highest rate permitted by
law, whichever is less.
"Depreciation and Amortization" has the meaning set forth in
Section 57.
"Environmental Insurer" means American International Specialty Lines
Insurance Company or such other environmental insurance company as Lender shall
select in its sole discretion.
"Environmental Laws" means any present and future federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law, relating to Hazardous Materials and/or the protection of human
health or the environment, by reason of a Release or Threatened Release of
Hazardous Materials or relating to liability for or costs of Remediation or
prevention of Releases. "Environmental Laws" includes, but is not limited to,
the following statutes, as amended, any successor thereto, and any regulations
rulings, orders or decrees promulgated pursuant thereto, and any state or local
statutes, ordinances, rules, regulations and the like addressing similar issues:
the Comprehensive Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground storage tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; the Safe Drinking Water Act; the Occupational Safety and Health
Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide
and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act. "Environmental Laws"
also includes, but is not limited to, any present and future federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law: conditioning transfer of property upon a negative declaration or
other approval of a Governmental Authority of the environmental condition of the
property; requiring notification or disclosure of Releases or other
environmental condition of the Premises to any Governmental Authority or other
person or entity, whether or not in connection with transfer of title to or
interest in property; imposing conditions or requirements relating to Hazardous
Materials in connection with permits or other authorization for lawful activity;
relating to nuisance, trespass or other causes of action related to Hazardous
Materials; relating to the handling and disposal of solid or hazardous waste;
and relating to wrongful death, personal injury, or property or other damage in
connection with the physical condition or use of the Premises by reason of the
presence of Hazardous Materials in, on, under or above the Premises.
"Environmental Liens" has the meaning set forth in Section 16.E.
"Equipment Payment Amount" has the meaning set forth in Section 57.
2
<PAGE> 3
"Event of Default" has the meaning set forth in Section 24.
"Fixed Charge Coverage Ratio" has the meaning set forth in Section 57.
"Franchise Finance" means Franchise Finance Corporation of America, a
Delaware corporation, and its successors and assigns.
"GAAP" means generally accepted accounting principles consistently
applied.
"Governmental Authority" means any governmental authority, agency,
department, commission, bureau, board, instrumentality, court or
quasi-governmental authority of the United States, the State or any political
subdivision thereof.
"Gross Sales" has the meaning set forth in Section 57.
"Hazardous Materials" means (i) any toxic substance or hazardous waste,
substance, solid waste, or related material, or any pollutant or contaminant;
(ii) radon gas, asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment which contains
dielectric fluid containing levels of polychlorinated biphenyls in excess of
federal, state or local safety guidelines, whichever are more stringent, or any
petroleum product; (iii) any substance, gas, material or chemical which is or
may be defined as or included in the definition of "hazardous substances,"
"toxic substances," "hazardous materials," "hazardous wastes," "regulated
substances" or words of similar import under any Environmental Laws; and (iv)
any other chemical, material, gas or substance the exposure to or release of
which is or may be prohibited, limited or regulated by any Governmental
Authority that asserts or may assert jurisdiction over the Premises or the
operations or activity at the Premises, or any chemical, material, gas or
substance that does or may pose a hazard to the health and/or safety of the
occupants of the Premises or the owners and/or occupants of property adjacent to
or surrounding the Premises.
"Indemnified Parties" means Lessor, Environmental Insurer and Lender
and their directors, officers, shareholders, partners, members, employees,
agents, servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns, including, but not limited
to, any successors by merger, consolidation or acquisition of all or a
substantial portion of the assets and business of Lessor, Lender or
Environmental Insurer, as applicable.
"Interest Expense" has the meaning set forth in Section 57.
"Lease FCCR Payment" has the meaning set forth in Section 24.A(xii).
"Lease Term" shall have the meaning described in Section 4.
"Lender" means FFCA Acquisition Corporation, a Delaware corporation.
"Loan Agreement" means the Loan Agreement dated as of the date of this
Lease in effect between Lessor and Lender, as such agreement may be amended from
time to time.
3
<PAGE> 4
"Loan Documents" means, collectively, the Loan Agreement, the Notes,
the Mortgages, the UCC-1 Financing Statements and all other documents,
instruments and agreements executed in connection therewith or contemplated
thereby, all as amended and supplemented.
"Loan FCCR Payment" has the meaning set forth in Section 24.A(xii).
"Losses" means any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement and
damages of whatever kind or nature (including, without limitation, attorneys'
fees, court costs and other costs of defense).
"Memorandum of Lease" means the Memorandum of Lease dated as of the
date of this Lease between Lessor and Lessee with respect to the Premises. A
duplicate original Memorandum of Lease will be executed and recorded in the
applicable real property records for each of the Premises.. The Memorandum of
Lease will contain the addresses and Lender Numbers for all of the Premises and
the legal description for the Premises.
"Mortgages" means the mortgages or deeds of trust, assignments of rents
and leases, security agreements and fixture filings dated as of even date
herewith executed by Lessor for the benefit of Lender with respect to the
Premises, as such instrument may be amended, restated and/or supplemented from
time to time.
"Net Amount" has the meaning set forth in Section 21.B.
"Net Income" has the meaning set forth in Section 57.
"Notes" means the promissory notes dated as of the date of this Lease
executed by Lessor and payable to Lender with respect to each Premises, as such
notes may be amended, restated and/or substituted from time to time.
"Obligations" has the meaning set forth in Section 21.B.
"Operating Lease Expense" has the meaning set forth in Section 57.
"Partial Taking" has the meaning set forth in Section 21.D.
"Permitted Concept" means a Famous Dave's restaurant or other
restaurant or retail concept approved in writing by Lender and Lessor in their
reasonable discretion.
"Person" means any individual, corporation, partnership, limited
liability company, trust, unincorporated organization, Governmental Authority or
any other form of entity.
"Personalty" has the meaning set forth in Section 31.
4
<PAGE> 5
"Premises" means the parcel or parcels of real estate legally described
in Exhibit A attached hereto, all rights, privileges and appurtenances
associated therewith, and all buildings, fixtures and other improvements
"Release" means any presence, release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.
"Remediation" means any response, remedial, removal, or corrective
action, any activity to cleanup, detoxify, decontaminate, contain or otherwise
remediate any Hazardous Material, any actions to prevent, cure or mitigate any
Release, any action to comply with any Environmental Laws or with any permits
issued pursuant thereto, any inspection, investigation, study, monitoring,
assessment, audit, sampling and testing, laboratory or other analysis, or any
evaluation relating to any Hazardous Materials.
"Securitization" shall have the meaning set forth in the Loan
Agreement.
"Securitized Loan Pool" means any pool or group of loans that are a
part of any Securitization.
"State" means the state in which the Premises are located.
"Substitute Premises" shall have the meaning set forth in the Loan
Agreement.
"Successor Lessor" has the meaning set forth in Section 25.
"Taking" has the meaning set forth in Section 21.A.
"Temporary Taking" has the meaning set forth in Section 21.C.
"Threatened Release" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air
or any other environmental medium comprising or surrounding the Premises which
may result from such Release.
"Total Taking" has the meaning set forth in Section 21.B.
"UCC-1 Financing Statements" means such UCC-1 Financing Statements
executed and delivered by Lessee for the benefit of Lessor with respect to the
Premises.
2. DEMISE OF PREMISES. In consideration of the rentals and other sums
to be paid by Lessee and of the other terms, covenants and conditions on
Lessee's part to be kept and performed, Lessor hereby leases to Lessee, and
Lessee hereby takes and hires, the Premises.
3. CHARACTERIZATION OF LEASE. A. Lessor and Lessee intend that:
5
<PAGE> 6
(i) this Lease constitutes a single master lease of all, but
not less than all, of the Premises and that Lessor and Lessee have
executed and delivered this Lease with the understanding that this
Lease constitutes a unitary, unseverable instrument pertaining to all,
but not less than all, of the Premises, and that neither this Lease nor
the duties, obligations or rights of Lessee may be allocated or
otherwise divided among the Premises by Lessee;
(ii) this Lease is a "true lease" and not a financing lease,
capital lease, mortgage, equitable mortgage, deed of trust, trust
agreement, security agreement or other financing or trust arrangement,
and the economic realities of this Lease are those of a true lease, and
the parties agree to execute such other documents to confirm this Lease
is a true lease; and
(iii) the business relationship created by this Lease and any
related documents is solely that of a long-term commercial lease
between landlord and tenant and has been entered into by both parties
in reliance upon the economic and legal bargains contained herein.
B. Lessor and Lessee acknowledge and agree that the Lease Term,
including any term extensions provided for in this Lease, is less than the
remaining economic life of each of the Premises.
C. Lessee waives any claim or defense based upon the characterization
of this Lease as anything other than a true lease, and Lessee stipulates and
agrees not to challenge the validity, enforceability or characterization of the
lease of the Premises as a true lease and further stipulates and agrees that
nothing contained in this Lease creates or is intended to create a joint
venture, partnership (either de jure or de facto), equitable mortgage, trust,
financing device or arrangement, security interest or the like. Lessee shall
support the intent of the parties that the lease of the Premises pursuant to
this Lease is a true lease and does not create a joint venture, partnership
(either de jure or de facto), equitable mortgage, trust, financing device or
arrangement, security interest or the like, if, and to the extent that, any
challenge occurs.
D. Lessee waives any claim or defense based upon the characterization
of this Lease as anything other than a master lease of all of the Premises, and
Lessee stipulates and agrees not to challenge the validity, enforceability or
characterization of the lease of the Premises as a unitary, unseverable
instrument pertaining to the lease of all, but not less than all, of the
Premises. Lessee shall support the intent of the parties that this Lease is a
unitary, unseverable instrument pertaining to the lease of all, but not less
than all, of the Premises.
E. The expressions of intent set forth in this Section are a material
inducement to Lessor entering into this Lease.
4. LEASE TERM. The Lease Term shall commence as of the Effective Date
and shall expire on the date which is twenty years and six months after the last
day of the month in which the Effective Date occurs unless terminated sooner as
provided in this Lease. The time period during which this Lease shall actually
be in effect is referred to herein as the "Lease Term."
5. RENTAL AND OTHER PAYMENTS. A. If the Effective Date is a date other
than the first day of the month, Lessee shall pay Lessor on the Effective Date
the Base Monthly Rental
6
<PAGE> 7
prorated on the basis of the ratio that the number of days from the Effective
Date through the last day in the month containing the Effective Date bears to
the number of days in such month. Thereafter, on or before the first day of each
succeeding calendar month, Lessee shall pay Lessor in advance the Base Monthly
Rental.
B. All sums of money required to be paid by Lessee under this Lease
which are not specifically referred to as rent ("Additional Rental") shall be
considered rent although not specifically designated as such. Lessor shall have
the same remedies for nonpayment of Additional Rental as those provided herein
for the nonpayment of Base Annual Rental.
6. REPRESENTATIONS AND WARRANTIES OF LESSOR. The representations and
warranties of Lessor contained in this Section are being made to induce Lessee
to enter into this Lease and Lessee has relied and will continue to rely upon
such representations and warranties. Lessor represents and warrants to Lessee as
follows:
A. Organization, Authority and Status of Lessor. (i) Lessor
has been duly organized and is validly existing and in good standing
under the laws of the State of Delaware and is qualified to do business
in any jurisdiction where such qualification is required. All necessary
action has been taken to authorize the execution, delivery and
performance by Lessor of this Lease and the other documents,
instruments and agreements provided for herein. Lessor is not a
"foreign limited liability company", "foreign corporation", "foreign
partnership", "foreign trust" or "foreign estate" as such terms are
defined in the Internal Revenue Code and the regulations promulgated
thereunder. Lessor's United States tax identification number is
correctly set forth on the signature page of this Lease.
(ii) The person who has executed this Lease on behalf of
Lessor is duly authorized so to do.
B. Enforceability. This Lease constitutes the legal, valid and
binding obligation of Lessor, enforceable against Lessor in accordance
with its terms.
C. Litigation. There are no suits, actions, proceedings or
investigations pending, or to the best of its knowledge, threatened
against or involving Lessor before any arbitrator, or Governmental
Authority which might reasonably result in any material adverse change
in the contemplated business, condition, worth or operations of Lessor.
D. Absence of Breaches or Defaults. Lessor is not in default,
beyond the passage of any applicable notice and cure periods, under any
document, instrument or agreement to which Lessor is a party or by
which Lessor or any of Lessor's property is subject or bound. The
authorization, execution, delivery and performance of this Lease and
the documents, instruments and agreements provided for herein will not
result in any breach of or default under any other document, instrument
or agreement to which Lessor is a party or by which Lessor, the
Premises or any of Lessor's property is subject or bound.
7. REPRESENTATIONS AND WARRANTIES OF LESSEE. The representations and
warranties of Lessee contained in this Section are being made to induce Lessor
to enter into this Lease and
7
<PAGE> 8
Lessor has relied, and will continue to rely, upon such representations and
warranties. Lessee represents and warrants to Lessor as follows:
A. Organization, Authority and Status of Lessee. (i) Lessee
has been duly organized or formed, is validly existing and in good
standing under the laws of its state of formation and is qualified to
do business in any jurisdiction where such qualification is required.
All necessary action has been taken to authorize the execution,
delivery and performance by Lessee of this Lease and of the other
documents, instruments and agreements provided for herein. Lessee is
not a "foreign limited liability company", "foreign corporation",
"foreign partnership", "foreign trust" or "foreign estate", as those
terms are defined in the Internal Revenue Code and the regulations
promulgated thereunder. Lessee's United States tax identification
number is correctly set forth on the signature page of this Lease.
(ii) The person who has executed this Lease on behalf of
Lessee is duly authorized to do so.
B. Enforceability. This Lease constitutes the legal, valid and
binding obligation of Lessee, enforceable against Lessee in strict
accordance with all of its terms.
C. Litigation. There are no suits, actions, proceedings or
investigations pending, or to the best of its knowledge, threatened
against or involving Lessee or the Premises before any arbitrator or
Governmental Authority which might reasonably result in any material
adverse change in the contemplated business, condition, worth or
operations of Lessee or the Premises.
D. Absence of Breaches or Defaults. Lessee is not in default
under any other document, instrument or agreement to which Lessee is a
party or by which Lessee, the Premises or any of Lessee's property is
subject or bound. The authorization, execution, delivery and
performance of this Lease and the documents, instruments and agreements
provided for herein will not result in any breach of or default under
any document, instrument or agreement to which Lessee is a party or by
which Lessee, the Premises or any of Lessee's property is subject or
bound.
