<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 7, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from..............to.......
Commission file number
---------------
AFC ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 58-2016606
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Six Concourse Parkway, Suite 1700
Atlanta, Georgia 30328-5352
(Address of principal executive offices) (Zip Code)
(770) 391-9500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
---- ____
As of October 21, 1997, there were 34,448,604 shares of the registrant's Common
Stock outstanding.
<PAGE>
AFC ENTERPRISES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART 1 FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations - For the Twelve
and Thirty-six Week Periods Ended September 7, 1997 and
September 8, 1996........................................................... 3
Condensed Consolidated Balance Sheets - December 29, 1996 and
September 7, 1997........................................................... 4
Condensed Consolidated Statements of Cash Flows - For the Thirty-six
Week Periods Ended September 7, 1997 and September 8, 1996.................. 5
Notes to Condensed Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 7
PART 2 OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................ 16
(a) Exhibits........................................................... 16
(b) Current Reports on Form 8-K........................................ 16
SIGNATURE............................................................................. 16
</TABLE>
<PAGE>
PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements
AFC Enterprises, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
12 Weeks Ended 36 Weeks Ended
9/7/97 9/8/96 9/7/97 9/8/96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales......................................... $ 89,846 $ 101,181 $ 284,573 $ 296,313
Revenues from franchising................................ 14,996 12,271 44,399 34,647
Revenues from manufacturing.............................. 1,591 1,868 4,648 5,911
Other revenues........................................... 2,063 2,000 6,059 5,634
--------- --------- --------- ----------
Total revenues......................................... 108,496 117,320 339,679 342,505
--------- --------- --------- ----------
Costs and Expenses:
Restaurant cost of sales................................. 29,820 33,914 92,791 97,786
Restaurant operating expenses............................ 44,354 50,853 140,375 146,535
Manufacturing cost of sales.............................. 1,025 1,198 3,004 4,190
General and administrative............................... 18,231 16,625 57,354 54,120
Depreciation and amortization............................ 8,388 7,026 23,475 20,687
Gain on sale of assets from AFDC transaction - - (5,319) -
--------- --------- --------- ----------
Total costs and expenses............................... 101,818 109,616 311,680 323,318
--------- --------- --------- ----------
Income From Operations..................................... 6,678 7,704 27,999 19,187
Other Expenses:
Interest, net............................................ 5,611 3,015 12,974 11,818
--------- --------- --------- ----------
Net Income Before Extraordinary Loss
and Income Taxes......................................... 1,067 4,689 15,025 7,369
Income tax expense....................................... (409) (1,822) (6,021) (2,986)
--------- --------- --------- ----------
Net income before extraordinary loss....................... 658 2,867 9,004 4,383
Extraordinary loss on early retirement
of debt (net of $2,673 income tax benefit)................ - - - 4,456
--------- --------- --------- ----------
Net Income (loss).......................................... 658 2,867 9,004 (73)
Preferred stock dividends.................................. - 1,370 2,240 3,553
Accretion of 8% preferred stock discount................... - 364 - 9,532
--------- --------- --------- ----------
Net Income (loss) Attributable to Common Stock............. $ 658 $ 1,133 $ 6,764 $ (13,158)
========= ========= ========= ==========
</TABLE>
See accompanying notes to financial statements.
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3
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================================================================================
AFC Enterprises, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
9/7/97 12/29/96
- ------------------------------------------ ----------------------------------
(Unaudited)
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents................ $ 40,619 $ 19,216
Accounts and current notes receivable,
net...................................... 9,617 9,314
Inventories.............................. 3,666 3,961
Deferred income taxes.................... 839 6,997
Prepaid expenses and other............... 1,878 5,621
------------ ------------
Total current assets.................. 56,619 45,109
------------ ------------
Long-term Assets:
Notes receivable, net.................... 3,395 4,836
Deferred income taxes.................... 2,147 -
Property and equipment, net.............. 200,741 189,223
Other assets............................. 5,743 7,295
Intangible assets, net................... 111,893 94,211
------------ ------------
Total long-term assets................ 323,919 295,565
------------ ------------
Total assets..................... $ 380,538 $ 340,674
============ ============
Liabilities, Mandatorily Redeemable Preferred Stock
and Shareholders' Equity:
Current Liabilities:
Accounts payable......................... $ 19,170 $ 18,370
Current portion of long-term debt and
capital lease obligations................ 8,882 11,753
Bank overdrafts.......................... 7,127 10,812
Accrued expenses and other............... 30,097 27,400
------------ ------------
Total current liabilities............. 65,276 68,335
------------ ------------
Long-term Liabilities:
Long-term debt, net of current portion... 47,732 121,806
10.25% Subordinated notes payable........ 175,000 -
Capital lease obligations, net of
current portion.......................... 13,283 18,234
Other liabilities........................ 34,104 33,435
Deferred income taxes.................... - 1,006
------------ ------------
Total long-term liabilities........... 270,119 174,481
------------ ------------
Total liabilities................ 335,395 242,816
------------ ------------
Mandatorily Redeemable Preferred Stock:
10% Preferred stock...................... - 59,956
Shareholders' Equity:
Common stock............................. 344 344
Capital in excess of par value........... 100,402 99,482
Accumulated deficit...................... (51,319) (58,083)
Notes receivable - officers.............. (4,284) (3,841)
------------ -------------
Total shareholders' equity............ 45,143 37,902
------------ -------------
Total liabilities, mandatorily
redeemable preferred stock
and shareholders' equity........ $ 380,538 $ 340,674
============ =============
</TABLE>
See accompanying notes to financial statements.
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4
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AFC ENTERPRISES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
36 Weeks Ended
9/7/97 9/8/96
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows Provided By (Used In) Operating Activities:
Net income (loss)........................................ $ 9,004 $ (73)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 23,475 20,687
(Gains)/losses on disposition and retirement of
property and equipment................................ (2,741) 2,202
Amortization of notes payable discount.................. - 7,729
Deferred compensation and other......................... 915 852
Other................................................... 1,593 978
(Increase) decrease in operating assets................. 9,685 5,523
Increase (decrease) in operating liabilities............ 3,952 (1,985)
----------- -----------
Total adjustments..................................... 36,879 35,986
----------- -----------
Net cash provided by operating activities................ 45,883 35,913
----------- -----------
Cash Flows Provided By (Used In) Investing Activities:
Proceeds from disposition of property and equipment...... 18,517 2,388
Investment in property and equipment..................... (27,184) (24,678)
Investment in intangible assets.......................... (14,159) -
Notes receivable additions............................... (2,537) (60)
Payments received on notes............................... 2,899 993
----------- -----------
Net cash used in investing activities.................... (22,464) (21,357)
----------- -----------
Cash Flows Provided By (Used In) Financing Activities:
Principal payments of long-term debt..................... (127,268) (67,744)
Proceeds from long-term debt............................. 50,000 -
Proceeds from subordinated notes......................... 175,000 -
Principal payments for capital lease obligations......... (23,554) (2,578)
Increase (decrease) in bank overdrafts, net.............. (3,684) 180
Redemption of 10% preferred stock........................ (62,197) -
Notes receivable - officers, net......................... (378) (4,469)
Issuance of common stock................................. 6 70,205
Bond and debt issuance costs............................. (9,941) -
Stock issuance costs..................................... - (6,058)
Preferred stock dividends paid........................... - (1,955)
----------- -----------
Net cash used in financing activities.................... (2,016) (12,419)
----------- -----------
Net increase (decrease) in cash and cash equivalents..... 21,403 2,137
Cash and cash equivalents at beginning of the period..... 19,216 13,609
----------- -----------
Cash and cash equivalents at end of the period........... $ 40,619 $ 15,746
=========== ===========
Supplemental Cash Flow Information:
Cash payments for income taxes.......................... $ 2,044 $ 1,261
Cash payments for interest.............................. 8,774 9,110
Noncash investing and financing activities:
Retirement of 8% preferred stock....................... - 45,150
Issuance of 10% preferred stock........................ - 56,000
Issuance of common stock............................... - 10,000
Capital lease obligations incurred..................... 18,849 7,235
</TABLE>
See accompanying notes financial statements.
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5
<PAGE>
AFC ENTERPRISES,INC.
Notes to Condensed Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Nature of Operations and Basis of Presentation
AFC Enterprises, Inc. (herein referred to as "AFC" or the "Company")
operates and franchises quick-service restaurants under the primary trade names
of Popeyes Chicken & Biscuits ("Popeyes"), Churchs Chicken ("Churchs") and
Chesapeake Bagel Bakery ("Chesapeake Bagel"). The accompanying condensed
consolidated financial statements have been prepared pursuant to the rules and
regulations for reporting on Form 10-Q. Accordingly, certain information and
footnotes required by generally accepted accounting principles for complete
financial statements are not included herein. The accompanying condensed
consolidated financial statements have not been audited by independent certified
public accountants, but in the opinion of management contain all adjustments
(which are of a normal recurring nature) necessary for a fair presentation of
the Company's financial condition and results of operations for the interim
periods presented. Interim period operating results are not necessarily
indicative of the results expected for the full fiscal year. Certain items in
the financial statements of the previous year have been reclassified in
conformity with the 1997 presentation. These reclassifications had no effect on
reported results of operations.
Significant Accounting Policies
The accounting and reporting policies practiced by the Company are set
forth in Note 1 to the Company's consolidated financial statements for the
fiscal year ended December 29, 1996, which are contained in the Company's
Registration Statement on Form S-4, Registration No. 333-29731 (the
"Registration Statement") filed with the Securities and Exchange Commission on
August 4, 1997 and are incorporated herein by reference.
2. Capital Lease Obligations
On August 29, 1997, The Company repaid certain capital lease obligations
totaling $16.7 million. The Company used a portion of the proceeds from the
refinancing transaction that took place during the second quarter of 1997 to
repay these capital lease obligations.
3. Financing Arrangements
On August 12, 1997, the Company secured a revolving line of credit of up to
$15.0 million to provide financing for the Company's Turnkey Development
program. As of September 7, 1997, the Company had not drawn against the
revolving line of credit.
================================================================================
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended. Such
forward-looking statements relate to the plans, objectives and expectations of
the Company for future operations. In light of the risks and uncertainties
inherent in any discussion of the Company's expected future performance or
operations, the inclusion of forward-looking statements in this report should
not be regarded as a representation by the Company or any other person that the
Company's operating expectations will be realized. Such performance could be
materially affected by a number of factors, including without limitation those
factors set forth in the "Risk Factors" section in the Registration Statement.
General
The Company is the second largest quick-service chicken restaurant company
in the world, franchising and operating quick-service restaurants under the
brands Popeyes and Churchs. The Company also franchises and operates quick
service bagel bakeries and restaurants under the brand Chesapeake Bagel Bakery
("Chesapeake Bagel").
Recent Developments
AFDC Transaction
On March 24, 1997 the Company sold 100 Company-operated restaurants in
eight domestic markets to Atlanta Franchise Development Corporation ("AFDC").
The Company also sold the land, building and equipment for 51 of these
restaurants, and it sold the building and equipment and leased the land for 49
of the restaurants to AFDC. The Company received approximately $19.9 million in
cash, along with a warrant to acquire, for nominal consideration, a 5.0% equity
interest in AFDC. As a result of this transaction, the Company recorded $2.5
million in franchise fees and approximately $5.3 million of gain associated with
the sale of the property in the second quarter of 1997.
Chesapeake Bagel Acquisition
In May 1997, the Company acquired from The American Bagel Company, the
franchise business and rights to Chesapeake Bagel. As a result of this
acquisition, the Company became the franchisor of 158 franchised Chesapeake
Bagel restaurants located primarily in Washington, D.C., Maryland and Virginia.
The net purchase price of the acquisition was approximately $11.8 million, plus
a potential earn out of up to $3.5 million, contingent upon the number of
restaurants which open in the future out of the existing pool of franchise
commitments. Substantially all of the purchase price was allocated to
intangible assets including franchise rights, trademarks and goodwill.
7
<PAGE>
Results of Operations
The following table presents selected revenues and expenses from the
Company's unaudited Consolidated Statements of Operations for the twelve
and thirty-six weeks ended September 7, 1997 and September 8, 1996. Amounts
are in millions and, accordingly, may differ from amounts reported
elsewhere in this document due to rounding. Percentage increases and
decreases presented in the table and presented throughout the discussion
set forth below are calculated based on the amounts reported in the table
below.
Historical Revenues and Operating Expenses
<TABLE>
<CAPTION>
12 Weeks Ended 36 Weeks Ended
------------------------------------ ---------------------------------------
September September % September September %
7, 8, Change 7, 8, Change
1997 1996 1997-1996 1997 1996 1997-1996
-------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Restaurant sales $ 89.8 $ 101.2 (11.3)% $ 284.6 $ 296.3 (3.9)%
Revenues from franchising 15.0 12.3 22.0 44.4 34.7 28.0
Revenues from manufacturing 1.6 1.8 (11.1) 4.6 5.9 (22.0)
Other revenues 2.1 2.0 5.0 6.1 5.6 8.9
------ ------- ------- -------
Total revenues 108.5 117.3 (7.5) 339.7 342.5 (0.8)
Costs and Expenses:
Restaurant cost of sales 29.8 33.9 (12.1) 92.8 97.8 (5.1)
Restaurant operating expenses 44.4 50.9 (12.8) 140.4 146.6 (4.2)
Manufacturing cost of sales 1.0 1.2 (16.7) 3.0 4.2 (28.6)
General and administrative 18.2 16.6 9.6 57.4 54.1 6.1
Depreciation and amortization 8.4 7.0 20.0 23.4 20.7 13.0
Gain on sale of assets - AFDC - - N/A (5.3) - N/A
------ ------- ------- ------
Total costs and expenses 101.8 109.6 (7.1) 311.7 323.4 (3.6)
------ ------- ------- ------
Income From Operations 6.7 7.7 (13.0) 28.0 19.1 46.6
Interest expense, net 5.6 3.0 86.7 13.0 11.8 10.2
------ ------- ------- ------
Net Income Before
Extraordinary Loss and Taxes 1.1 4.7 (76.6) 15.0 7.3 105.5
Income tax expense 0.4 1.8 (77.8) 6.0 3.0 100.0
------ ------- ------- ------
Net Income Before
Extraordinary Items 0.7 2.9 (75.9) 9.0 4.3 109.3%
Extraordinary loss, net - - N/A - 4.4 N/A
------ ------- ------- ------
Net Income/(Loss) $ 0.7 $ 2.9 (75.9) % $ 9.0 $ (0.1) N/A
====== ======= ======= =======
</TABLE>
8
<PAGE>
Selected Financial Information
The following table sets forth certain financial information and other
restaurant data relating to Company and franchise restaurants, as reported to
the Company by franchisees (dollars in millions).
<TABLE>
<CAPTION>
12 Weeks Ended 36 Weeks Ended
--------------------------------- ---------------------------------
September September % September September %
7, 8, Change 7, 8, Change
1997 1996 1997-1996 1997 1996 1997-1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
EBITDA, as defined (1) $ 15.7 $ 15.5 1.3 % $ 49.6 $ 43.1 15.1 %
Capital Expenditures $ 16.9 $ 12.5 35.2 % $ 46.3 $ 31.9 45.1 %
Restaurant Data:
Systemwide restaurant
sales:
Popeyes $ 204.8 $ 182.3 12.3 % $ 585.1 $ 522.9 11.9 %
Churchs 171.1 161.7 5.8 503.0 463.9 8.4
Chesapeake Bagel (2) 17.5 N/A N/A 26.5 N/A N/A
-------- -------- -------- --------
Total $ 393.4 $ 344.0 14.4 % $1,114.6 $ 986.8 13.0 %
Systemwide restaurant
openings:
Popeyes 35 30 16.7 % 85 74 14.9 %
Churchs 27 36 (25.0) 93 69 34.8
Chesapeake Bagel 10 N/A N/A 20 N/A N/A
-------- -------- -------- --------
Total 72 66 9.1 % 198 143 38.5 %
Systemwide restaurants
open, end of period:
Popeyes 1,092 1,004 8.8 %
Churchs 1,332 1,253 6.3
Chesapeake Bagel 161 N/A N/A
-------- --------
Total 2,585 2,257 14.5 %
Systemwide change in
comparable sales (2):
Popeyes 2.8 % 0.4 % 2.9 % 1.1 %
Churchs 1.3 2.0 4.4 3.1
</TABLE>
(1) EBITDA represents income from operations plus depreciation and
amortization, adjusted for gains/losses on asset dispositions and
writedowns, compensation expense related to stock option activity (deferred
compensation) and non-cash officer notes receivable items related to the
executive compensation award.
(2) Sales figures are not available for Chesapeake Bagel for the twelve and
thirty-six week periods ended September 8, 1996, since the Company did not
acquire the franchise rights of Chesapeake Bagel until May 1997.
9
<PAGE>
Operating Results
Twelve Weeks Ended September 7, 1997 and September 8, 1996
Revenues
Total revenues decreased by $8.8 million for the twelve weeks ended
September 7, 1997, a decrease of 7.5% over the same period in 1996 primarily due
to the sale of 100 Company-operated restaurants to AFDC.
Restaurant Sales. The Company reported restaurant sales of $89.8 million
during the twelve weeks ended September 7, 1997, compared to $101.2 million
during the same period of 1996. The decrease in restaurant sales of $11.4
million or 11.3% was primarily attributable to the sale of 100 Company-operated
restaurants to AFDC during the second quarter of 1997. These restaurants
reported restaurant sales of $13.5 million during the third quarter of 1996.
The overall sales decrease was partially offset by an increase in comparable
sales for the remaining Company-operated restaurants of 3.4% for the quarter.
Revenues From Franchising. Revenues from franchising increased $2.7 million
or 22.0% during the third fiscal quarter of 1997 over the same period of a year
ago. Franchise royalty revenue increased $2.9 million or 27.6%, while franchise
fees decreased $0.2 million or 11.1%. The increase in franchise royalty revenue
was attributable to several factors, including royalty revenues recorded for 100
restaurants franchised in connection with the AFDC transaction and franchised
Chesapeake Bagel restaurants, an increase in the number of franchised
restaurants and comparable sales increases for domestic and international
franchised restaurants.
Revenues From Manufacturing. Revenues from manufacturing decreased 11.1% or
$0.2 million for the twelve weeks ended September 7, 1997, compared to the
twelve weeks ended September 8, 1996. The decrease in revenues was primarily
attributable to a decrease in sales of proprietary gas fryers.
Operating Costs and Expenses
Restaurant Cost of Sales. Cost of sales amounted to $29.8 million, or 33.2%
of restaurant sales, during the third fiscal quarter ended September 7, 1997,
compared to $33.9 million, or 33.5% of restaurant sales, for the corresponding
period in 1996. The $4.1 million or 12.1% decrease was primarily due to the
decrease in restaurant sales during the third fiscal quarter of 1997, compared
to the third fiscal quarter of 1996. Restaurant cost of sales as a percentage of
sales decreased slightly for the third quarter of 1997 compared to the third
quarter of 1996 due to small menu price increases taken in late 1996 and early
1997, usage reductions in paper items and shortening and favorable pricing on
certain non-poultry food items.
10
<PAGE>
Restaurant Operating Expenses. Restaurant operating expenses during the
third fiscal quarter of 1997 decreased $6.5 million or 12.8% below the
corresponding period during 1996. The decrease was primarily attributable to
the sale of the 100 Company-operated restaurants to AFDC. As a percentage of
restaurant sales, operating expenses for the twelve weeks ended September 7,
1997 were 49.4%, compared to 50.3% during the twelve weeks ended September 8,
1996. As a percentage of sales, personnel expenses were 28.7% during the third
fiscal quarter of 1997, compared to 27.5% during the same period of a year ago.
The increase in personnel expenses as a percentage of sales was due to increases
in the Federal minimum wage rate, which were effective October 1, 1996 and
September 1, 1997. The Federal minimum wage rate increased from $4.25 per hour
to $5.15 per hour from September 6, 1996 to September 7, 1997. Approximately
86% of the Company's restaurant labor force are hourly employees whose wages are
impacted by these increases in the Federal minimum wage rate. Marketing costs
as a percentage of restaurant sales was 7.5% for the third quarter of 1997,
versus 9.1% for the third quarter of 1996. The decrease was due to a reduction
in food discount promotions during the third quarter of 1997, versus the third
quarter of 1996. Other operating expenses as a percentage of restaurant sales
was 13.3% during the third fiscal quarter of 1997, compared to 13.8% during the
third fiscal quarter of 1996. The decrease was primarily attributable to
decreases in utility and maintenance costs during the third fiscal quarter of
1997, compared to the third fiscal quarter of 1996.
Manufacturing Cost of Sales. Manufacturing cost of sales was down $0.2
million or 16.7% for the third twelve weeks of 1997 compared to the third twelve
weeks of 1996. The decrease was primarily due to the decrease in manufacturing
revenues from the prior year.
General and Administrative Expenses. The Company incurred general and
administrative expenses of $18.2 million, or 16.7% of total revenues for the
twelve-week period ended September 7, 1997, compared to $16.6 million, or 14.1%,
for the comparable period in 1996. The increase in general and administrative
expenses during the third fiscal quarter of 1997 versus the third fiscal quarter
of 1996 was primarily attributable to overhead costs incurred by the new
Chesapeake Bagel brand, deferred compensation expense associated with employee
stock options, costs incurred to attract new franchisees and costs associated
with acquisition activities.
Depreciation and Amortization. Depreciation and amortization amounted to
$8.4 million for the twelve-week period ended September 7, 1997, compared to
$7.0 million for the corresponding period in 1996. The 20.0% increase was
primarily attributable to the depreciation of fixed assets placed in service
during the period from September 8, 1996 to September 7, 1997. Partially
offsetting the increase was a decrease in depreciation expense associated with
the sale of 100 restaurants to AFDC and other asset dispositions. The
depreciable basis of fixed assets increased from $257.2 million at September 8,
1996 to $286.3 million at September 7, 1997, or 11.3%. Depreciation expense for
the twelve weeks ended September 7, 1997 versus the corresponding period of a
year ago increased disproportionately over the increase in depreciable fixed
assets from September 8, 1996 to September 7, 1997 due to the fact that fixed
asset additions during this period consisted primarily of personal property
assets with relatively shorter depreciable lives and fixed asset dispositions
during this period consisted primarily of real property assets with relatively
longer depreciable lives. As a percentage of total revenues, depreciation and
amortization was 7.7% at September 7, 1997, versus 6.0% at September 8, 1996.
Net Interest Expense. Net interest expense for the twelve week period ended
September 7, 1997 was $5.6 million, compared to $3.0 million for the twelve week
period ended September 8, 1996. The increase in net interest expense was due to
higher levels of debt outstanding and higher effective interest rates during the
third quarter of 1997 as compared to the third quarter of
11
<PAGE>
1996. In addition, capital lease obligations outstanding during the third
quarter of 1997 were substantially higher than those during the comparable
period of a year ago.
Income Taxes. The Company's effective tax rate was 38.3% for the twelve
weeks ended September 7, 1997, which was not materially different than the
effective tax rate of 38.8% for the comparable period of a year ago.
Thirty-Six Weeks Ended September 7, 1997 and September 8, 1996
Revenues
Total revenues decreased 0.8%, or $2.8 million, during the thirty-six weeks
ended September 7, 1997 as compared to the thirty-six weeks ended September 8,
1996.
Restaurant Sales. Restaurant sales decreased 3.9%, or $11.7 million, from
the prior year. The decrease was primarily attributable to the sale of the 100
AFDC restaurants. These restaurants reported restaurant sales of $26.4 million
during the second and third quarters of 1996. The overall sales decrease was
partially offset by an increase in comparable sales for the remaining Company-
operated restaurants of 5.2% for the year.
Revenues From Franchising. Revenues from franchising increased $9.7
million or 28.0% from the prior year. Franchise royalty revenue increased $6.4
million or 21.2% and franchise fees increased $3.3 million or 73.3%. The
increase in franchise royalty revenue was attributable to several factors
including royalty revenues recorded for 100 restaurants franchised in connection
with the AFDC transaction, royalty revenues recorded for franchised Chesapeake
Bagel restaurants, an increase in the number of franchised restaurants and
comparable sales increases for domestic and international franchised
restaurants. The increase in franchise fees was primarily attributable to
franchise fees of $2.5 million recorded in connection with the AFDC transaction
and franchise fees of $1.2 million recorded in connection with the sale of 47
California restaurants to a franchisee.
Revenues From Manufacturing. Revenues from manufacturing decreased 22.0%,
or $1.3 million for the thirty-six weeks ended September 7, 1997 versus the
thirty-six weeks ended September 8, 1996. The decrease was primarily
attributable to a decrease in the sale of smallwares.
Operating Costs and Expenses
Restaurant Cost of Sales. Cost of sales for the year decreased 5.1% or
$5.0 million from the prior year. The decrease was primarily attributable to a
decrease in restaurant sales. Expressed as a percentage of restaurant sales,
cost of sales were 32.6% for the thirty-six weeks ended September 7, 1997
compared to 33.0% for the thirty-six weeks ended September 8, 1996. The decrease
in the percentage was attributable to small menu price increases taken in late
1996 and early 1997, usage reductions in paper items and shortening and
favorable pricing on certain non-poultry food items.
Restaurant Operating Expenses. Restaurant operating expenses for the
thirty-six weeks ending September 7, 1997 decreased $6.2 million or 4.2% from
the corresponding period in 1996. The decrease in restaurant operating expenses
was primarily attributable to the sale of the 100 AFDC restaurants. Restaurant
operating expenses as a percentage of restaurant sales were 49.3% for the first
three quarters of 1997, compared to 49.5% for the first three quarters of 1996.
Personnel expenses expressed as a percentage of restaurant sales was 28.6% for
the thirty-six weeks ended September 7, 1997, versus 27.9% for the thirty-six
weeks ended September 8, 1996. The increase in personnel costs as a percentage
of restaurant sales was primarily due to increases
12
<PAGE>
in the minimum wage levels effective October 1, 1996 and September 1, 1997.
Marketing expenses expressed as a percentage of restaurant sales was 7.6% for
the first three quarters of 1997, versus 8.0% for the first three quarters of
1996. The decrease in the percentage was primarily due to lower food discount
costs. Other restaurant operating costs expressed as a percentage of sales was
13.1% for thirty six week period ending September 7, 1997, versus 13.6% for the
corresponding period of 1996. The decrease in the percentage was primarily due
to decreases in utility costs resulting from the installation of more energy
efficient gas fryers in Company-operated restaurants.
Manufacturing Cost of Sales. Manufacturing cost of sales decreased 28.6%
or $1.2 million, for the thirty-six weeks ended September 7, 1997 compared to
the thirty-six weeks ended September 8, 1996. The decrease was primarily
attributable to the decrease in revenues during the first three quarters of 1997
compared to the same period of a year ago.
General and Administrative Expenses. General and administrative expenses
increased $3.3 million or 6.1% during the first three quarters of 1997 compared
to the first three quarters of 1996. As a percentage of total revenues, general
and administrative expenses increased from 15.8% for the first three quarters of
1996 to 16.8% for the first three quarters of 1997. The increase in general and
administrative expenses was due to a number of factors including asset
writedowns of software costs, overhead costs associated with the Chesapeake
Bagel brand, an increase in franchise sales marketing costs, an increase in
costs associated with acquisition activity and information technology
initiatives, and deferred compensation expenses related to employee stock
options.