E. Licenses and Permits. Lessee has obtained all required
licenses and permits, both governmental and private, to use and operate
the Premises as a Permitted Concept.
F. Financial Condition; Information Provided to Lessor. The
financial statements, all financial data and all other documents and
information heretofore delivered to Lessor or Lender by or with respect
to Lessee and/or the Premises in connection with this Lease and/or
relating to Lessee and/or the Premises are true, correct and complete
in all material respects, and there have been no amendments to such
financial statements, financial data and other documents and
information since the date such financial statements, financial data,
documents and other information were prepared or delivered to Lessor or
Lender, and no material adverse change has occurred to any such
financial statements, financial data, documents and other information
not disclosed in writing to Lessor and Lender.
8
<PAGE> 9
G. True Lease. Lessee intends for this Lease to be a "true
lease" and not a financing lease, capital lease, mortgage, equitable
mortgage, deed of trust, trust agreement, security agreement or other
financing or trust arrangement, and the economic realities of this
Lease are those of a true lease. The option to purchase provided for in
this Lease may be exercised only by Lessee paying the greater of the
fair market value of the Premises and the Purchase Price, which payment
amount will not be nominal. The term of this Lease is less than the
remaining economic life of the Premises. Lessee waives any claim or
defense based upon the characterization of this Lease as anything other
than a true lease, and Lessee stipulates and agrees not to challenge
the validity, enforceability or characterization of the lease of the
Premises as a true lease and further stipulates and agrees that nothing
contained in this Lease creates or is intended to create a joint
venture, partnership, equitable mortgage, trust, financing device or
arrangement, security interest or the like. Lessee shall support the
intent of the parties that the lease of the Premises pursuant to this
Lease is a true lease and does not create a joint venture, partnership,
equitable mortgage, trust, financing device or arrangement, security
interest or the like, if, and to the extent that, any challenge occurs.
H. Liabilities of Lessor. Lessee is not liable for any
indebtedness for money borrowed by Lessor and has not guaranteed any of
the debts or obligations of Lessor.
8. NONCONSOLIDATION COVENANTS. Lessee covenants to Lessor for so
long as this Lease is in effect that:
(i) The annual financial statements of Lessee, including
consolidated financial statements, if any, shall contain notes stating
that (a) all of Lessor's assets are owned by Lessor and (b) Lessor is a
separate entity with its own separate creditors which will be entitled
to be satisfied out of Lessor's assets.
(ii) Lessee will not assume liability for any indebtedness for
money borrowed by Lessor and does not, and will not, guarantee any of
the debts or obligations of Lessor. Lessee will not hold itself out as
being liable for any obligations or indebtedness of Lessor.
(iii) Lessee shall not and shall use its best efforts to cause
its affiliates not to hold Lessor out to the public or to any
individual creditors as being a unified entity with assets and
liabilities in common with Lessee except that Lessor may be included in
Lessee's or its affiliates' reports under the Securities Exchange Act
of 1934, as amended, and its and their consolidated financial
statements, as appropriate, provided such statements adequately
disclose the ownership by Lessor of the Premises and that the Premises
are available first to satisfy any creditors of Lessor.
(iv) Lessee shall conduct its business so as not to mislead
others as to the separate identity of Lessor, and particularly will
avoid the appearance of conducting business on behalf of Lessor.
Without limiting the generality of the foregoing, no oral and written
communications of Lessee, including, without limitation, letters,
invoices, purchase orders, contracts, statements and loan applications,
will be made in the name of Lessor which to the extent that to do
otherwise would materially bear upon the maintenance of Lessor's
separate identity.
9
<PAGE> 10
(v) Lessee will not act in Lessor's name.
(vi) Where necessary and appropriate, Lessee shall disclose
the independent business status of Lessor to creditors of Lessee, if
any.
(vii) The resolutions, agreements and other instruments of
Lessee, if any, underlying the transactions described in this Lease
will be maintained by Lessee.
(viii) All transactions between Lessee and Lessor will be no
less fair to each party than they could obtain on an arm's-length
basis.
(ix) The books, records and accounts of Lessee shall at all
times be maintained in a manner permitting the assets and liabilities
of Lessor to be easily separated and readily ascertained from those of
Lessee.
(x) Lessee will not direct, or otherwise control, the ongoing
business decisions of Lessor.
(xi) Lessee will not file or cause to be filed a voluntary or
involuntary petition in bankruptcy on behalf of or against Lessor, nor
seek substantive consolidation of the assets and liabilities of Lessor
and Lessee in any bankruptcy or insolvency proceeding during the Lease
Term and for a period of 91 days after the Lease Term.
9. RENTALS TO BE NET TO LESSOR. The Base Annual Rental payable
hereunder shall be net to Lessor, so that this Lease shall yield to Lessor the
rentals specified during the Lease Term, and that all costs, expenses and
obligations of every kind and nature whatsoever relating to the Premises shall
be performed and paid by Lessee.
10. TAXES AND ASSESSMENTS. Lessee shall pay, prior to the earlier of
delinquency or the accrual of interest on the unpaid balance, all taxes and
assessments (or the applicable installments of such taxes and assessments) of
every type or nature assessed against or imposed upon the Premises or Lessee
during the Lease Term which affect in any manner the net return realized by
Lessor under this Lease, including without limitation, the following:
A. All taxes and assessments upon the Premises or any part thereof
and upon any Personalty and improvements located on the Premises, whether
belonging to Lessor or Lessee, or any tax or charge levied in lieu of such
taxes and assessments;
B. All taxes, charges, license fees and or similar fees imposed by
reason of the use of the Premises by Lessee; and
C. All excise, transaction, privilege, license, sales, use and
other taxes upon the rental or other payments hereunder, the leasehold
estate of either party or the activities of either party pursuant to this
Lease.
All taxing authorities shall be instructed to send all tax and
assessment invoices to Lessor. After recording the information on such invoices,
Lessor shall forward such invoices to
10
<PAGE> 11
Lessee for payment. Within 30 days after each tax and assessment payment is
required by this Section to be paid, Lessee shall provide Lessor with evidence
satisfactory to Lessor that such payment was made in a timely fashion. Lessee
may, at its own expense, contest or cause to be contested (in the case of any
item involving more than $10,000.00, after prior written notice to Lessor), by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any item
specified in the foregoing subsection A or lien therefor, provided that (i) such
proceeding shall suspend the collection thereof from the Premises or any
interest therein, (ii) neither the Premises nor any interest therein would be in
any danger of being sold, forfeited or lost by reason of such proceedings, (iii)
no Event of Default is occurring, and (iv) Lessee shall have deposited with
Lessor adequate reserves for the payment of the taxes, together with all
interest and penalties thereon, unless paid in full under protest, or Lessee
shall have furnished the security as may be required in the proceeding or as may
be required by Lessor to insure payment of any contested taxes.
11. UTILITIES. Lessee shall contract, in its own name, for and pay when
due all charges for the connection and use of water, gas, electricity,
telephone, garbage collection, sewer use and other utility services supplied to
the Premises during the Lease Term. Under no circumstances shall Lessor be
responsible for any interruption of any utility service.
12. INSURANCE. Throughout the Lease Term Lessee shall maintain with
respect to the Premises, at its sole expense, the following types and amounts of
insurance (which may be included under a blanket insurance policy if all the
other terms hereof are satisfied), in addition to such other insurance as Lessor
may reasonably require from time to time:
A. Insurance against loss, damage or destruction by fire and other
casualty, including theft, vandalism and malicious mischief, flood (if
the Premises is in a location designated by the Federal Emergency
Management Administration as a Special Flood Hazard Area), earthquake
(if the Premises is in an area subject to destructive earthquakes
within recorded history), boiler explosion (if there is any boiler upon
the Premises), plate glass breakage, sprinkler damage (if the Premises
has a sprinkler system), all matters covered by a standard extended
coverage endorsement, all matters covered by a special coverage
endorsement commonly known as an "all-risk" endorsement and such other
risks as Lessor may reasonably require, insuring the Premises for not
less than 100% of their full insurable replacement cost.
B. Comprehensive general liability and property damage insurance,
including a products liability clause, covering Lessor and Lessee
against bodily injury liability, property damage liability and
automobile bodily injury and property damage liability, including
without limitation any liability arising out of the ownership,
maintenance, repair, condition or operation of the Premises or
adjoining ways, streets or sidewalks and, if applicable, insurance
covering Lessor and Lessee against liability arising from the sale of
liquor, beer or wine on the Premises. Such insurance policy or policies
shall contain a broad form contractual liability endorsement under
which the insurer agrees to insure Lessee's obligations under Section
18 hereof to the extent insurable, and a "severability of interest"
clause or endorsement which precludes the insurer from denying the
claim of Lessee or Lessor because of the negligence or other acts of
the other, shall be in amounts of not less
11
<PAGE> 12
than $1,000,000.00 per injury and occurrence with respect to any
insured liability, whether for personal injury or property damage, or
such higher limits as Lessor may reasonably require from time to time,
and shall be of form and substance satisfactory to Lessor.
C. State Worker's Compensation insurance in the statutorily
mandated limits, employer's liability insurance with limits not less
than $500,000.00 or such greater amount as Lessor may from time to time
require and such other insurance as may be necessary to comply with
applicable laws.
D. Business income insurance or rental interruption insurance, as
requested by Lessor, equal to 100% of the Base Annual Rental for a
period of not less than six months.
All insurance policies shall:
(i) Provide for a waiver of subrogation by the insurer as to
claims against Lessor, its employees and agents and provide that such
insurance cannot be unreasonably cancelled, invalidated or suspended on
account of the conduct of Lessee, its officers, directors, employees or
agents;
(ii) Provide that any "no other insurance" clause in the
insurance policy shall exclude any policies of insurance maintained by
Lessor and that the insurance policy shall not be brought into
contribution with insurance maintained by Lessor;
(iii) Contain a standard without contribution mortgage clause
endorsement in favor of Lender and any other lender designated by
Lessor or Lender;
(iv) Provide that the policy of insurance shall not be
terminated, cancelled or substantially modified without at least thirty
(30) days' prior written notice to Lessor, Lender and to any lender
covered by any standard mortgage clause endorsement;
(v) Provide that the insurer shall not have the option to
restore the Premises if Lessor elects to terminate this Lease in
accordance with the terms hereof;
(vi) Be issued by insurance companies licensed to do business in
the State and which are rated A:VI or better by Best's Insurance Guide
or are otherwise approved by Lessor; and
(vii) Provide that the insurer shall not deny a claim because of
the negligence of Lessee, anyone acting for Lessee or any subtenant or
other occupant of the Premises.
It is expressly understood and agreed that the foregoing minimum limits
of insurance coverage shall not limit the liability of Lessee for its acts or
omissions as provided in this Lease.
12
<PAGE> 13
All insurance policies (with the exception of worker's compensation insurance to
the extent not available under statutory law) shall designate Lessor, Lender and
any other mortgagee of Lessor as additional insureds as their interests may
appear and shall be payable as set forth in Section 21 hereof. All such policies
shall be written as primary policies, with deductibles not to exceed 10% of the
amount of coverage. Any other policies, including any policy now or hereafter
carried by Lessor or Lender, shall serve as excess coverage. Lessee shall
procure policies for all insurance for periods of not less than one year and
shall provide to Lessor and any lender of Lessor certificates of insurance or,
upon Lessor's request, duplicate originals of insurance policies evidencing that
insurance satisfying the requirements of this Lease is in effect at all times.
13. TAX AND INSURANCE IMPOUND. Upon the occurrence of an Event of
Default, Lessor may require Lessee to pay to Lessor sums which will provide an
impound account (which shall not be deemed a trust fund) for paying up to the
next one year of taxes, assessments and/or insurance premiums. Upon such
requirement, Lessor will estimate the amounts needed for such purposes and will
notify Lessee to pay the same to Lessor in equal monthly installments, as nearly
as practicable, in addition to all other sums due under this Lease. Should
additional funds be required at any time, Lessee shall pay the same to Lessor
within ten (10) days of demand. Lessee shall advise Lessor of all taxes and
insurance bills which are due and shall cooperate fully with Lessor in assuring
that the same are paid. Lessor may deposit all impounded funds in accounts
insured by any federal or state agency and may commingle such funds with other
funds and accounts of Lessor. Interest or other gains from such funds, if any,
shall be the sole property of Lessor. Upon the occurrence of an Event of Default
by Lessee, Lessor may apply all impounded funds against any sums due from Lessee
to Lessor. Lessor shall give to Lessee an annual accounting showing all credits
and debits to and from such impounded funds received from Lessee.
14. PAYMENT OF RENTAL AND OTHER SUMS. All rental and other sums which
Lessee is required to pay hereunder shall be the unconditional obligation of
Lessee and shall be payable in full when due without any setoff, abatement,
deferment, deduction or counterclaim whatsoever. Upon execution of this Lease,
Lessee shall establish arrangements whereby payments of the Base Monthly Rental,
any Additional Rental and impound payments, if any, are transferred by wire or
other means directly from Lessee's bank account to such account as Lessor may
designate; provided, however, upon notice from Lender to Lessee and Lessor
delivered in the manner set forth in Section 29, Lessee shall deliver all
payments of Base Monthly Rental as specified in such notice from Lender and
Lessor hereby acknowledges that Lessee shall receive full credit hereunder for
any payments so made to Lender as if such payment had been made to Lessor. Any
delinquent payment (that is, any payment not made within five calendar days
after the date when due) shall, in addition to any other remedy of Lessor, incur
a late charge of 5% (which late charge is intended to compensate Lessor for the
cost of handling and processing such delinquent payment and should not be
considered interest) and bear interest at the Default Rate, such interest to be
computed from and including the date such payment was due through and including
the date of the payment; provided, however, in no event shall Lessee be
obligated to pay a sum of late charge and interest higher than the maximum legal
rate then in effect.
13
<PAGE> 14
15. USE. A. Lessee shall use the Premises solely for the operation of a
Permitted Concept and for no other purpose. Lessee shall occupy the Premises
promptly following the Effective Date and, except as set forth below and except
during periods when the Premises is untenantable by reason of fire or other
casualty or condemnation (provided, however, during all such periods while the
Premises is untenantable, Lessee shall strictly comply with the terms and
conditions of Section 21 of this Lease), Lessee shall at all times during the
Lease Term occupy the Premises and shall diligently operate its business on the
Premises. Lessee may cease diligent operation of business at the Premises for a
period not to exceed 90 days and may do so only once within any five-year period
during the Lease Term. If Lessee does discontinue operation as permitted by this
Section, Lessee shall (i) give written notice to Lessor within 10 days after
Lessee elects to cease operation, (ii) provide adequate protection and
maintenance of the Premises during any period of vacancy and (iii) pay all costs
necessary to restore the Premises to their condition on the day operation of the
business ceased at such time as the Premises is reopened for Lessee's business
operations or other substituted use approved by Lessor as contemplated below.
Notwithstanding anything herein to the contrary, Lessee shall pay the Base
Monthly Rental on the first day of each month during any period in which Lessee
discontinues operation.
Lessee shall not, by itself or through any assignment, sublease or
other type of transfer, convert the Premises to an alternative use during the
Lease Term without Lessor's consent, which consent shall not be unreasonably
withheld. Lessor may consider any or all of the following in determining whether
to grant its consent, without being deemed to be unreasonable: (i) whether the
rental paid to Lessor would be equal to or greater than the anticipated rental
assuming continued existing use, (ii) whether the proposed rental to be paid to
Lessor is reasonable considering the converted use of the Premises and the
customary rental prevailing in the community for such use, (iii) whether the
converted use will be consistent with the highest and best use of the Premises,
and (iv) whether the converted use will increase Lessor's risks or decrease the
value of the Premises.
B. Notwithstanding the provisions of the foregoing Section 15.A, Lessee
may cease continuous operation of its business on a Premises for up to 120 days
if Lessee, in the exercise of its reasonable business judgment, determines in
good faith that the business at such Premises cannot be operated economically as
evidenced by an affidavit so stating signed by an officer of Lessee ("Uneconomic
Operations"). If Lessee does not, in good faith, permanently reopen the Premises
for operation as a Permitted Concept within 120 days of cessation, then, Lessee
shall, on or prior to the last day of the 120-day period, substitute the
Premises in accordance with Section 58 of this Lease. If Lessee fails to
substitute the Premises as contemplated in this Section B in accordance with the
requirements of Section 13 of the Loan Agreement, such failure shall be an Event
of Default under this Lease and shall entitle Lessor to immediately exercise all
remedies available at law or in equity and as set forth in this Lease.
16. COMPLIANCE WITH LAWS, RESTRICTIONS, COVENANTS AND ENCUMBRANCES.
A. Lessee's use and occupation of the Premises, and the condition
thereof, shall, at Lessee's sole cost and expense, comply fully with (i) all
applicable statutes, regulations, rules, ordinances, codes, licenses, permits,
orders and approvals of each Governmental Authority, including, without
limitation, all health, building, fire, safety and other codes, ordinances and
requirements
14
<PAGE> 15
and all applicable standards of the National Board of Fire Underwriters, and all
policies or rules of common law, in each case, as amended, and any judicial or
administrative interpretation thereof, including any judicial order, consent,
decree or judgment applicable to Lessee (collectively, "Applicable
Regulations"), and (ii) all restrictions, covenants and encumbrances of record
with respect to the Premises.
B. Lessee will not permit any act or condition to exist on or about the
Premises which will increase any insurance rate thereon, except when such acts
are required in the normal course of its business and Lessee shall pay for such
increase.
C. Without limiting the generality of the other provisions of this
Section, Lessee agrees that it shall be responsible for complying in all
respects with the Americans with Disabilities Act of 1990, as such act may be
amended from time to time, and all regulations promulgated thereunder
(collectively, the "ADA"), as it affects the Premises, including, but not
limited to, making required "readily achievable" changes to remove any
architectural or communications barriers, and providing auxiliary aids and
services within the Premises. Lessee further agrees that any and all alterations
made to the Premises during the Lease Term will comply with the requirements of
the ADA. All plans for alterations which must be submitted to Lessor under the
provisions of Section 18 must include a statement from a licensed Architect or
Engineer certifying that they have reviewed the plans, and that the plans comply
with all applicable provisions of the ADA. Any subsequent approval or consent to
the plans by the Lessor shall not be deemed to be a representation of Lessor's
part that the plans comply with the ADA, which obligation shall remain with
Lessee. Lessee agrees that it will defend, indemnify and hold harmless the
Indemnified Parties from and against any and all Losses caused by, incurred or
resulting from Lessee's failure to comply with its obligations under this
Section.
D. Lessee represents and warrants to Lessor and Environmental Insurer
as follows:
(i) The Premises and Lessee are not in violation of, or
subject to, any existing, pending or to the best of Lessee's knowledge
threatened investigation or inquiry by any Governmental Authority or to
any remedial obligations under any Environmental Laws, and this
representation and warranty would continue to be true and correct
following disclosure to each Governmental Authority of all relevant
facts, conditions and circumstances, if any, pertaining to the
Premises. If any such investigation or inquiry is subsequently
initiated, Lessee will promptly notify Lessor.
(ii) Lessee has not obtained and is not required to obtain any
permits, licenses or similar authorizations to construct, occupy,
operate or use any buildings, improvements, fixtures and equipment
forming a part of the Premises by reason of any Environmental Laws.
(iii) No Hazardous Materials have been used, handled,
manufactured, generated, produced, stored, treated, processed,
transferred, disposed of or otherwise Released by Lessee, and to the
best of Lessee's knowledge, by any third party in, on, under, from or
about the Premises, except in De Minimis Amounts.
15
<PAGE> 16
(iv) The Premises do not contain Hazardous Materials other
than in De Minimis Amounts in full compliance with all Environmental
laws.
(v) To the best of Lessee's knowledge, there is no threat of
any Release migrating to the Premises.
(vi) There is no present, or to the best of Lessee's
knowledge, past non-compliance with Environmental Laws, or with permits
issued pursuant thereto, in connection with the Premises.
(vii) Lessee has not received any written or oral notice or
other communication from any person or entity (including but not
limited to a Governmental Authority) relating to Hazardous Materials or
Remediation thereof, of possible liability of any person or entity
pursuant to any Environmental Law, other environmental conditions in
connection with the Premises, or any actual or potential administrative
or judicial proceedings in connection with any of the foregoing.
(viii) Lessee has truthfully and fully provided to Lessor, in
writing, any and all information relating to environmental conditions
in, on, under or from the Premises that is known to Lessee and that is
contained in Lessee's files and records, including but not limited to
any reports relating to Hazardous Materials in, on, under or from the
Premises.
E. Lessee covenants to Lessor and Environmental Insurer during
the Lease Term that: (i) all uses and operations on or of the Premises, whether
by Lessee or any other person or entity, shall be in compliance with all
Environmental Laws and permits issued pursuant thereto; (ii) there shall be no
Releases in, on, under or from the Premises, except in De Minimis Amounts; (iii)
there shall be no Hazardous Materials or Regulated Substances in, on, or under
the Premises, except in De Minimis Amounts; (iv) Lessee shall keep the Premises
free and clear of all liens and other encumbrances imposed pursuant to any
Environmental Law, whether due to any act or omission of Lessee or any other
person or entity (the "Environmental Liens"); (v) Lessee shall, at its sole cost
and expense, fully and expeditiously cooperate in all activities pursuant to
subsection (1) below, including but not limited to providing all relevant
information and making knowledgeable persons available for interviews; (vi)
Lessee shall, at its sole cost and expense, perform any environmental site
assessment or other investigation of environmental conditions in connection with
the Premises as may be reasonably requested by Lessor (including but not limited
to sampling, testing and analysis of soil, water, air, building materials and
other materials and substances whether solid, liquid or gas), and share with
Lessor and Environmental Insurer the reports and other results thereof, and
Lessor, Environmental Insurer and the other Indemnified Parties shall be
entitled to rely on such reports and other results thereof; (vii) Lessee shall,
at its sole cost and expense, comply with all reasonable written requests of
Lessor to (1) reasonably effectuate Remediation of any condition (including but
not limited to a Release) in, on, under or from the Premises; (2) comply with
any Environmental Law; (3) comply with any directive from any Governmental
Authority; and (4) take any other reasonable action necessary or appropriate for
protection of human health or the environment; (viii) Lessee shall not do or
allow any tenant or other user of the Premises to do any act that materially
increases the dangers to human health or the environment, poses an unreasonable
risk of harm to any person or entity (whether on or off the Premises), impairs
or may impair the
16
<PAGE> 17
value of the Premises, is contrary to any requirement of any insurer,
constitutes a public or private nuisance, constitutes waste, or violates any
covenant, condition, agreement or easement applicable to the Premises; and (ix)
Lessee shall immediately notify Lessor in writing of (A) any presence of
Releases or Threatened Releases in, on, under, from or migrating towards the
Premises; (B) any non-compliance with any Environmental Laws related in any way
to the Premises; (C) any actual or potential Environmental Lien; (D) any
required or proposed Remediation of environmental conditions relating to the
Premises; and (E) any written or oral notice or other communication which Lessee
becomes aware from any source whatsoever (including but not limited to a
Governmental Authority) relating in any way to Hazardous Materials or
Remediation thereof, possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Premises, or any actual or potential administrative or judicial proceedings in
connection with anything referred to in this Section.
F. Lessee shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless the Indemnified Parties from and against
any and all Losses (excluding Losses arising out of any of the Indemnified
Parties' gross negligence or willful misconduct) and costs of Remediation
(whether or not performed voluntarily), engineers' fees, environmental
consultants' fees, and costs of investigation (including but not limited to
sampling, testing, and analysis of soil, water, air, building materials and
other materials and substances whether solid, liquid or gas) imposed upon or
incurred by or asserted against any Indemnified Parties, and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (i) any presence of any Hazardous Materials in, on, above, or under
the Premises; (ii) any past or present Release or Threatened Release in, on,
above, under or from the Premises; (iii) any activity by Lessee, any person or
entity affiliated with Lessee or any other tenant or other user of the Premises
in connection with any actual, proposed or threatened use, treatment, storage,
holding, existence, disposition or other Release, generation, production,
manufacturing, processing, refining, control, management, abatement, removal,
handling, transfer or transportation to or from the Premises of any Hazardous
Materials at any time located in, under, on or above the Premises; (iv) any
activity by Lessee, any person or entity affiliated with Lessee or any other
tenant or other user of the Premises in connection with any actual or proposed
Remediation of any Hazardous Materials at any time located in, under, on or
above the Premises, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including but not limited to any removal,
remedial or corrective action; (v) any past, present or threatened
non-compliance or violations of any Environmental Laws (or permits issued
pursuant to any Environmental Law) in connection with the Premises or operations
thereon, including but not limited to any failure by Lessee, any person or
entity affiliated with Lessee or any other tenant or other user of the Premises
to comply with any order of any Governmental Authority in connection with any
Environmental Laws; (vi) the imposition, recording or filing or the threatened
imposition, recording or filing of any Environmental Lien encumbering the
Premises; (vii) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in this Section;
(viii) any past, present or threatened injury to, destruction of or loss of
natural resources in any way connected with the Premises, including but not
limited to costs to investigate and assess such injury, destruction or loss;
(ix) any acts of Lessee, any person or entity affiliated with Lessee or any
other tenant or user of the Premises in arranging for disposal or treatment, or
arranging with a transporter for transport for disposal or treatment, of
Hazardous Materials owned or possessed by Lessee, any person or entity
affiliated with Lessee or any other tenant or other user of the Premises, at any
facility or incineration
17
<PAGE> 18
vessel owned or operated by another person or entity and containing such or
similar Hazardous Materials; (x) any acts of Lessee, any person or entity
affiliated with Lessee or any other tenant or other user of the Premises, in
accepting any Hazardous Materials for transport to disposal or treatment
facilities, incineration vessels or sites selected by Lessee, any person or
entity affiliated with Lessee or any other tenant or other user of the Premises,
from which there is a Release, or a Threatened Release of any Hazardous Material
which causes the incurrence of costs for Remediation; (xi) any personal injury,
wrongful death, or property damage arising under any statutory or common law or
tort law theory, including but not limited to damages assessed for the
maintenance of a private or public nuisance or for the conducting of an
abnormally dangerous activity on or near the Premises; and (xii) any
misrepresentation or inaccuracy in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to this
Section.
G. Upon reasonable prior notice, Lessor, Lender, any other lender to
Lessor, Environmental Insurer and any other person or entity designated by
Lessor, including but not limited to any receiver, any representative of a
Governmental Authority, and any environmental consultant, shall have the right,
but not the obligation, to enter upon the Premises at all reasonable times
(including, without limitation, in connection with a proposed sale or conveyance
of the Premises or a proposed financing or refinancing secured by the Premises
or in connection with the exercise of any remedies set forth in this Lease, the
Mortgages or the other Loan Documents or for any other commercially reasonable
purpose) to assess any and all aspects of the environmental condition of the
Premises and its use, including but not limited to conducting any environmental
assessment or audit (the scope of which shall be determined in Lessor's sole and
absolute discretion) and taking samples of soil, groundwater or other water,
air, or building materials, and conducting other invasive testing. Lessee shall
cooperate with and provide access to Lessor, Lender, Environmental Insurer and
any such person or entity designated by Lessor. Any such assessment or
investigation shall be at Lessee's sole cost and expense. Notwithstanding the
foregoing, any such assessment or investigation ordered for the purpose of
Lender's assignment of the Loan (as defined in the Loan Agreement) shall be at
Lender's cost and expense.
H. The obligations of Lessee and the rights and remedies of Lessor
under the foregoing subsections D through G shall survive the termination,
expiration and/or release of this Lease.
I. In addition to the other requirements of this Section, Lessee shall,
at all times throughout the Lease Term, comply with all Applicable Regulations.
17. CONDITION OF PREMISES; MAINTENANCE. Lessee has inspected, or had
the opportunity to inspect, the Premises and hereby accepts the Premises "AS IS"
and "WHERE IS" with no representation or warranty of Lessor as to the condition
thereof. The Premises shall be kept in good, clean, sanitary and working
condition; and Lessee shall at all times at its own expense maintain, repair and
replace, as necessary, the Premises, including all portions of the Premises,
whether or not the Premises were in such condition on the Effective Date.