Depreciation and Amortization. Depreciation and amortization increased
$2.7 million or 13.0% from the prior year. Depreciation and amortization as a
percentage of total revenues increased from 6.0% to 6.9% from the thirty-six
weeks ended September 8, 1996 to the thirty-six weeks ended September 7, 1997.
The increase was primarily due to fixed asset additions made during this period
totaling $60.6 million. Partially offsetting the increase was a decrease in
depreciation expense associated with the sale of 100 restaurants to AFDC and
other asset dispositions. The depreciable basis of fixed assets increased from
$257.2 million at September 8, 1996 to $286.3 million at September 7, 1997, or
11.3%. Depreciation expense for the thirty-six weeks ended September 7, 1997
versus the corresponding period of a year ago increased disproportionately over
the increase in depreciable fixed assets from September 8, 1996 to September 7,
1997 due to the fact that fixed asset additions during this period consisted
primarily of personal property assets with relatively shorter depreciable lives
and fixed asset dispositions during this period consisted primarily of real
property assets with relatively longer depreciable lives.
Net Interest Expense. Net interest expense for the thirty-six week period
ended September 7, 1997 was $13.0 million, compared to $11.8 million for the
thirty-six week period ended September 8, 1996. The $1.2 million increase in
net interest expense was due to higher levels of average debt outstanding and
higher effective interest rates during the first three quarters of 1997 as
compared with the first three quarters of 1996. The increase in average debt
outstanding was primarily attributable to the refinancing transaction completed
during the second quarter of 1997 and higher levels of capital lease obligations
outstanding during the first three quarters of 1997.
Income Taxes. The Company's effective tax rate for the thirty-six weeks
ended September 7, 1997 was 40.1%, which was not materially different than the
effective tax rate of 40.5% for the comparable period of a year ago.
Extraordinary Loss. During the second quarter of 1996 the Company
completed a refinancing whereby it sold 21.1 million shares of its common stock
for $70.0 million. Proceeds
13
<PAGE>
from the sale of stock were used, in part, to retire $65.0 million of the
Company's existing debt. As a result, the Company recognized an extraordinary
loss on the early retirement of debt (net of income taxes) in the amount of $4.4
million during the thirty-six week period ended September 8, 1996.
Liquidity and Capital Resources
The Company has financed its business activities primarily with funds
generated from operating activities, proceeds from the sale of shares of common
stock, proceeds from long-term debt and a revolving line of credit and proceeds
from the sale of certain Company-operated restaurants. Available cash and cash
equivalents, net of bank overdrafts, as of September 7, 1997 were $33.5 million,
compared to $8.4 million as of December 29, 1996. Net cash provided by
operating activities for the thirty-six weeks ended September 7, 1997 and
September 8, 1996 was $45.9 million and $35.9 million, respectively. The
Company's working capital deficit as of September 7, 1997 was $8.7 million,
while it had a working capital deficit as of December 29, 1996 of approximately
$23.2 million. Both the increase in cash and cash equivalents and the decrease
in the working capital deficit carried as of September 7, 1997 were primarily
due to net proceeds received in the debt refinancing transaction.
In May 1997, the Company completed a debt offering of $175.0 million of
Senior Subordinated Notes. In connection with this debt offering, the Company
also entered into a new $175.0 million Senior Secured Credit Facility whereby
the Company was provided with a $50.0 million term loan, a $25.0 million
revolving credit facility and a $100.0 million facility to be used for future
acquisitions. Under the terms of the revolving credit facility, the Company may
borrow and obtain letters of credit up to an aggregate of $25.0 million. At
September 7, 1997, the Company had $14.3 million in outstanding letters of
credit and $10.7 million available for short-term borrowings under the revolving
credit facility. Also at September 7, 1997, $100.0 million was available for
borrowings under the acquisition facility. On August 29, 1997 a portion of the
proceeds from the refinancing was used to repay certain capitalized lease
obligations totaling $16.7 million. The repayment was anticipated as part of
the refinancing transaction that occurred during the second quarter of 1997.
In August 1997, the Company secured a revolving line of credit of up to
$15.0 million to provide financing for the Company's Turnkey Development
program. As of September 7, 1997, the Company had not drawn against the
revolving line of credit.
During the Company's thirty-six weeks ended September 7, 1997 the Company
invested in various capital projects totaling $46.3 million. During this period
the Company invested $11.0 million in its re-imaging and renovation program and
$25.0 million in new management information systems. In addition, during the
first half of 1997, the Company invested $10.3 million in other capital assets
to update, replace and extend the lives of restaurant equipment and facilities,
construct a small number of new restaurant facilities and complete other minor
projects.
Based upon the current level of operations and anticipated growth,
management of the Company believes that available cash flow, together with the
available borrowings under the Senior Secured New Credit Facility and other
sources of liquidity, will be adequate to meet the Company's anticipated future
requirements for working capital, capital expenditures and scheduled payments
under the Senior Subordinated Notes and the Senior Secured New Credit Facility.
14
<PAGE>
Seasonality
The Company has historically experienced the strongest operating results at
both Popeyes and Churchs restaurants during the summer months while operating
results have been somewhat lower during the winter season. The holiday season
and inclement winter weather reduce the volume of consumer traffic at quick-
service restaurants and may impair the ability of certain restaurants to conduct
regular operations for short periods of time.
15
<PAGE>
PART 2. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The following exhibits are included herewith:
10.60 Credit agreement with Banco Popular ("Banco Popular")
De Puerto Rico for Turnkey Development program
financing
10.61 Exhibit A of credit agreement with Banco Popular -- The
Budget
10.62 Exhibit B of credit agreement with Banco Popular --
Form of Notes
10.63 Exhibit C of credit agreement with Banco Popular --
Form of Leasehold Mortgage
10.64 Exhibit D of credit agreement with Banco Popular --
Form of Owned Property Mortgage
10.65 Exhibit E of credit agreement with Banco Popular --
Form of Assignment of Contracts
10.66 Exhibit F of credit agreement with Banco Popular --
Form of Environmental Indemnity Agreement
10.67 Exhibit G of credit agreement with Banco Popular --
Form of Borrowing Certificate
10.68 Exhibit H of credit agreement with Banco Popular --
Terms and Conditions of Standard Franchise Loans
10.69 Exhibit I of credit agreement with Banco Popular --
Terms and Conditions of Popular Plus Loans
10.70 Exhibit J of credit agreement with Banco Popular --
Description of Borrower's "Plus Program"
10.71 Exhibit K-1 of credit agreement with Banco Popular --
Franchise Loan Commitment
10.72 Exhibit K-2 of credit agreement with Banco Popular --
Forms of Franchisee Loan Documents
27.1 Financial Data Schedule
(b) Current Reports on Form 8-K
None.
SIGNATURE
Pursuant to 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.
AFC Enterprises, Inc.
Date: October 21, 1997 By: /s/ Gerald Wilkins
-------------------
Gerald Wilkins
Chief Financial Officer
<PAGE>
CREDIT AGREEMENT
Dated as of August 12, 1997
between
AFC ENTERPRISES, INC.
("Borrower")
and
BANCO POPULAR DE PUERTO RICO
("Lender")
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS................................................................................... 1
1.1 Defined Terms................................................................................. 1
1.2 Other Definitional Provisions................................................................. 11
SECTION 2. AMOUNT AND TERMS OF LOANS..................................................................... 12
2.1 Loans; Amount of Loans........................................................................ 12
2.2 Collateral for Loans.......................................................................... 12
2.3 The Notes..................................................................................... 12
2.4 Procedure for Loan Borrowings................................................................. 12
2.5 Purpose of Loans.............................................................................. 13
2.6 Termination of Loan Borrowings................................................................ 13
2.7 Interest Rates................................................................................ 13
2.8 Calculation of Interest....................................................................... 14
2.9 Payment of Interest........................................................................... 14
2.10 Repayment of Loans............................................................................ 14
2.11 Facility Fee.................................................................................. 14
2.12 LIBOR Rate Election........................................................................... 14
2.13 Procedure for Payment......................................................................... 15
2.14 Prepayment.................................................................................... 15
2.15 Use of Proceeds of Loans...................................................................... 16
2.16 Taxes......................................................................................... 16
2.17 Indemnification............................................................................... 17
2.18 Reimbursement................................................................................. 17
2.19 Changes....................................................................................... 18
2.20 Lender's Rights............................................................................... 18
2.21 Number of Interest Rates...................................................................... 19
2.22 Default Rate.................................................................................. 19
2.23 No Usury...................................................................................... 19
2.24 Late Charge................................................................................... 19
SECTION 3. REQUIRED EQUITY............................................................................... 20
3.1 Borrower's Required Equity.................................................................... 20
3.2 No Reimbursement.............................................................................. 20
SECTION 4. REPRESENTATIONS AND WARRANTIES................................................................ 20
4.1 Financial Condition........................................................................... 20
4.2 No Change..................................................................................... 20
4.3 Corporate Existence; Compliance with Law...................................................... 20
4.4 Company Power; Authorization; Enforceable Obligations......................................... 21
4.5 No Legal Bar.................................................................................. 21
4.6 No Litigation................................................................................. 21
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
4.7 No Default.................................................................................... 21
4.8 Ownership of Property; Liens.................................................................. 21
4.9 [Intentionally Omitted]....................................................................... 21
4.10 Taxes......................................................................................... 22
4.11 Federal Regulations........................................................................... 22
4.12 ERISA......................................................................................... 22
4.13 Investment Company Act; Other Regulations..................................................... 22
4.14 Environmental Matters......................................................................... 23
4.15 Regulation H.................................................................................. 23
4.16 Existing Credit Facility Loan Agreement....................................................... 23
4.17 Construction and Renovation of Stores......................................................... 24
4.18 Compliance with Code and Regulations.......................................................... 24
4.19 Plans......................................................................................... 24
4.20 Building Permits; Other Permits............................................................... 24
SECTION 5. CONDITIONS PRECEDENT.......................................................................... 24
5.1 Conditions to Closing......................................................................... 24
5.2 Conditions to Loans After Closing Date and Reborrowings....................................... 28
SECTION 6. AFFIRMATIVE COVENANTS......................................................................... 29
6.1 Financial Statements.......................................................................... 29
6.2 Certificates; Other Information............................................................... 29
6.3 Payment of Obligations........................................................................ 30
6.4 Conduct of Business and Maintenance of Existence.............................................. 30
6.5 Maintenance of Property; Insurance............................................................ 30
6.6 Books and Records............................................................................. 30
6.7 Notices....................................................................................... 30
6.8 Environmental Laws............................................................................ 31
6.9 Real Estate Taxes............................................................................. 31
6.10 Inspections; Cooperation...................................................................... 31
6.11 Restoration................................................................................... 32
6.12 Payment of Obligations........................................................................ 32
6.13 Cost Overruns................................................................................. 32
6.14 [Intentionally Omitted]....................................................................... 32
6.15 Compliance with Laws; Encroachments........................................................... 32
6.16 Approval of Construction...................................................................... 33
6.17 Payments for Labor and Materials.............................................................. 33
6.18 Correction of Construction Defects............................................................ 33
6.19 Contractual Obligations....................................................................... 33
SECTION 7. NEGATIVE COVENANTS............................................................................ 33
7.1 Indebtedness to Affiliates or Others.......................................................... 34
7.2 Limitation on Loans to Affiliates or Others................................................... 34
7.3 Limitation on Liens........................................................................... 34
7.4 Limitation on Fundamental Changes............................................................. 34
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
7.5 Limitation on Sale of Assets.................................................................. 34
7.6 Limitation on Investments, Loans and Advances................................................. 34
7.7 Limitation on Transactions with Affiliates.................................................... 34
7.8 Limitation on Changes in Fiscal Year.......................................................... 35
7.9 Amendment; Modification Agreements............................................................ 35
7.10 Cost of Construction.......................................................................... 35
7.11 Contract Compliance........................................................................... 35
SECTION 8. EVENTS OF DEFAULT............................................................................. 35
SECTION 9. MISCELLANEOUS................................................................................. 38
9.1 Amendments and Waivers........................................................................ 38
9.2 Notices....................................................................................... 38
9.3 No Waiver; Cumulative Remedies................................................................ 39
9.4 Survival of Representations and Warranties.................................................... 39
9.5 Payment of Expenses and Taxes................................................................. 39
9.6 Sale of Completed Stores...................................................................... 40
9.7 Completed Store Financing; Popular Plus....................................................... 40
9.8 Successors and Assigns; Participations and Assignments........................................ 41
9.9 Counterparts.................................................................................. 42
9.10 Severability.................................................................................. 42
9.11 Integration................................................................................... 42
9.12 GOVERNING LAW................................................................................. 42
9.13 Submission To Jurisdiction; Waivers........................................................... 42
9.14 Acknowledgments............................................................................... 43
9.15 WAIVERS OF JURY TRIAL......................................................................... 43
</TABLE>
EXHIBITS AND SCHEDULES
Exhibit A The Budget
Exhibit B Form of Notes
Exhibit C Form of Leasehold Mortgage
Exhibit D Form of Owned Property Mortgage
Exhibit E Form of Assignment of Contracts
Exhibit F Form of Environmental Indemnity Agreement
Exhibit G Form of Borrowing Certificate
Exhibit H Terms and Conditions of Standard
Franchisee Loans
Exhibit I Terms and Conditions of Popular
Plus Loans
Exhibit J Description of Borrower's "Plus Program"
Exhibit K-1 Franchisee Loan Commitment
iii
<PAGE>
Exhibit K-2 Forms of Franchisee Loan
Documents
Schedule 1 Existing Credit Facility Financial Covenants
Schedule 2 Insurance Requirements
Schedule 3 Litigation
Schedule 4 Recent Company Acquisitions
iv
<PAGE>
CREDIT AGREEMENT (this "Agreement"), dated as of August 12, 1997,
---------
between AFC ENTERPRISES, INC., a Minnesota corporation, having an address at Six
Concourse Parkway, Suite 1700, Atlanta, Georgia 30328-5352 ("Borrower"), and
--------
BANCO POPULAR DE PUERTO RICO, having an address at 7 West 51st Street, New
York, New York 10019 ("Lender").
------
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following
-------------
terms shall have the following meanings:
"Acquisition": the acquisition by Borrower of fee or leasehold
interests in parcels of land or in-line store units for development as
Popeyes(R) or Church's(R) franchise stores.
"Affiliate": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 50% or more of the securities
having ordinary voting power for the election of directors of such Person or (b)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Agreement": this Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Applicable Interest Rate": (A) during the Revolving Loan Commitment
Period, either (i) the Revolving Loan Commitment Period Applicable Base Rate,
or (ii) the Revolving Loan Commitment Period Applicable LIBOR Rate, and (B)
during the Term Loan Period, if any, (i) the Term Loan Period Applicable Base
Rate, or (ii) the Term Loan Period Applicable LIBOR Rate.
"Applicable LIBOR Rate": During the Revolving Loan Commitment
Period, the Revolving Loan Commitment Period Applicable LIBOR Rate, and during
the Term Loan Period, if any, the Term Loan Period Applicable LIBOR Rate.
"Approved Sale": as defined in Section 9.6.
"Assignment of Contracts": the Assignment of Contracts, Licenses,
Permits and Agreements to be executed and delivered by Borrower or an Affiliate
with respect to any Property, which Assignment of Contracts shall be
substantially in the form of Exhibit E annexed hereto and made a part hereof.
---------
"Borrowing Certificate": as defined in Section 5.1(u).
<PAGE>
"Budget": the pro forma budget prepared by Borrower setting forth the
costs of the Acquisition and the construction, renovation and equipping of the
Stores, which Budget is annexed hereto as Exhibit A, and which will be modified
---------
for each Leased Property and each Owned Property for the particulars of each
Acquisition.
"Business": as defined in Section 5.1(n)(iii).
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Closing Date": the date on which the conditions precedent set
forth in Section 5.1 shall be satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Borrower acquired or financed with
the proceeds of any Loan, upon which a Lien is purported to be created by any
Loan Document.
"Commitment Letter": the Commitment Letter dated March 13, 1997
issued by Lender to Borrower, and accepted by Borrower as of March 13, 1997, and
as amended by amendment dated as of the date hereof.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"Completed Store": as defined in Section 9.6.
"Completed Store Contract": as defined in Section 9.6.
"Contractual Obligation": as to any Person, any provision of any
security issued, by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Construction Contracts": any and all contracts entered into by
Borrower or any Affiliate for the construction, renovation or equipping of the
Stores.
"Conversion Requirement": the sale of not less than fifty percent
(50%) of the Completed Stores, the acquisition, construction, renovation and/or
equipping of which shall have been financed by the proceeds of any Loan, at or
prior to the end of the Revolving Loan Commitment Period. As used herein,
"sale" may include any Completed Store which is the subject of a fully executed,
binding and irrevocable Completed Store Contract approved by Lender, whether or
not the closing of the transaction contemplated thereunder shall have occurred
prior to the end of the Revolving Loan Commitment Period; provided, however,
that
2
<PAGE>
for purposes of determining whether the Conversion Requirement shall have been
satisfied, fully executed, binding and irrevocable Completed Store Contracts
shall account for not more than ten percent (10%) of the "sales" required to
satisfy the Conversion Requirement.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Default Rate": a rate per annum equal to the Applicable Interest Rate
then in effect plus five hundred (500) basis points, but in no event greater
than the maximum rate of inter est permitted by applicable law.
"Domestic Business Day": Any day other than a Saturday or Sunday or a
day when commercial banks are authorized or required by law or executive order
to close in New York, New York.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Environmental Indemnity Agreement": the Environmental Indemnity
Agreement, to be executed and delivered by Borrower or an Affiliate with respect
to any Property, which Environmental Indemnity Agreement shall be substantially
in the form of Exhibit F annexed hereto and made a part hereof.
---------
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"Equity Contribution": the cash contribution of not less than twenty
percent (20%) of the cost of acquisition, construction, renovation and equipping
of the Stores, on a per-Store basis, which shall be made by Borrower on a
per-Store basis prior to the making of any Loan by Lender with respect to such
Store.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Business Day": any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London, England.
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
3
<PAGE>
"Existing Credit Facility": the loan and letter of credit facility
made by the Existing Lenders to Borrower pursuant to the Existing Credit
Facility Loan Agreement.
"Existing Credit Facility Financial Covenants": the financial and
other covenants made by Borrower under the Existing Credit Facility Loan
Agreement, a description of which covenants are annexed hereto as Schedule 1.
----------
"Existing Credit Facility Loan Agreement": the Loan Agreement dated
as of May 21, 1997, among Borrower, Goldman Sachs Credit Partners L.P., as
syndication agent and arranging agent, Canadian Imperial Bank of Commerce, as
administrative agent, and the Existing Lenders.
"Existing Lenders": the lenders listed on the signature pages of the
Existing Credit Facility Loan Agreement.
"Facility Fee": a fee equal to one percent (1%) of the principal
amount of each Loan.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"First Periodic Amortization Date": Subject to the provisions of
Section 2.10, March 1, 1999.
"First Periodic Interest Date": the first day of the occurring month
after the month in which the Closing Date occurs.
"Franchisee Loans": as defined in Section 9.7(a).
"Franchisee Loan Commitment": as defined in Section 9.7(a).
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time consistent with those utilized in
preparing the audited financial statements referred to in subsection 4.1.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranteed Indebtedness": any Indebtedness which is guaranteed
directly or indirectly in any manner by Borrower or any Affiliate of Borrower,
or in effect guaranteed directly or indirectly in any manner by Borrower or any
Affiliate of Borrower.
4
<PAGE>
"Hazardous Materials": hazardous and/or toxic, dangerous and/or
regulated, substances, wastes, materials, pollutants or contaminants, asbestos,
petroleum, tremolite, anthlophylie or actinolite or polychlorinated biphenyls
(including, without limitation, any raw materials which include hazardous
constituents) and any other substances or materials which are included under or
regulated by Environmental Laws.
"Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices or indebtedness
the existence of which is being contested by such Person in good faith and by
appropriate action), (b) any other indebtedness of such Person which is
evidenced by a note, bond, debenture or similar instrument, (c) all obligations
of such Person under Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, (e) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment there of,
(f) any Guaranteed Indebtedness, and (g) any other indebtedness required to be
recorded as indebtedness on the financial statements of such Person in
accordance with GAAP.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Insurance Requirements": the insurance requirements listed on
Schedule 2 annexed hereto and made a part hereof.
- ----------
"Lease": any lease entered into by Borrower for a Store.
"Leased Property": any leasehold interest in real property acquired
by Borrower with the proceeds of any Loan pursuant to a Lease.
"Leasehold Mortgages": collectively, the leasehold mortgages to be
executed and delivered by Borrower or an Affiliate to Lender with respect to any
Leased Property pursuant to the provisions of Section 5.1(a) hereof, which
Leasehold Mortgages shall encumber Borrower's (or its Affiliate's) interest in
the Leased Property and which shall be substantially in the form of Exhibit C
---------
annexed hereto and made a part hereof.
"Lender": Banco Popular de Puerto Rico, its successors and assigns.
"Lender's Engineer": any engineering or construction consulting firm
designated by Borrower and approved by Lender (which approval shall not be
unreasonably withheld or delayed), and engaged by Lender at Borrower's expense
to inspect the Plans and the construction, renovation and equipping of the
Stores.
5
<PAGE>
"LIBOR Interest Period": each 30-day period occurring while this
Agreement remains in effect, provided that no LIBOR Interest Period shall end
later than the Maturity Date. If a LIBOR Interest Period so selected would
otherwise end on a date which is not a Eurodollar Business Day, such LIBOR
Interest Period shall instead end on the next Eurodollar Business Day; provided
that (i) if such next Eurodollar Business Day falls in the next calendar month,
such LIBOR Interest Period shall end on the preceding Eurodollar Business Day,
and (ii) if such LIBOR Interest Period begins on a day for which there is no
numerically corresponding Eurodollar Business Day in the calendar month at the
end of such LIBOR Interest Period, then such LIBOR Interest Period shall end on
the last Eurodollar Business Day of such calendar month.
"LIBOR Pricing Option": the option granted to Borrower pursuant to
Section 2.12 hereof to have interest on all or a portion (but, if a portion, in
no event less than $100,000.00) of the principal amount of the Notes computed
with reference to the Applicable LIBOR Rate for a LIBOR Interest Period.
"LIBOR Rate": as applied to any LIBOR Interest Period, the rate per
annum, as determined by Lender (rounded to the nearest 1/16th of 1% or, if there
is no nearest 1/16th of 1%, the next higher 1/16th of 1%), at which deposits in
Eurodollars are offered to prime banks in the London Interbank Eurocurrency
Market (as determined by Lender) for dollar deposits in an amount approximately
equal to the portion of the principal amount of the Notes to be subject to a
LIBOR Pricing Option and having a maturity corresponding to each LIBOR Interest
Period, as quoted at approximately 11:00 A.M. (London time) two (2) Eurodollar
Business Days prior to the date upon which a LIBOR Interest Period is to
commence, as adjusted for Statutory Reserves. Each determination by Lender of
the LIBOR Rate shall be conclusive in the absence of manifest error.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, choate lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as any of the
foregoing), other than Real Estate Taxes or other taxes which are not then due
and payable.
"Loans": as defined in Section 2.1.
"Loan Documents": the Commitment Letter, this Agreement, the Notes,
the Mortgages, the Assignment of Contracts, the Security Agreement, the Leases,
and any other document evidencing, securing, or executed or delivered in
connection with, the Loan.
"Loan Payoff Amount": as defined in Section 9.6.
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of Borrower taken as a whole or (b) the validity or enforceability of this
Agreement or of any other Loan Documents
6
<PAGE>
or the rights or remedies of Lender hereunder or thereunder, unless the
principal amount of the Note secured thereby and all accrued interest thereon
shall have been repaid in full.
"Maturity Date": February 11, 1999; provided, however, in the event
the Conversion Requirement shall have been satisfied prior to February 11, 1999,
and Borrower shall have requested in writing that the maturity of the Notes be
extended, the Maturity Date shall be extended to February 11, 2003, but in no
event later than sixty-six (66) months from the Closing Date.
"Mortgages": the collective reference to the Owned Property Mortgages
and the Leasehold Mort gages.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a) (3) of ERISA.
"Non-Excluded Taxes": as defined in Section 2.10.
"Notes": collectively, the revolving loan promissory notes of
Borrower substantially in the form of Exhibit B attached hereto payable to the
---------
order of Lender and representing the obligation of Borrower to pay the unpaid
principal amount of the Loans evidenced by such notes, together with interest
thereon as prescribed therein.
"Obligations": all obligations of Borrower to Lender under or in
connection with this Agreement, the Loan Documents or any related instrument or
document, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, or now or hereafter existing, or due or to become due.
"Owned Property": any parcel of land or other interest in real
property acquired in fee by Borrower with the proceeds of any Loan.
"Owned Property Mortgages": Collectively, the mortgages to be
executed and delivered by Borrower or an Affiliate with respect to any Owned
Property in accordance with the provisions of Section 5.1 (a) hereof, which
Owned Property Mortgages shall encumber Borrower's (or its Affiliate's) interest
in the Owned Property and which shall be substantially in the form of Exhibit D
---------
annexed hereto and made a part hereof.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title Iv of ERISA.
"Periodic Amortization Amount": provided the Conversion Requirement
shall have been satisfied, an amount to be determined by Lender at the end of
the Revolving Loan Commitment Period based on the principal amount of the Notes
then outstanding in order to fully amortize such principal amount during the
Term Loan Period in equal monthly installments.
7
<PAGE>
"Periodic Amortization Date": the first (1/st/) day of each calendar
month occurring after the First Periodic Amortization Date.
"Periodic Amortization Payment": a periodic payment of a portion of
the Principal Amount equal to the Periodic Amortization Amount.
"Periodic Interest Date": the first (1/st/) day of each calendar
month occurring after the First Periodic Interest Date.
"Permitted Encumbrances": (i) Liens for taxes, assessments or
governmental charges or claims, the payment of which is not, at the time, due
and payable in order to avoid any penalty or fine; provided that no such charge
or claim need be paid if being contested in good faith by appropriate
proceedings promptly instituted by Borrower; (ii) statutory Liens of landlords
and Liens of carriers, warehousemen, mechanics and materialmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor; (iii) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance and
other type of social security or to secure the performance of tenders, statutory
obligations, surety, indemnity and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money); (iv) any attachment or judgment Lien not constituting an Event of
Default hereunder; (v) leases or subleases granted to others not interfering in
any material respect with the ordinary conduct of the business of Borrower;
(vi) easements, rights of way, licenses, covenants, conditions, restrictions,
zoning requirements, reciprocal easement operating agreements, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary conduct
of the business of Borrower at the Leased Property or Owned Property subject to
such Lien; (viii) any (a) interest or title of a lessor under any Lease, (b)
restriction or encumbrance that the interest or title of such lessor or
sublessor may be subject to, or (c) subordination of the interest of the lessee
or sublessee under such lease to any restriction or encumbrance referred to in
the preceding clause (b); (viii) Liens arising from filing Uniform Commercial
Code financing statements and fixture filings relating solely to (a) the
Existing Credit Facility, (b) equipment or Leases permitted by the Existing
Credit Facility, and (c) this Agreement or the Loan Documents; (ix) Liens on
goods held by suppliers arising in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor; (x) Liens in favor of customs and revenues authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (xi) rights of franchisees under franchise agreements in
keeping with the Borrower's historical practices; (xii) with respect to a Leased
Mortgage, any defect or encumbrance caused by or arising out of the failure to
record the Lease or a memorandum thereof in the applicable real property records
other than any defect or encumbrance created by Borrower; (xiii) the effect of
any eminent domain or condemnation proceedings; and (xiv) any matter disclosed
in the
8
<PAGE>
mortgagee title insurance commitment from the Title Company which is not
objected to by Lender.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which any Borrower or an Affiliate is (or, if
such plan were terminated at such time, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Plans": any and all standardized plans and specifications prepared
in connection with the construction, renovation and equipping of the Stores and
approved in writing by Lender, and as the same may be from time to time be
amended with the prior written approval of Lender with respect to any material
modifications.
"Popular Plus Loans": as defined in Section 9.7(b).
"Prime Rate": the prime commercial lending rate of Lender as publicly
announced (or published internally by Lender) to be in effect from time to time.
The Prime Rate is not necessarily the lowest rate charged by Lender for
commercial or other types of loans, it being understood that the Prime Rate is
only one of the bases for computing interest on loans made by Lender and that,
by basing interest on the Prime Rate, Lender has not committed to charge and
Borrower has not in any way bargained for interest based on a lower or the
lowest rate at which Lender may now or in the future make loans to other
borrowers. Any interest rate based on the Prime Rate shall be adjusted on and
as of the effective date of any change in the Prime Rate.
"Prime Rate Option": the option granted to Borrower pursuant to
Section 2.7 to have interest on all or a portion of the principal amount of the
Notes computed with respect to (i) during the Revolving Loan Commitment Period,
the Revolving Loan Commitment Period Applicable Base Rate, and (ii) during the
Term Loan Period, if any, the Term Loan Period Applicable Base Rate.
"Properties": collectively, the Owned Properties and the Leased
Properties.
"Qualified AFC Franchisee": as defined in Section 9.6.
"Real Estate Taxes": as defined in Section 6.9.
"Regulation D": Regulation D, as amended from time to time, of the
Board of Governors of the Feder al Reserve System (or any successor thereto),
including any successor or other regulations or official interpretation of said
Board of Governors or any other regulations in substance substituted therefore.
9
<PAGE>
"Regulatory Development": any or all of the following: (a) any change
in or making or adoption of any United States federal, state or foreign law,
regulation (including Regulation D) or interpretation thereof by any
Governmental Authority, monetary authority, fiscal agency or other authority
(whether or not having the force of law); (b) any application of any existing
law, regulation or interpretation thereof by any Governmental Authority,
monetary authority, fiscal agency or other authority (whether or not having the
force of law); and/or (c) any voluntary or involuntary compliance by Lender with
any request or directive (whether or not having the force of law) of any
Governmental Authority, monetary or fiscal agency or other authority.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections 13, 19 or 20 of PBGC Reg. 2615.
"Request for Borrowing": as defined in Section 2.4.
"Requirement of Law": as to any Person, the operating agreement,
articles of organization, certificate of organization, certificate of
incorporation, or other organizational or governing documents of such Person,
and any law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Responsible Officer": the president, the vice president of finance,
the executive vice president or the chief financial officer of Borrower.
"Revolving Loan Commitment Period": The period commencing on the
Closing Date and ending on February 11, 1999.
"Revolving Loan Commitment Period Applicable Base Rate": A rate per
annum equal to the Prime Rate plus fifty (50) basis points.
"Revolving Loan Commitment Period Applicable LIBOR Rate": A rate per
annum equal to the LIBOR Rate plus three hundred (300) basis points.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Standard Franchisee Loans": as defined in Section 9.7(b).
"Statutory Reserves": for any LIBOR Interest Period, the average
maximum rate, expressed as a decimal, at which reserves (including any marginal,
supplemental or
10
<PAGE>
emergency reserves) are required to be maintained by Lender during such LIBOR
Interest Period under Regulation D including in the case of Eurodollar loans,
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Statutory Reserves shall reflect any
other reserves required to be maintained by Lender by reason of any Regulatory
Development against (i) any category of liabilities which includes deposits by
reference to which the LIBOR Rate is to be determined or (ii) any category of
extensions of credit or other assets which include loans subject to the LIBOR
Rate. Statutory Reserves shall be adjusted automatically on and as of the
effective date of any change in said reserve requirement percentage. Any
determination of Statutory Reserves by Lender shall be conclusive in the absence
of manifest error.
"Stores": the portion of the Properties to be developed by Borrower
as Popeye's(R) or Church's(R) franchise restaurants.
"Term Loan Period": provided the Conversion Requirement shall have
been satisfied, the period commencing on February 12, 1999 and ending on
February 11, 2003.
"Term Loan Period Applicable Base Rate": a rate per annum equal to
the Prime Rate plus one hundred (100) basis points.
"Term Loan Period Applicable LIBOR Rate": a rate per annum equal to
the LIBOR Rate plus three hundred fifty (350) basis points.
"Title Company": A national title company designated by Borrower and
approved by Lender, which approval shall not be unreasonably withheld or
delayed.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower not defined in subsection 1.1 and accounting terms partly defined in
subsection 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Section, Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
11
<PAGE>
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 LOANS; AMOUNT OF LOANS. Subject to the terms and conditions
----------------------
hereof, Lender agrees to make revolving loans (collectively, "Loans") to
-----
Borrower from time to time during the Revolving Loan Commitment Period in the
aggregate principal amount at any one time outstanding not to exceed the sum of
Fifteen Million and 00/100 Dollars ($15,000,000), as such amount may be reduced
from time to time or reborrowed and increased pursuant to Section 2.10 hereof.
Subject to the requirements of Sections 5.1 and 5.2 hereof, during the Revolving
Loan Commitment Period, Borrower may request Lender to make Loans in whole or in
part, all in accordance with the terms and conditions of this Agreement,
provided, however, that on the date of the making of any Loans and after giving
- -------- -------
effect to the making of such Loans, the Loans outstanding at such time shall not
exceed the sum of Fifteen Million and 00/100 Dollars ($15,000,000.00).
2.2 COLLATERAL FOR LOANS. The Loans shall be secured by the
--------------------
Mortgages and the other Collateral described herein and in the other Loan
Documents.
2.3 THE NOTES. The Loans shall be evidenced by the Notes. The Notes
---------
shall represent the obligation of Borrower to pay the unpaid principal amount of
the Loans made by Lender with interest thereon as described therein. Lender is
hereby authorized to record the date and amount of each Loan and the date and
amount of each payment or prepayment of principal thereof on the schedule
annexed to and constituting a part of each Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded
----- -----
in the absence of manifest error; provided, however, that the failure by Lender
-------- -------
to make any such recordation on any Note shall not affect any of the obligations
of Borrower under such Note or this Agreement. Each Note shall (i) bear
interest, payable as specified in Section 2.9 hereof, for the period from the
date thereof on the unpaid principal amount thereof from time to time
outstanding at the applicable interest rates per annum specified in Section 2.7
hereof, and (ii) be stated to mature on the Maturity Date.
2.4 PROCEDURE FOR LOAN BORROWINGS. (a) Subject to the requirements
-----------------------------
of Section 5.1 and 5.2, Borrower may borrow Loans during the Revolving Loan
Commitment Period on any Business Day. Borrower shall give Lender irrevocable
written (including telecopy) notice (or telephonic notice promptly confirmed in
writing) (each, a "Request for Borrowing"), in a form reasonably acceptable to
---------------------
Lender, prior to 10:00 a.m., New York City time, at least ten (10) Business Days
prior to the proposed borrowing date, specifying (i) the amount of the Loan,
(ii) the requested borrowing date (which must be a Business Day), and (iii)
whether the requested Loan is to accrue interest based on the LIBOR Pricing
Option or the Prime Rate Option.
(b) Each Request for Borrowing shall be accompanied by all relevant
documentation (including, without limitation, Leases, contracts of sale,
invoices, receipted bills, equipment invoices and executed lien waivers) with
respect to the Loan requested to be advanced which shall be subject to Lender's
review and approval.
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<PAGE>
(c) There shall be a maximum of two (2) Loans advanced for each
Store.
2.5 PURPOSE OF LOANS. The proceeds of the Loans shall be used
----------------
solely to finance the Acquisition and the construction, renovation and equipping
of the Improvements. The Request for Borrowing delivered by Borrower pursuant to
Section 2.4 in connection with each Loan shall contain a specific itemized
description of the items to be funded or reimbursed, certified in each instance
by Borrower.
2.6 TERMINATION OF LOAN BORROWINGS. Upon the expiration of the
------------------------------
Revolving Loan Commitment Period, Borrower shall no longer have the right to
borrow or reborrow Loans hereunder, and Lender's obligation to advance any Loans
shall automatically terminate. In the event the Conversion Requirement shall
have been satisfied, the principal amount of the then outstanding Loans shall
be fixed and shall be repaid at the times and in accordance with the provisions
of Section 2.10(c). In the event the Conversion Requirement shall not have been
satisfied, the outstanding principal amounts of the Loans, together with all
accrued interest thereon and all other amounts due under this Agreement and the
other Loan Documents shall be immediately due and payable.
2.7 INTEREST RATES. Interest on the principal amount of the Notes
--------------
shall accrue at the rates set forth in this Section 2.7.
(a) REVOLVER PERIOD. During the Revolving Loan Commitment Period,
---------------
interest shall accrue on the principal amount of the Notes as follows:
(i) as to any portion of the principal amount not subject to a
LIBOR Pricing Option, at a rate per annum equal to the Revolving Loan Commitment
Period Applicable Base Rate; or
(ii) as to any portion of the principal amount subject to a
LIBOR Pricing Option, at a rate per annum equal to the Revolving Loan Commitment
Period Applicable LIBOR Rate; or
(iii) upon the occurrence and during the continuation of an
Event of Default, or after maturity, whether by acceleration or otherwise, at
the Default Rate.
(b) TERM LOAN PERIOD. During the Term Loan Period, if any, interest
----------------
shall accrue on the principal amount of the Notes as follows:
(i) as to any portion of the principal amount not subject to a
LIBOR Pricing Option, at a rate per annum equal to the Term Loan Period
Applicable Base Rate; or
(ii) as to any portion of the principal amount subject to a
LIBOR Pricing Option, at a rate per annum equal to the Term Loan Period
Applicable LIBOR Rate; or
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<PAGE>
(iii) upon the occurrence and during the continuation of an
Event of Default, or after maturity, whether by acceleration or otherwise, at
the Default Rate.
2.8 CALCULATION OF INTEREST. Interest under the Notes shall be
-----------------------
calculated on the basis of a 360-day year for the actual number of days
involved.
2.9 PAYMENT OF INTEREST. Borrower agrees to pay interest on the
-------------------
principal amount of each Note at a rate per annum equal to the Applicable
Interest Rate then in effect by periodic payments of interest in arrears
commencing on the First Periodic Interest Date and continuing on each Periodic
Interest Date with respect to each Note thereafter until the entire principal
amount of the Note is paid. Interest shall also be due with respect to each Note
on the Maturity Date at the Applicable Interest Rate for the period from the
Periodic Interest Date immediately preceding the Maturity Date up to and
including the Maturity Date. After maturity, the principal amount of each Note
and accrued interest thereon shall, at Lender's option, be payable on demand.
2.10 REPAYMENT OF LOANS. (a) The Loans shall mature, and the
------------------
principal amount of the Notes and all accrued interest hereunder and thereunder
shall be due and payable, on February 11, 1999, unless the Conversion
Requirement shall have been satisfied, in which event the term of the Loans
shall be extended for the Term Loan Period. In no event shall the Maturity Date
be extended beyond February 11, 2003.
(b) During the Revolving Loan Commitment Period and the Term Loan
Period, if any, Borrower shall repay the Loans on a per-store basis
simultaneously with the closing of an Approved Sale from the Loan Payoff Amount
of such Approved Sale.
(c) Provided the Conversion Requirement shall have been satisfied and
the term of this Agreement shall have been extended for the Term Loan Period,
Borrower agrees to pay, in addition to the payment of interest in accordance
with Section 2.9, the principal amount now or hereafter owing under the Loans
prior to the Maturity Date by making Periodic Amortization Payments that are
due and payable during the term of this Agreement commencing on the First
Periodic Amortization Date, and thereafter on each succeeding Periodic
Amortization Date.
(d) The unpaid principal amount of the Loans, and all accrued and
unpaid interest thereon, shall be due and payable on the Maturity Date.
2.11 FACILITY FEE. Borrower shall pay to Lender a Facility Fee of
------------
one percent (1%) of the principal amount of each Loan; the Facility Fee shall be
paid by Borrower to Lender simultaneously with the making of any Loan hereunder.
2.12 LIBOR RATE ELECTION. Provided there is no Default or Event
-------------------
of Default hereunder or under any other Loan Document, Borrower may elect a
LIBOR Pricing Option by (i) giving written notice to Lender no later than 10:00
A.M. (New York, New York time) three (3) Eurodollar Business Days prior to the
commencement of a LIBOR Interest Period of
14
<PAGE>
Borrower's desire to select a LIBOR Pricing Option and (ii) by not later than
1:00 P.M. (New York, New York time) three (3) Eurodollar Business Days prior to
the commencement of a LIBOR Interest Period, Borrower shall by telephonic advice
(to be confirmed the next day in writing) irrevocably select a LIBOR Pricing
Option based upon approximate and nonbinding rates quoted by Lender to Borrower
at the time of such telephonic notice, by specifying the portion (but in no
event less than $100,000.00) of the principal amount of the Notes not then
subject to a LIBOR Pricing Option to bear interest at the Applicable LIBOR Rate.
If the written confirmation received by Lender differs from the action taken by
Lender, the records of Lender shall control absent manifest error. Prior to the
effective date of any LIBOR Pricing Option, Lender shall notify Borrower (by
telephone, telecopy or otherwise) if any LIBOR Pricing Option is not available
to Lender because (i) Eurodollar deposits which have a maturity corresponding to
the proposed LIBOR Interest Period in an amount equal to the portion of the
Principal Amount to be subject to such LIBOR Pricing Option are not reasonably
available to Lender in the London Interbank Eurocurrency Market, or (ii) by
reason of circumstances affecting such Market, adequate and reasonable methods
do not exist for Lender to ascertain the interest rate applicable to such
deposits for the proposed LIBOR Interest Period, or (iii) Lender has determined
in its reasonable discretion that the Applicable LIBOR Rate does not adequately
and fairly reflect the cost to Lender of making or maintaining the portion of
the Principal Amount to be subject to a LIBOR Pricing Option. Upon the
termination of a LIBOR Pricing Option, the portion of the principal amount of
the Notes subject to such LIBOR Pricing Option will thenceforth bear interest at
(i) the Revolving Loan Commitment Period Applicable Base Rate, if such
termination occurs during the Revolving Loan Commitment Period, or (ii) the Term
Loan Period Applicable Base Rate, if such termination occurs during the Term
Loan Period, if any, unless, in either case, an alternative LIBOR Pricing Option
shall thereafter be exercised in accordance with the provisions of this
Section.
2.13 PROCEDURE FOR PAYMENT. Each payment under this Agreement and the
---------------------
Notes, including each prepayment of the principal amount and payment of interest
and principal hereunder and under the Notes, shall be made by Borrower to Lender
at its office at 7 West 51/st/ Street, New York, New York 10019, in immediately
available funds, by 3:00 P.M., New York City time, on the due date for such
payment. The failure of Borrower to make any such payment by the aforesaid time
shall not constitute a default hereunder, provided that such payment is made on
such due date, but any such payment received by Lender after 3:00 P.M., New York
City time, on such due date shall be deemed to have been made on the next
Domestic Business Day or Eurodollar Business Day, as the case may be, for the
purpose of calculating interest on the principal amount of the Notes. If any
payment hereunder or under the Notes shall be due and payable on a day which is
not a Domestic Business Day or Eurodollar Business Day, as the case may be, the
maturity thereof shall be extended to the next Domestic Business Day or
Eurodollar Business Day, as the case may be (except as otherwise provided in the
definition of LIBOR Interest Period), and interest shall be payable at the
applicable rate specified herein during such extension.
2.14 PREPAYMENT. Subject to the provisions of Sections 2.17, 2.18
----------
and 2.19 of this Agreement, upon not less than five (5) Domestic Business Days
prior written notice to Lender with respect to prepayment of any principal
amount of a Note which is subject to a
15
<PAGE>
LIBOR Pricing Option, specifying the intended date of prepayment, Borrower shall
have the right to prepay the principal amount of a Note, in whole or in part,
without premium or penalty but with all accrued interest on the amount being
prepaid to the date of such prepayment. No notice of prepayment need be given
with respect to any principal amount of a Note which is not subject to a LIBOR
Pricing Option. In the event Borrower makes a partial prepayment of the
principal amount of a Note pursuant to and in accordance with this Section 2.14,
Borrower may designate that such prepayment, after payment of accrued interest
on the amount being prepaid, be applied to repay such principal amount which is
then subject to a particular LIBOR Pricing Option, provided: (i) said
designation is contained in the written notice of prepayment, (ii) Borrower
complies with the provisions of Sections 2.17, 2.18 and 2.19 hereof and (iii)
after a partial prepayment of the principal amount which is then subject to a
particular LIBOR Pricing Option, said LIBOR Pricing Option shall be terminated
with respect to the Note in question and thereafter any outstanding principal
amount of such Note previously subject to a LIBOR Pricing Option shall bear
interest from and after the date of termination of such LIBOR Pricing Option at
(i) the Revolving Loan Commitment Period Applicable Base Rate, if such
termination occurs during the Revolving Loan Commitment Period, or (ii) the Term
Loan Period Applicable Base Rate, if such termination occurs during the Term
Loan Period, if any, unless Borrower shall in either case thereafter elect, in
accordance with the terms of Section 2.12, another LIBOR Pricing Option. The
notice of prepayment with respect to any principal amount then subject to a
LIBOR Pricing Option under this Section shall be irrevocable and shall obligate
Borrower to prepay the amount stated therein on the date stated therein.
2.15 USE OF PROCEEDS OF LOANS. The proceeds of the Loans shall be
------------------------
used by Borrower to finance the Acquisition and the construction, renovation and
equipping of the Stores.
2.16 TAXES. All payments made by Borrower under this Agreement, the
-----
Notes or any other Loan Document shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding income taxes and franchise taxes
imposed on Lender as a result of a present or former connection between Lender
and the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreements, the Note or any other Loan Document). If any such non-excluded
taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-
---
Excluded Taxes") are required to be withheld from any amounts payable to Lender
- --------------
hereunder or under the Notes, the amounts so payable to Lender shall be
increased to the extent necessary to yield to Lender (after payment of all Non-
Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in the Notes. Whenever any Non-Excluded Taxes
are payable by Borrower, as promptly as possible thereafter Borrower shall send
to Lender a certified copy of an original official receipt received by Borrower
showing payment thereof. If Borrower fails to pay any Non-Excluded Taxes when
16
<PAGE>
due to the appropriate taxing authority or fails to remit to Lender the required
receipts or other required documentary evidence, Borrower shall indemnify Lender
for any incremental taxes, interest or penalties that may become payable by
Lender as a result of any such failure. The agreements in this Section 2.16
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder and under the other Loan Document.
2.17 INDEMNIFICATION. Notwithstanding anything to the contrary
---------------
contained herein or in any other Loan Document, Borrower agrees that if, while a
LIBOR Pricing Option is in effect, (i) any repayment or prepayment of the Loans
is made for any reason (other than as required by Section 2.10 of this Agreement
or as contemplated in the last sentence of the definition of LIBOR Interest
Period) on a day prior to the last Domestic or Eurodollar Business Day of the
then effective LIBOR Interest Period, if any, or (ii) by any other action of
Borrower or by reason of an acceleration of the Loans, a LIBOR Pricing Option is
terminated on a day prior to the last Domestic or Eurodollar Business Day of the
then effective LIBOR Interest Period with respect to such LIBOR Pricing Option,
Borrower shall indemnify Lender against, and pay on demand directly to Lender,
any loss, liability, expense, penalty or other charge suffered or incurred by
Lender as a result of such repayment or termination of a LIBOR Pricing Option,
including, without limitation, (a) any loss, liability, expense, penalty or
other charge suffered or incurred by Lender during the period from the date of
receipt of such repayment or acceleration to the last Domestic or Eurodollar
Business Day, as the case may be, of the LIBOR Interest Period in question if
the rate of interest obtainable by Lender upon the redeployment of an amount of
funds equal to such repayment is less than the interest rate computed with
reference to the Applicable LIBOR Rate in effect during the LIBOR Interest
Period in question, or (b) any loss, liability or expense suffered by Lender in
liquidating prior to maturity Eurodollar deposits or other deposits, as the case
may be, in amounts which correspond to such payment. A certificate of Lender
giving a reasonably detailed calculation of the amount of any such loss or
expense shall be deemed conclusive in the absence of manifest error.
2.18 REIMBURSEMENT. Borrower agrees to reimburse Lender for its costs
-------------
in complying during the term of this Agreement with all applicable laws,
executive orders and regulations of the governments of the United States, the
United Kingdom and any other applicable government, and of any regulatory or
administrative agency thereof (including, without limitation, the Bank of
England, the Board of Governors of the Federal Reserve System or any other
governmental body claiming jurisdiction), including any increase in said costs
due to change therein or in the interpretation thereof, which impose, modify or
deem applicable any reserve, asset maintenance or special deposit or capital
adequacy requirements on the obligation of Lender to make loans hereunder or on
deposits obtained in the London Interbank Eurocurrency Market or other markets
in respect of the portion of the principal amount of the Notes subject to a
LIBOR Pricing Option, or which subject Lender to any tax with respect to this
Agreement or the Notes or change the basis of taxation of payments to Lender of
principal, interest or fees payable under this Agreement or the Notes (except
for any tax, or changes in the rate of any tax, based upon the net income or
profits of Lender) or which impose any other similar conditions with respect to
the Loan or the obligation of Lender to
17
<PAGE>
make the Loan. The increased cost to Lender in complying with laws, executive
orders or regulations which impose, modify or deem applicable any reserve, asset
maintenance or special deposit or capital adequacy requirements on the
obligation of Lender to make loans hereunder or on deposits obtained in the
London Interbank Eurocurrency Market or other markets shall be computed by
determining the amount by which such requirements effectively increase Lender's
cost of making and maintaining the deposits attributable to the portion of the
principal amount of the Notes subject to a LIBOR Pricing Option, and by
computing the additional interest which would have been owing to Lender if such
effective increase had been added to the Applicable LIBOR Rate for purposes of
determining the Applicable LIBOR Rate during the affected period. A certificate
of Lender giving a reasonably detailed calculation of the amount of such costs
shall be deemed conclusive in the absence of manifest error. Lender shall give
Borrower written notice of any such increased cost of Lender's making and
maintaining the deposits attributable to the portion of the principal amount of
the Notes subject to the LIBOR Pricing Option upon Lender's receipt of notice of
the same.
2.19 CHANGES. Notwithstanding anything to the contrary contained
-------
herein, in the Notes, the Mortgage or in any other Loan Document, if, prior to
or during any LIBOR Interest Period, any change in any law, treaty, regulation
or official directive, or in the interpretation thereof, by any governmental
body charged with the administration thereof, shall make it unlawful for Lender
to fund or maintain its funding in Eurodollars or other dollars of the principal
amount of the Notes subject to a LIBOR Pricing Option or otherwise to give
effect to Lender's obligations as contemplated hereby, (i) Lender may by notice
to Borrower declare that its obligations in respect of any such LIBOR Pricing
Option are terminated forthwith, (ii) such LIBOR Pricing Option shall forthwith
cease to be in effect, and interest shall from and after such date be calculated
based on (i) the Revolving Loan Commitment Period Applicable Base Rate, if such
termination occurs during the Revolving Loan Commitment Period, or (ii) the Term
Loan Period Applicable Base Rate, if such termination occurs during the Term
Loan Period, if any, unless Borrower shall in either case thereafter elect, in
accordance with the terms hereof, an individual LIBOR Pricing Option not subject
to such illegality, and (iii) Borrower agrees to indemnify Lender against any
loss, cost, or expense as provided in Section 2.17. A certificate of Lender
giving a reasonably detailed calculation of the amount of any such loss,
expense, penalty or other charge shall be deemed conclusive in the absence of
manifest error.
2.20 LENDER'S RIGHTS. Lender has indicated that if Borrower elects a
---------------
LIBOR Pricing Option, Lender may wish to purchase one or more deposits in order
to fund or maintain its funding of the portion of the principal amount of the
Notes subject to such LIBOR Pricing Option during the LIBOR Interest Period in
question. Lender shall be entitled to fund and maintain its funding of all or
any part of that portion of the principal amount of the Notes in any manner it
sees fit, provided that all determinations hereunder (including, without
limitation, all determinations under Sections 2.17, 2.18 and 2.19 of this
Agreement) shall be made as if Lender had actually funded and maintained that
portion of the principal amount of the Notes to be subject to such LIBOR Pricing
Option during the applicable LIBOR Interest Period through the purchase of
Eurodollar deposits or other deposits, as the case may be, in an
18
<PAGE>
amount equal to the portion of the principal amount of the Notes subject to such
LIBOR Pricing Option and having a maturity corresponding to such LIBOR Interest
Period.
2.21 NUMBER OF INTEREST RATES. The total number of LIBOR Pricing
------------------------
Options outstanding under each Note at any one time shall not exceed two (2).
2.22 DEFAULT RATE. Borrower does hereby agree that upon the
------------
occurrence and during the continuation of an Event of Default hereunder, or
under the Mortgages or any other Loan Document, or upon the failure of Borrower
to pay the Obligations in full on the Maturity Date, Lender shall be entitled to
receive and Borrower shall pay interest on the entire unpaid principal amount of
the Notes from the date of such default at the Default Rate. Interest shall
accrue hereunder and under the Notes at the Default Rate from the occurrence of
the default until the actual receipt and collection of the Obligations. This
charge shall be added to the Obligations and shall be deemed secured by the
Mortgages. This Section, however, shall not be construed as an agreement or
privilege to extend the date of payment of the Obligations, nor as a waiver of
any other right or remedy accruing to Lender by reason of the occurrence of any
default. In the event the Default Rate is above the maximum rate permitted by
applicable law, the Default Rate shall be the maximum rate permitted by
applicable law.
2.23 NO USURY. This Agreement is subject to the express condition
--------
that at no time shall Borrower be obligated or required to pay interest on the
Obligations at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay. If by the
terms of this Agreement or the Notes, Borrower is at any time required or
obligated to pay interest on the Obligations at a rate in excess of such maximum
rate, the rate of interest due under this Agreement or the Notes shall be deemed
to be immediately reduced to such maximum rate and all previous payments in
excess of the maximum rate shall be deemed to have been payments in reduction of
principal and not on account of the interest due hereunder.
2.24 LATE CHARGE. If any sum payable under this Agreement, the Notes
-----------
or any other Loan Document is not paid within fifteen (15) days after the date
on which it is due, Borrower shall pay to Lender upon demand an amount equal to
the lesser of two percent (2%) of such unpaid sum or the maximum amount
permitted by applicable law to defray the expenses incurred by Lender in
handling and processing such delinquent payment and to compensate Lender for the
loss of the use of such delinquent payment and such amount shall be secured by
the Mortgages and the other Loan Documents.