18
<PAGE> 19
18. WASTE; ALTERATIONS AND IMPROVEMENTS. Lessee shall not commit actual
or constructive waste upon the Premises. During the Lease Term, Lessee shall not
alter the exterior, structural, plumbing or electrical elements of the Premises
in any manner without the consent of Lessor, which consent shall not be
unreasonably withheld or conditioned; provided, however, Lessee may undertake
nonstructural alterations to the Premises costing less than $50,000.00 without
Lessor's consent. If Lessor's consent is required hereunder and Lessor consents
to the making of any such alterations, the same shall be made by Lessee at
Lessee's sole expense by a licensed contractor and according to plans and
specifications approved by Lessor and subject to such other conditions as Lessor
shall require. Any work at any time commenced by Lessee on the Premises shall be
prosecuted diligently to completion, shall be of good workmanship and materials
and shall comply fully with all the terms of this Lease. Upon completion of any
alterations, Lessee shall promptly provide Lessor with (i) evidence of full
payment to all laborers and materialmen contributing to the alterations, (ii) an
architect's certificate certifying the alterations to have been completed in
conformity with the plans and specifications, (iii) a certificate of occupancy
(if the alterations are of such a nature as would require the issuance of a
certificate of occupancy), and (iv) any other documents or information
reasonably requested by Lessor. Lessee shall execute and file or record, as
appropriate, a "Notice of Non-Responsibility," or any equivalent notice
permitted under applicable law in the state where the Premises is located. Any
addition to or alteration of the Premises shall be deemed a part of the Premises
and belong to Lessor, and Lessee shall execute and deliver to Lessor such
instruments as Lessor may require to evidence the ownership by Lessor of such
addition or alteration.
19. INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold
harmless each of the Indemnified Parties from and against any and all Losses
(excluding Losses suffered by an Indemnified Party arising out of such
Indemnified Party's gross negligence or willful misconduct) caused by, incurred
or resulting from Lessee's operations of or relating in any manner to the
Premises, whether relating to their original design or construction, latent
defects, alteration, maintenance, use by Lessee or any person thereon,
supervision or otherwise, or from any breach of, upon an Event of Default under,
or failure to perform, any term or provision of this Lease by Lessee, its
officers, employees, agents or other persons. It is expressly understood and
agreed that Lessee's obligations under this Section shall survive the expiration
or earlier termination of this Lease for any reason.
20. QUIET ENJOYMENT. So long as Lessee shall pay the rental and other
sums herein provided and shall keep and perform all of the terms, covenants and
conditions on its part herein contained, Lessee shall have, subject and
subordinate to Lessor's rights herein, the right to the peaceful and quiet
occupancy of the Premises.
21. CONDEMNATION OR DESTRUCTION. A. In case of a taking of all or any
part of the Premises or the commencement of any proceedings or negotiations
which might result in a taking for any public or quasi-public purpose by any
lawful power or authority by exercise of the right of condemnation or eminent
domain or by agreement between Lessor, Lessee and those authorized to exercise
such right ("Taking"), Lessee will promptly give written notice thereof to
Lessor, generally describing the nature and extent of such Taking and including
copies of any documents or notices received in connection therewith.
19
<PAGE> 20
B. In case of a Taking of the whole of any of the Premises, other than
for temporary use ("Total Taking"), this Lease shall terminate with respect to
such Premises as of the date of the Total Taking, but this Lease shall otherwise
continue in full force and effect with respect to the remaining Premises. From
and after the date of a Total Taking, the Base Annual Rental shall be reduced by
an amount equal to the product of (i) the net award or payment resulting from
such Total Taking, after deducting all costs, fees and expenses incident to the
collection of such award of payment (the "Net Amount"), and (ii) 11%. If the
date of such Total Taking is other than the first day of a month, the Base
Annual Rental payable for the month in which such Total Taking occurs shall be
apportioned based on such Adjustment as of the date of the Total Taking.
Lessee's obligations to Lessor under Section 18 of this Lease with respect to
such Premises and Lessee's obligation to pay all other sums of money under this
Lease (whether payable to Lessor or to a third-party) which accrue prior to the
date of such Total Taking shall survive the termination of this Lease with
respect to such Premises. Total Taking shall include a taking of substantially
all the Premises if, in the sole determination of Lessor, the remainder of the
Premises is not useable and cannot be made useable for the purposes provided
herein. Lessor shall be entitled to receive the entire award or payment in
connection with any taking of the Premises without deduction for any estate
vested in Lessee by this Lease. Lessee hereby expressly assigns to Lessor all of
its right, title and interest in and to every such award or payment and agrees
that Lessee shall not be entitled to any award or payment for the value of
Lessee's leasehold interest in the Lease. Lessee shall be entitled to claim and
receive any award or payment from the condemning authority expressly granted for
the taking of Lessee's Personalty, the interruption of its business and moving
expenses, but only if such claim or award does not adversely affect or interfere
with the prosecution of Lessor's claim for the Taking. Lessee shall promptly
send Lessor copies of all correspondence and pleadings relating to any such
claim.
C. In case of a temporary use of all or any part of the Premises by a
Taking ("Temporary Taking"), this Lease shall remain in full force and effect
without any reduction of Base Annual Rental, Additional Rental or any other sum
payable hereunder. Except as provided below, Lessee shall be entitled to the
entire award for a Temporary Taking, whether paid by damages, rent or otherwise,
unless the period of occupation and use by the condemning authorities shall
extend beyond the date of expiration of this Lease, in which case the award made
for such Taking shall be apportioned between Lessor and Lessee as of the date of
such expiration. At the termination of any such Temporary Taking, Lessee will,
at its own cost and expense and pursuant to the terms of Section 18 above,
promptly commence and complete the restoration of the Premises; provided,
however, Lessee shall not be required to restore the Premises if the Lease Term
shall expire prior to, or within one year after, the date of termination of the
Temporary Taking, and in such event Lessor shall be entitled to recover all
damages and awards arising out of the failure of the condemning authority to
repair and restore the Premises at the expiration of such Temporary Taking.
D. In the event of a Taking of less than all of the Premises for other
than a temporary use ("Partial Taking") or of damage or destruction to all or
any part of the Premises, all awards, compensation or damages shall be paid to
Lessor, and Lessor shall have the option to (i) terminate this Lease, provided
that Lessor shall have obtained Lender's prior written consent, by notifying
Lessee within 60 days after Lessee gives Lessor notice of such damage or
destruction or that title has vested in the taking authority or (ii) continue
this Lease in effect,
20
<PAGE> 21
which election may be evidenced by either a notice from Lessor to Lessee or
Lessor's failure to notify Lessee that Lessor has elected to terminate this
Lease within such 60-day period. Lessee shall have a period of 60 days after
Lessor's notice that it has elected to terminate this Lease during which to
elect to continue this Lease on the terms herein provided. If Lessee does not
elect to continue this Lease or shall fail during such 60-day period to notify
Lessor of Lessee's intent to continue this Lease, then this Lease shall
terminate as of the last day of the month during which such period expired.
Lessee shall then immediately vacate and surrender the Premises, all obligations
of either party hereunder shall cease as of the date of termination (provided,
however, Lessee's obligations to Lessor under Section 19 and Lessee's
obligations to pay Base Annual Rental, Additional Rental and all other sums
(whether payable to Lessor or a third-party) accruing under this Lease prior to
the date of termination shall survive such termination), the Base Annual Rental
shall be reduced by an amount equal to the product of (i) the Net Award
resulting from such Taking and (ii) 11%, and Lessor may retain all such awards,
compensation or damages. If Lessor elects not to terminate this Lease, or if
Lessor elects to terminate this Lease but Lessee elects to continue this Lease,
then this Lease shall continue in full force and effect on the following terms:
(i) all Base Annual Rental, Additional Rental and other sums and obligations due
under this Lease shall continue unabated, and (ii) Lessee shall promptly
commence and diligently prosecute restoration of the Premises to the same
condition, as nearly as practicable, as prior to such partial condemnation,
damage or destruction as approved by Lessor. Lessor shall promptly make
available in installments as restoration progresses an amount up to but not
exceeding the amount of any award, compensation or damages received by Lessor,
upon request of Lessee accompanied by evidence reasonably satisfactory to Lessor
that such amount has been paid or is due and payable and is properly a part of
such costs and that Lessee has complied with the terms of Section 18 above in
connection with the restoration. Lessor shall be entitled to keep any portion of
such award, compensation or damages which may be in excess of the cost of
restoration, and Lessee shall bear all additional costs, fees and expenses of
such restoration in excess of the amount of any such award, compensation or
damages.
E. Notwithstanding the foregoing, if at the time of any Taking or any
damage or destruction to all or any part of the Premises or at any time
thereafter an Event of Default has occurred and such Event of Default shall be
continuing, Lessor is hereby authorized and empowered but shall not be
obligated, in the name and on behalf of Lessee and otherwise, to file and
prosecute Lessee's claim, if any, for an award on account of such Taking or for
insurance proceeds on account of such damage or destruction and to collect such
award or proceeds and apply the same, after deducting all costs, fees and
expenses incident to the collection thereof, to the curing of such Event of
Default and any other then existing Event of Default under this Lease and/or to
the payment of any amounts owed by Lessee to Lessor under this Lease, in such
order, priority and proportions as Lessor in its discretion shall deem proper.
F. Notwithstanding the foregoing, nothing in this Section 21 shall be
construed as limiting or otherwise adversely affecting the representations,
warranties, covenants and characterizations in and of this Lease, including,
without limitation, those provisions set forth in Section 3 of this Lease.
21
<PAGE> 22
22. INSPECTION. Lessor and its authorized representatives shall have
the right, upon giving reasonable notice, to enter the Premises or any part
thereof and inspect the same and make photographic or other evidence concerning
Lessee's compliance with the terms of this Lease. Lessor and its authorized
representatives will use reasonable efforts to minimize any inconvenience or
interference with Lessee's business while conducting such entry and inspection.
Notwithstanding the foregoing, Lessee hereby waives any claim for damages for
any injury or inconvenience to or interference with Lessee's business, any loss
of occupancy or quiet enjoyment of the Premises and any other loss occasioned by
such entry, unless such entry is due to Lessor's or its authorized
representatives' gross negligence or willful misconduct. Lessee shall keep and
maintain at Lessee's chief executive office full, complete and appropriate books
of account and records of Lessee's business relating to the Premises in
accordance with GAAP. To the extent permitted by law, Lessee's books and records
shall at all times be open for inspection by Lessor or Lender, their respective
auditors or other authorized representatives and shall show such information as
is reasonably necessary to determine compliance with Lessor's obligations under
the Loan Documents.
23. OPTION TO PURCHASE THE PROPERTIES. Lessee shall have the option
during the 90 days immediately preceding the tenth and twentieth anniversaries
of this Lease and during the 90-day period immediately preceding the end of the
first and second optional extension terms set forth in Section 28 of this Lease,
if applicable (as applicable, the "Window"), to elect to purchase the Premises
for the greater of (i) their fair market value (which fair market value shall be
determined in the manner set forth below) or (ii) the Purchase Price (provided
that the Purchase Price shall be adjusted for purposes of this Section 23 to
include only those Premises subject to the Lease at the time the option to
purchase is consummated). Lessee shall elect such option by giving written
notice (the "Option Notice") to Lessor of its intention to do so, and the
closing of such purchase must occur during the first 90 days (the "Purchase
Period") following the end of the applicable Window for which the Option Notice
was given. Within 90 days of Lessor's receipt of the Option Notice, Lessor
shall, at Lessee's sole expense, retain an independent MAI appraiser to prepare
an appraisal of the fair market value of the Premises, including any additions
or renovations thereto. In determining the fair market value of the Premises,
the appraiser shall utilize the cost, income and sales comparison approaches to
value. In utilizing the income approach, the appraiser shall determine the
"leased fee" value of the Premises, which shall be arrived at by considering (i)
the income that would be produced by this Lease through the end of the fully
extended Lease Term, and (ii) any other factors relating to such approach which
the appraiser shall deem relevant in his sole discretion. The highest amount
which results from the calculation of each of the cost approach, the income
approach, and the sales comparison approach, all as determined in accordance
with the provisions of this Section, shall constitute the fair market value of
the Premises for purposes of this Section. If within 20 days after being
notified of the result of such appraisal Lessee elects to reject that appraisal,
then the first appraisal shall become null and void and Lessor shall nominate to
Lessee a list of not less than three independent MAI appraisers who are
experienced with appraising property similar to the Premises, and Lessee shall
select one such appraiser. Within 60 days of such selection, Lessor shall retain
such appraiser to prepare an appraisal of the Premises in the same manner
described above. Within 20 days after the results of that appraisal have been
delivered to Lessee, Lessee shall notify Lessor of its election to exercise this
option to purchase the Premises for the price set forth in such appraisal. If
such notice of exercise is not received by Lessor within such
22
<PAGE> 23
20-day period, the option for such time period shall lapse and this Lease shall
remain in full force and effect.
Upon exercise of this option, Lessor and Lessee shall open an escrow
account with a recognized title insurance or trust company selected by Lessor.
Such escrow shall be subject to the standard escrow instructions of the escrow
agent, to the extent they are not inconsistent herewith. At or before the close
of escrow, Lessor shall deliver to the escrow agent its special warranty deed
conveying to Lessee all of Lessor's right, title and interest in the Premises
free and clear of all liens and encumbrances except liens for taxes and
assessments and easements, covenants and restrictions of record which were
attached to the Premises as of the date hereof, attached during the Lease Term
through Lessee's action or inaction, as the case may be, have been granted by
Lessor in lieu of a taking by the power of eminent domain or the like, have been
approved by Lessee, or which do not materially adversely affect the use and
quiet enjoyment (as enjoyed on the date of this Lease) of any of the Premises as
a Permitted Concept. In the event Lessor is unable to convey title as required,
Lessee shall have the right to accept such title as Lessor can convey or elect
not to consummate its exercise of the option, in which case the option for such
time period shall lapse and this Lease shall remain in full force and effect.
Both Lessor and Lessee agree to execute a purchase agreement, escrow
instructions and such other instruments as may be necessary or appropriate to
consummate the sale of the Premises in the manner herein provided. All cost of
exercise of the option, including, but not limited to, escrow fees, title
insurance fees, recording costs or fees, attorneys' fees (including those of
Lessor), appraisal fees, stamp taxes and transfer fees shall be borne by Lessee.
Lessee shall continue to pay and perform all of its obligations under this Lease
until the close of escrow which in no event shall occur after the date of the
expiration of the Lease Term or the expiration of any extension thereof. The
purchase price paid by Lessee in exercising this option shall be paid to Lessor
or to such person or entity as Lessor may direct at closing in immediately
available funds. Lessee shall not have the right to exercise this option or
consummate the exercise thereof if at the time of exercise or consummation there
shall be an Event of Default or if any condition shall exist which upon the
giving of notice or the passage of time, or both, would constitute an Event of
Default by Lessee under this Lease.