19
<PAGE>
SECTION 3. REQUIRED EQUITY
3.1 BORROWER'S REQUIRED EQUITY. As of the Closing Date of
---------------------------
each Loan for each Store, Borrower shall provide Lender with evidence acceptable
to Lender that Borrower has expended or will expend the Equity Contribution. The
Equity Contribution must be made by Borrower on a per-Store basis prior to the
making of any Loan by Lender with respect to such Store.
3.2 NO REIMBURSEMENT. Costs and expenses paid or funded from the
-----------------
Equity Contribution will not be reimbursed from or by proceeds of any Loan
hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement and to make the Loans,
Borrower hereby represents and warrants to Lender that:
4.1 FINANCIAL CONDITION. All financial statements which have
-------------------
heretofore been furnished to Lender are substantially and materially complete
and correct and present fairly the financial condition of Borrower as of the
date thereof. All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein). Borrower did
not have, as of the date of the most recent financial statement referred to
above, any contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto. Except as
disclosed in Schedule 4 annexed hereto and made a part hereof, during the period
----------
from December 29, 1996 to and including the date hereof there has been no sale,
transfer or other disposition by Borrower of any material part of its business
or property and no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to the
financial condition of Borrower.
4.2 NO CHANGE. Since December 29, 1996 there has been no
---------
development or event which has had or could have a Material Adverse Effect.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Borrower (a) is duly
----------------------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the company power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification and (d) is
in compliance with all Requirements of Law which, if not complied with, would
have a Material Adverse Effect upon Borrower's ability to perform the
Obligations.
20
<PAGE>
4.4 COMPANY POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Borrower
-----------------------------------------------------
has the corporate power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and to borrow hereunder and
under the terms of the Notes and has taken all necessary company action to
authorize the borrowing on the terms and conditions of this Agreement and the
Notes and to authorize the execution, delivery and performance of the Loan
Documents to which it is a party. No consent or authorization of, filing with,
notice to or other act by or in respect of any Governmental Authority or any
other Person is required in connection with the borrowing hereunder or with the
execution, delivery, performance, validity or enforceability of the Loan
Documents to which Borrower is a party. This Agreement and the other Loan
Documents have been duly executed and delivered on behalf of Borrower. This
Agreement and the other Loan Documents to which it is a party constitute the
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
4.5 NO LEGAL BAR. The execution, delivery and performance of the
------------
Loan Documents to which Borrower is a party, the borrowing hereunder and the use
of the proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of Borrower and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
4.6 No Litigation. Except as set forth on Schedule 3 annexed hereto
------------- ----------
and made a part hereof, no material litigation or investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of Borrower, threatened by or against Borrower or against any of its
properties or revenues that would have a Material Adverse Effect on Borrower's
ability to perform the Obligations or to consummate any of the transactions
contemplated hereunder or under the other Loan Documents.
4.7 NO DEFAULT. Borrower is not in default under or with respect to
----------
any of its material Contractual Obligations, including, without limitation, its
Contractual Obligations under and pursuant to the Existing Credit Facility Loan
Agreement.
4.8 OWNERSHIP OF PROPERTY; LIENS. On the Closing Date of each Loan
----------------------------
for each Store, (i) Borrower will have a good, record and valid fee interest in
the Owned Properties, (ii) Borrower will have a good, record and valid leasehold
interest in the Leasehold Properties, (iii) Borrower will have a good, record
and valid ownership (either fee or leasehold) in all its other property acquired
or to be acquired with the proceeds of a Loan, and (iv) none of the Properties
is or shall be subject to any Lien other than the Liens created by the Loan
Documents or that of real property or similar taxes which are not yet due and
payable or other Permitted Encumbrances.
4.9 [INTENTIONALLY OMITTED].
---------------------
21
<PAGE>
4.10 TAXES. Borrower has filed or caused to be filed all tax
-----
returns which, to the knowledge of Borrower, are required to be filed and has
paid all taxes shown to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than any the amount of which does not exceed $100,000.00 in the aggregate
or the amount or validity of which are currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of Borrower); no tax Lien for overdue
amounts has been filed, and, to the knowledge of Borrower, no claim is being
asserted, with respect to any such tax, fee or other charge which would have a
Material Adverse Effect.
4.11 FEDERAL REGULATIONS. No part of the proceeds of the Loans will
-------------------
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. If requested by Lender, Borrower will furnish to Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case
may be.
4.12 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period which
has not been discharged. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. Neither Borrower nor any Commonly
Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither Borrower nor any Commonly Controlled Entity
would become subject to any liability under ERISA if Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
4.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. Borrower is not an
-----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. Borrower
is not subject to regulation under any Federal or State statute or regulation
which limits its ability to incur Indebtedness.
22
<PAGE>
4.14 ENVIRONMENTAL MATTERS.
---------------------
(a) Borrower has not received any notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of the Properties or the Business, nor does Borrower to its knowledge have
reason to believe that any such notice will be received or is being threatened.
(b) To the best knowledge of Borrower, Hazardous Materials have not
been transported or disposed of from the Properties in violation of, or in a
manner or to a location which could give rise to liability under, any
Environmental Law, nor have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of the Properties in violation of, or
in a manner that could give rise to liability under, any applicable
Environmental Law.
(c) To the best knowledge of Borrower, no judicial proceeding or
governmental or administrative action is pending or threatened under any
Environmental Law to which Borrower is or will be named as a party with respect
to the Properties or the Business, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to the Properties or the Business.
(d) With respect to Properties that will be newly acquired by
Borrower using proceeds from a Loan, and as to which Properties Borrower did
not have operational control prior to the date upon which such Property shall
have been acquired by Borrower using proceeds from a Loan, Borrower shall be
deemed to have complied with the representations and warranties of this Section
4.14 if it relies on a Phase I or Phase II (as appropriate) environmental audit
of the Property in question conducted by an environmental engineer licensed in
the state in which the Property is located within the due diligence period
occurring prior to Borrower's acquisition of the Property, provided such
environmental audit is issued in favor of Borrower and Lender and is
satisfactory to Lender in all respects.
4.15 REGULATION H. No Mortgage encumbers, nor will any Mortgage
------------
encumber, improved real property which is located in an area that has been
identified by the Secretary of Housing and Urban Development as an area having
special flood hazards and in which flood insurance has been made available under
the National Flood Insurance Act of 1968.
4.16 EXISTING CREDIT FACILITY LOAN AGREEMENT. (a) The Existing
---------------------------------------
Credit Facility Loan Agreement is in full force and effect and has not been
modified or amended except as fully disclosed to Lender in writing; and (b) no
uncured, material default or event of default has occurred and is continuing
under the Existing Credit Facility Loan Agreement.
23
<PAGE>
4.17 CONSTRUCTION AND RENOVATION OF STORES. The construction and
-------------------------------------
renovation of the Stores shall be performed within the perimeter of the
Properties in accordance with the Plans and in accordance with all applicable
laws and any restrictive covenants applicable thereto. The construction,
renovation and use of the Stores complies and will comply with applicable zoning
ordinances, regulations and restrictive covenants affecting the Properties and
all requirements of all Governmental Authorities for such construction,
renovation and use have been and will continue to be satisfied and no material
violation of any laws or regulations exists or will exist with respect thereto.
4.18 COMPLIANCE WITH CODE AND REGULATIONS. The Stores shall be
------------------------------------
constructed, renovated, equipped, operated, used and maintained in material and
substantial compliance with, and shall at all times during the ownership by
Borrower continue to be in material and substantial compliance with all
applicable laws including, without limitation, all applicable safety, fire,
health, and other codes or regulations affecting the Properties, including,
without limitation, all applicable provisions of Title III of the Americans with
Disabilities Act of 1990 (as same may be amended from time to time) and all
applicable provisions of the Occupational Health and Safety Act so as to avoid
the imposition of penalties or disruption of the Business.
4.19 PLANS. To the extent required by applicable law, the Plans have
-----
been or will be approved by all Governmental Authorities having or claiming
jurisdiction over the Properties.
4.20 BUILDING PERMITS; OTHER PERMITS. All building, construction and
-------------------------------
other permits necessary or required in connection with the construction,
renovation or equipping of the Stores have been or will be validly issued and
all fees and bonds required in connection therewith have been or will be paid or
posted, as the circumstances may require.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO CLOSING. The agreement of Lender to make the
---------------------
Loans is subject to the satisfaction, immediately prior to or concurrently with
the Closing Date, of the following conditions precedent:
(a) Loan Documents. Lender shall have received (i) this
--------------
Agreement, executed and delivered by a duly authorized officer of Borrower,
(ii) the Notes, executed and delivered by a duly authorized officer of
Borrower, in the principal amount of any Loans made as of the Closing Date,
(iii) to the extent any of the proceeds of a Loan are to be used to acquire
a Property or construct, renovate or equip any Improvements, (x) a
Leasehold Mortgage, executed and delivered by a duly authorized officer of
Borrower, if such Property is a Leased Property, or (y) an Owned Property
Mortgage, executed and delivered by a duly authorized officer of Borrower,
if such Property is an Owned Property, (iv) the Assignment of Contracts,
executed and delivered by a duly authorized officer of Borrower, (v) the
Environmental Indemnity
24
<PAGE>
Agreement, executed and delivered by a duly authorized officer of Borrower,
and (vi) UCC-1 Financing Statements, executed and delivered by a duly
authorized officer of Borrower.
(b) Equity Contribution. Lender shall have received evidence
-------------------
that Borrower has made, or will concurrently make, the Equity Contribution
with respect to any Property for which a Loan is being made.
(c) Related Documents. Lender shall have received all other
-----------------
documents and agreements described in the Closing Checklist prepared in
connection with the Loans, and such other documents or instruments as may
be reasonably requested by Lender.
(d) Corporate Proceedings of Borrower. Lender shall have
---------------------------------
received a copy of the resolutions, certified by any of Borrower's
Secretary or Assistant Secretaries and in form and substance reasonably
satisfactory to Lender, of Borrower authorizing (i) the execution, delivery
and performance of this Agreement and the other Loan Documents to which it
is a party, (ii) the borrowings contemplated hereunder and (iii) the
granting by it of the Liens created ed pursuant to the Loan Documents,
effective as of the Closing Date, which certificate shall be in form and
substance reasonably satisfactory to Lender and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
(e) Borrower Incumbency Certificate. Lender shall have
-------------------------------
received a Certificate of Borrower, dated the Closing Date, as to the
incumbency and signature of the officer(s) of Borrower executing any Loan
Document satisfactory in form and substance to Lender.
(f) Corporation Documents. Lender shall have received true and
----------------------
complete copies of the certificate of incorporation and by-laws of
Borrower.
(g) Plans. Lender and Lender's Engineer shall have reviewed
-----
and approved the Plans prepared as of the Closing Date with respect to the
Improvements. The Plans may be amended or modified without Lender's consent
on a Store-by-Store basis to comply with specific circumstances, provided
such amendments or modifications are not material to the Plans as a whole.
(h) Budget. Lender shall have reviewed and approved the Budget.
------
(i) Construction Contracts. Lender shall have reviewed and
----------------------
approved all Construction Contracts entered into by Borrower as of the
Closing Date and Lender shall have received a letter agreement from each
contractor under the Construction Contracts whereby such contractor shall
agree to perform for Lender, at Lender's option, at no increase in price,
if Lender takes possession of the Property to
25
<PAGE>
which such Construction Contract relates following a foreclosure, deed-in-
lieu of foreclosure, or otherwise.
(j) Bonds. In the event the Plans or the Construction Contracts
-----
for a Store deviate materially from the standard Plans and Construction
Contracts for a typical Store (i.e., such deviations will result in
construction costs which will exceed by more than twenty percent (20%) in
the aggregate the total costs set forth in the pro forma Budget attached
hereto as Exhibit A), as determined by Lender's Engineer, Lender shall have
---------
received and approved material and labor payment bonds and performance
bonds with respect to all contractors under such Construction Contracts.
(k) Leases. (i) The Leases shall be valid, in full force and effect
------
according to their terms, shall not be in default in any material respect,
and shall not have been modified or amended except as fully disclosed by
Borrower to Lender in writing; (ii) Borrower shall be the absolute owner
of the tenant's or lessee's interest in the Leases; (iii) Borrower shall
not be in default under the terms of any Lease, which default would have a
Material Adverse Effect, and (iv) Lender shall have received true and
correct copies of all Leases, together with estoppel certificates, and
consent to assign/mortgage or recognition agreements from the lessor under
each Lease.
(l) Fees. Lender shall have received the Facility Fee then due and
----
the fees to be received on the Closing Date referred to in Section 9.5.
(m) Legal Opinion. (i) On the date hereof, Lender shall have
-------------
received the opinion of Cohen Pollock Merlin Axelrod & Tanenbaum, counsel
to Borrower, in form and substance acceptable to Lender; and (ii) prior to
the making of any for the of any Property or for the construction,
renovation or equipping of Improvements on such Property, the Mortgage to
be executed by Borrower and which will encumber the Property in question
shall have been reviewed by Lender's local counsel, at Borrower's expense,
and conformed to the requirements of, and placed in form so that such
Mortgage is enforceable and acceptable for recording under the laws of,
the jurisdiction in which the Property is located; provided, however,
-------- -------
that Lender shall require only one (1) such review described in this
clause (ii) per jurisdiction for each six (6) month period to the extent
Borrower acquires multiple Properties in a particular jurisdiction with
the proceeds of Loans.
(n) Environmental Report. (i) Lender shall have received (no later
--------------------
than ten (10) days prior to the Closing Date) and approved a Phase I
environmental site assessment with respect to any newly acquired Property
for which a Loan has been requested by Borrower and which report shall
conclude to the satisfaction n of Lender that, among other things, there is
no indication of a release of Hazardous Materials at or from such Property,
or arising from or related to the Business, in violation of or in amounts
or in a manner that could give rise to liability under nder Environmental
Laws.
26
<PAGE>
(ii) As a condition to Lender's obligation to advance any
Loan proceeds hereunder for a particular Property, the Property in question
will not contain, and, to the best knowledge of Borrower, shall not have
previously contained, any Hazardous Materials in amounts or concentrations
which (i) constitute or constituted a violation of, or (ii) could give rise
to liability under, any Environmental Law.
(iii) To the best knowledge of Borrower at the time of
the making of a Loan hereunder with respect to a particular Property, the
Property in question and all operations at such Property shall or will be
in compliance with all applicable Environmental Laws, and there is no
contamination at, under or about such Property in violation of any
Environmental Law with respect to such Property or the business operated by
Borrower on such Property (the "Business") which could interfere with the
--------
continued operation of such Property or materially impair the fair saleable
value thereof.
(o) Survey. Prior to the making of any Loan for the
------
acquisition of any Property or for the construction, renovation or
equipping of Improvements on such Property, Lender shall have received and
approved a survey of such Property, certified to Lender and the Title
Company, showing the location of all existing Improvements thereon.
(p) Permits. Prior to the making of any Loan for the
-------
construction, renovation or equipping of any Improvements, Lender shall
have received and approved evidence that Borrower has obtained all
necessary zoning approvals and all required building permits, operating
licenses and other permits required in connection with the construction,
renovation, equipping and operating of such Property or Properties.
(q) Title Policy. Prior to the making of any Loan for the
------------
acquisition of a Property, Lender shall have receive a mortgagee title
policy or title commitment from the Title Company with respect to such
Property. Said mortgagee title insurance policy shall insure the applicable
Mortgage as a first lien on such Property and shall contain no exceptions
affecting marketability other than the Permitted Encumbrances and other
exceptions approved by Lender in writing.
(r) Appraisal. Prior to the making of any Loan for the
---------
acquisition of any Property or the construction, renovation or equipping of
any Improvements, Lender shall have received and approved an appraisal of
such Property or Improvements.
(s) Mortgage Tax. All mortgage recording taxes and recording
------------
and filing fees for a Mortgage shall have been paid by Borrower.
27
<PAGE>
(t) Real Estate Taxes. Prior to the making of any Loan for the
-----------------
acquisition of any Property or for the construction, renovation or
equipping of any Improvements, Lender shall have received evidence that all
Real Estate Taxes then due and payable with respect to such Property or
Improvements have been paid.
(u) Borrowing Certificate. Lender shall have received a
---------------------
certificate executed by a Responsible Officer in the form of Exhibit G
---------
annexed hereto and made a part hereof (a "Borrowing Certificate"), dated as
---------------------
of the Closing Date, certifying (i) that at the time of and immediately
after giving effect to any Loan to be made on the Closing Date, no Default
or Event of Default has occurred and is continuing, (ii) that all the
representations and warranties contained in Section 4 hereof are true and
correct in all material respects as of such date, (iii) Borrower has
substantially complied with all covenants and conditions required to be
complied by it hereunder by such date, and (iv) the Equity Contribution
required to be made by Borrower as of such date has been made by Borrower.
(v) Actions to Perfect Liens. Lender shall have received
------------------------
evidence in form and substance satisfactory to it that all filings,
recordings, registrations and other actions, including, without limitation,
the filing of duly executed financing statements on form UCC-1, necessary
or, in the opinion of Lender, desirable to perfect the Liens created by the
Loan Documents shall have been completed or will be completed upon the
making of a Loan.
(w) Lien Searches. Lender shall have received the results of a
-------------
recent search by a Person satisfactory to Lender, of the Uniform Commercial
Code, judgment and tax lien filings which may have been filed with respect
to personal property of Borrower located in, on or at the Properties, and
the results of such search shall be satisfactory to Lender. Notwithstanding
the foregoing, any such search shall be acceptable to Lender for a period
of one hundred eighty (180) days with regard to any subsequent Loans made
with respect to Properties in the same jurisdiction.
(x) Insurance. Lender shall have received evidence in form and
---------
substance satisfactory to it that all of the Insurance Requirements shall
have been satisfied.
5.2 CONDITIONS TO LOANS AFTER CLOSING DATE AND REBORROWINGS. The
--------------------------------------------------------
obligation of Lender to make Loans after the Closing Date is subject to
satisfaction of (i) the limitations set forth in Section 2.1, (ii) the
conditions described in Section 5.1, and (iii) the following additional
conditions:
(a) Borrowing Certificate. Lender shall have received a Borrowing
---------------------
Certificate executed by a Responsible Officer as of the date of the
requested Loan.
(b) No Default. At the time of and immediately after giving effect
----------
to such Loan, no Default or Event of Default shall have and be
continuing.
28
<PAGE>
(c) Representations and Warranties. All of the representations and
------------------------------
warranties contained in Section 4 hereof shall be true and correct on and
as of the date of such Loan with the same effect as if made on and as of
such date.
(d) Note; Mortgage; UCC-1s. Borrower shall have executed a delivered
----------------------
Note and, to the extent the proceeds of such Loan are to be used for the
acquisition of a Property or the construction, renovation or equipping of a
Store, (x) a Leasehold Mortgage or an Owned Property Mortgage, as the case
may be, and (y) UCC-1 Financing statements.
(e) Mortgage Tax. Any and all mortgage taxes and recording fees
------------
which are then due and payable shall have been fully paid by Borrower, it
being understood by Borrower that no sums paid or prepaid to Lender with
respect to the Loans will be readvanced unless and until any and all
mortgage taxes and recording fees for the Mortgages which are then due and
payable are fully paid by Borrower.
SECTION 6. AFFIRMATIVE COVENANTS
Borrower hereby agrees that, so long as this Agreement remains in
effect or any amount is owing to Lender hereunder or under any other Loan
Document, Borrower shall:
6.1 Financial Statements. Furnish to Lender: (a) (i) within sixty (60)
--------------------
days after the end of each fiscal quarter of Borro wer, quarterly internally
prepared financial statements of Borrower acceptable to Lender and certified by
the chief financial officer of Borrower having been prepared in accordance with
GAAP consistently applied, subject to year-end audit adjustments; and (ii)
within ninety (90) days after the end of each fiscal year, annual financial
statements of Borrower acceptable to Lender, prepared in accordance with GAAP
consistently applied and audited by a independent accounting firm acceptable to
Lender; all such financial statements shall be complete and correct in all
material respects and shall be prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such accountants or officer, as the case
may be, and disclosed therein).
6.2 Certificates; Other Information. Furnish to Lender:
-------------------------------
(a) concurrently with the delivery of the annual financial
statements referred to in Section 6.1(a)(ii), a certificate of the chief
financial officer of Borrower stating that he has no knowledge of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Section 6.1(a)(i), a certificate of a Responsible Officer
stating that, to the best of such Responsible Officer's knowledge,
Borrower during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition,
29
<PAGE>
contained in this Agreement and the other Loan Documents to be observed,
performed or satisfied by it, and that such Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate; and
(c) promptly, such additional financial and other information as
any Lender may from time to time reasonably request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at
----------------------
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
Borrower or where such failure to pay, discharge or otherwise satisfy will not
have a Material Adverse Effect.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE . Continue to
------------------------------------------------
engage in business at the Properties of the same general type as now conducted
by it and preserve, renew and keep in full force and effect its company
existence and take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business.
6.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful
----------------------------------
and necessary in its Business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on the Properties
and the Improvements in at least such amounts and against at least such risks
(but including in any event public liability and business interruption) as are
usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to Lender, upon written request, full
information as to the insurance carried.
6.6 BOOKS AND RECORDS. Keep proper books of records and account in
-----------------
which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its Business.
6.7 NOTICES. Promptly give notice to Lender of:
-------
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any material
Contractual Obligation of Borrower or (ii) the commencement of any
investigation or proceeding affecting Borrower, the Collateral and any
Government ntal Authority which would have a Material Adverse Effect;
(c) any material pending or threatened litigation affecting
Borrower or the Collateral;
30
<PAGE>
(d) the following events, as soon as possible and in any event
within 30 days after Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer
Plan or (ii) the institution of proceedings or the taking of any other
action by the PBGC or Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;
(e) any amendment or modification of, or any waiver obtained
under, the Existing Credit Facility Loan Agreement; and
(f) any default or event of default under, or the threatened
termination of, the Existing Credit Facility Loan Agreement.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Borrower proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS. (a) Comply with all Environmental Laws
------------------
applicable to the Properties and obtain and comply with and maintain any and
all licenses, approvals, notifications, registrations or permits required by
Environmental Laws applicable to the Properties.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions applicable to the
Properties required under Environmental Laws and promptly comply with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws applicable to the Properties.
6.9 REAL ESTATE TAXES. Provide Lender, promptly after same are
-----------------
issued by the relevant Governmental Authorities with tax receipts or receipted
tax bills, or other evidence of payment, evidencing the payment of all real
estate taxes and assessments, water and sewer charges and other assessments and
charges (collectively, "Real Estate Taxes") that are due and payable with
-----------------
respect to the Properties and required to be paid by Borrower.
6.10 INSPECTIONS; COOPERATION. Permit Lender and its duly authorized
------------------------
representatives, including, without limitation, Lender's Engineer, to enter upon
the Properties, to inspect the Stores and any and all materials to be used in
connection with the construction, renovation and equipping of the Stores, to
examine all detailed plans and shop drawings and similar materials as well as
all records and books of account maintained by or on behalf of Borrower relating
thereto (including conducting a full audit) and to discuss the affairs, finances
and accounts pertaining to the Loans and the Properties with representatives of
Borrower. Borrower shall at all times cooperate and cause its employees and
agents, as well as the contractors and subcontractors and materialmen to
cooperate with Lender and its duly
31
<PAGE>
authorized representatives, including, without limitation, Lender's Engineer,
in connection with or in aid of the performance of Lender's functions under this
Agreement. The fees of any representatives engaged or employed by Lender in
connection with or in aid of the performance of Lender's functions under this
Agreement including, without limitation, the fees of Lender's Engineer, shall be
paid by Borrower. Such inspections by Lender's Engineer shall not be conducted
more than twice during the construction, renovation or equipping of any Store.
6.11 RESTORATION. Proceed immediately, if the Stores (or other
-----------
improvements on the Properties), are partially or totally damaged or destroyed
by fire or other casualty, with the restoration thereof and diligently prosecute
the work of restoration to completion, if Lender shall elect to make available
to Borrower the proceeds of any fire or other casualty insurance paid to and
received by Lender with respect to such damage or destruction. Notwithstanding
the foregoing, in the event that (i) the Stores are partially or totally damaged
or destroyed, and (ii) Lender elects not to make insurance proceeds available to
Borrower, then Borrower shall proceed diligently to demolish or contain such
damaged Stores or take such other action as is necessary to make them compatible
with the undamaged Stores and surrounding Property, all such work to be approved
in advance by Lender, provided that Lender shall make available to Borrower
insurance proceeds paid to and received by Lender to the extent necessary to
cover the costs of demolishing or containing the damaged Stores. Notwithstanding
anything in this Section 6.11, Borrower, in lieu of restoring any Store which is
damaged or destroyed by fire or other casualty, may elect in accordance with the
provisions of the Mortgages, to repay the Loan or Loans the proceeds of which
were used to finance the construction, renovation and/or equipping of such
Store. Upon the repayment by Borrower of the principal amount of and all accrued
interest under such Loan or Loans, together with all other fees and expenses
required to be paid by Borrower under the Loan Documents with respect to such
Loan or Loans, Borrower shall be deemed to have satisfied all of its obligations
hereunder and under the other Loan Documents with respect to such Store, and
Lender shall assign to Borrower all of Lender's right, title and interest in and
to any insurance proceeds with respect to such damaged or destroyed Store.
6.12 PAYMENT OF OBLIGATIONS. Pay when due all obligations incurred
----------------------
by Borrower for the cost of constructing, renovating and/or equipping the
Stores.
6.13 COST OVERRUNS. Promptly provide Lender with written notice of
-------------
any significant cost overruns with respect to the construction, renovation or
equipping of any Stores. For purposes of this Section 6.13, a "significant" cost
overrun shall be deemed an overrun of ten percent (10%) or more of the aggregate
amount of all Construction Contracts for a particular Store.
6.14 [INTENTIONALLY OMITTED].
----------------------
6.15 COMPLIANCE WITH LAWS; ENCROACHMENTS. Cause the construction,
-----------------------------------
renovation and equipping of the Stores to be performed (i) in accordance with
all applicable (whether present or future) laws, ordinances, rules, regulations,
requirements and orders of
32
<PAGE>
any Governmental Authorities, and (ii) within the perimeter of the Properties
without encroachment upon any easements or rights of way, all substantially in
accordance with the Plans and in accordance with any building restriction lines
and set-backs and any restrictive covenants, declarations, covenants, zoning and
subdivision ordinances and development conditions and proffers applicable
thereto.
6.16 APPROVAL OF CONSTRUCTION. Not permit work associated with the
------------------------
construction, renovation or equipping of the Stores to be commenced unless and
until the Plans have been approved by Lender in accordance with Section 5.1(g)
hereof and, to the extent required by applicable law or any effective
restrictive covenant, by all Governmental Authorities having or claiming
jurisdiction and by the beneficiary of any such restrictive covenant, and unless
and until all building, construction and other permits necessary or required in
connection with the construction, renovation or equipping of the Stores have
been validly issued and all fees and bonds required in connection therewith have
been paid or posted, as the circumstances may require.