The failure of Lessee to consummate the purchase of the Premises as
contemplated herein shall not release Lessee from its obligations under this
Lease and the Lease shall remain in full force and effect until the expiration
of the Lease Term or applicable extension period. The escrow shall close within
the Purchase Period, or Lessor, at its option, may terminate Lessee's option to
purchase the Premises during such time period. The closing date may be extended
for a reasonable period of time to permit Lessor to cure title defects or to
permit either party to cure any other defects or defaults provided each party is
diligently seeking to cure such defect or default and Lessee continues to
perform its obligation hereunder.
Lessee may not sell, assign, transfer, hypothecate or otherwise dispose
of the option granted herein or any interest therein, except in conjunction with
a permitted assignment of Lessee's entire interest herein and then only to the
assignee thereof. Any attempted assignment of this option which is contrary to
the terms of this paragraph shall be deemed to be an Event of Default under this
Lease and the option granted herein shall be void.
23
<PAGE> 24
24. DEFAULT, CONDITIONAL LIMITATIONS, REMEDIES AND MEASURE OF DAMAGES.
A. Each of the following shall be an event of default under this Lease (each, an
"Event of Default"):
(i) If any representation or warranty of Lessee set forth in
this Lease is false in any material respect, or if Lessee renders any
false statement or account;
(ii) If any rent or other monetary sum due under this Lease is
not paid within five days from the date when due; provided, however,
notwithstanding the occurrence of such an Event of Default, Lessor
shall not be entitled to exercise its remedies set forth below unless
and until Lessor shall have given Lessee notice thereof and a period of
five days from the delivery of such notice shall have elapsed without
such Event of Default being cured;
(iii) If Lessee fails to pay, prior to delinquency, any taxes,
assessments or other charges the failure of which to pay will result in
the imposition of a lien against the Premises pursuant to Applicable
Regulations;
(iv) If Lessee becomes insolvent within the meaning of the
Code, files or notifies Lessor that it intends to file a petition under
the Code, initiates a proceeding under any similar law or statute
relating to bankruptcy, insolvency, reorganization, winding up or
adjustment of debts (collectively, hereinafter, an "Action"), becomes
the subject of either a petition under the Code or an Action, or is not
generally paying its debts as the same become due;
(v) If Lessee vacates or abandons the Premises subject to
the terms and conditions of Section 15 above;
(vi) If Lessee fails to observe or perform any of the other
covenants, conditions or obligations of Lessee in this Lease; provided,
however, if any such failure does not involve the payment of any
monetary sum, is not willful or intentional, does not place any rights
or property of Lessor in immediate jeopardy, and is within the
reasonable power of Lessee to promptly cure after receipt of notice
thereof, all as determined by Lessor in its reasonable discretion, then
such failure shall not constitute an Event of Default hereunder, unless
otherwise expressly provided herein, unless and until Lessor shall have
given Lessee notice thereof and a period of 30 days shall have elapsed,
during which period Lessee may correct or cure such failure, upon
failure of which an Event of Default shall be deemed to have occurred
hereunder without further notice or demand of any kind being required.
If such failure cannot reasonably be cured within such 30 day period,
as determined by Lessor in its reasonable discretion, and Lessee is
diligently pursuing a cure of such failure, then Lessee shall have a
reasonable period to cure such failure beyond such 30 day period, which
shall in no event exceed 120 days after receiving notice of such
failure from Lessor. If Lessee shall fail to correct or cure such
failure within such 120-day period, an Event of Default shall be deemed
to have occurred hereunder without further notice or demand of any kind
being required;
(vii) If a final, nonappealable judgment is rendered by a
court against Lessee which has a material adverse effect on the ability
to conduct business at the Premises as a
24
<PAGE> 25
Permitted Concept, or which does not have a material adverse
effect on the ability to conduct business at the Premises as a
Permitted Concept but which is in the amount of $100,000.00 or more,
and in either event is not discharged or provision made for such
discharge within 60 days from the date of entry thereof;
(viii) If with Lessee's reasonable consent, Lessor shall have
elected to substitute a Substitute Premises for the Premises in
accordance with the provisions of Section 13 of the Loan Agreement, the
failure of Lessee, on or before the date of the closing of such
substitution, to enter into a lease with Lessor for the Substitute
Premises on the same terms, conditions and provisions of this Lease;
(x) If Lender shall have given Lessor notice of a breach of
the Fixed Charge Coverage Ratio requirement under the Loan Agreement
and Lessor shall have notified Lessee that the Fixed Charge Coverage
Ratio requirement under this Lease has been breached and that Lessor
has elected to substitute a Substitute Premises for the Premises in
accordance with the provisions of Section 13 of the Loan Agreement, the
failure of Lessee, on or before the date of the closing of such
substitution, to enter into a lease with Lessor for the Substitute
Premises on the same terms, conditions and provisions of this Lease;
(xi) If there is an Event of Default under the Loan Agreement
which results from a breach or default by Lessor under Section 7.B of
the Loan Agreement.
(xii) If Lender shall have given Lessor notice of a breach of the
Fixed Charge Coverage Ratio requirement under the Loan Agreement
and Lessor shall have notified Lessee that the Fixed Charge Coverage
Ratio requirement under this Lease has been breached and that Lessor is
making a payment with respect to the applicable Note in order to cure
Lessor's breach of the Fixed Charge Coverage Ratio requirement under
the Loan Agreement (the "Loan FCCR Payment"), the failure of Lessee to
pay to Lessor an amount equal to the Loan FCCR Payment (the "Lease FCCR
Payment") on or before the date that Lessor is required to pay the Loan
FCCR Payment to Lender. Promptly after Lessee's payment of the Lease
FCCR Payment, Lessor and Lessee agree to execute an amendment to this
Lease in form and substance reasonably acceptable to Lessor and Lessee
reducing the Base Annual Rental to an equitable amount to be agreed
upon by Lessor and Lessee in good faith after taking into account the
Lease FCCR Payment, but in no event shall the reduced Base Annual
Rental be less than the aggregate debt service amount payable under the
Notes over a one-year period (after taking into account any reduction
in such debt service amount after payment of the Loan FCCR Payment).
(xiii) If Lessee fails or refuses to sign an estoppel certificate
as required under Section 26 of this Lease within ten (10) days
following a request by Lessor.
B. Upon the occurrence of an Event of Default, with or without notice
or demand, except the notice prior to default required under certain
circumstances by subsection A. above or such other notice as may be required by
statute and cannot be waived by Lessee (all other notices being hereby waived),
Lessor shall be entitled to exercise, at its option, concurrently,
25
<PAGE> 26
successively, or in any combination, all remedies available at law or in equity,
including without limitation, any one or more of the following:
(i) To terminate this Lease, whereupon Lessee's right to
possession of the Premises shall cease and this Lease, except as to
Lessee's liability, shall be terminated.
(ii) To reenter and take possession of the Premises, any or
all Personalty of Lessee and, to the extent permissible, all
franchises, licenses, area development agreements, permits and other
rights or privileges of Lessee pertaining to the use and operation of
the Premises and to expel Lessee and those claiming under or through
Lessee, without being deemed guilty in any manner of trespass or
becoming liable for any loss or damage resulting therefrom, without
resort to legal or judicial process, procedure or action. No notice
from Lessor hereunder or under a forcible entry and detainer statute or
similar law shall constitute an election by Lessor to terminate this
Lease unless such notice specifically so states. If Lessee shall, after
default, voluntarily give up possession of the Premises to Lessor,
deliver to Lessor or its agents the keys to the Premises, or both, such
actions shall be deemed to be in compliance with Lessor's rights and
the acceptance thereof by Lessor or its agents shall not be deemed to
constitute a termination of the Lease. Lessor reserves the right
following any reentry and/or reletting to exercise its right to
terminate this Lease by giving Lessee written notice thereof, in which
event this Lease will terminate as specified in said notice.
(iii) To seize all Personalty which Lessee owns or in which it
has an interest, in which Lessor shall have a landlord's lien and/or
security interest, and to dispose thereof in accordance with the laws
prevailing at the time and place of such seizure or to remove all or
any portion of such property and cause the same to be stored in a
public warehouse or elsewhere at Lessee's sole expense, without
becoming liable for any loss or damage resulting therefrom and without
resorting to legal or judicial process, procedure or action.
(iv) To bring an action against Lessee for any damages
sustained by Lessor or any equitable relief available to Lessor.
(v) To relet the Premises or any part thereof for such term
or terms (including a term which extends beyond the original Lease
Term), at such rentals and upon such other terms as Lessor, in its sole
discretion, may determine, with all proceeds received from such
reletting being applied to the rental and other sums due from Lessee in
such order as Lessor may, in it sole discretion, determine, which other
sums include, without limitation, all repossession costs, brokerage
commissions, attorneys' fees and expenses, employee expenses,
alteration, remodeling and repair costs and expenses of preparing for
such reletting. Except to the extent required by applicable law, Lessor
shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the
Premises or any part thereof, or, in the event of any such reletting,
for refusal or failure to collect any rent due upon such reletting, and
no such refusal or failure shall operate to relieve Lessee of any
liability under this Lease or otherwise to affect any such liability.
Lessor reserves the right following any reentry and/or reletting to
exercise its right to terminate this Lease by giving Lessee written
notice thereof, in which event this Lease will terminate as specified
in said notice.
26
<PAGE> 27
(vi) To accelerate and recover from Lessee all rent and
other monetary sums due and owing and scheduled to become due and owing
under this Lease both before and after the date of such breach for the
entire original scheduled Lease Term.
(vii) To recover from Lessee all costs and expenses,
including attorneys' fees, court costs, expert witness fees, costs of
tests and analyses, travel and accommodation expenses, deposition and
trial transcripts, copies and other similar costs and fees, paid or
incurred by Lessor as a result of such breach, regardless of whether or
not legal proceedings are actually commenced.
(viii) To immediately or at any time thereafter, and with or
without notice, at Lessor's sole option but without any obligation to
do so, correct such breach or default and charge Lessee all costs and
expenses incurred by Lessor therein. Any sum or sums so paid by Lessor,
together with interest at the then existing maximum legal rate, but not
higher than 15% per annum, shall be deemed to be additional rent
hereunder and shall be immediately due from Lessee to Lessor. Any such
acts by Lessor in correcting Lessee's breaches or defaults hereunder
shall not be deemed to cure said breaches or defaults or constitute any
waiver of Lessor's right to exercise any or all remedies set forth
herein.
(ix) To immediately or at any time thereafter, and with or
without notice, except as required herein, set off any money of Lessee
held by Lessor under this Lease against any sum owing by Lessee
hereunder.
(x) To seek any equitable relief available to Lessor,
including, without limitation, the right of specific performance.
All powers and remedies given by this Section to Lessor,
subject to applicable law, shall be cumulative and not exclusive of one
another or of any other right or remedy or of any other powers and
remedies available to Lessor under this Lease, by judicial proceedings
or otherwise, to enforce the performance or observance of the covenants
and agreements of Lessee contained in this Lease, and no delay or
omission of Lessor to exercise any right or power accruing upon the
occurrence of any Event of Default shall impair any other or subsequent
Event of Default or impair any rights or remedies consequent thereto.
Every power and remedy given by this Section or by law to Lessor may be
exercised from time to time, and as often as may be deemed expedient,
by Lessor, subject at all times to Lessor's right in its sole judgment
to discontinue any work commenced by Lessor or change any course of
action undertaken by Lessor.
25. Mortgages, Subordination and Attornment. Lessor's interest in
this Lease and/or the Premises shall not be subordinate to any liens or
encumbrances placed upon the Premises by or resulting from any act of Lessee,
and nothing herein contained shall be construed to require such subordination by
Lessor. Lessee shall keep the Premises free from any liens for work performed,
materials furnished or obligations incurred by Lessee. NOTICE IS HEREBY GIVEN
THAT LESSEE IS NOT AUTHORIZED TO PLACE OR ALLOW TO BE PLACED ANY LIEN, MORTGAGE,
DEED OF TRUST, SECURITY INTEREST OR ENCUMBRANCE OF ANY KIND UPON ALL OR ANY PART
OF THE PREMISES AND THE PERSONALTY
27
<PAGE> 28
OR LESSEE'S LEASEHOLD INTEREST THEREIN, AND ANY SUCH PURPORTED TRANSACTION SHALL
BE VOID. FURTHERMORE, ANY SUCH PURPORTED TRANSACTION SHALL BE DEEMED A TORTIOUS
INTERFERENCE WITH LESSOR'S RELATIONSHIP WITH LESSEE AND LESSOR'S OWNERSHIP OF
THE PREMISES.
This Lease at all times shall automatically be subordinate to the
Mortgages and to the lien of any and all ground leases, mortgages and trust
deeds now or hereafter placed upon the Premises by Lessor, and Lessee covenants
and agrees to execute and deliver, upon demand, such further instruments
subordinating this Lease to the lien of any or all such ground leases, mortgages
or trust deeds as shall be desired by Lessor, or any present or proposed
mortgagees or lenders under trust deeds, upon the condition that Lessee shall
have the right to remain in possession and to enjoy the Premises under the terms
of this Lease, notwithstanding any default in any or all such mortgages or trust
deeds, or after foreclosure thereof, so long as there is no Event of Default
under any of the covenants, conditions and agreements contained in this Lease.
If any mortgagee, receiver, Lender or other secured party elects to
have this Lease and the interest of Lessee hereunder be superior to any such
ground lease, mortgage or trust deed and evidences such election by notice given
to Lessee, then this Lease and the interest of Lessee hereunder shall be deemed
superior to any such ground lease, mortgage or trust deed, whether this Lease
was executed before or after such ground lease, mortgage or trust deed and in
that event such mortgagee, receiver, Lender or other secured party shall have
the same rights with respect to this Lease as if it had been executed and
delivered prior to the execution and delivery of such ground lease, mortgage or
trust deed and had been assigned to such mortgagee, receiver, Lender or other
secured party.
Although the foregoing provisions shall be self-operative and no future
instrument of subordination shall be required, upon request by Lessor, Lessee
shall execute and deliver whatever instruments may be required for such
purposes, and in the event Lessee fails so to do within 10 days after demand,
Lessee does hereby make, constitute and irrevocably appoint Lessor as its agent
and attorney-in-fact and in its name, place and stead so to do, which
appointment shall be deemed coupled with an interest.