6.17 PAYMENTS FOR LABOR AND MATERIALS. Pay when due all bills for
--------------------------------
services or labor performed and materials supplied in connection with the
construction, renovation or equipping of the Stores. In the event any
mechanics' lien or other lien or encumbrance shall be filed or attached against
the Properties, Borrower covenants and agrees that, within sixty (60) days after
the filing of such lien, Borrower will promptly discharge the same by payment or
filing bond or otherwise as permitted by law; and if Borrower fails to do so,
Lender may, at its option, in addition to, and not in limitation of, all other
rights and remedies of Lender in the Event of Default by Borrower, and without
regard to the priority of said mechanics' lien or other lien or encumbrance, pay
the same, and all amounts expended by Lender for such purpose shall constitute
loans to Borrower and shall be secured by the Collateral, and shall be due and
payable forthwith by Borrower to Lender with interest thereon at the Default
Rate provided for in the Notes.
6.18 CORRECTION OF CONSTRUCTION DEFECTS. Promptly following any
----------------------------------
demand by Lender, correct or cause the correction of any structural defects in
the Stores then owned or leased (to the extent the applicable Lease obligates
Borrower to do so) by Borrower and any material and substantial departures or
deviations from the Plans not approved in writing by Lender or otherwise deemed
approved pursuant to Section 5.1(g) hereof.
6.19 CONTRACTUAL OBLIGATIONS. Comply at all times with its
-----------------------
Contractual Obligations under the Existing Credit Facility Loan Agreement
(including, without limitation, the Existing Credit Facility Financial
Covenants) and all other Contractual Obligations.
SECTION 7. NEGATIVE COVENANTS
Borrower hereby agrees that, so long as this Agreement remains in
effect or any amount is owing to Lender hereunder or under any other Loan
Document, Borrower shall not, directly or indirectly:
33
<PAGE>
7.1 INDEBTEDNESS TO AFFILIATES OR OTHERS. Except to the extent
------------------------------------
permitted under the Existing Credit Facility Loan Agreement, incur any
Indebtedness after the Closing Date to its shareholders, partners, officers,
members and/or Affiliates without Lender's prior written consent, and any such
Indebtedness approved by Lender shall be made expressly subordinated to the
Obligations on terms acceptable to Lender.
7.2 LIMITATION ON LOANS TO AFFILIATES OR OTHERS. After the Closing
-------------------------------------------
Date, issue a loan or loans to its shareholders, partners, officers, members
and/or Affiliates in excess of $1,000,000.00 in the aggregate during any fiscal
year of Borrower; provided, however, that a condition to the making of any such
loan or loans shall be that the same not cause Borrower to default under this
Agreement or the other Loan Documents or the Existing Credit Facility Loan
Agreement.
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist
-------------------
any Lien upon any of the Properties, or any other property, assets or revenues,
whether now owned or hereafter acquired, except for the Permitted Encumbrances
and the Liens granted to or permitted pursuant to the Existing Credit Facility
Loan Agreement and Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of Borrower in conformity with GAAP.
7.4 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
---------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets, or make any material change in its present method of
conducting business, except as permitted under the Existing Credit Facility Loan
Agreement.
7.5 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
----------------------------
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, except for the sale of Completed Stores
pursuant to Section 9.6, transactions in the ordinary course of the Business or
as other wise permitted under the Existing Credit Facility Loan Agreement.
7.6 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
---------------------------------------------
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, including,
without limitation, any partner, shareholder, officer, member or Affiliate of
Borrower, unless otherwise permitted hereunder or under the Existing Credit
Facility Loan Agreement.
7.7 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
------------------------------------------
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement or as
contemplated under the Existing Credit Facility Loan Agreement,
34
<PAGE>
(b) in the ordinary course of Borrower's business and (c) upon fair and
reasonable terms no less favorable to Borrower than it would obtain in a
comparable arm's length transaction with a Person which is not an Affiliate;
provided, however, that the foregoing restriction shall not apply to reasonable
and customary compensation or employee benefit arrangements with any officer or
member of the board of directors of Borrower or a wholly-owned subsidiary of
Borrower permitted under the Existing Credit Facility Loan Agreement.
7.8 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
------------------------------------
Borrower to end on a day other than a day occurring within the period from
December 20 to December 31.
7.9 AMENDMENT; MODIFICATION AGREEMENTS. Amend, modify, cancel or
----------------------------------
terminate (i) any Lease, (ii) any Construction Contract, (iii) the Existing
Credit Facility Loan Agreement, or (iv) any other document or agreement entered
into in connection with the Existing Credit Facility, if any such amendment,
modification, cancellation or termination would have a Material Adverse Effect.
7.10 COST OF CONSTRUCTION. Permit the aggregate sum of hard costs
--------------------
and soft costs incurred in connection with the acquisition, construction,
renovation and equipping of any Store to exceed $1,000,000.00.
7.11 CONTRACT COMPLIANCE. Not permit any uncured default to exist
-------------------
under any Construction Contract, unless Borrower is contesting such default
diligently and in good faith.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Borrower shall fail to make any payment of interest or
principal, or interest and principal, under the Notes, in any case, within
five (5) days after the same is due;
(b) Borrower shall default in the observance or performance of
any other covenant or agreement contained in this Agreement or any other
Loan Document, and such default shall continue beyond any applicable notice
or cure period;
(c) A default by Borrower under any Lease which is encumbered
by a Leasehold Mortgage shall continue beyond any applicable notice or cure
period, or any Lease which is encumbered by a Leasehold Mortgage shall be
modified, amended, terminated, surrendered or assigned by Borrower, without
the prior written consent of Lender;
35
<PAGE>
(d) A default by Borrower with respect to any of the Existing
Credit Facility Financial Covenants shall continue beyond the applicable
notice and cure period specified in the Existing Credit Facility Loan
Agreement;
(e) Any representation or warranty of Borrower made herein or
in any other Loan Document, or in any certificate, report, financial
statement or other instrument or document furnished to Lender by Borrower
shall have been false or misleading in any material respect when made;
(f) if Borrower shall make an assignment for the benefit of
creditors or if Borrower shall generally not be paying its debts as they
become due;
(g) if a receiver, liquidator or trustee of Borrower shall be
appointed or if Borrower shall be adjudicated a bankrupt or insolvent, or
if any petition for bankruptcy, reorganization or arrangement pursuant to
federal bankruptcy law, or any similar federal or state law, shall be filed
by or against, consented to, or acquiesced in by, Borrower or if any
proceeding for the dissolution or liquidation of Borrower shall be
instituted; however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower, upon the same
not being discharged, stayed or dismissed within ninety (90) days;
(h) (i) If Borrower shall fail to pay when due any principal of
or interest on or other amounts (to the extent such other amounts are in
excess of $750,000,00) owing in respect of one or more items of
Indebtedness in an individual principal amount of $750,000.00 or more or
with an aggregate principal amount of $3,000,000.00 or more, in each case
beyond the end of any grace period provided therefor; or (ii) a breach or
default by Borrower (which breach or default occurs or continues after the
Closing Date) with respect to any other material term of (a) one or more
items of Indebtedness in the individual or aggregate principal amounts
referred to in clause (i) above or (b) any loan agreement, mortgage,
indenture or other agreement relating to such item(s) of Indebtedness in
the individual or aggregate principal amounts referred to in clause (i)
above, if the effect of such breach or default is to cause, or permit the
holder or holders of that Indebtedness (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness to become or be declared due
and payable prior to its stated maturity or the stated maturity of any
underlying obligation, as the case may be (upon the giving or receiving of
notice, lapse of time, both, or otherwise);
(i) (i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan, (ii) any "accumulated funding deficiency" (as defined in Section
302 of ERISA), whether or not waived, shall exist with respect to any Plan
or any Lien in favor of the PBGC or a Plan shall arise on the assets of
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
36
<PAGE>
proceedings or appointment of a trustee is, in the reasonable opinion of
Lender, likely to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) Borrower or any Commonly Controlled
Entity shall, or in the reasonable opinion of Lender is likely to, incur
any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist with respect to a Plan; and in each case in
clauses (i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could have a Material Adverse
Effect;
(j) One or more judgments or decrees shall be enter ed against
Borrower involving an aggregate liability (not paid or fully covered by
insurance) of $3,000,000.00 or more, and any such judgment or decree shall
not have been vacated, discharged, stayed or bonded pending appeal within
sixty (60) days from the entry thereof; or
(k) (i) Any of the Loan Documents shall cease, for any reason,
to be in full force and effect, or Borrower shall so assert or (ii) the
Lien created by any of the Loan Documents shall cease to be enforceable and
of the same effect and priority purported to be created thereby, unless
Borrower repays the Loan(s) secured by such Loan Documents within fifteen
(15) days after receipt by Borrower of written notice of the purported
unenforceability or reduction in Lien priority;
then, in any such event Lender may, by notice to Borrower, declare the
Loans (with accrued interest thereon) and all other amounts owing under this
Agreement, the Notes and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable. Except
as expressly provided above in this Section, presentment, demand, protest and
all other notices of any kind are hereby expressly waived. Except for the
Defaults or Events of Default described in Section 8(a) (which shall be subject
to the applicable cure period described therein) and Section 8(k) (with respect
to which there shall be no additional cure period), the Defaults or Events of
Default described in Sections 8(b) through 8(j) shall have a cure period of
thirty (30) days following receipt of written notice from Lender of the
occurrence of such Default or Event of Default, unless the notice and cure
period specified in any such subsection is greater than thirty (30) days, in
which case the greater period shall govern. With respect to the Defaults or
Events of Default described in Sections 8(b) through 8(j), Borrower shall have,
in addition, to the thirty (30) day cure period described in the immediately
preceding sentence, such additional time as is reasonably necessary to cure such
Default or Event of Default, provided that (x) Borrower commences to cure such
Default or Event of Default within such thirty (30) day period and diligently
prosecutes such cure to completion, and (y) Lender determines in its reasonable
discretion that such Default or Event of Default can be cured within such
additional time period.
37
<PAGE>
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other
----------------------
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. Lender
may, from time to time, (a) enter into with Borrower written amendments,
supplements or modifications hereto and to the other Loan Documents for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of Lender of Borrower hereunder or
thereunder or (b) waive, on such terms and conditions as Lender may specify in
such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences. In the case
of any waiver, Borrower and Lender shall be restored to their former positions
and rights hereunder and under the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.
9.2 NOTICES. Any notice, demand, statement, request or consent made
-------
hereunder shall be in writing to the other party hereto at its address set forth
below or at such other address as such party may designate by notice to the
other party hereto and shall be deemed given (i) on receipt, if mailed, by
certified or registered U.S. mail, return receipt requested, postage prepaid;
(ii) on receipt, if delivered, fee prepaid, to a national overnight delivery
service (such as Federal Express, Purolater Courier, U.P.S. Next Day Air); or
(iii) when delivered, if delivered by hand, as evidenced by a signed receipt:
To Borrower:
AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5352
Attention: Mr. Gerald Wilkins
Chief Financial Officer
Telephone: (770) 353-3280
with a courtesy copy to:
AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5352
Attention: Asset Management and Legal Department
Telephone: (770) 353-9500
38
<PAGE>
To Lender:
Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019
Attention: Ms. Karen Hamilton
Vice President
Telephone: (212) 445-1811
with a courtesy copy to:
McConnell Valdes
1301 Avenue of the Americas
30/th/ Floor
New York, New York 10019
Attention: Brian F. Doran, Esq.
Telephone: (212) 586-4630
9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
------------------------------
delay in exercising, on the part Lender, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
------------------------------------------
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loan.
9.5 PAYMENT OF EXPENSES AND TAXES. Borrower agrees (a) to pay or
-----------------------------
reimburse Lender for all its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to Lender and Lender's Engineer, (b) to pay or
reimburse Lender for all its costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents, including, without limitation, the fees
and disbursements of counsel to Lender, (c) to pay, indemnify, and hold Lender
harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, mortgage, stamp, excise
and other taxes, if any, which may be payable or determined to be payable in
connection with
39
<PAGE>
the execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold
Lender harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
other Loan Documents and any such other documents, including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
Borrower or any of the Properties (all the foregoing in this clause (d),
collectively, the "Indemnified Liabilities"), provided, that Borrower shall have
-----------------------
no obligation hereunder to Lender with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of Lender. The
agreements in this Section shall survive repayment of the Loans and all other
amounts payable hereunder.
9.6 SALE OF COMPLETED STORES . Upon completion by Borrower of the
------------------------
construction, renovation and equipping of any Store (such Store, a "Completed
---------
Store"), Borrower may at its election sell such Completed Store to franchisees
- -----
of Borrower which meet Borrower's franchise qualifications and which are
otherwise acceptable to Borrower as a purchaser of such Completed Store (each, a
"Qualified AFC Franchisee"). Any sale of a Completed Store shall occur in
------------------------
accordance with a contract of sale (a "Completed Store Contract") which must be
------------------------
submitted to Lender for Lender's review and approval not later than thirty (30)
days prior to the scheduled closing date. Upon Lender's approval of a Completed
Store Contract, the sale of the Completed Store contemplated by such Completed
Store Contract shall be deemed an "Approved Sale". Each Completed Store
-------------
Contract shall provide that simultaneously with the transfer of title of the
Completed Store, Lender shall receive a sum equal to the Loan Payoff Amount as a
condition to Lender's delivery of an assignment or satisfaction of the Mortgage
encumbering such Store. "Loan Payoff Amount" shall mean the sum of (i) the
------------------
principal amount of the Loans made hereunder in connection with the
acquisition, construction, renovation and equipping of the Completed Store, (ii)
all accrued interest on such Loans, and (iii) all other fees and charges due to
Lender hereunder or under the Loan Documents in connection with the making,
repayment or satisfaction of such Loan. Upon Lender's receipt of the Loan
Payoff Amount in immediately available funds, Lender shall apply same in
repayment of the Loan(s) to which such Loan Payoff Amount relates and shall
deliver to Borrower a satisfaction or assignment of the Mortgage(s) which secure
such Loan(s).
9.7 COMPLETED STORE FINANCING; POPULAR PLUS. (a) For so long as
---------------------------------------
Borrower is not in default under this Agreement or any other Loan Document,
Lender agrees that it shall accept applications from Qualified AFC Franchisees
which have contracted to purchase Completed Stores in connection with Approved
Sales and which have made application to obtain financing from Lender for the
acquisition of such Completed Stores (collectively "Franchisee Loans"). Such
----------------
agreement by Lender shall not constitute a commitment to make any loan(s) to
Qualified AFC Franchisees, it being understood that a written commitment to make
a Franchisee Loan (a "Franchisee Loan Commitment") shall be
--------------------------
40
<PAGE>
issued by Lender only after Lender shall have approved such Qualified AFC
Franchisee's credit application.
(b) The Franchisee Loans shall consist of the terms and conditions
outlined in Exhibit H ("Standard Franchisee Loans") and Exhibit I ("Popular
--------- ------------------------- --------- -------
Plus Loans"), respectively, annexed hereto, and such additional terms and
- ----------
conditions as Lender may require in connection with the making of any Franchisee
Loan. The terms and conditions of Popular Plus Loans shall only be made
available to Qualified AFC Franchisees which (i) participate in Borrower's "Plus
----
Program" (as described in Exhibit J attached hereto) and (ii) whose credit
- ------- ---------
application is otherwise approved by Lender.
(c) For information purposes only, and without obligating Lender in
any way, the form of Franchisee Loan Commitment is attach ed hereto as Exhibit
-------
K-1 and the forms of basic loan documentation for Franchisee Loans are attached
- ---
hereto as Exhibits K-2(a) through K(2)(f). The inclusion of such terms,
-------------- ------
conditions and exhibits herein shall in no event constitute a commitment on the
part of Lender to make any Franchisee Loan, and any Franchisee Loan shall be
made only upon (i) Lender's approval of the credit application of the Qualified
AFC Franchisee, and (ii) such Qualified AFC Franchisee's acceptance and
execution of the Franchisee Loan Commitment and all loan documentation required
by Lender in connection with such Franchisee Loan.
(d) Each Franchisee Loan Commitment shall provide that
simultaneously with the closing of the Franchisee Loan, Lender shall receive the
Loan Payoff Amount with respect to the Completed Store to be financed from the
proceeds of such Franchisee Loan.
9.8 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This
------------------------------------------------------
Agreement shall be binding upon and inure to benefit of Borrower, Lender, and
their respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Lender.
(b) Lender shall have the right, exercisable at any time and from time to
time, to sell, transfer or assign the Loans and the Loan Documents, or grant
participations therein, or issue certificates or securities evidencing a
beneficial interest therein in a rated or unrated public offering or private
placement, and Lender may forward to any purchaser, transferee, assignee,
servicer, participant, investor or credit rating agency rating such securities
(collectively, an "Investor") or prospective Investor all documents and
--------
information in Lender's possession with respect to Borrower, the Properties and
the Loan Documents as such Investor or prospective Investor may request.
Notwithstanding anything herein to the contrary, (i) no such sale, transfer or
assignment of the Loans or of the Loan Documents shall, without the consent of
Borrower, require Borrower to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, transfer or assignment
under the security laws of any state; (ii) all payments made by Borrower on any
Note executed hereunder or in connection herewith shall be payable solely to
Lender or to one (1) servicing agent of Lender and any participant, assignee or
transferee of the Loans or the Loan Documents designated in a notice to Borrower
(Lender or any such designee for purposes of this Section 9.8 is hereinafter
41
<PAGE>
referred to as "Servicing Agent"); (iii) Servicing Agent shall be fully
---------------
authorized to receive all notices, grant all consents or waivers, release
Liens, accept payments and otherwise perform as if Servicing Agent were the sole
Lender hereunder and Borrower shall be entitled to rely upon such authority; and
(iv) no participant, transferee or assignee shall have any right individually to
realize upon any of the Collateral, it being understood and agreed that all
powers, rights and remedies under the Loan Documents may be executed solely by
the Servicing Agent for the benefit of all participants, transferees or
assignees in accordance with the terms thereof.
9.9 COUNTERPARTS. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
9.10 SEVERABILITY. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.11 INTEGRATION. This Agreement and the other Loan Documents
-----------
represent the agreement of Borrower and Lender with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by Lender relative to subject matter hereof not expressly set forth
or referred to herein or in the other Loan Documents. To the extent any of the
provisions of the other Loan Documents shall conflict with the provisions of
this Agreement, the provisions of this Agreement shall control and supercede.
9.12 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS.
9.13 SUBMISSION TO JURISDICTION; WAIVERS. Borrower hereby irrevocably
-----------------------------------
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts
of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such court s and waives any objection that it may now or hereafter have
to the venue of
42
<PAGE>
any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that nothing herein shall affect the right to
effect service of process in any manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(d) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
9.14 ACKNOWLEDGMENTS. Borrower hereby acknowledges that:
---------------
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) Lender has no fiduciary relationship with or duty to
Borrower arising out of or in connection with this Agreement or any of
the other Loan Documents, and the relationship between Lender, on one
hand, and Borrower, on the other hand, in connection here with or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby between Borrower and Lender.
9.15 WAIVERS OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
---------------------
LAW, BORROWER AND LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY NON-COMPULSORY COUNTERCLAIM THEREIN.
(THE REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK)
43
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
BORROWER:
--------
AFC ENTERPRISES, INC.,
a Minnesota corporation
By:_______________________
Name:_____________________
Title:____________________
LENDER:
------
BANCO POPULAR DE PUERTO RICO
By:_______________________
Name:_____________________
Title:____________________
44
<PAGE>
EXHIBIT A
---------
PRO-FORMA DEVELOPMENT BUDGET*
<TABLE>
<S> <C> <C>
Land $ 230,000 - $ 300,000
Site Work 70,000 - 90,000
Building 150,000 - 170,000
Equipment 140,000 - 150,000
Signage 20,000 - 30,000
Architect & Engineering 20,000 - 30,000
-------- - -------
TOTAL $ 630,000 - $ 770,000
</TABLE>
*Plus construction interest, legal fees and lender inspection costs.
<PAGE>
EXHIBIT B
---------
FORM OF NOTES
-------------
REVOLVING LOAN NOTE
-------------------
$____________ New York, New York
________ __, 1997
FOR VALUE RECEIVED, AFC ENTERPRISES, INC., a Minnesota corporation, having
an office at Six Concourse Parkway, Suite 1700, Atlanta, Georgia 30328-
5352("Borrower"), promises to pay to the order of BANCO POPULAR DE PUERTO RICO,
with an office at 7 West 51/st/ Street, New York, New York 10019, and its
sucessors and assigns ("Lender"), or at such place as the holder hereof may from
time to time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of ___________
DOLLARS ($_________) on the Maturity Date (as hereinafter defined). The
undersigned further agrees to pay interest at said office, in like money, from
the date hereof on the unpaid principal amount hereof from time to time
outstanding (the "Principal Amount") at the rates and on the dates specified in
Sections 2.7 and 2.9 of the Credit Agreement (hereinafter defined). The holder
of this Note is hereby authorized to record the date and amount of each payment
or prepayment of principal of the Loan on the schedule annexed hereto and made a
part hereof and any such recordation shall constitute prima facie evidence of
----- -----
the accuracy of the information so recorded in the absence of manifest error.
This Note is one of the Notes referred to in the Credit Agreement dated as
of August __, 1997 (as the same may from time to time be amended, modified or
supplemented, the "Credit Agreement") between Borrower and Lender, to which
reference is made for a statement of the rights, obligations and security of
Lender and the duties and obligations of Borrower in relation thereto; but
neither this reference to the Credit Agreement nor any provision thereof shall
affect or impair the absolute and
<PAGE>
unconditional obligation of Borrower to pay the principal sum of and interest on
this Note when due.
All defined terms used but not specifically defined herein shall have the
meanings set forth in the Credit Agreement.
The unpaid principal balance of this Note, together with accrued interest
thereon, unless earlier paid, shall be due and payable in full on the Maturity
Date. All payments shall be applied to the payment of accrued interest hereon
and thereafter to the payment of principal, and shall otherwise be applied as
set forth in the Credit Agreement.
As used in this Note, the term "Maturity Date" shall mean the earlier to
occur of (a) the acceleration of the maturity of the Loan pursuant to the terms
of the Credit Agreement or (b) February __, 1999; provided however, in the event
the Conversion Requirement shall have been satisfied, the term of this Note
shall be extended for the Term Loan Period, but in no event shall the Maturity
Date occur later than February __, 2003.
This Note is secured by, among other things, the Mortgage, which encumbers
property situated in the City of ___________ and State of ________, more
particularly described in the Mortgage. This Note shall evidence, and the
Mortgage shall secure, the indebtedness described herein, and any future loans,
advances, payments and disbursements pursuant to the Mortgage shall be added to
the principal indebtedness hereunder.
This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the Debt at a rate which
could subject Lender to either civil or criminal liability as a result of being
in excess of the maximum interest rate which Borrower is permitted by applicable
law to contract or agree to pay. If by the terms of this Note, Borrower is at
any time required or obligated to pay interest on the Debt at a rate in excess
of such maximum rate, the rate of interest due under this Note shall be deemed
to be immediately reduced to such maximum rate and all previous payments in
excess of the maximum rate shall be deemed to have been payments in reduction of
principal and not on account of the interest due hereunder.
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an
2
<PAGE>
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
Borrower and all others who are or who may become liable for the payment of
all or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest, notice of protest, and non)payment, and
notice of intent to accelerate the maturity hereof (and of such acceleration).
No release of any security for the Debt or extension of time for payment of this
Note or any installment hereof, and no alteration, amendment or waiver of any
provision of this Note, the Credit Agreement, the Mortgage or the other Loan
Documents made by agreement between Lender and any other person or party shall
release, modify, amend, waive, extend, change, discharge, terminate or affect
the liability of Borrower, and any other who may become liable for the payment
of all or any part of the Debt, under this Note, the Credit Agreement, the
Mortgage or the other Loan Documents.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute,
deliver and perform its obligations pursuant to this Note, the Credit Agreement,
the Mortgage and the other Loan Documents and that this Note, the Credit
Agreement, the Mortgage and the other Loan Documents constitute valid and
binding obligations of Borrower.
This Note shall be governed and construed in accordance with the laws of
the State of New York without regard to principles of conflict of laws.
If any provision of this Note is held to be invalid or unenforceable by a
court of competent jurisdiction, the other provisions of this Note shall remain
in full force and effect.
Any failure by Lender to insist upon strict performance by Borrower of any
of the provisions of this Note, the Credit Agreement, the Mortgage or the other
Loan Documents shall not be deemed to be a waiver of any of the terms or
provisions of this Note, the Credit Agreement, the Mortgage or the other Loan
Documents, and Lender shall have the right thereafter to insist upon strict
performance by Borrower of any and all of them.
3
<PAGE>
All times, wherever stated herein, shall be of the essence of this Note.
Subject to the provisions of Section 9.8 of the Credit Agreement, Lender
shall have the right, exercisable at any time and from time to time, to sell,
transfer or assign this Note, the Credit Agreement, the Mortgage and the other
Loan Documents, or grant participations therein, or issue certificates or
securities evidencing a beneficial interest therein in a rated or unrated public
offering or private placement, and Lender may forward to any purchaser,
transferee, assignee, servicer, participant, investor or credit rating agency
rating such securities (collectively, an "Investor") or prospective Investor all
--------
documents and information in Lender's possession with respect to Borrower, the
Mortgaged Property (as defined in the Mortgage) and the Loan Documents as such
Investor or prospective Investor may request.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THE LOAN EVIDENCED BY THIS
NOTE OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE CREDIT
AGREEMENT, THE MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF
BORROWER OR LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER'S MAKING
OF THE LOAN SECURED BY THE MORTGAGE AND THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the date first above written.
AFC ENTERPRISES, INC.,
a Minnesota corporation
By:_________________________
Name:_______________________
Title:______________________
4
<PAGE>
PAYMENTS AND PREPAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of
Amount of Principal Notations
Date Loan Payment made By
- ------- ------------- ------------ --------------
<S> <C> <C> <C>
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
_______ _____________ ____________ ______________
</TABLE>
5
<PAGE>
EXHIBIT C
---------
FORM OF LEASEHOLD MORTGAGE
--------------------------
LEASEHOLD MORTGAGE, SECURITY AGREEMENT AND
ASSIGNMENT OF LEASES AND RENTS
BY AND BETWEEN
AFC ENTERPRISES, INC.
SIX CONCOURSE PARKWAY
SUITE 1700
ATLANTA, GEORGIA 30328-5352
("MORTGAGOR")
AND
BANCO POPULAR DE PUERTO RICO
7 WEST 51/ST/ STREET
NEW YORK, NEW YORK 10019
("MORTGAGEE")
DATED AS OF _________, 199__
LOCATION OF PREMISES:
RECORDING REQUESTED BY AND
WHEN RECORDED - RETURN TO:
Brian F. Doran, Esq.
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
<PAGE>
THIS LEASEHOLD MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND
RENTS (the "Mortgage"), made as of the __ day of _____, 199__, by AFC
--------
ENTERPRISES, INC., a Minnesota corporation, having an office at Six Concourse
Parkway, Suite 1700, Atlanta, Georgia 30328-5352 ("Mortgagor") and BANCO POPULAR
---------
DE PUERTO RICO, having offices at 7 West 51/st/ Street, New York, New York 10019
("Mortgagee").