In the event any purchaser or assignee of Lender at a foreclosure sale
acquires title to the Premises, or in the event Lender or any assignee otherwise
succeeds to the rights of Lessor as landlord under this Lease, Lessee shall
attorn to Lender or such purchaser or assignee, as the case may be (a "Successor
Lessor"), and recognize the Successor Lessor as lessor under this Lease, and, if
the Successor Lessor in its sole discretion elects to recognize Lessee's tenancy
under this Lease, this Lease shall continue in full force and effect as a direct
lease between the Successor Lessor and Lessee, provided that the Successor
Lessor shall only be liable for any obligations of the lessor under this Lease
which accrue after the date that such Successor Lessor acquires title. The
foregoing provision shall be self operative and effective without the execution
of any further instruments.
Lessee shall give written notice to any lender of Lessor having a
recorded lien upon the Premises or any part thereof of which Lessee has been
notified of any breach or default by Lessor of any of its obligations under this
Lease and give such lender at least 60 days beyond any
28
<PAGE> 29
notice period to which Lessor might be entitled to cure such default before
Lessee may exercise any remedy with respect thereto. Upon request by Lessor,
Lessee shall also provide Lessee's most recent audited financial statements to
Lessor or any such lender and certify the continuing accuracy of such financial
statements in such manner as Lessor or such lender may request.
26. ESTOPPEL CERTIFICATE. At any time, and from time to time, Lessee
shall, promptly and in no event later than 10 days after a request from Lessor,
Lender or any other mortgagee of the Premises, execute, acknowledge and deliver
to Lessor, Lender or any other present or proposed mortgagee or purchaser
designated by Lessor, Lender or any mortgagee of the Premises a certificate in
the form supplied by Lessor, certifying: (i) that Lessee has accepted the
Premises (or, if Lessee has not done so, that Lessee has not accepted the
Premises, and specifying the reasons therefor); (ii) that this Lease is in full
force and effect and has not been modified (or if modified, setting forth all
modifications), or, if this Lease is not in full force and effect, the
certificate shall so specify the reasons therefor; (iii) the commencement and
expiration dates of the Lease Term and the terms of any extension options of
Lessee; (iv) the date to which the rentals have been paid under this Lease and
the amount thereof then payable; (v) whether there are then any existing
defaults by Lessor in the performance of its obligations under this Lease, and,
if there are any such defaults, specifying the nature and extent thereof;
(vi) that no notice has been received by Lessee of any default under this Lease
which has not been cured, except as to defaults specified in the certificate;
(vii) the capacity of the person executing such certificate, and that such
person is duly authorized to execute the same on behalf of Lessee; (viii) that
neither Lessor nor Lender has actual involvement in the management or control of
decision making related to the operational aspects or the day-to-day operations
of the Premises; and (ix) any other information reasonably requested by Lessor,
Lender, or its present or proposed purchaser or mortgagee.
27. ASSIGNMENT. If Lender shall succeed to the rights of Lessor as
landlord under this Lease, whether through foreclosure of the lien of the
applicable Mortgage, deed-in-lieu of foreclosure or otherwise, Lender, as
lessor, shall have the right to sell or convey the Premises or to assign its
right, title and interest as lessor under this Lease in whole or in part. In the
event of any such sale or assignment other than a security assignment, Lessee
shall attorn to such purchaser or assignee and Lessor shall be relieved, from
and after the date of such transfer or conveyance, of liability for the
performance of any obligation of Lessor contained herein, except for obligations
or liabilities accrued prior to such assignment or sale (provided, however,
nothing in this Section 26 shall impose liability on Lender or such purchaser or
assignee, as lessor, for the obligations of Lessor accruing under this Lease
prior to the time Lender or such purchaser or assignee, as the case may be,
succeeds to Lessor's rights as lessor under this Lease). Otherwise, and except
as permitted pursuant to the Loan Documents, Lessor shall not have the right to
sell or convey the Premises or to assign its right, title and interest as lessor
under this Lease in whole or in part.
Lessee acknowledges that Lessor has relied both on the business
experience and creditworthiness of Lessee and upon the particular purposes for
which Lessee intends to use the Premises in entering into this Lease. Without
the prior written consent of Lessor (i) Lessee shall not assign, transfer,
convey, pledge or mortgage this Lease or any interest therein, whether by
operation of law or otherwise; (ii) no interest in Lessee shall be assigned,
transferred, conveyed, pledged or
29
<PAGE> 30
mortgaged, whether by operation of law or otherwise, including, without
limitation, a dissolution of Lessee, provided, however, the foregoing shall not
apply to (A) any transfer of stock traded publicly during such period of time
that Lessee is a publicly traded company or (B) any other transfer of stock that
does not result in a change of voting control in Lessee; and (iii) Lessee shall
not sublet all or any part of the Premises. It is expressly agreed that Lessor
may withhold or condition such consent based upon such matters as Lessor may in
its reasonable discretion determine, including, without limitation, the
experience and creditworthiness of any assignee, the assumption by any assignee
of all of Lessee's obligations hereunder by undertakings enforceable by Lessor,
payment to Lessor of any rentals owing under a sublease which are in excess of
the rentals owing hereunder, the transfer to any assignee of all necessary
licenses and franchises to continue operating the Premises for the purposes
herein provided, receipt of such representations and warranties from any
assignee as Lessor may request, including such matters as its organization,
existence, good standing and finances and other matters, whether or not similar
in kind. At the time of any assignment of this Lease which is approved by
Lessor, the assignee shall assume all of the obligations of Lessee under this
Lease pursuant to Lessor's standard form of assumption agreement. No such
assignment nor any subletting of the Premises shall relieve Lessee of its
obligations respecting this Lease. Any assignment, transfer, conveyance, pledge
or mortgage in violation of this paragraph shall be voidable at the sole option
of Lessor.
28. OPTION TO EXTEND. Lessee, provided there is no Event of Default
hereunder at the time of exercise or at the expiration of the Lease Term or, if
applicable, the first extension of the Lease Term, shall have the option to
continue this Lease in effect for up to two additional successive periods of
five years each in accordance with the terms and provisions of this Lease then
in effect, including, without limitation, adjustments in the Base Annual Rental
during such extension term in accordance with the provisions of Section 5 except
for the following:
A. In the event the annual fair market rental value of the
Premises (to be determined as set forth below) is greater than the Base
Annual Rental then the annual fair market rental value of the Premises
shall be substituted for the Base Annual Rental and all other
provisions shall remain the same; or
B. In the event the annual fair market rental value of the
Premises is less than the Base Annual Rental the provisions of this
Lease shall remain the same.
Lessee shall exercise such extension option by giving notice to Lessor
of Lessee's intention to do so not more than 270 days or less than 210 days
prior to the expiration of the Lease Term or the first extension of the Lease
Term and upon receipt of such notice Lessor shall within 90 days, at Lessee's
expense, cause an appraisal of the fair market rental value of the Premises to
be made by an independent MAI appraiser. If within 20 days after being notified
of the result of such appraisal Lessee elects to reject that appraisal, then
Lessor shall nominate to Lessee a list of not less than three independent MAI
appraisers who are experienced with appraising property similar to the Premises,
and Lessee shall select one such appraiser. Within 60 days of such selection an
appraisal shall be made of the Premises by that appraiser and within 20 days
after the results of that appraisal shall have been delivered to Lessee, Lessee
shall notify Lessor of Lessee's election to exercise its option to extend this
Lease and shall pay the rental so established above which shall be absolutely
net to Lessor as provided in Section 9 hereof. If such notice of exercise is not
received by Lessor
30
<PAGE> 31
within the 20-day period then this Lease shall terminate on the last day of the
Lease Term or, if applicable, the last day of the first extension of the Lease
Term.
29. NOTICES. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this Lease shall
be in writing and given by (i) hand delivery, (ii) facsimile (with a copy by
overnight delivery service), (iii) express overnight delivery service or
(iv) certified or registered mail, return receipt requested, and shall be deemed
to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if
delivered by facsimile, (c) the next Business Day, if delivered by express
overnight delivery service, or (d) the third Business Day following the day of
deposit of such notice with the United States Postal Service, if sent by
certified or registered mail, return receipt requested. Notices shall be
provided to the parties and addresses (or facsimile numbers, as applicable)
specified below:
If to Lessee: Famous Dave's of America, Inc.
7657 Anagram Drive
Eden Prairie, MN 55344
Attention: John Doll
Telephone: (612) 294-1305
Telecopy: (612) 294-1323
If to Lessor: MinWood Partners, Inc.
7657 Anagram Drive
Eden Prairie, MN 55344
Attention: John Doll
Telephone: (612) 294-1305
Telecopy: (612) 294-1323
or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above. No such notices, consents, approvals or other communications
shall be valid unless Lender receives a duplicate original thereof at the
following address:
Dennis L. Ruben, Esq.
Executive Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Telephone: (480) 585-4500
Telecopy: (480) 585-2226
or to such other address or such other person as Lender may from time to time
specify to Lessor and Lessee in a notice delivered in the manner provided above.
30. HOLDING OVER. If Lessee remains in possession of the Premises after
the expiration of the term hereof, Lessee, at Lessor's option and within
Lessor's sole discretion, may
31
<PAGE> 32
be deemed a tenant on a month-to-month basis and shall continue to pay rentals
and other sums in the amounts herein provided, except that the Base Monthly
Rental shall be 125% of the Base Monthly Rental in effect on the day immediately
preceding the expiration of the term hereof, and to comply with all the terms of
this Lease; provided that nothing herein nor the acceptance of rent by Lessor
shall be deemed a consent to such holding over. Lessee shall defend, indemnify,
protect and hold the Indemnified Parties harmless from and against any and all
Losses resulting from Lessee's failure to surrender possession upon the
expiration of the Lease Term, including, without limitation, any claims made by
any succeeding lessee.
31. LANDLORD'S LIEN/SECURITY INTEREST. Lessee agrees that Lessor shall
have a landlord's lien, and additionally hereby separately grants to Lessor a
first and prior security interest, in, on and against Lessee's right, title and
interest in and to all trade fixtures, machinery, appliances, furniture,
equipment and other personal property from time to time situated on or used in
connection with the Premises (the "Personalty"), which lien and security
interest shall secure the payment of all rental and other charges payable by
Lessee to Lessor under the terms hereof and all other obligations of Lessee to
Lessor under this Lease. Lessee further agrees to execute and deliver to Lessor
from time to time such financing statements and other documents as Lessor may
then deem appropriate or necessary to perfect and maintain said lien and
security interest, and expressly acknowledges and agrees that, cumulative of all
other rights of Lessor hereunder, Lessor shall have all rights and remedies of
Lessor at law or in equity in the event of any Event of Default of Lessee
hereunder, including, to the extent applicable, the Uniform Commercial Code then
in effect in the State in which the Premises is located. If Lessee shall fail
for any reason to execute any such financing statement or document within
10 days after Lessor's request therefor, Lessor shall have the right to execute
the same as attorney-in-fact of Lessee, coupled with an interest, for, and on
behalf, and in the name of Lessee. Lessee covenants to promptly notify Lessor of
any changes in Lessee's name and/or organizational structure which may
necessitate the execution and filing of additional financing statements
(provided, however, the foregoing shall not be construed as Lessor's consent to
such changes). Lessor may exercise any or all of the remedies of a secured party
available to it under the UCC with respect to such Personalty, and it is
expressly agreed that if upon an Event of Default Lessor should proceed to
dispose of such property in accordance with the provisions of the UCC, 10 days'
notice by Lessor to Lessee shall be deemed to be reasonable notice under any
provision of the UCC requiring such notice.
32. REMOVAL OF PERSONALTY. Lessee may move all movable fixtures located
at the Premises at its discretion during the Lease Term so long as there is no
Event of Default. At the expiration of the Lease Term, and if Lessee is not then
in breach hereof, Lessee may remove from the Premises all Personalty belonging
to Lessee. Lessee shall repair any damage caused by such removal and shall leave
the Premises broom clean and in good and working condition and repair inside and
out. Any property of Lessee left on the Premises on the tenth day following the
expiration of the Lease Term shall automatically and immediately become the
property of Lessor.
33. FINANCIAL STATEMENTS. Within 45 days after the end of each fiscal
quarter and within 120 days after the end of each fiscal year of Lessee, Lessee
shall deliver to Lessor, Lender and any other mortgagee of Lessor pertaining to
the Premises (i) complete financial statements of
32
<PAGE> 33
Lessee including a balance sheet, profit and loss statement, statement of cash
flows and all other related schedules for the fiscal period then ended; and
(ii) income statements for the business at the Premises. All such financial
statements shall be prepared in accordance with GAAP, consistently applied from
period to period, and shall be certified to be accurate and complete by Lessee
(or the Treasurer or other appropriate officer of Lessee). Lessee understands
that Lessor and Lender will rely upon such financial statements and Lessee
represents that such reliance is reasonable. In the event that Lessee's property
and business at the Premises is ordinarily consolidated with other business for
financial statement purposes, such financial statements shall be prepared on a
consolidated basis showing separately the sales, profits and losses, assets and
liabilities pertaining to the Premises with the basis for allocation of overhead
of other charges being clearly set forth. The financial statements delivered to
Lessor and Lender need not be audited, but Lessee shall deliver to Lessor and
Lender copies of any audited financial statements of Lessee which may be
prepared, as soon as they are available. Notwithstanding the foregoing and
provided Lessee is a publicly traded corporation, Lessor agrees that Lessee may
comply with the reporting requirements of item (i) above by providing Lessor
with copies of (x) reports on Forms 10-K, 10-Q and 8-K which Lessee shall have
filed with the Securities and Exchange Commission, which reports shall be
delivered to Lessor promptly after the filing of such reports, and (y) all
financial statements, reports and proxy statements mailed to the shareholders of
Lessee, which materials shall be delivered to Lessor promptly after the mailing
of such materials to such shareholders.
34. FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
lockouts, acts of God, enemy or hostile governmental action, civil commotion,
fire or other casualty beyond the control of the party obligated to perform
shall excuse the performance by such party for a period equal to any such
prevention, delay or stoppage, except the obligations imposed with regard to
rental and other monies to be paid by Lessee pursuant to this Lease.
35. DOCUMENT REVIEW. In the event Lessee makes any reasonable request
upon Lessor requiring Lessor or its attorneys to review and/or prepare (or cause
to be reviewed and/or prepared) any document or documents in connection with or
arising out of or as a result of this Lease, then, except as expressly stated
elsewhere herein, Lessee shall reimburse Lessor or its designee promptly upon
Lessor's demand therefor a reasonable processing and review fee in an amount not
less than $500.00 for each such request.