---------
W I T N E S S E T H:
- - - - - - - - - -
To secure the payment of an indebtedness in the principal sum of
________________________________ DOLLARS ($___________), lawful money of the
United States of America, to be paid with interest according to a certain note
dated the date hereof made by Mortgagor to Mortgagee (the note together with all
extensions, renewals or modifications thereof being hereinafter collectively
called the "Note") (said indebtedness, interest and all other sums due hereunder
----
and under the Note being collectively called the "Debt"), Mortgagor has
----
mortgaged, given, granted, bargained, sold, aliened, conveyed, confirmed,
pledged, assigned, and hypothecated and by these presents does hereby mortgage,
give, grant, bargain, sell, alien, convey, confirm, pledge, assign and
hypothecate unto Mortgagee all right, title, interest and estate of Mortgagor
now owned, or hereafter acquired, in and to the following property, rights,
interests and estates (such property, rights, interests and estates being
hereinafter described are collectively referred to herein as the "Mortgaged
---------
Property"):
- --------
(a) that certain lease dated _____________, 199__, between
___________, as landlord, and Mortgagor, as tenant (the "Lease") affecting the
-----
real property described in Exhibit A attached hereto (the "Property") and the
--------- --------
leasehold estate created thereby (and all other interests of Mortgagor presently
owned or hereafter acquired in the Property) and all modifications, renewals or
extensions of the Lease and all rights of Mortgagor to renew or extend the term
of the Lease and all of Mortgagor's right, title and interest in and to the
Property;
(b) all machinery, equipment, fixtures, furniture, equipment,
cooking supplies, stoves, refrigerators, dishes, glassware, utensils and
inventories and other property of every kind and nature, whether tangible or
intangible, whatsoever owned by Mortgagor, or in which Mortgagor has or shall
have an interest, now or hereafter located upon the Property, or appurtenant
thereto, and usable in connection with the present or future operation and
occupancy of the Property and all building equipment, materials and supplies and
construction equipment, materials and supplies of any nature whatsoever owned by
Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter
located upon the Property and financed or acquired with the proceeds evidenced
by the Note, or appurtenant thereto, or usable in connection with the present or
future construction, renovation, operation, enjoyment and occupancy of the
Property (hereinafter collectively called the "Equipment"), including the
---------
proceeds of any sale or transfer of the foregoing, and the right, title and
interest of Mortgagor
<PAGE>
in and to any of the Equipment which may be subject to any security
interests, as defined in the Uniform Commercial Code, as adopted and enacted by
the State of ______________ (the "Uniform Commercial Code") superior in lien to
-----------------------
the lien of this Mortgage;
(c) all subleases and other agreements affecting the use, enjoyment
or occupancy of the Property heretofore or hereafter entered into by Mortgagor
(collectively, the "Subleases") and all income, rents, issues, profits and
---------
revenues from the Property (collectively, the "Rents") and all proceeds from the
-----
sale, surrender, termination or other disposition of the Subleases and the right
to receive and apply the Rents to the payment of the Debt;
(d) all proceeds of and any unearned premiums on any insurance
policies covering the Mortgaged Property, including, without limitation, the
right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Mortgaged Property; and
(e) the right, in the name and on behalf of Mortgagor, to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to commence any action or proceeding to protect the interest of
Mortgagee in the Mortgaged Property.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto
and to the use and benefit of Mortgagee, and the successors and assigns of
Mortgagee, forever.
AND Mortgagor represents and warrants to and covenants and agrees with Mortgagee
as follows:
1. Payment of Debt and Incorporation of Covenants, Conditions and
--------------------------------------------------------------
Agreements. Mortgagor will pay the Debt at the time and in the manner provided
- ----------
in the Note, the Credit Agreement (as hereinafter defined) and in this Mortgage.
All the covenants, conditions and agreements contained in (a) the Note, (b) the
Credit Agreement, dated as of the date hereof, between Mortgagor and Mortgagee,
as the same may be modified or supplemented from time to time (the "Credit
------
Agreement") and (c) all and any of the documents other than the Note, the Credit
- ---------
Agreement or this Mortgage now or hereafter executed by Mortgagor and/or others
and by or in favor of Mortgagee, which wholly or partially secure or guaranty
payment of the Note (collectively, the "Loan Documents"), are hereby made a part
--------------
of this Mortgage to the same extent and with the same force as if fully set
forth herein. In the event of any conflict between the terms of this Mortgage
and the terms of the Credit Agreement, the Credit Agreement shall govern and
control to the extent of such conflict.
2. The Lease. The Lease is in full force and effect and has not been
---------
modified, amended or altered as of the date hereof and, to the best of
Mortgagor's knowledge, there are no defaults by any party thereto.
-2-
<PAGE>
3. Warranty of Title. Subject to the Permitted Encumbrances (as defined
-----------------
in the Credit Agreement), Mortgagor warrants that it has good title to the
leasehold estate created by the Lease and a good and marketable interest in such
leasehold, and that Mortgagor owns the Equipment, in each case free and clear of
liens, claims and encumbrances.
4. Insurance.
---------
(a) Mortgagor, at its sole cost and expense, for the mutual benefit
of Mortgagor and Mortgagee, shall obtain and maintain during the entire term of
this Mortgage the policies of insurance described in Schedule B annexed to the
----------
Credit Agreement.
(b) If the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty, Mortgagor shall give prompt written
notice thereof to Mortgagee. Sums paid to Mortgagee by an insurer, after
deduction of Mortgagee's reasonable costs and expenses of collection (after such
deduction, the "Insurance Proceeds"), shall be applied as hereinafter set forth.
------------------
If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty, Mortgagor may elect (which election must be exercised
not later than fifteen (15) days after the date the Mortgaged Property shall be
so damaged or destroyed) to repay the principal amount of the Note, together
with all accrued interest under the Note and all fees and expenses required to
be paid by Mortgagor under the Note, the Credit Agreement, this Mortgage and the
other Loan Documents with respect to the Loan (as defined in the Credit
Agreement) evidenced by the Note and secured by this Mortgage, in lieu of any
requirement on the part of Mortgagor to restore the Mortgaged Property. Such
sums must be paid by Mortgagor to Mortgagee within thirty (30) days after the
date of damage or destruction of the Mortgaged Property. Upon the payment of
such sums to Mortgagee, the Mortgagor shall have no further obligation to
restore the Mortgaged Property and Mortgagee shall assign to Mortgagor all of
Mortgagee's right, title and interest in and to the Insurance Proceeds. In the
event Mortgagor shall fail to make the election described in this paragraph 4(b)
within fifteen (15) days after the date the Mortgaged Property shall be damaged
or destroyed, then, at Mortgagee's election, the Insurance Proceeds may be
retained and (i) applied by Mortgagee toward payment of the Debt in such
priority and proportions as Mortgagee in its discretion shall deem proper or,
(ii) if the conditions set forth in paragraph 4(d) of this Mortgage are
satisfied, as determined by Mortgagee in its sole discretion, paid to Mortgagor
for the restoration and repair of the Mortgaged Property in accordance with
paragraph 4(c) of this Mortgage in whole or in such lesser amount as is
necessary to pay for the costs of such restoration and repair.
(c) If the Insurance Proceeds are made available to Mortgagor for
the cost of restoration and repair of the Mortgaged Property, (i) the Mortgaged
Property shall be substantially restored to the equivalent of its condition
prior to such casualty or to such other condition as Mortgagee may approve in
writing, (ii) such restoration and repair shall be done in compliance with all
applicable laws, rules and regulations, and (iii) all reasonable costs and
expenses incurred by Mortgagee in connection with making the Insurance Proceeds
available for such restoration and repair including, without limitation, counsel
fees and inspecting
-3-
<PAGE>
engineers' fees incurred by Mortgagee, shall be paid by Mortgagor. If the cost
to repair or restore the Mortgaged Property will exceed $100,000, Mortgagee may,
at Mortgagee's option, condition disbursement of said proceeds on Mortgagee's
approval of such plans and specifications of an architect reasonably
satisfactory to Mortgagee, contractor's cost estimates, architect's
certificates, waivers of liens, sworn statements of mechanics and material men
and such other evidence of costs, percentage completion of construction,
application of payments, and satisfaction of liens as Mortgagee may reasonably
require. If the Insurance Proceeds are applied to the payment of the Debt, any
such application of proceeds to principal shall not extend or postpone the
maturity date of the Note or change the amount or the due date of any
installment payment under the Note. Any surplus Insurance Proceeds, after
payment of the Debt, shall be paid to Mortgagor. If the Mortgaged Property is
sold pursuant to paragraph 26 of this Mortgage or if Mortgagee acquires title to
the Mortgaged Property, Mortgagee shall have all of the right, title and
interest of Mortgagor in and to any insurance policies and unearned premiums
thereon and in and to the Insurance Proceeds resulting from any damage to the
Mortgaged Property prior to such sale or acquisition.
(d) Mortgagee shall not exercise its option to apply Insurance
Proceeds to the payment of the sums secured by this Mortgage if all the
following conditions are met, as determined by Mortgagee in its sole discretion:
(i) no Event of Default is then continuing under this Mortgage, the Note, the
Credit Agreement or any other Loan Document; (ii) Mortgagee determines that
there will be sufficient funds (whether consisting of Insurance Proceeds and/or
other sums made available by Mortgagor for restoration) to restore and repair
the Mortgaged Property to the condition required under paragraph 4(c) above;
(iii) Mortgagee determines that restoration and repair of the Mortgaged Property
to the condition required under paragraph 4(c) above will be completed within
the greater of (A) three (3) months after Mortgagor's receipt of Insurance
Proceeds or (B) the period of time covered by the business interruption
insurance, if any, then in effect from the date of the loss or casualty to the
Mortgaged Property; and (iv) Mortgagee shall have received evidence reasonably
satisfactory to it that during the period of restoration and repair of the
Mortgaged Property to the condition required under subparagraph 4(c) above, the
sum of (A) income derived from the Mortgaged Property, as reasonably determined
by Mortgagee, plus (B) proceeds of business interruption insurance, if any, to
be paid, plus (C) amounts that Mortgagor demonstrates to Mortgagee's reasonable
satisfaction will be made available by Mortgagor from other sources during such
period will equal or exceed the sum of (D) expenses in connection with the
operation of the Mortgaged Property and (E) the debt service under the Note.
(e) Notwithstanding anything herein to the contrary, in the event of
a conflict between the terms of the Lease and the terms hereof with respect to
application of Insurance Proceeds, the Lease shall govern and control to the
extent of such conflict.
5. Payment of Taxes, etc.
---------------------
(a) All taxes, assessments and water and sewer rents, now or
hereafter levied or assessed or imposed against the Mortgaged Property or any
part thereof (the "Taxes") which are payable by Mortgagor under the Lease shall
-----
be paid by Mortgagor when due. Mortgagor
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<PAGE>
shall pay all ground rents, maintenance charges, other governmental impositions,
and other charges, including without limitation vault charges and license fees
for the use of vaults, chutes and similar areas adjoining the Mortgaged
Property, now or hereafter levied or assessed or imposed against the Mortgaged
Property or any part thereof (the "Other Charges") which are payable by
-------------
Mortgagor under the Lease as the same become due and payable. Mortgagor will
deliver to Mortgagee, promptly after same are made available to Mortgagor, tax
certificates or receipted tax bills or other evidence of payment issued by the
relevant taxing authority evidencing that the Taxes and Other Charges have been
so paid or are not then delinquent. Mortgagor shall not suffer and shall
promptly cause to be paid or discharged any lien or charge whatsoever which may
be or become a lien or charge against the Mortgaged Property (other than a
Permitted Encumbrance), and shall promptly pay for all utility services provided
to the Mortgaged Property.
(b) Subject to the terms of the Lease, Mortgagor, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Taxes or Other Charges, provided
that (i) Mortgagor is not in default under the Note, the Credit Agreement, this
Mortgage or any other Loan Document, (ii) such proceeding shall be permitted
under and be conducted in accordance with the provisions of any other instrument
to which Mortgagor is subject and shall not constitute a default thereunder,
(iii) neither the Mortgaged Property nor any part thereof or interest therein
will be in danger of being sold, forfeited, terminated, cancelled or lost, (iv)
Mortgagor shall have paid the Taxes under protest or set aside adequate reserves
for the payment of the Taxes or Other Charges, together with all interest and
penalties thereon and (v) Mortgagor shall have furnished such security as may be
required in the proceeding to insure the payment of any such Taxes or Other
Charges, together with all interest and penalties thereon.
6. Escrow Fund. (a) In the event Mortgagor shall at any time fail to pay
-----------
any Taxes when due, and such failure shall continue for a period of fifteen (15)
days after the date such Taxes were due, Mortgagee may, at its election, require
Mortgagor to pay to Mortgagee, on the first day of each calendar month occurring
thereafter, one-twelfth (1/12th) of an amount which would be sufficient to pay
the Taxes payable, or estimated by Mortgagee to be payable, during the next
twelve (12) months and also provide for an additional reserve equal to one-sixth
(1/6th) of the Taxes payable (said amounts being hereinafter called the "Tax
---
Escrow Fund.")
- -----------
(b) The Tax Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Note, shall be added together and shall be paid as
an aggregate sum by Mortgagor to Mortgagee. Mortgagor hereby pledges to
Mortgagee any and all monies now or hereafter deposited in the Tax Escrow Fund
as additional security for the payment of the Debt. Mortgagee will apply the
Tax Escrow Fund to payments of Taxes to be made by Mortgagor pursuant to
paragraph 4 hereof. If the amount of the Tax Escrow Fund shall exceed the
amounts due for Taxes pursuant to paragraph 5 hereof, Mortgagee shall, in its
discretion, return any excess to Mortgagor or credit such excess against future
payments to be made to the Tax Escrow Fund. In allocating such excess,
Mortgagee may deal with the person shown on
-5-
<PAGE>
the records of Mortgagee to be the owner of the Mortgaged Property. If the
balance in the Tax Escrow Fund on the first day of the month which is one full
month prior to the due date of any Taxes is not sufficient to pay the Taxes,
Mortgagor shall pay to Mortgagee, upon demand, an amount which Mortgagee shall
estimate as sufficient to make up the deficiency. Upon the acceleration of the
Debt as described in paragraph 26 hereof, Mortgagee may apply any sums then
present in the Tax Escrow Fund to the payment of the following items in any
order in its sole discretion :
(i) Taxes and Other Charges;
(ii) Interest on the unpaid principal balance of the Note;
(iii) Amortization of the unpaid principal balance of the Note; or
(iv) All other sums payable pursuant to the Note, the Credit
Agreement, this Mortgage and the other Loan Documents, including without
limitation, advances made by Mortgagee pursuant to the terms of this
Mortgage.
(c) Until expended or applied as above provided, any amounts in the
Tax Escrow Fund shall constitute additional security for the Debt. The Tax
Escrow Fund shall not constitute a trust fund and may be commingled with other
monies held by Mortgagee. No earnings or interest on the Tax Escrow Fund shall
be paid to Mortgagor, unless applicable law requires interest on the Tax Escrow
Fund to be paid to Mortgagor. Any such required interest shall be deposited in
the Tax Escrow Fund as additional security for the payment of the Debt.
7. Condemnation.
------------
(a) Mortgagor shall promptly give Mortgagee written notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Mortgagee copies of any and all papers served in
connection with such proceedings. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Mortgagor shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note, the Credit Agreement, this Mortgage
and the other Loan Documents and the Debt shall not be reduced until any award
or payment therefor shall have been actually received after expenses of
collection and applied by Mortgagee to the discharge of the Debt. Mortgagee
shall not be limited to the interest paid on the award by the condemning
authority but shall be entitled to receive out of the award interest at the rate
or rates provided herein and in the Note . Mortgagor shall cause the award or
payment made in any condemnation or eminent domain proceeding, which is payable
to Mortgagor, to be paid directly to Mortgagee. Sums paid to Mortgagee for such
condemnation or action of eminent domain, after deduction of Mortgagee's
reasonable costs and expenses of collection (after such deduction, the
"Condemnation Proceeds"), shall be applied as hereinafter set forth. In the
---------------------
event of the actual commencement of condemnation or eminent domain proceedings
affecting the Mortgaged Property, Mortgagor may elect (which election must be
exercised not later than
-6-
<PAGE>
fifteen (15) days prior to the effective date of the taking of the Mortgaged
Property to repay the principal amount of the Note, together with all accrued
interest under the Note and all fees and expenses required to be paid by
Mortgagor under the Note, the Credit Agreement, this Mortgage and the other Loan
Documents with respect to the Loan evidenced by the Note and secured by this
Mortgage, in lieu of any requirement on the part of Mortgagor to restore the
Mortgaged Property. Such sums must be paid by Mortgagor to Mortgagee within
thirty (30) days after the making of Mortgagor's election as provided above.
Upon the payment of such sums to Mortgagee, the Mortgagor shall have no further
obligation to restore the Mortgaged Property and Mortgagee shall assign to
Mortgagor all of Mortgagee's right, title and interest in and to the
Condemnation Proceeds. In the event Mortgagor shall fail to make the election
described above in this paragraph 7(a) within fifteen (15) days prior to the
effective date of the taking of the Mortgaged Property, then, at Mortgagee's
election, the Condemnation Proceeds may be retained and (i) applied by Mortgagee
toward payment of the Debt in such priority and proportions as Mortgagee in its
discretion shall deem proper, or (ii) if the conditions set forth in paragraph
7(c) of this Mortgage are satisfied, as determined by Mortgagee in its sole
discretion, paid to Mortgagor for the restoration and repair of the Mortgaged
Property in accordance with paragraph 7(b) of this Mortgage in whole or in such
lesser amount as is necessary to pay for the costs of such restoration and
repair. If the Mortgaged Property is sold pursuant to paragraph 26 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
Condemnation Proceeds resulting from any condemnation or eminent domain
proceeding of the Mortgaged Property prior to such sale or acquisition.
(b) If the Condemnation Proceeds are made available to Mortgagor for
the cost of restoration and repair of the Mortgaged Property, (i) the Mortgaged
Property shall be substantially restored to the equivalent of its condition
prior to such condemnation or to such other condition as Mortgagee may approve
in writing, (ii) such restoration and repair shall be done in compliance with
all applicable laws, rules and regulations, and (iii) all reasonable costs and
expenses incurred by Mortgagee in connection with making the Condemnation
Proceeds available for such restoration and repair including, without
limitation, counsel fees and inspecting engineers' fees incurred by Mortgagee,
shall be paid by Mortgagor. If the cost to repair or restore the Mortgaged
Property will exceed $100,000, Mortgagee may, at Mortgagee's option, condition
disbursement of said proceeds on Mortgagee's approval of such plans and
specifications of an architect reasonably satisfactory to Mortgagee,
contractor's cost estimates, architect's certificates, waivers of liens, sworn
statements of mechanics and material men and such other evidence of costs,
percentage completion of construction, application of payments, and satisfaction
of liens as Mortgagee may reasonably require. If the Condemnation Proceeds are
applied to the payment of the Debt, any such application of proceeds to
principal shall not extend or postpone the maturity date of the Note or change
the amount or the due date of any installment payment under the Note. Any
surplus Condemnation Proceeds, after payment of the Debt, shall be paid to
Mortgagor. If the Mortgaged Property is sold pursuant to paragraph 26 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
Condemnation Proceeds resulting from any condemnation or eminent domain
proceeding of the Mortgaged Property prior to such sale or acquisition.
-7-
<PAGE>
(c) Mortgagee shall not exercise its option to apply Condemnation
Proceeds to the payment of the sums secured by this Mortgage if all the
following conditions are met, as determined by Mortgagee in its sole discretion:
(i) no Event of Default is then continuing under this Mortgage, the Note, the
Credit Agreement or any other Loan Document; (ii) Mortgagee determines that
there will be sufficient funds (whether consisting of Condemnation Proceeds
and/or other sums made available by Mortgagor for restoration) to restore and
repair the Mortgaged Property to the condition required under paragraph 7(b)
above; (iii) Mortgagee determines that restoration and repair of the Mortgaged
Property to the condition required under paragraph 7(b) above will be completed
within the greater of (A) three (3) months after Mortgagor's receipt of
Condemnation Proceeds or (B) the period of time covered by the business
interruption insurance, if any, then in effect from the date of the loss or
casualty to the Mortgaged Property; and (iv) Mortgagee shall have received
evidence reasonably satisfactory to it that during the period of restoration and
repair of the Mortgaged Property to the condition required under subparagraph
6(b) above, the sum of (A) income derived from the Mortgaged Property, as
reasonably determined by Mortgagee, plus (B) proceeds of business interruption
insurance, if any, to be paid, plus (C) amounts that Mortgagor demonstrates to
Mortgagee's reasonable satisfaction will be made available by Mortgagor from
other sources during such period will equal or exceed the sum of (D) expenses in
connection with the operation of the Mortgaged Property and (E) the debt service
under the Note.
(d) Notwithstanding anything herein to the contrary, in the event of
a conflict between the terms of the Lease and the terms hereof with respect to
the application of Condemnation Proceeds, the Lease shall govern and control to
the extent of such conflict.
8. Subleases and Rents.
-------------------
(a) Mortgagor does hereby absolutely and unconditionally assign to
Mortgagee its right, title and interest in all current and future Subleases and
Rents, it being intended by Mortgagor that this assignment constitutes a
present, absolute assignment and not an assignment for additional security only.
Such assignment to Mortgagee shall not be construed to bind Mortgagee to the
performance of any of the covenants, conditions or provisions contained in any
such Sublease or otherwise to impose any obligation upon Mortgagee. Mortgagor
agrees to execute and deliver to Mortgagee such additional instruments, in form
and substance reasonably satisfactory to Mortgagee, as may hereafter be
requested by Mortgagee to further evidence and confirm such assignment.
Nevertheless, subject to the terms of this paragraph 8, Mortgagee grants to
Mortgagor a revocable license to operate and manage the Mortgaged Property and
to collect the Rents. Mortgagor shall hold the Rents, or a portion thereof
sufficient to discharge all current sums due on the Debt, in trust for the
benefit of Mortgagee for use in the payment of such sums. Upon an Event of
Default, the license granted to Mortgagor herein shall be automatically revoked
and Mortgagee shall immediately be entitled to possession of all Rents, whether
or not Mortgagee enters upon or takes control of the Mortgaged Property.
Mortgagee is hereby granted and assigned by Mortgagor the right, at its option,
upon the revocation of the license granted herein to enter upon the
-8-
<PAGE>
Mortgaged Property in person, by agent or by court-appointed receiver to collect
the Rents. Any Rents collected after the revocation of the license herein
granted may be applied toward payment of the Debt in such priority and
proportion as Mortgagee in its discretion shall deem proper.
(b) Upon request, Mortgagor shall furnish Mortgagee with copies of
all Subleases and all amendments or modifications of any Sublease. All Subleases
shall provide that each such Sublease is subordinate to this Mortgage and that
the sublessee agrees to attorn to Mortgagee. Mortgagee shall execute and deliver
to any sublessee which is a Qualified AFC Franchisee (as defined in the Credit
Agreement) a non-disturbance agreement, which agreement shall be in the
Mortgagee's standard form and prepared by Mortgagee's counsel at Mortgagor's
expense. Mortgagor (i) shall observe and perform all the obligations imposed
upon the sublessor under the Subleases and shall not do or permit to be done
anything to impair the value of the Subleases as security for the Debt; (ii)
shall upon request by Mortgagee, send Mortgagee copies of all notices of default
sent or received by Mortgagee under the Subleases; (iii) shall enforce all of
the terms, covenants and conditions contained in the Subleases on the part of
the sublessee thereunder to be observed or performed to the extent commercially
reasonable; (iv) shall not collect any of the Rents (excluding common area
charges, taxes and insurance deposits and security deposits) more than one (1)
month in advance (except with respect to collection of the final month's rent as
security); (v) shall not execute any other assignment of sublessor's interest in
the Subleases or the Rents; and (vi) shall execute and deliver at the request of
Mortgagee all such further assurances, confirmations and assignments in
connection with the Mortgaged Property as Mortgagee shall from time to time
require.
(c) Mortgagor shall not, without the prior written consent of
Mortgagee (i) amend or modify any Sublease with respect to the term thereof or
the Rent payable thereunder, (ii) execute a new Sublease, (iii) permit use of
the demised premises under any Sublease for use or uses other than quick service
restaurant use; or (iv) terminate, cancel or accept a surrender of any Sublease
other than as a result of the Sublessee's non-payment of Rent or uncured breach
of any material term of its Sublease.
9. Maintenance of Mortgaged Property. Mortgagor shall cause the Mortgaged
---------------------------------
Property to be maintained in a good and safe condition and repair. Subject to
the rights and obligations of the landlord or lessor under the Lease, any
improvements at the Property (the "Improvements") and the Equipment shall not be
------------
removed, demolished or materially altered (except for normal replacement of the
Equipment) without the written consent of Mortgagee. Mortgagor shall promptly
comply with all laws, orders and ordinances affecting the Mortgaged Property and
the use thereof. To the extent required of Mortgagor under the Lease, Mortgagor
shall promptly repair, replace or rebuild any part of the Mortgaged Property
that (i) is damaged or destroyed by any casualty (subject to the provisions of
paragraph 4 hereof), (ii) becomes damaged, worn or dilapidated, or (iii) is
affected by any proceeding of the character referred to in paragraph 7 hereof
(subject to the provision of such paragraph 7) and Mortgagor shall complete and
pay for any structure at any time in the process of construction, renovation or
repair on the Property. Mortgagor shall not initiate, join in,
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<PAGE>
acquiesce in, or consent to any change in any private restrictive covenant,
zoning law or other public or private restriction, limiting or defining the uses
which may be made of the Mortgaged Property or any part thereof. If under
applicable zoning provisions the use of all or any portion of the Mortgaged
Property is or shall become a nonconforming use, Mortgagor will not cause or
permit such nonconforming use to be discontinued or abandoned without the
express written consent of Mortgagee.
10. Transfer or Encumbrance of the Mortgaged Property.
-------------------------------------------------
(a) Mortgagor acknowledges that Mortgagee has examined and relied on
the creditworthiness of Mortgagor and experience of Mortgagor in developing,
constructing, renovating, owning and operating properties such as the Mortgaged
Property in agreeing to make the Loan secured hereby, and that Mortgagee will
continue to rely on Mortgagor's ownership of the Mortgaged Property as a means
of maintaining the value of the Mortgaged Property as security for repayment of
the Debt. Mortgagor acknowledges that Mortgagee has a valid interest in
maintaining the value of the Mortgaged Property so as to ensure that, should
Mortgagor default in the repayment of the Debt, Mortgagee can recover the Debt
by a sale of the Mortgaged Property. Except as otherwise expressly provided in
the Credit Agreement, Mortgagor shall not, without the prior written consent of
Mortgagee, sell, convey, alien, mortgage, encumber, pledge or otherwise transfer
the Mortgaged Property or any part thereof, or permit the Mortgaged Property or
any part thereof to be sold, conveyed, aliened, mortgaged, encumbered, pledged
or otherwise transferred (any of the foregoing, a "Transfer").
--------
(b) Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Mortgagor's Transfer of the
Mortgaged Property without Mortgagee's consent or in contravention of the
provisions of the Credit Agreement.