36. TIME IS OF THE ESSENCE. Time is of the essence with respect to each
and every provision of this Lease in which time is a factor.
37. LESSOR'S LIABILITY. Notwithstanding anything to the contrary
provided in this Lease, it is specifically understood and agreed, such agreement
being a primary consideration for the execution of this Lease by Lessor, that
(i) there shall be absolutely no personal liability on the part of Lessor, its
successors or assigns and its officers, directors, employees and agents to
Lessee with respect to any of the terms, covenants and conditions of this Lease,
(ii) Lessee waives all claims, demands and causes of action against Lessor's
officers, directors, employees and agents in the event of any breach by Lessor
of any of the terms, covenants and conditions of this Lease to be performed by
Lessor, and (iii) Lessee shall look solely to the Premises for the satisfaction
of each and every remedy of Lessee in the event of any breach by Lessor of any
of the terms, covenants and conditions of this Lease to be performed by Lessor,
or any other matter
33
<PAGE> 34
in connection with this Lease or the Premises, such exculpation of liability to
be absolute and without any exception whatsoever.
38. CONSENT OF LESSOR. Unless specified otherwise herein, Lessor's
consent to any request of Lessee may be conditioned or withheld in Lessor's sole
discretion. Lessor shall have no liability for damages resulting from Lessor's
failure to give any consent, approval or instruction reserved to Lessor,
Lessee's sole remedy in any such event being an action for injunctive relief.
39. WAIVER AND AMENDMENT. No provision of this Lease shall be deemed
waived or amended except by a written instrument unambiguously setting forth the
matter waived or amended and signed by the party against which enforcement of
such waiver or amendment is sought. Waiver of any matter shall not be deemed a
waiver of the same or any other matter on any future occasion. No acceptance by
Lessor of an amount less than the monthly rent and other payments stipulated to
be due under this Lease shall be deemed to be other than a payment on account of
the earliest such rent or other payments then due or in arrears nor shall any
endorsement or statement on any check or letter accompanying any such payment be
deemed a waiver of Lessor's right to collect any unpaid amounts or an accord and
satisfaction.
40. SUCCESSORS BOUND. Except as otherwise specifically provided herein,
the terms, covenants and conditions contained in this Lease shall bind and inure
to the benefit of the respective heirs, successors, executors, administrators
and assigns of each of the parties hereto.
41. NO MERGER. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not result in a merger of
Lessor's and Lessee's estates, and shall, at the option of Lessor, either
terminate any or all existing subleases or subtenancies, or operate as an
assignment to Lessor of any or all of such subleases or subtenancies.
42. CAPTIONS. Captions are used throughout this Lease for convenience
of reference only and shall not be considered in any manner in the construction
or interpretation hereof.
43. SEVERABILITY. The provisions of this Lease shall be deemed
severable. If any part of this Lease shall be held unenforceable by any court of
competent jurisdiction, the remainder shall remain in full force and effect, and
such unenforceable provision shall be reformed by such court so as to give
maximum legal effect to the intention of the parties as expressed therein.
44. CHARACTERIZATION. A. It is the intent of the parties hereto that
the business relationship created by this Lease and any related documents is
solely that of a long-term commercial lease between landlord and tenant and has
been entered into by both parties in reliance upon the economic and legal
bargains contained herein. None of the agreements contained herein is intended,
nor shall the same be deemed or construed, to create a partnership (either de
jure or de facto) between Lessor and Lessee, to make them joint venturers, to
make Lessee an agent, legal representative, partner, subsidiary or employee of
Lessor, nor to make Lessor in any way responsible for the debts, obligations or
losses of Lessee.
B. Lessor and Lessee acknowledge and warrant to each other that each
has been represented by independent counsel and has executed this Lease after
being fully advised by said
34
<PAGE> 35
counsel as to its effect and significance. This Lease shall be interpreted and
construed in a fair and impartial manner without regard to such factors as the
party which prepared the instrument, the relative bargaining powers of the
parties or the domicile of any party. Whenever in this Lease any words of
obligation or duty are used, such words or expressions shall have the same force
and effect as though made in the form of a covenant.
45. EASEMENTS. During the Lease Term Lessor shall have the right to
grant utility easements on, over, under and above the Premises, provided that
Lessor obtains Lessee's prior consent (which consent shall not reasonably be
withheld) that such easements will not materially interfere with Lessee's
long-term use of the Premises.
46. BANKRUPTCY. A. As a material inducement to Lessor executing this
Lease, Lessee acknowledges and agrees that Lessor is relying upon (i) the
financial condition and specific operating experience of Lessee and Lessee's
obligation to use the Premises specifically as a Permitted Concept,
(ii) Lessee's timely performance of all of its obligations under this Lease
notwithstanding the entry of an order for relief under the Code for Lessee,
(iii) the characterization of this Lease as set forth in Section 3, and (iv) all
Events of Default under this Lease as to the Premises being cured promptly and
this Lease being assumed within 60 days of any order for relief entered under
the Code for Lessee, or this Lease being rejected within such 60 day period and
the Premises surrendered to Lessor.
Accordingly, in consideration of the mutual covenants contained in this
Lease and for other good and valuable consideration, Lessee hereby agrees that:
(i) All obligations that accrue under this Lease (including
the obligation to pay rent), from and after the date that an Action is
commenced shall be timely performed exactly as provided in this Lease
and any failure to so perform shall be harmful and prejudicial to
Lessor;
(ii) Any and all obligations under this Lease that become due
from and after the date that an Action is commenced and that are not
paid as required by this Lease shall, in the amount of such rents,
constitute administrative expense claims allowable under the Code with
priority of payment at least equal to that of any other actual and
necessary expenses incurred after the commencement of the Action;
(iii) Any extension of the time period within which the Lessee
may assume or reject this Lease without an obligation to cause all
obligations coming due under this Lease from and after the date that an
Action is commenced to be performed as and when required under this
Lease shall be harmful and prejudicial to Lessor;
(iv) Any time period designated as the period within which the
Lessee must cure all defaults and compensate Lessor for all pecuniary
losses which extends beyond the date of assumption of this Lease shall
be harmful and prejudicial to Lessor;
(v) Any assignment of this Lease must result in all terms and
conditions of this Lease being assumed by the assignee without
alteration or amendment, and any assignment
35
<PAGE> 36
which results in an amendment or alteration of the terms and
conditions of this Lease without the express written consent of Lessor
shall be harmful and prejudicial to Lessor;
(vi) Any proposed assignment of this Lease to an assignee: (a)
that will not use the Premises specifically as a Permitted Concept or
(b) that does not possess financial condition, operating performance
and experience characteristics equal to or better than the financial
condition, operating performance and experience of Lessee as of the
Effective Date, shall be harmful and prejudicial to Lessor; and
(vii) The rejection (or deemed rejection) of this Lease for
any reason whatsoever shall constitute cause for immediate relief from
the automatic stay provisions of the Code, and Lessee stipulates that
such automatic stay shall be lifted immediately and possession of the
Premises will be delivered to Lessor immediately without the necessity
of any further action by Lessor.
(viii) This Lease shall at all times be treated as consistent
with the specific characterizations set forth in Section 3 of this
Lease, and assumption or rejection of this Lease shall be (a) in its
entirety, (b) for all of the Premises, and (c) in strict accordance
with the specific terms and conditions of this Lease.
B. No provision of this Lease shall be deemed a waiver of Lessor's
rights or remedies under the Code or applicable law to oppose any assumption
and/or assignment of this Lease, to require timely performance of Lessee's
obligations under this Lease, or to regain possession of the Premises as a
result of the failure of Lessee to comply with the terms and conditions of this
Lease or the Code.
C. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Lessee to or on behalf of Lessor under this Lease, whether or not
expressly denominated as such, shall constitute "rent" for the purposes of the
Code.
D. For purposes of this Section addressing the rights and obligations
of Lessor and Lessee in the event that an Action is commenced, the term "Lessee"
shall include Lessee's successor in bankruptcy, whether a trustee, Lessee as
debtor in possession or other responsible person.
47. NO OFFER. No contractual or other rights shall exist between Lessor
and Lessee with respect to the Premises until both have executed and delivered
this Lease, notwithstanding that deposits may have been received by Lessor and
notwithstanding that Lessor may have delivered to Lessee an unexecuted copy of
this Lease. The submission of this Lease to Lessee shall be for examination
purposes only, and does not and shall not constitute a reservation of or an
option for Lessee to lease or otherwise create any interest on the part of
Lessee in the Premises.
48. OTHER DOCUMENTS. Each of the parties agrees to sign such other and
further documents as may be necessary or appropriate to carry out the intentions
expressed in this Lease.
36
<PAGE> 37
49. ATTORNEYS' FEES. In the event of any judicial or other adversarial
proceeding between the parties concerning this Lease, to the extent permitted by
law, the prevailing party shall be entitled to recover all of its reasonable
attorneys' fees and other costs in addition to any other relief to which it may
be entitled. In addition, Lessor shall, upon demand, be entitled to all
attorneys' fees and all other costs incurred in the preparation and service of
any notice or demand hereunder, whether or not a legal action is subsequently
commenced. References in this Lease to Lessor's attorneys' fees and/or costs
shall mean both the fees and costs of independent counsel retained by Lessor
with respect to the matter and the fees and costs of Lessor's in-house counsel
incurred in connection with the matter.
50. ENTIRE AGREEMENT. This Lease and any other instruments or
agreements referred to herein, constitute the entire agreement between the
parties with respect to the subject matter hereof, and there are no other
representations, warranties or agreements except as herein provided. Without
limiting the foregoing, Lessee specifically acknowledges that neither Lessor nor
any agent, officer, employee or representative of Lessor has made any
representation or warranty regarding the projected level of Lessee's gross sales
or the projected profitability of the business to be conducted on the Premises.
Furthermore, Lessee acknowledges that Lessor did not prepare or assist in the
preparation of any of the projected figures used by Lessee in analyzing the
economic viability and feasibility of the business to be conducted by Lessee at
the Premises.
51. FORUM SELECTION; JURISDICTION; VENUE; CHOICE OF LAW. Lessee
acknowledges that this Lease was substantially negotiated in the State of
Arizona, this Lease was delivered in the State of Arizona, and there are
substantial contacts between the parties and the transactions contemplated
herein and the State of Arizona. For purposes of any action or proceeding
arising out of this Lease, the parties hereto expressly submit to the
jurisdiction of all federal and state courts located in the State of Arizona.
Lessee and Lessor consent that they may be served with any process or paper by
registered mail or by personal service within or without the State of Arizona in
accordance with applicable law. Furthermore, Lessee and Lessor waive and agree
not to assert in any such action, suit or proceeding that they are not
personally subject to the jurisdiction of such courts, that the action, suit or
proceeding is brought in an inconvenient forum or that venue of the action, suit
or proceeding is improper. The creation of this Lease and the rights and
remedies of Lessor with respect to the Premises, as provided herein and by the
laws of the State, shall be governed by and construed in accordance with the
internal laws of the State, without regard to principles of conflicts of law.
With respect to other provisions of this Lease, this Lease shall be governed by
the internal laws of the State of Arizona, without regard to its principles of
conflicts of law. Nothing contained in this Section shall limit or restrict the
right of Lessor or Lessee to commence any proceeding in the federal or state
courts located in the state in which the Premises is located to the extent
Lessor or Lessee deems such proceeding necessary or advisable to exercise
remedies available under this Lease.
52. COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall be deemed an original.
53. MEMORANDUM OF LEASE. Concurrently with the execution of this Lease,
Lessor and Lessee are executing a Memorandum of Lease to be recorded in the
applicable real property
37
<PAGE> 38
records with respect to each of the Premises. Further, upon Lessor's request,
Lessee agrees to execute and acknowledge a termination of lease and/or quit
claim deed in recordable form with respect to each of the Premises to be held by
Lessor until the expiration or sooner termination of the Lease Term.
54. NO BROKERAGE. Lessor and Lessee represent and warrant to each other
that they have had no conversation or negotiations with any broker concerning
the leasing of the Premises. Each of Lessor and Lessee agrees to protect,
indemnify, save and keep harmless the other, against and from all liabilities,
claims, losses, costs, damages and expenses, including attorneys' fees, arising
out of, resulting from or in connection with their breach of the foregoing
warranty and representation.
55. WAIVER OF JURY TRIAL AND PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES. LESSOR AND LESSEE HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO
ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH
RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE
RELATIONSHIP OF LESSOR AND LESSEE, LESSEE'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY.
THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY
JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
FURTHERMORE, LESSEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES
FROM LESSOR AND ANY OF LESSOR'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR
ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY LESSEE AGAINST LESSOR OR
ANY OF LESSOR'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIR
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
LEASE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY
LESSEE OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL
ASPECT OF THEIR BARGAIN.
56. RELIANCE BY ENVIRONMENTAL INSURER. Lessee acknowledges and agrees
that Environmental Insurer may rely on the representations, warranties and
covenants set forth in Section 16 of this Lease, that Environmental Insurer is
an intended third-party beneficiary of such representations, warranties and
covenants and that Environmental Insurer shall have all rights and remedies
available at law or in equity as a result of a breach of such representations,
warranties and covenants, including to the extent applicable, the right of
subrogation.
57. FIXED CHARGE COVERAGE RATIO. Lessee covenants to Lessor that an
aggregate Fixed Charge Coverage Ratio of at least 1.50:1 shall be maintained
with respect to the Premises, as
38
<PAGE> 39
determined on the last day of each fiscal year of Lessee. For purposes of this
Section, the term "Fixed Charge Coverage Ratio" shall mean with respect to the
twelve month period of time immediately preceding the date of determination, the
ratio calculated for such period of time, each as determined in accordance with
GAAP, of (a) the sum of Net Income (including proceeds from business
interruption insurance payments, if any), Depreciation and Amortization,
Interest Expense and Operating Lease Expense, less a corporate overhead
allocation (which shall equal the sum of 5% of Gross Sales ) to (b) the sum of
the Operating Lease Expense (including, without limitation, any Operating Lease
Expense relating to this Lease and the Equipment Payment Amount.
For purposes of this Section, the following terms shall be defined as
set forth below:
"Capital Lease" shall mean any lease of any
property (whether real, personal or mixed) by Lessee with
respect to one or more of the Premises, which lease would, in
conformity with GAAP, be required to be accounted for as a
capital lease on the balance sheet of Lessee. The term
"Capital Lease" shall not include any operating lease.
"Debt" shall mean as directly related to all of the
Premises and the period of determination (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds,
indentures, notes or similar instruments, (iii) obligations to
pay the deferred purchase price of property or services,
(iv) obligations under leases which should be, in accordance
with GAAP, recorded as Capital Leases, and (v) obligations
under direct or indirect guarantees in respect of, and
obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (iv) above.
"Depreciation and Amortization" shall mean with
respect to all of the Premises the depreciation and
amortization accruing during any period of determination with
respect to Lessor as determined in accordance with GAAP.
"Equipment Payment Amount" shall mean for any period
of determination the sum of all amounts payable during such
period of determination under all (i) leases for equipment
located at one or more of the Premises other than this Lease
and (ii) all loans secured by equipment located at one or more
of the Premises.
"Gross Sales" shall mean the sales or other income
arising from all business conducted at all of the Premises by
Lessee during the period of determination, less sales tax,
credit card commission and complimentary sales, as presented
in Lessee's publicly disclosed financial statements, and any
amounts received from not-for-profit sales of all non-food
items approved for use in connection with promotional
campaigns, if any, for all of the Premises.
"Interest Expense" shall mean for any period of
determination, the sum of all interest accrued or which should
be accrued in respect of all Debt of Lessee
39
<PAGE> 40
allocable to one or more of the Premises and all
business operations thereon during such period (including
interest attributable to Capital Leases), as determined in
accordance with GAAP.
"Net Income" shall mean with respect to the period of
determination, the net income or net loss of Lessee allocable
to all of the Premises. In determining the amount of Net
Income, (i) adjustments shall be made for nonrecurring gains
and losses allocable to the period of determination,
(ii) deductions shall be made for, among other things,
Depreciation and Amortization, Interest Expense and Operating
Lease Expense allocable to the period of determination, and
(iii) no deductions shall be made for (x) income taxes or
charges equivalent to income taxes allocable to the period of
determination, as determined in accordance with GAAP, or
(y) corporate overhead expense allocable to the period of
determination.
"Operating Lease Expense" shall mean the expenses
incurred by Lessee under any operating leases with respect to
one or more of the Premises and the business operations
thereon during the period of determination, as determined in
accordance with GAAP.
58. Substitution. A. In the event Lessee ceases operation of a
Permitted Concept as a result of Uneconomic Operations, Lessee shall have the
right to terminate this Lease by substituting a Substitute Premises and lease
for such individual Premises and this Lease, subject to fulfillment of the
following conditions:
(i) Lessee shall have given Lessor notice of Lessee's
intention to substitute the Premises (the "Substitution Notice") and no
more than 120 days shall have elapsed since Lessor's notice of Lessee's
intention to cease operation as a result of Uneconomic Operations.
(ii) Lessee must provide for the substitution of a Substitute
Premises, and the proposed Substitute Premises must:
(1) be a Permitted Concept, in good condition and repair,
ordinary wear and tear excepted;
(2) have for the twelve-month period preceding the date
of the closing of such substitution a Fixed Charge Coverage Ratio
(as defined below) of at least 1.50:1;
(3) be owned by and vested in Lessee free and clear of
all liens and encumbrances, except such matters as are acceptable
to Lessor (the "Substitute Premises Permitted Exceptions"); and
(4) have for the twelve-month period preceding the date
of the closing of such substitution gross sales that are greater
than the Lessee's gross sales for the same period at the
Premises.
40
<PAGE> 41
(5) have a fair market value equal to or greater than
the fair market value of the Premises. The fair market value of
the Premises and the fair market value of the Substitute Premises
shall be determined in the same manner as set forth in Section 23
above.
(iii) Lessor shall have inspected and approved the Substitute
Premises utilizing Lessor customary site inspection and underwriting
approval criteria. Lessee shall have reimbursed Lessor for all of its
costs and expenses incurred with respect to such proposed
substitution, including, without limitation, Lessor's third-party
and/or in-house site inspectors' costs and expenses with respect to
the proposed Substitute Premises. Lessee shall be solely responsible
for the payment of all costs and expenses resulting from such proposed
substitution, including, without limitation, the cost of title
insurance and endorsements, survey charges, stamp taxes, mortgage
taxes, transfer fees, escrow and recording fees, the cost of
environmental reports and the attorneys' fees and expenses of counsel
to Lessee and Lessor.
(v) Lessor shall have received a preliminary title report
and irrevocable commitment to insure title by means of an owner's ALTA
extended coverage policy of title insurance (or its equivalent, in the
event such form is not issued in the jurisdiction where the proposed
Substitute Premises is located) for such proposed Substitute Premises
issued by Title Company (as defined in the Loan Documents) showing good
and marketable title in Lessee and committing to insure Lessor's fee
ownership of the proposed Substitute Premises, subject only to the
Substitute Premises Permitted Exceptions and containing endorsements
substantially comparable to those required by Lessor in connection with
Lessor's initial acquisition of the Premises (the "Closing");
(vi) Lessor shall have received a current ALTA survey of
such proposed Substitute Premises, the form of which shall be
comparable to those received by Lessor at the Closing and sufficient to
cause the standard survey exceptions set forth in the title policy
referred to in the preceding subsection to be deleted.
(vii) Lessor shall have received a satisfactory environmental
insurance policy or a Phase I environmental report with respect to such
proposed Substitute Premises, the scope of which shall conform to the
then customary standards for Lessor purchasing commercial real estate,
which shall conclude that there is no Environmental Condition affecting
the proposed Substitute Premises.
(viii) Lessee shall deliver, or cause to be delivered, with
respect to Lessee and the Substitute Premises, opinions of Counsel in
form and substance comparable to those received at the Closing (but
also addressing such matters unique to the Substitute Premises as may
be reasonably required by Lessor).
(ix) no default, beyond any applicable notice and cure
period, shall then exist with respect to any other lease, loan or other
transaction between Lessor or its affiliates on the one hand and Lessee
or its affiliates on the other hand.
41
<PAGE> 42
(x) Lessee shall have executed such documents as are
comparable to the security documents executed and delivered at Closing,
as applicable (but with such revisions as may be reasonably required by
Lessor to address matters unique to the Substitute Premises) or
amendments to such documents, including, without limitation, a deed,
lease, memorandum of lease and UCC-1 financing statements (the
"Substitute Documents"), to provide Lessor with fee ownership of the
proposed Substitute Premises, subject only to the Substitute Premises
Permitted Exceptions, and all other rights, remedies and benefits with
respect to the proposed Substitute Premises which Lessor holds in the
Premises, all of which documents shall be in form and substance
reasonably satisfactory to Lessor.
(xi) the representations and warranties set forth in the
Substitute Documents and Section 7 of this Lease applicable to the
proposed Substitute Premises shall be true and correct in all material
respects as of the date of substitution, and Lessee shall have
delivered to Lessor an officer's certificate certifying to that effect.
(xii) Lessee shall have delivered to Lessor certificates of
insurance showing that insurance required by the Substitute Documents
is in full force and effect.
Upon satisfaction of the foregoing conditions with respect to the
substitution of the Premises and this Lease:
(a) the proposed Substitute Premises and lease shall be deemed
substituted for the Premises and this Lease;
(b) the Purchase Price for the Substitute Premises shall be
the same as the Purchase Price for the Premises;
(c) in connection with this Lease, Lessor and Lessee shall
execute Lessor's standard form mutual release and termination of lease;
(d) the Substitute Documents shall be dated as of the date of
the substitution; and
(e) Lessor will execute a limited warranty deed for the
Premises in favor of Lessee; title to the Premises shall be conveyed
subject to liens for taxes and assessments and easements, covenants and
restrictions of record which were attached to the Premises as of the
date hereof, attached during the Lease Term through Lessee's action or
inaction, as the case may be, have been granted by Lessor in lieu of a
taking by the power of eminent domain or the like, have been approved
by Lessee, or which do not materially adversely affect the use of the
Premises as a Permitted Concept.
B. For Purposes of this Section, the following terms shall be
defined as set forth below:
"Capital Lease" shall mean any lease of any property
(whether real, personal or mixed) by Lessee with respect to the
Substitute Premises which lease would, in conformity with GAAP, be
required to be accounted for as a capital
42
<PAGE> 43
lease on the balance sheet of Lessee. The term "Capital Lease" shall
not include any operating lease.
"Debt" shall mean as directly related to the Substitute
Premises and the period of determination (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, indentures,
notes or similar instruments, (iii) obligations to pay the deferred
purchase price of property or services, (iv) obligations under
leases which should be, in accordance with GAAP, accounted for as
Capital Leases, and (v) obligations under direct or indirect
guarantees in respect of, and obligations (contingent or otherwise)
to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clauses (i) through (iv) above.
"Depreciation and Amortization" shall mean with respect to
the Substitute Premises the depreciation and amortization accruing
during any period of determination with respect to Debtor as
determined in accordance with GAAP.
" Equipment Payment Amount" shall mean for any period of
determination the sum of all amounts payable during such period of
determination under all (i) leases for equipment located at the
Substitute Premises and (ii) all loans secured by equipment located
at the Substitute Premises.
"FFCA Payments" shall mean with respect to the period of
determination, the sum of the Base Monthly Rental and any and all
other rent due and payable under this Lease.
"Fixed Charge Coverage Ratio" shall mean with respect to
the twelve month period of time immediately preceding the date of
determination, the ratio calculated for such period of time, each as
determined in accordance with GAAP, of (a) the sum of Net Income
(including proceeds from business interruption insurance payments,
if any), Depreciation and Amortization, Interest Expense and
Operating Lease Expense, less a corporate overhead allocation in an
amount equal to 5% of Gross Sales to (b) the sum of the FFCA
Payments, Operating Lease Expense and the Equipment Payment Amount.
"Gross Sales" shall mean the sales or other income arising
from all business conducted at the Substitute Premises by Lessee
during the period of determination, less sales tax, credit card
commission and complimentary sales, as presented in the Lessee's
publicly disclosed financial statements, and any amounts received
from not-for-profit sales of all non-food items approved for use in
connection with promotional campaigns, if any.
"Interest Expense" shall mean for any period of
determination, the sum of all interest accrued or which should be
accrued in respect of all Debt of Lessee allocable to the Substitute
Premises and all business operations thereon during
43
<PAGE> 44
such period (including interest attributable to Capital Leases), as
determined in accordance with GAAP.
"Net Income" shall mean with respect to the period of
determination, the aggregate net income or net loss of Lessee
allocable to the Substitute Premises. In determining the amount of
Net Income, (i) adjustments shall be made for nonrecurring gains and
losses allocable to the period of determination, (ii) deductions
shall be made for Depreciation and Amortization, Interest Expense
and Operating Lease Expense allocable to the period of
determination, and (iii) no deductions shall be made for (x) income
taxes or charges equivalent to income taxes allocable to the period
of determination, as determined in accordance with GAAP, or
(y) corporate overhead expense allocable to the period of
determination.
"Operating Lease Expense" shall mean the sum of all
payments and expenses incurred by Lessee under any operating leases
with respect to the Substitute Premises and the business operations
thereon during the period of determination, as determined in
accordance with GAAP.
C. Lessee shall also have the right to substitute a Premises in
accordance with this Section in the event Lessor exercises its right to
substitution under the Loan Agreement.
59. LEASEHOLD FINANCING. Lessee may obtain leasehold financing on the
Premises located at 14601 Highway 7, Minnetonka, Minnesota which such financing
shall be secured by this Lease, provided that (i) Lender and Lessor shall
receive all material reasonably necessary to review the terms and conditions of
the leasehold financing, (ii) Lender and Lessor approve in writing the terms and
conditions of the leasehold financing, and (iii) subsequent to the leasehold
financing, the Fixed Charge Coverage Ratio as determined in accordance with
Section 57 shall be maintained.
44
<PAGE> 45
IN WITNESS WHEREOF, Lessor and Lessee have entered into this Lease as
of the date first above written.
LESSOR:
MINWOOD PARTNERS, INC.,
a Delaware corporation
By: /s/ Martin J. O'Dowd
---------------------------------
Printed Name: Martin J. O'Dowd
-----------------------
Lessor's Tax Identification Number: Title: Director
51-0396229 -----------------------------
----------------------------------------
LESSEE:
FAMOUS DAVE'S OF AMERICA, INC.,
a Minnesota corporation
By: /s/ Martin J. O'Dowd
--------------------------------
Printed Name: Martin J. O'Dowd
----------------------
Lessee's Tax Identification Number: Title: President
41-1782300 -----------------------------
- -----------------------------------------
<PAGE> 46
STATE OF Minnesota )
-------------------) SS.
COUNTY OF Hennepin )
-------------------
The foregoing instrument was acknowledged before me on January 17,
2000 by Martin J. O'Dowd, Director of MinWood Partners, Inc., a Delaware
corporation, on behalf of the corporation.
/s/ Rita A. Witting
---------------------------------
Notary Public
My Commission Expires:
1/31/05
- ------------------------------------------
STATE OF Minnesota )
----------------------)SS.
COUNTY OF Hennepin )
----------------------
The foregoing instrument was acknowledged before me on January 17, 2000
by Martin J. O'Dowd, President of Famous Dave's of America, Inc., a Minnesota
corporation, on behalf of the corporation.
/s/ Rita A. Witting
---------------------------------
Notary Public
My Commission Expires:
1/31/05
- --------------------------------------------
<PAGE> 47
EXHIBIT A
PREMISES
FFCA No. ADDRESS AMOUNT
- -------- ------- ------
8001-0988 14601 Highway 7 $2,000,000.00
Minnetonka, MN
8001-0990 1940 Donegal Drive $1,800,000.00
Woodbury, MN
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FAMOUS
DAVE'S OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR
THE THREE MONTHS ENDED APRIL 2, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-03-2000
<PERIOD-END> APR-02-2000
<CASH> 987
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,259
<CURRENT-ASSETS> 3,537
<PP&E> 48,146
<DEPRECIATION> 7,268
<TOTAL-ASSETS> 45,158
<CURRENT-LIABILITIES> 8,566
<BONDS> 9,496
0
0
<COMMON> 43,391
<OTHER-SE> (16,295)
<TOTAL-LIABILITY-AND-EQUITY> 45,158
<SALES> 15,091
<TOTAL-REVENUES> 15,091
<CGS> 4,980
<TOTAL-COSTS> 14,829
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225
<INCOME-PRETAX> 51
<INCOME-TAX> 0
<INCOME-CONTINUING> 51
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