11. Estoppel Certificates and No Default Affidavits.
-----------------------------------------------
(a) After request by either Mortgagor or Mortgagee, Mortgagor or
Mortgagee, as the case may be, shall within ten (10) days furnish the requesting
party with a statement, duly acknowledged and certified, setting forth (i) the
amount of the original principal amount of the Note, (ii) the unpaid principal
amount of the Note, (iii) the rate of interest of the Note, (iv) the date
installments of interest and/or principal were last paid, (v) any offsets or
defenses to the payment of the Debt, if any and (vi) that the Note and this
Mortgage are valid, legal and binding obligations and have not been modified or
if modified, giving the particulars of such modification.
(b) Within ten (10) days after request by Mortgagee, Mortgagor will
request sublessees under the Subleases to furnish Mortgagee with estoppel
certificates as required by such sublessees' respective Sublease and Mortgagor
will use diligent efforts to obtain such estoppel certificates.
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<PAGE>
12. Changes in the Laws Regarding Taxation. If any law is enacted or
--------------------------------------
adopted or amended after the date of this Mortgage which deducts the Debt from
the value of the Mortgaged Property for the purpose of taxation or which imposes
a tax, either directly or indirectly, on the Debt or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any. In the event Mortgagee is advised by counsel chosen by it that
the payment of such tax or interest and penalties by Mortgagor would be unlawful
or taxable to Mortgagee or unenforceable or provide the basis for a defense of
usury, then in any such event, Mortgagee shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt immediately due
and payable.
13. No Credits on Account of the Debt. Mortgagor will not claim or demand
---------------------------------
or be entitled to any credit or credits on account of the Debt for any part of
the Taxes or Other Charges assessed against the Mortgaged Property, or any part
thereof, and no deduction shall otherwise be made or claimed from the assessed
value of the Mortgaged Property, or any part thereof, for real estate tax
purposes by reason of this Mortgage or the Debt. In the event such claim,
credit or deduction shall be required by law, Mortgagee shall have the option,
by written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
14. Documentary Stamps. If at any time the United States of America, the
------------------
State of ______________ or any subdivision thereof shall require revenue or
other stamps to be affixed to the Note or this Mortgage, or impose any other tax
or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
15. Usury Laws. This Mortgage and the Note are subject to the express
----------
condition that at no time shall Mortgagor be obligated or required to pay
interest on the Debt at a rate which could subject Mortgagee to either civil or
criminal liability as a result of being in excess of the maximum interest rate
which Mortgagor is permitted by law to contract or agree to pay. If by the
terms of this Mortgage or the Note, Mortgagor is at any time required or
obligated to pay interest on the Debt at a rate in excess of such maximum rate,
the rate of interest under the same shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all previous payments in excess of such maximum rate shall be deemed to
have been payments in reduction of the principal and not on account of the
interest due hereunder.
16. Performance of Leases; Security Agreement.
-----------------------------------------
(a) Mortgagor will comply with the terms and provisions of the Lease
and will faithfully perform all of its obligations under the Lease and promptly
cure any default by it under any of the provisions thereof. Mortgagor shall
promptly send to Mortgagee a true and correct copy of any notice, report,
certificate or other communication that Mortgagor is obligated to deliver in
connection with the Lease.
-11-
<PAGE>
(b) Mortgagor hereby assigns and transfers to Mortgagee and creates
a security interest in all of Mortgagor's right, title and interest in and to
the consideration, in whatever form delivered, for the sale, transfer or
conveyance of Mortgagor's interest in the Lease.
17. Performance of Other Agreements. Mortgagor shall observe and perform
-------------------------------
each and every term to be observed or performed by Mortgagor pursuant to the
terms of any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property if the effect of the failure to observe or perform the same
would cause a Material Adverse Effect (as defined in the Credit Agreement).
18. Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and
-----------------
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged,
assigned and hypothecated or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee,
or for carrying out the intention or facilitating the performance of the terms
of this Mortgage or for filing, registering or recording this Mortgage.
Mortgagor, on demand, will execute and deliver and hereby authorizes Mortgagee
to execute in the name of Mortgagor or without the signature of Mortgagor to the
extent Mortgagee may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Mortgagee in the Mortgaged Property. Mortgagor grants to Mortgagee
an irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Mortgagee
at law and in equity, including without limitation such rights and remedies
available to Mortgagee pursuant to this paragraph 18.
19. Trust Fund. Mortgagor shall receive the advances secured hereby and
----------
shall hold the right to receive the advances as a trust fund to be applied first
as required by the Credit Agreement before using any part of the total of the
same for any other purpose.
20. Recording of Mortgage, etc. Mortgagor forthwith upon the execution
--------------------------
and delivery of this Mortgage and thereafter, from time to time, will cause this
Mortgage, and any security instrument creating a lien or security interest or
evidencing the lien hereof upon the Mortgaged Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to protect the lien or security interest hereof upon, and
the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance,
-12-
<PAGE>
except where prohibited by law so to do. Mortgagor shall hold harmless and
indemnify Mortgagee, its successors and assigns, against any liability incurred
by reason of the imposition of any tax on the making and recording of this
Mortgage.
21. Events of Default. The Debt shall become immediately due and payable
-----------------
at the option of Mortgagee, without notice or demand, upon any one or more of
the following events ("Events of Default"):
-----------------
(a) if any of the Taxes or Other Charges is not paid when the same is
due and payable, subject to the provisions of paragraphs 5 and 6;
(b) if Mortgagor violates or does not comply with any of the
provisions of paragraphs 8, 10 or 16;
(c) if a default by Mortgagor under the Lease shall continue beyond
any applicable notice or grace period, or if the Lease shall be modified or
amended without the prior written consent of Mortgagee, or if the Lease shall be
terminated, surrendered or assigned;
(d) if the Mortgaged Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real estate taxes and
assessments not then due and payable or Permitted Encumbrances and such lien
shall remain undischarged of record (by payment, bonding or otherwise) for a
period of sixty (60) calendar days after the filing of such lien;
(e) if Mortgagor fails to cure promptly any violations of laws or
ordinances affecting the Mortgaged Property and such failure continues for a
period of thirty (30) calendar days after Mortgagor's receipt of notice thereof;
or
(f) the occurrence of an Event of Default under the Credit Agreement.
22. Default Interest. Upon the occurrence of any Event of Default,
----------------
Mortgagor shall pay interest on the unpaid principal balance of the Note at the
Default Rate (as defined in the Note). The Default Rate shall be computed from
the occurrence of the Event of Default until the actual receipt and collection
of the Debt. This charge shall be added to the Debt, and shall be deemed
secured by this Mortgage. This clause, however, shall not be construed as an
agreement or privilege to extend the date of the payment of the Debt, nor as a
waiver of any other right or remedy accruing to Mortgagee by reason of the
occurrence of any Event of Default. If the Default Rate is above the maximum
rate permitted by applicable law, the Default Rate shall be the maximum rate
permitted by applicable law.
23. Right to Cure Defaults. Upon the occurrence of any Event of Default
----------------------
or if Mortgagor fails to make any payment or to do any act as herein provided
within any applicable notice or grace period, Mortgagee may, but without any
obligation to do so and without further notice to or demand on Mortgagor and
without releasing Mortgagor from any
-13-
<PAGE>
obligation hereunder, make or do the same in such manner and to such extent as
Mortgagee may deem necessary to protect the security hereof. Mortgagee is
authorized to enter upon the Mortgaged Property for such purposes or appear in,
defend, or bring any action or proceeding to protect its interest in the
Mortgaged Property or to foreclose this Mortgage or collect the Debt, and the
reasonable cost and expense thereof (including reasonable attorneys' fees to the
extent permitted by law and any appraisal fees), with interest calculated at the
Default Rate, shall constitute a portion of the Debt and shall be secured by
this Mortgage and the other Loan Documents and shall be due and payable to
Mortgagee upon demand. All such costs and expenses incurred by Mortgagee in
remedying such Event of Default or in appearing in, defending, or bringing any
such action or proceeding shall bear interest at the Default Rate, for the
period after notice from Mortgagee that such cost or expense was incurred to the
date of payment of Mortgagee.
24. Late Payment Charge. If any portion of the Debt is not paid within
-------------------
fifteen (15) calendar days after the date on which it is due, Mortgagor shall
pay to Mortgagee upon demand a late charge equal to the lesser of two percent
(2%) of such unpaid portion of the Debt or the maximum amount permitted by
applicable law, to defray the expense incurred by Mortgagee in handling and
processing such delinquent payment and to compensate Mortgagee for the loss of
the use of such delinquent payment, and such amount shall be secured by this
Mortgage.
25. Right of Entry. Subject to the provisions of the Lease, Mortgagee and
--------------
its agents shall have the right to enter and inspect the Mortgaged Property at
all reasonable times.
26. Remedies.
--------
(a) Subject to the rights of the landlord or lessor under the Lease,
upon the occurrence of any Event of Default, Mortgagee may take such action,
without notice or demand, as it deems advisable to protect and enforce its
rights against Mortgagor and in and to the Mortgaged Property, including, but
not limited to, the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such order as Mortgagee may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Mortgagee:
(i) declare the entire Debt to be immediately due and payable;
(ii) institute proceedings for the complete foreclosure of this
Mortgage, in which case the Mortgaged Property or any interest therein may
be sold for cash or upon credit in one or more parcels or in several
interests or portions and in any order or manner;
(iii) with or without entry, to the extent permitted and pursuant to
the procedures provided by applicable law, institute proceedings for the
partial foreclosure of this Mortgage for the portion of the Debt then due
and payable, subject to the continuing lien of this Mortgage for the
balance of the Debt not then due;
-14-
<PAGE>
(iv) sell for cash or upon credit the Mortgaged Property or any
part thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to power of
sale or otherwise, at one or more sales, as an entity or in parcels, at
such time and place, upon such terms and after such notice thereof as may
be required or permitted by law;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the Note or in the Credit Agreement;
(vi) recover judgment on the Note either before, during or after
any proceedings for the enforcement of this Mortgage;
(vii) apply for the appointment of a receiver of the Mortgaged
Property, without notice and without regard for the adequacy of the
security for the Debt and without regard for the solvency of the Mortgagor
or of any person, firm or other entity liable for the payment of the Debt;
(viii) enforce Mortgagee's interest in the Subleases and Rents and
enter into or upon the Mortgaged Property, either personally or by its
agents, nominees or attorneys and dispossess Mortgagor and its agents and
servants therefrom, and thereupon Mortgagee may (A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal with all and
every part of the Mortgaged Property; (B) make reasonable and necessary
alterations, additions, renewals, replacements and improvements to or on
the Mortgaged Property to restore same to good condition and working order;
(C) exercise all rights and powers of Mortgagor with respect to the
Mortgaged Property, whether in the name of Mortgagor or otherwise,
including, without limitation, the right to make, cancel, enforce or modify
Subleases, obtain and evict tenants, and demand, sue for, collect and
receive all earnings, revenues, rents, issues, profits and other income of
the Mortgaged Property and every part thereof; and (D) apply the receipts
from the Mortgaged Property to the payment of the Debt, after deducting
therefrom all reasonable expenses (including reasonable attorneys' fees)
incurred in connection with the aforesaid operations and all amounts
necessary to pay the Taxes, assessments, insurance and Other Charges in
connection with the Mortgaged Property, as well as just and reasonable
compensation for the services of Mortgagee, its counsel, agents and
employees; or
(ix) pursue such other rights and remedies as may be available at
law and in equity.
In the event of a sale, by foreclosure or otherwise, of less than all of
the Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portion of the Mortgaged Property.
(b) The proceeds of any sale made under or by virtue of this
paragraph, together with any other sums which then may be held by Mortgagee
under this Mortgage,
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<PAGE>
whether under the provisions of this paragraph or otherwise, shall be applied by
Mortgagee to the payment of the Debt in such priority and proportion as
Mortgagee in its discretion shall deem proper.
(c) To the extent permitted by applicable law, Mortgagee may adjourn
from time to time any sale by it to be made under or by virtue of this Mortgage
by announcement at the time and place appointed for such sale or for such
adjourned sale or sales; and, except as otherwise provided by any applicable
provision of law, Mortgagee, without further notice or publication, may make
such sale at the time and place to which the same shall be so adjourned.
(d) Upon the completion of any sale or sales made by Mortgagee under
or by virtue of this paragraph, Mortgagee, or an officer of any court empowered
to do so, shall execute and deliver to the accepted purchaser or purchasers a
good and sufficient instrument, or good and sufficient instruments, conveying,
assigning and transferring all estate, right, title and interest in and to the
property and rights sold. Mortgagee is hereby irrevocably appointed the true and
lawful attorney of Mortgagor, in its name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the Mortgaged Property and
rights so sold and for that purpose Mortgagee may execute all necessary
instruments of conveyance, assignment and transfer, and may substitute one or
more persons with like power, Mortgagor hereby ratifying and confirming all that
its said attorney or such substitute or substitutes shall lawfully do by virtue
hereof. Any such sale or sales made under or by virtue of this paragraph shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Mortgagor in and to the properties
and rights so sold, and shall be a perpetual bar both at law and in equity
against Mortgagor and against any and all persons claiming or who may claim the
same, or any part thereof from, through or under Mortgagor.
(e) Upon any sale made under or by virtue of this paragraph,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Debt the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which Mortgagee
is authorized to deduct under this Mortgage.
(f) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
27. Reasonable Use and Occupancy. Subject to the rights of the landlord
----------------------------
or lessor under the Lease, in addition to the rights which Mortgagee may have
herein, upon the occurrence of any Event of Default, Mortgagee, at its option,
may require Mortgagor to pay monthly in advance to Mortgagee, or any receiver
appointed to collect the Rents, the fair and reasonable rental value for the use
and occupation of such part of the Mortgaged Property as may be occupied by
Mortgagor or may require Mortgagor to vacate and surrender possession
-16-
<PAGE>
of the Mortgaged Property to Mortgagee or to such receiver and, in default
thereof, Mortgagor may be evicted by summary proceedings or otherwise.
28. Security Agreement. This Mortgage is both a real property mortgage
------------------
and a "security agreement" within the meaning of the Uniform Commercial Code.
The Mortgaged Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Mortgagor in
the Mortgaged Property. Mortgagor by executing and delivering this Mortgage has
granted and hereby grants to Mortgagee, as security for the Debt, a security
interest in the Mortgaged Property to the full extent that the Mortgaged
Property may be subject to the Uniform Commercial Code (said portion of the
Mortgaged Property so subject to the Uniform Commercial Code being called in
this paragraph 28 the "Collateral"). If an Event of Default shall occur,
----------
Mortgagee, in addition to any other rights and remedies which it may have, shall
have and may exercise immediately and without demand, any and all rights and
remedies granted to a secured party upon default under the Uniform Commercial
Code, including, without limiting the generality of the foregoing, the right to
take possession of the Collateral or any part thereof, and to take such other
measures as Mortgagee may deem necessary for the care, protection and
preservation of the Collateral. Upon the request or demand of Mortgagee,
Mortgagor shall at its expense assemble the Collateral and make it available to
Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall pay to
Mortgagee on demand any and all expenses, including legal expenses and
reasonable attorneys' fees, incurred or paid by Mortgagee in protecting the
interest in the Collateral and in enforcing the rights hereunder with respect to
the Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor in accordance with
the provisions hereof at least ten (10) days prior to such action, shall
constitute commercially reasonable notice to Mortgagor. The proceeds of any
disposition of the Collateral, or any part thereof, may be applied by Mortgagee
to the payment of the Debt in such priority and proportions as Mortgagee in its
discretion shall deem proper.
29. Actions and Proceedings. Mortgagee has the right to appear in and
-----------------------
defend any action or proceeding brought with respect to the Mortgaged Property
and to bring any action or proceeding, in the name and on behalf of Mortgagor,
which Mortgagee, in its discretion, decides should be brought to protect their
interest in the Mortgaged Property. Mortgagee shall, at its option, be
subrogated to the lien of any mortgage or other security instrument discharged
in whole or in part by the Debt, and any such subrogation rights shall
constitute additional security for the payment of the Debt.
30. Waiver of Counterclaim. Mortgagor hereby waives the right to assert a
----------------------
counterclaim, other than a mandatory or compulsory counterclaim, in any action
or proceeding brought against it by Mortgagee.
31. Recovery of Sums Required to Be Paid. Mortgagee shall have the right
------------------------------------
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of
Mortgagee thereafter to bring an action of foreclosure, or any
-17-
<PAGE>
other action, for a default or defaults by Mortgagor existing at the time such
earlier action was commenced.
32. Marshalling and Other Matters. Mortgagor hereby waives, to the extent
-----------------------------
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Mortgaged Property or any
part thereof or any interest therein. Further, Mortgagor, to the extent
permitted by law, hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
33. Hazardous Waste and Asbestos. Mortgagor hereby represents and
----------------------------
warrants to Mortgagee that, to the best of Mortgagor's knowledge, (a) the
Mortgaged Property is not in direct or indirect violation of any local, state,
federal or other governmental authority, statute, ordinance, code, order,
decree, law, rule or regulation pertaining to or imposing liability or standards
of conduct concerning environmental regulation, contamination or clean-up
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), the Resource Conservation
------
and Recovery Act, as amended ("RCRA"), and any state super-lien and
----
environmental clean-up statutes (collectively, "Environmental Laws"); (b) the
------------------
Mortgaged Property is not subject to any private or governmental lien or
judicial or administrative notice or action relating to hazardous and/or toxic,
dangerous and/or regulated, substances, wastes, materials, pollutants or
contaminants, petroleum, tremolite, anthlophylie or actinolite or
polychlorinated biphenyls (including, without limitation, any raw materials
which include hazardous constituents) and any other substances or materials
which are included under or regulated by Environmental Laws (collectively,
"Hazardous Materials"); (c) no Hazardous Materials are or have been, prior to
- --------------------
Mortgagor's acquisition of the Mortgaged Property, discharged, generated,
treated, disposed of or stored on, incorporated in, or removed or transported
from the Mortgaged Property otherwise than in compliance with all Environmental
Laws and (d) there is no asbestos present in, and no underground storage tanks
exist on, any of the Mortgaged Property. So long as Mortgagor owns or is in
possession of the Mortgaged Property, Mortgagor shall keep or cause the
Mortgaged Property to be kept free from Hazardous Materials and in compliance
with all Environmental Laws, shall promptly notify Mortgagee if Mortgagor shall
become aware of any Hazardous Materials on the Mortgaged Property and/or if
Mortgagor shall become aware that the Mortgaged Property is in direct or
indirect violation of any Environmental Laws and Mortgagor shall remove such
Hazardous Materials and/or cure such violations, as applicable, as required by
law, promptly after Mortgagor becomes aware of same, at Mortgagor's sole
expense. Nothing herein shall prevent Mortgagor from recovering such expenses
from any other party that may be liable for such removal or cure. The term
"Hazardous Materials" shall specifically not include the emission, discharge,
generation, processing, storage or transportation of any hazardous substances or
hazardous materials (including, without limitation, cleaning materials and
solvents) pursuant to, and in accordance with, a valid federal or state permit,
license or order or otherwise in accordance with applicable Environmental
-18-
<PAGE>
Laws. The obligations and liabilities of Mortgagor under this paragraph 33 shall
survive any termination, satisfaction, or assignment of this Mortgage, any
Transfer and/or any exercise by Mortgagee of any of its rights or remedies
hereunder, including but not limited to, the acquisition of the Mortgaged
Property by foreclosure or a conveyance in lieu of foreclosure.
34. Handicapped Access.
------------------
(a) Mortgagor agrees that the Mortgaged Property shall at all times
comply to the extent applicable with the requirements of the Americans with
Disabilities Act of 1990, all state and local laws and ordinances related to
handicapped access and all rules, regulations, and orders issued pursuant
thereto including, without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively, "Access
------
Laws") to the extent necessary to avoid the imposition of any penalty or the
- ----
interruption of the conduct of the business at the Mortgaged Property.
(b) Mortgagor agrees to give prompt notice to Mortgagee of the
receipt by Mortgagor of any complaints related to violations of any Access Laws
and of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
35. Indemnification. In addition to any other indemnifications provided
---------------
herein or in the Note, the Credit Agreement or the other Loan Documents,
Mortgagor shall protect, defend, indemnify and save harmless Mortgagee from and
against all liabilities, obligations, claims, demands, damages, penalties,
causes of action, losses, fines, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) imposed upon or incurred by
or asserted against Mortgagee, except to the extent resulting from Mortgagee's
gross negligence or wilful misconduct, by reason of (a) ownership of this
Mortgage or the Mortgaged Property or any interest therein; (b) the construction
or renovation of any Improvements; (c) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Mortgaged
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (d) any use, nonuse or
condition in, on or about the Mortgaged Property or any part thereof or on
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (e) any failure on the part of Mortgagor to perform or comply with any
of the terms of this Mortgage; (f) performance of any labor or services or the
furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof; and (g) any failure of the Mortgaged Property to
comply with any Access Laws. Any amounts payable to Mortgagee by reason of the
application of this paragraph 35 shall be secured by this Mortgage and shall
become immediately due and payable and shall bear interest at the Default Rate
from the date any payment is made by Mortgagee hereunder until such payment is
reimbursed by Mortgagor. The obligations and liabilities of Mortgagor under
this paragraph 35 shall survive any termination, satisfaction or assignment of
this Mortgage, any Transfer and/or any exercise by Mortgagee of any of its
rights and remedies hereunder, including but not limited to, the acquisition of
the Mortgaged Property by foreclosure or a conveyance in lieu of foreclosure.
-19-
<PAGE>
36. Notices. Any notice, demand, statement, request or consent made
-------
hereunder shall be in writing to the other party hereto at its address set forth
below or at such other address as such party may designate by notice to the
other party hereto and shall be deemed given (i) on receipt, if mailed, by
certified or registered U.S. mail, return receipt requested, postage prepaid;
(ii) on receipt, if delivered, fee prepaid, to a national overnight delivery
service (such as Federal Express, Purolater Courier, U.P.S. Next Day Air); or
(iii) when delivered, if delivered by hand, as evidenced by a signed receipt:
To Mortgagor:
AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5352
Attention: Mr. Gerald Wilkins
Chief Financial Officer
Telephone: (770) 353-3280
with a courtesy copy to:
AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5352
Attention: Asset Management and Legal Department
Telephone: (770) 391-9500
To Mortgagee:
Banco Popular de Puerto Rico
7 West 51/st/ Street
New York, New York 10019
Attention: Ms. Karen Hamilton
Vice President
Telephone: (212) 445-1800
with a courtesy copy to:
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Brian F. Doran, Esq.
Telephone: (212) 586-4630
-20-
<PAGE>
A "Business Day" is any day other than a Saturday or Sunday, or a day on which
banking and savings and loan institutions in the State of New York are
authorized or obligated by law or executive order to remain closed. Refusal to
accept delivery of any notice shall be deemed to be receipt of such notice.
37. Authority. (a) Mortgagor (and the undersigned representative of
---------
Mortgagor, if any) has full power, authority and right to execute, deliver and
perform its obligations pursuant to this Mortgage, and to mortgage, give, grant,
bargain, sell, alien, enfeoff, convey, confirm, pledge, hypothecate and assign
the Mortgaged Property pursuant to the terms hereof and to keep and observe all
of the terms of this Mortgage on Mortgagor's part to be performed and (b)
Mortgagor represents and warrants that Mortgagor is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended and the related Treasury Department regulations, including temporary
regulations.
38. Waiver of Notice. Mortgagor shall not be entitled to any notices of
----------------
any nature whatsoever from Mortgagee except with respect to matters for which
this Mortgage or the Credit Agreement specifically and expressly provides for
the giving of notice by Mortgagee to Mortgagor and except with respect to
matters for which Mortgagee is required by applicable law to give notice, and
Mortgagor hereby expressly waives the right to receive any notice from Mortgagee
with respect to any matter for which this Mortgage does not specifically and
expressly provide for the giving of notice by Mortgagee to Mortgagor.
39. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage,
----------------------------
Mortgagee exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
40. Non-Waiver. The failure of Mortgagee to insist upon strict
----------
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the Note or the Credit Agreement or the other
Loan Documents, (b) the release, regardless of consideration, of the whole or
any part of the Mortgaged Property, or of any person liable for the Debt or any
portion thereof or (c) any agreement or stipulation by Mortgagee extending the
time of payment or otherwise modifying or supplementing the terms of the Note,
the Credit Agreement, this Mortgage or the other Loan Documents. Mortgagee may
resort for the payment of the Debt to any other security held by Mortgagee in
such order and manner as Mortgagee, in its discretion, may elect. Mortgagee may
take action to recover the Debt, or any portion thereof, or to enforce any
covenant hereof without prejudice to the right of Mortgagee thereafter to
foreclose this Mortgage. The rights and remedies of Mortgagee under this
Mortgage shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Mortgagee shall be construed
as an election to proceed under any one provision herein to the
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<PAGE>
exclusion of any other provision. Mortgagee shall not be limited exclusively to
the rights and remedies herein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity.
41. No Oral Change. This Mortgage, and any provisions hereof, may not be
--------------
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Mortgagor or Mortgagee, but only by
an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
42. Successors and Assigns. This Mortgage shall be binding upon and inure
----------------------
to the benefit of Mortgagor and Mortgagee and their respective heirs, personal
representatives, successors and assigns forever. Any assignment by Mortgagee of
its interest hereunder shall be subject to the provisions of Section 9.8 of the
Credit Agreement.
43. Inapplicable Provisions. If any term, covenant or condition of the
-----------------------
Note, the Credit Agreement or this Mortgage is held to be invalid, illegal or
unenforceable in any respect, the Note, the Credit Agreement and this Mortgage
shall be construed without such provision.
44. Headings, etc. The headings and captions of various paragraphs of
-------------
this Mortgage are for convenience of reference only and are not to be construed
as defining or limiting, in any way, the scope or intent of the provisions
hereof.
45. Governing Law. This Mortgage shall be governed by and construed in
-------------
accordance with the laws of the State of ___________ without regard to
principles of conflict of laws.
46. Definitions. Unless the context clearly indicates a contrary intent
-----------
or unless otherwise specifically provided herein, words used in this Mortgage
may be used interchangeably in singular or plural form and the word "Mortgagor"
shall mean "each Mortgagor and any subsequent owner or owners of the Mortgaged
Property or any part thereof or any interest therein," the word "Mortgagee"
shall mean "Mortgagee and any subsequent holder of the Note," the word "Note"
shall mean "the Note and any other evidence of indebtedness secured by this
Mortgage," the word "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "Mortgaged Property" shall
include any portion of the Mortgaged Property and any interest therein.
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms and the singular form of nouns
and pronouns shall include the plural and vice versa.
47. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
-----------------------
MORTGAGOR AND MORTGAGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON
THE LOAN EVIDENCED BY THE NOTE OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE NOTE, THE CREDIT AGREEMENT, THIS MORTGAGE OR ANY OF THE OTHER LOAN
-22-
<PAGE>
DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
VERBAL OR WRITTEN) OR ACTION OF MORTGAGOR OR MORTGAGEE. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR MORTGAGEE'S MAKING OF THE LOAN SECURED BY THIS MORTGAGE
AND THE OTHER LOAN DOCUMENTS.
48. Assignment. Subject to Section 9.8 of the Credit Agreement, Mortgagee
----------
shall have the right, exercisable at any time and from time to time, to sell,
transfer or assign the Mortgage and the other Loan Documents, or grant
participations therein, or issue certificates or securities evidencing a
beneficial interest therein in a rated or unrated public offering or private
placement, and Mortgagee may forward to any purchaser, transferee, assignee,
servicer, participant, investor or credit rating agency rating such securities
(collectively, an "Investor") or prospective Investor all documents and
information in Mortgagee's possession with respect to Mortgagor, the Mortgaged
Property and the Loan Documents as such Investor or prospective Investor may
request.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage, intending to be
legally bound, the day and year first above written.
AFC ENTERPRISES, INC.,
a Minnesota corporation
By: ______________________________
Name:____________________________
Title:_____________________________
-23-
<PAGE>
STATE OF ________________ )
) ss.:
COUNTY OF ______________ )
On the ___ day of _________, 199__, before me personally came ______________, to
me known, who, being by me duly sworn, did depose and say that he has an address
at ___________________________________, that he is the _______________ of
AFC Enterprises, Inc., a Minnesota corporation, the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
consent of the shareholders of said corporation.
______________________________________
Notary Public
My commission expires:
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT D
---------
FORM OF OWNED PROPERTY MORTGAGE
-------------------------------
MORTGAGE, SECURITY AGREEMENT AND
ASSIGNMENT OF LEASES AND RENTS
BY AND BETWEEN
AFC ENTERPRISES, INC.
SIX CONCOURSE PARKWAY
SUITE 1700
ATLANTA, GEORGIA 30328-5352
("MORTGAGOR")
AND
BANCO POPULAR DE PUERTO RICO
7 WEST 51/ST/ STREET
NEW YORK, NEW YORK 10019
("MORTGAGEE")
DATED AS OF _________, 199__
LOCATION OF PREMISES:
RECORDING REQUESTED BY AND
WHEN RECORDED - RETURN TO:
Brian F. Doran, Esq.
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
<PAGE>
THIS MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS (the
"Mortgage"), made as of the __ day of _____, 199_, by AFC ENTERPRISES, INC., a
--------
Minnesota corporation, having an office at Six Concourse Parkway, Suite 1700,
Atlanta, Georgia 30328-5352 ("Mortgagor") and BANCO POPULAR DE PUERTO RICO,
---------
having offices at 7 West 51/st/ Street, New York, New York 10019 ("Mortgagee").
---------
W I T N E S S E T H:
- - - - - - - - - -
To secure the payment of an indebtedness in the principal sum of
________________________________ DOLLARS ($___________), lawful money of the
United States of America, to be paid with interest according to a certain note
dated the date hereof made by Mortgagor to Mortgagee (the note together with all
extensions, renewals or modifications thereof being hereinafter collectively
called the "Note") (said indebtedness, interest and all other sums due hereunder
----
and under the Note being collectively called the "Debt"), Mortgagor has
----
mortgaged, given, granted, bargained, sold, aliened, conveyed, confirmed,
pledged, assigned, and hypothecated and by these presents does hereby mortgage,
give, grant, bargain, sell, alien, convey, confirm, pledge, assign and
hypothecate unto Mortgagee the real property described in Exhibit A attached
---------
hereto (the "Land") and the buildings, structures, fixtures, additions,
----
enlargements, extensions, modifications, repairs, replacements and improvements,
now or hereafter located thereon (the "Improvements");
------------
TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Land and the Improvements together with the following
property, rights, interests and estates being hereinafter described are
collectively referred to herein as the "Mortgaged Property"):
------------------
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to the Land
or the Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or proposed,
in front of or adjoining the Land, to the center line thereof and all the
estates, rights, titles, interests, property, possession, claim and demand
whatsoever, both at law and in equity, of Mortgagor of, in and to the Land and
the Improvements and every part and parcel thereof, with the appurtenances
thereto;
(b) all machinery, equipment, fixtures, furniture, equipment, cooking
supplies, stoves, refrigerators, dishes, glassware, utensils and inventories and
other property of every kind and nature, whether tangible or intangible,
whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an
interest, now or hereafter located upon the Land or the Improvements, or
appurtenant thereto, and usable in connection with the present or future
<PAGE>
operation and occupancy of the Land or the Improvements and all building
equipment, materials and supplies and construction equipment, materials and
supplies of any nature whatsoever owned by Mortgagor, or in which Mortgagor has
or shall have an interest, now or hereafter located upon the Land or the
Improvements and financed or acquired with the proceeds evidenced by the Note,
or appurtenant thereto, or usable in connection with the present or future
construction, renovation, operation, enjoyment and occupancy of the Land or the
Improvement (hereinafter collectively called the "Equipment"), including the
---------
proceeds of any sale or transfer of the foregoing, and the right, title and
interest of Mortgagor in and to any of the Equipment which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the State of ______________ (the "Uniform Commercial Code") superior
-----------------------
in lien to the lien of this Mortgage;
(c) all awards or payments, including interest thereon, which may
heretofore or hereafter be made with respect to the Mortgaged Property, whether
from the exercise of eminent domain or condemnation (including but not limited
to any transfer made in lieu of or in anticipation of the exercise of said
rights), or for a change of grade, or for any other injury to or decrease in the
value of the Mortgaged Property;
(d) all leases and other agreements affecting the use, enjoyment or
occupancy of the Land or the Improvements heretofore or hereafter entered into
by Mortgagor (collectively, the "Leases") and all income, rents, issues, profits
------
and revenues from the Land or Improvements (collectively, the "Rents") and all
-----
proceeds from the sale, surrender, termination or other disposition of the
Leases and the right to receive and apply the Rents to the payment of the Debt;
(e) all proceeds of and any unearned premiums on any insurance
policies covering the Mortgaged Property, including, without limitation, the
right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Mortgaged Property; and
(f) the right, in the name and on behalf of Mortgagor, to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to commence any action or proceeding to protect the interest of
Mortgagee in the Mortgaged Property.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto
and to the use and benefit of Mortgagee, and the successors and assigns of
Mortgagee, forever.
AND Mortgagor represents and warrants to and covenants and agrees with Mortgagee
as follows:
1. Payment of Debt and Incorporation of Covenants, Conditions and
--------------------------------------------------------------
Agreements. Mortgagor will pay the Debt at the time and in the manner provided
- ----------
in the Note, the Credit
-2-
<PAGE>
Agreement (as hereinafter defined) and in this Mortgage. All the covenants,
conditions and agreements contained in (a) the Note, (b) the Credit Agreement,
dated as of the date hereof, between Mortgagor and Mortgagee, as the same may be
modified or supplemented from time to time (the "Credit Agreement") and (c) all
----------------
and any of the documents other than the Note, the Credit Agreement or this
Mortgage now or hereafter executed by Mortgagor and/or others and by or in favor
of Mortgagee, which wholly or partially secure or guaranty payment of the Note
(collectively, the "Loan Documents"), are hereby made a part of this Mortgage to
--------------
same extent and with the same force as if fully set forth herein. In the
event of any conflict between the terms of this Mortgage and the terms of the
Credit Agreement, the Credit Agreement shall govern and control to the extent of
such conflict.
2. Warranty of Title. Mortgagor warrants that it has good title to the
-----------------
Mortgaged Property and has the right to mortgage, give, grant, bargain, sell,
alien, convey, confirm, pledge, assign and hypothecate the same and that
Mortgagor possesses an unencumbered fee estate in the Land and the Improvements
and that it owns the Mortgaged Property free and clear of all liens,
encumbrances and charges whatsoever except for those exceptions shown in the
title insurance policy insuring the lien of this Mortgage and the Permitted
Encumbrances (as defined in the Credit Agreement). Mortgagor shall forever
warrant, defend and preserve such title and the validity and priority of the
lien of this Mortgage and shall forever warrant and defend the same to Mortgagee
against the claims of all persons whomsoever, subject to the Permitted
Encumbrances.
3. Insurance.
---------
(a) Mortgagor, at its sole cost and expense, for the mutual benefit
of Mortgagor and Mortgagee, shall obtain and maintain during the entire term of
this Mortgage the policies of insurance described in Schedule B annexed to the
----------
Credit Agreement.
(b) If the Mortgaged Property shall be damaged or destroyed, in whole
or in part, by fire or other casualty, Mortgagor shall give prompt written
notice thereof to Mortgagee. Sums paid to Mortgagee by an insurer, after
deduction of Mortgagee's reasonable costs and expenses of collection (after such
deduction, the "Insurance Proceeds"), shall be applied as hereinafter set forth.
------------------
If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty, Mortgagor may elect (which election must be exercised
not later than fifteen (15) days after the date the Mortgaged Property shall be
so damaged or destroyed) to repay the principal amount of the Note, together
with all accrued interest under the Note and all fees and expenses required to
be paid by Mortgagor under the Note, the Credit Agreement, this Mortgage and the
other Loan Documents with respect to the Loan (as defined in the Credit
Agreement) evidenced by the Note and secured by this Mortgage, in lieu of any
requirement on the part of Mortgagor to restore the Mortgaged Property. Such
sums must be paid by Mortgagor to Mortgagee within thirty (30) days after the
making of Mortgagor's election as provided above. Upon the payment of such sums
to Mortgagee, the Mortgagor shall have no further obligation to restore the
Mortgaged Property and Mortgagee shall assign to Mortgagor all of Mortgagee's
right, title and interest in and to the Insurance Proceeds. In the event
Mortgagor shall fail to make the election described in
-3-
<PAGE>
this paragraph 3(b) within fifteen (15) days after the date the Mortgaged
Property shall be damaged or destroyed, then, the Insurance Proceeds may be
retained and (i) applied by Mortgagee toward payment of the Debt in such
priority and proportions as Mortgagee in its discretion shall deem proper or,
(ii) if the conditions set forth in paragraph 3(d) of this Mortgage are
satisfied, as determined by Mortgagee in its sole discretion, paid to Mortgagor
for the restoration and repair of the Mortgaged Property in accordance with
paragraph 3(c) of this Mortgage in whole or in such lesser amount as is
necessary to pay for the costs of such restoration and repair.
(c) If the Insurance Proceeds are made available to Mortgagor for the
cost of restoration and repair of the Mortgaged Property, (i) the Mortgaged
Property shall be substantially restored to the equivalent of its condition
prior to such casualty or to such other condition as Mortgagee may approve in
writing, (ii) such restoration and repair shall be done in compliance with all
applicable laws, rules and regulations, and (iii) all reasonable costs and
expenses incurred by Mortgagee in connection with making the Insurance Proceeds
available for such restoration and repair including, without limitation, counsel
fees and inspecting engineers' fees incurred by Mortgagee, shall be paid by
Mortgagor. If the cost to repair or restore the Mortgaged Property will exceed
$100,000, Mortgagee may, at Mortgagee's option, condition disbursement of said
proceeds on Mortgagee's approval of such plans and specifications of an
architect reasonably satisfactory to Mortgagee, contractor's cost estimates,
architect's certificates, waivers of liens, sworn statements of mechanics and
material men and such other evidence of costs, percentage completion of
construction, application of payments, and satisfaction of liens as Mortgagee
may reasonably require. If the Insurance Proceeds are applied to the payment of
the Debt, any such application of proceeds to principal shall not extend or
postpone the maturity date of the Note or change the amount or the due date of
any installment payment under the Note. Any surplus Insurance Proceeds, after
payment of the Debt, shall be paid to Mortgagor. If the Mortgaged Property is
sold pursuant to paragraph 25 of this Mortgage or if Mortgagee acquires title to
the Mortgaged Property, Mortgagee shall have all of the right, title and
interest of Mortgagor in and to any insurance policies and unearned premiums
thereon and in and to the Insurance Proceeds resulting from any damage to the
Mortgaged Property prior to such sale or acquisition.
(d) Mortgagee shall not exercise its option to apply Insurance
Proceeds to the payment of the sums secured by this Mortgage if all the
following conditions are met, as determined by Mortgagee in its sole discretion:
(i) no Event of Default is then continuing under this Mortgage, the Note, the
Credit Agreement or any other Loan Document; (ii) Mortgagee determines that
there will be sufficient funds (whether consisting of Insurance Proceeds and/or
other sums made available by Mortgagor for restoration) to restore and repair
the Mortgaged Property to the condition required under paragraph 3(c) above;
(iii) Mortgagee determines that restoration and repair of the Mortgaged Property
to the condition required under paragraph 3(c) above will be completed within
the greater of (A) three (3) months after Mortgagor=s receipt of Insurance
Proceeds or (B) the period of time covered by the business interruption
insurance, if any, then in effect from the date of the loss or casualty to the
Mortgaged Property; and (iv) Mortgagee shall have received evidence reasonably
satisfactory to it that during the period of restoration and repair of the
Mortgaged Property to the condition
-4-
<PAGE>
required under subparagraph 3(c) above, the sum of (A) income derived from the
Mortgaged Property, as reasonably determined by Mortgagee, plus (B) proceeds of
business interruption insurance, if any, to be paid, plus (C) amounts that
Mortgagor demonstrates to Mortgagee's reasonable satisfaction will be made
available by Mortgagor from other sources during such period will equal or
exceed the sum of (D) expenses in connection with the operation of the Mortgaged
Property and (E) the debt service under the Note.
4. Payment of Taxes, etc.
---------------------
(a) All taxes, assessments and water and sewer rents, now or
hereafter levied or assessed or imposed against the Mortgaged Property or any
part thereof (the "Taxes") shall be paid by Mortgagor when due. Mortgagor shall
-----
pay all ground rents, maintenance charges, other governmental impositions, and
other charges, including without limitation vault charges and license fees for
the use of vaults, chutes and similar areas adjoining the Mortgaged Property,
now or hereafter levied or assessed or imposed against the Mortgaged Property or
any part thereof (the "Other Charges") as the same become due and payable.
-------------
Mortgagor will deliver to Mortgagee, promptly after same are made available to
Mortgagor, tax certificates or receipted tax bills or other evidence of payment
issued by the relevant taxing authority evidencing that the Taxes and Other
Charges have been so paid or are not then delinquent. Mortgagor shall not suffer
and shall promptly cause to be paid or discharged any lien or charge whatsoever
which may be or become a lien or charge against the Mortgaged Property (other
than a Permitted Encumbrance), and shall promptly pay for all utility services
provided to the Mortgaged Property.
(b) Mortgagor, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any of
the Taxes or Other Charges, provided that (i) Mortgagor is not in default under
the Note, the Credit Agreement, this Mortgage or any other Loan Document, (ii)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Mortgagor is subject and shall not
constitute a default thereunder, (iii) neither the Mortgaged Property nor any
part thereof or interest therein will be in danger of being sold, forfeited,
terminated, cancelled or lost, (iv) Mortgagor shall have paid the Taxes under
protest or set aside adequate reserves for the payment of the Taxes or Other
Charges, together with all interest and penalties thereon and (v) Mortgagor
shall have furnished such security as may be required in the proceeding to
insure the payment of any such Taxes or Other Charges, together with all
interest and penalties thereon.
5. Escrow Fund. (a) In the event Mortgagor shall at any time fail to pay
-----------
any Taxes when due, and such failure shall continue for a period of fifteen (15)
days after the date such Taxes were due, Mortgagee may, at its election, require
Mortgagor to pay to Mortgagee, on the first day of each calendar month occurring
thereafter, one-twelfth (1/12th) of an amount which would be sufficient to pay
the Taxes payable, or estimated by Mortgagee to be payable, during the next
twelve (12) months and also provide for an additional reserve equal to one-
-5-
<PAGE>
sixth (1/6th) of the Taxes payable (said amounts being hereinafter called the
"Tax Escrow Fund.")
---------------
(b) The Tax Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Note, shall be added together and shall be paid as
an aggregate sum by Mortgagor to Mortgagee. Mortgagor hereby pledges to
Mortgagee any and all monies now or hereafter deposited in the Tax Escrow Fund
as additional security for the payment of the Debt. Mortgagee will apply the
Tax Escrow Fund to payments of Taxes to be made by Mortgagor pursuant to
paragraph 4 hereof. If the amount of the Tax Escrow Fund shall exceed the
amounts due for Taxes pursuant to paragraph 4 hereof, Mortgagee shall, in its
discretion, return any excess to Mortgagor or credit such excess against future
payments to be made to the Tax Escrow Fund. In allocating such excess,
Mortgagee may deal with the person shown on the records of Mortgagee to be the
owner of the Mortgaged Property. If the balance in the Tax Escrow Fund on the
first day of the month which is one full month prior to the due date of any
Taxes is not sufficient to pay the Taxes, Mortgagor shall pay to Mortgagee, upon
demand, an amount which Mortgagee shall estimate as sufficient to make up the
deficiency. Upon the acceleration of the Debt as described in paragraph 25
hereof, Mortgagee may apply any sums then present in the Tax Escrow Fund to the
payment of the following items in any order in its sole discretion:
(i) Taxes and Other Charges;
(ii) Interest on the unpaid principal balance of the Note;
(iii) Amortization of the unpaid principal balance of the Note; or
(iv) All other sums payable pursuant to the Note, the Credit
Agreement, this Mortgage and the other Loan Documents, including without
limitation, advances made by Mortgagee pursuant to the terms of this
Mortgage.
(c) Until expended or applied as above provided, any amounts in the
Tax Escrow Fund shall constitute additional security for the Debt. The Tax
Escrow Fund shall not constitute a trust fund and may be commingled with other
monies held by Mortgagee. No earnings or interest on the Tax Escrow Fund shall
be paid to Mortgagor, unless applicable law requires interest on the Tax Escrow
Fund to be paid to Mortgagor. Any such required interest shall be deposited in
the Tax Escrow Fund as additional security for the payment of the Debt.
6. Condemnation.
------------
(a) Mortgagor shall promptly give Mortgagee written notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Mortgagee copies of any and all papers served in
connection with such proceedings. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Mortgagor shall continue to pay the Debt at the time and in the
-6-
<PAGE>
manner provided for its payment in the Note, the Credit Agreement, this Mortgage
and the other Loan Documents and the Debt shall not be reduced until any award
or payment therefor shall have been actually received after expenses of
collection and applied by Mortgagee to the discharge of the Debt. Mortgagee
shall not be limited to the interest paid on the award by the condemning
authority but shall be entitled to receive out of the award interest at the rate
or rates provided herein and in the Note. Mortgagor shall cause the award or
payment made in any condemnation or eminent domain proceeding, which is payable
to Mortgagor, to be paid directly to Mortgagee. Sums paid to Mortgagee for such
condemnation or action of eminent domain, after deduction of Mortgagee's
reasonable costs and expenses of collection (after such deduction, the
"Condemnation Proceeds"), shall be applied as hereinafter set forth. In the
---------------------
event of the actual commencement of condemnation or eminent domain proceedings
affecting the Mortgaged Property, Mortgagor may elect (which election must be
exercised not later than fifteen (15) days prior to the effective date of the
taking of the Mortgaged Property to repay the principal amount of the Note,
together with all accrued interest under the Note and all fees and expenses
required to be paid by Mortgagor under the Note, the Credit Agreement, this
Mortgage and the other Loan Documents with respect to the Loan evidenced by the
Note and secured by this Mortgage, in lieu of any requirement on the part of
Mortgagor to restore the Mortgaged Property. Such sums must be paid by Mortgagor
to Mortgagee within thirty (30) days after the making of Mortgagor=s election as
provided above. Upon the payment of such sums to Mortgagee, the Mortgagor shall
have no further obligation to restore the Mortgaged Property and Mortgagee shall
assign to Mortgagor all of Mortgagee's right, title and interest in and to the
Condemnation Proceeds. In the event Mortgagor shall fail to make the election
described above in this paragraph 6(a) within fifteen (15) days prior to the
effective date of the taking of the Mortgaged Property, then, at Mortgagee's
election, the Condemnation Proceeds may be retained and (i) applied by Mortgagee
toward payment of the Debt in such priority and proportions as Mortgagee in its
discretion shall deem proper, or (ii) if the conditions set forth in paragraph
6(c) of this Mortgage are satisfied, as determined by Mortgagee in its sole
discretion, paid to Mortgagor for the restoration and repair of the Mortgaged
Property in accordance with paragraph 6(b) of this Mortgage in whole or in such
lesser amount as is necessary to pay for the costs of such restoration and
repair. If the Mortgaged Property is sold pursuant to paragraph 25 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
Condemnation Proceeds resulting from any condemnation or eminent domain
proceeding of the Mortgaged Property prior to such sale or acquisition.
(b) If the Condemnation Proceeds are made available to Mortgagor for
the cost of restoration and repair of the Mortgaged Property, (i) the Mortgaged
Property shall be substantially restored to the equivalent of its condition
prior to such condemnation or to such other condition as Mortgagee may approve
in writing, (ii) such restoration and repair shall be done in compliance with
all applicable laws, rules and regulations, and (iii) all reasonable costs and
expenses incurred by Mortgagee in connection with making the Condemnation
Proceeds available for such restoration and repair including, without
limitation, counsel fees and inspecting engineers' fees incurred by Mortgagee,
shall be paid by Mortgagor. If the cost to repair or restore the Mortgaged
Property will exceed $100,000, Mortgagee may, at Mortgagee's option, condition
disbursement of said proceeds on Mortgagee's approval of such
-7-
<PAGE>
plans and specifications of an architect reasonably satisfactory to Mortgagee,
contractor's cost estimates, architect's certificates, waivers of liens, sworn
statements of mechanics and material men and such other evidence of costs,
percentage completion of construction, application of payments, and satisfaction
of liens as Mortgagee may reasonably require. If the Condemnation Proceeds are
applied to the payment of the Debt, any such application of proceeds to
principal shall not extend or postpone the maturity date of the Note or change
the amount or the due date of any installment payment under the Note. Any
surplus Condemnation Proceeds, after payment of the Debt, shall be paid to
Mortgagor. If the Mortgaged Property is sold pursuant to paragraph 25 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
Condemnation Proceeds resulting from any condemnation or eminent domain
proceeding of the Mortgaged Property prior to such sale or acquisition.
(c) Mortgagee shall not exercise its option to apply Condemnation
Proceeds to the payment of the sums secured by this Mortgage if all the
following conditions are met, as determined by Mortgagee in its sole discretion:
(i) no Event of Default is then continuing under this Mortgage, the Note, the
Credit Agreement or any other Loan Document; (ii) Mortgagee determines that
there will be sufficient funds (whether consisting of Condemnation Proceeds
and/or other sums made available by Mortgagor for restoration) to restore and
repair the Mortgaged Property to the condition required under paragraph 6(b)
above; (iii) Mortgagee determines that restoration and repair of the Mortgaged
Property to the condition required under paragraph 6(b) above will be completed
within the greater of (A) three (3) months after Mortgagor=s receipt of
Condemnation Proceeds or (B) the period of time covered by the business
interruption insurance, if any, then in effect from the date of the loss or
casualty to the Mortgaged Property; and (iv) Mortgagee shall have received
evidence reasonably satisfactory to it that during the period of restoration and
repair of the Mortgaged Property to the condition required under subparagraph
6(b) above, the sum of (A) income derived from the Mortgaged Property, as
reasonably determined by Mortgagee, plus (B) proceeds of business interruption
insurance, if any, to be paid, plus (C) amounts that Mortgagor demonstrates to
Mortgagee's reasonable satisfaction will be made available by Mortgagor from
other sources during such period will equal or exceed the sum of (D) expenses in
connection with the operation of the Mortgaged Property and (E) the debt service
under the Note.
7. Leases and Rents.
----------------
(a) Mortgagor does hereby absolutely and unconditionally assign to
Mortgagee its right, title and interest in all current and future Leases and
Rents, it being intended by Mortgagor that this assignment constitutes a
present, absolute assignment and not an assignment for additional security only.
Such assignment to Mortgagee shall not be construed to bind Mortgagee to the
performance of any of the covenants, conditions or provisions contained in any
such Lease or otherwise to impose any obligation upon Mortgagee. Mortgagor
agrees to execute and deliver to Mortgagee such additional instruments, in form
and substance reasonably satisfactory to Mortgagee, as may hereafter be
requested by Mortgagee to further evidence and confirm such assignment.
Nevertheless, subject to the
-8-
<PAGE>
terms of this paragraph 7, Mortgagee grants to Mortgagor a revocable license to
operate and manage the Mortgaged Property and to collect the Rents. Mortgagor
shall hold the Rents, or a portion thereof sufficient to discharge all current
sums due on the Debt, in trust for the benefit of Mortgagee for use in the
payment of such sums. Upon an Event of Default, the license granted to Mortgagor
herein shall be automatically revoked and Mortgagee shall immediately be
entitled to possession of all Rents, whether or not Mortgagee enters upon or
takes control of the Mortgaged Property. Mortgagee is hereby granted and
assigned by Mortgagor the right, at its option, upon the revocation of the
license granted herein to enter upon the Mortgaged Property in person, by agent
or by court-appointed receiver to collect the Rents. Any Rents collected after
the revocation of the license herein granted may be applied toward payment of
the Debt in such priority and proportion as Mortgagee in its discretion shall
deem proper.
(b) Upon request, Mortgagor shall furnish Mortgagee with copies of
all Leases and all amendments or modifications of any Lease. All Leases shall
provide that each such Lease is subordinate to this Mortgage and that the lessee
agrees to attorn to Mortgagee. Mortgagee shall execute and deliver to any lessee
which is a Qualified AFC Franchisee (as defined in the Credit Agreement) a non-
disturbance agreement, which agreement shall be in the Mortgagee's standard form
and prepared by Mortgagee=s counsel at Mortgagor's expense. Mortgagor (i) shall
observe and perform all the obligations imposed upon the lessor under the Leases
and shall not do or permit to be done anything to impair the value of the Leases
as security for the Debt; (ii) shall upon request by Mortgagee, send Mortgagee
copies of all notices of default sent or received by Mortgagee under the Leases;
(iii) shall enforce all of the material terms, covenants and conditions
contained in the Leases on the part of the lessee thereunder to be observed or
performed to the extent commercially reasonable; (iv) shall not collect any of
the Rents (excluding common area charges, taxes and insurance deposits and
security deposits) more than one (1) month in advance (except with respect to
collection of the final month's rent as security); (v) shall not execute any
other assignment of lessor's interest in the Leases or the Rents; and (vi) shall
execute and deliver at the request of Mortgagee all such further assurances,
confirmations and assignments in connection with the Mortgaged Property as
Mortgagee shall from time to time require.
(c) Mortgagor shall not, without the prior written consent of
Mortgagee (i) amend or modify any Lease with respect to the term thereof or the
Rent payable thereunder, (ii) execute a new Lease, (iii) permit use of the
demised premises under any Lease for use or uses other than quick service
restaurant use; or (iv) terminate, cancel or accept a surrender of any Lease
other than as a result of the lessee=s non-payment of Rent or uncured breach of
any material term of its Lease.
8. Maintenance of Mortgaged Property. Mortgagor shall cause the Mortgaged
---------------------------------
Property to be maintained in a good and safe condition and repair. The
Improvements and the Equipment shall not be removed, demolished or materially
altered (except for normal replacement of the Equipment) without the written
consent of Mortgagee. Mortgagor shall promptly comply with all laws, orders and
ordinances affecting the Mortgaged Property and the use thereof. Mortgagor
shall promptly repair, replace or rebuild any part of the
-9-
<PAGE>
Mortgaged Property that (i) is damaged or destroyed by any casualty (subject to
the provisions of paragraph 3 hereof), (ii) becomes damaged, worn or
dilapidated, or (iii) is affected by any proceeding of the character referred to
in paragraph 6 hereof (subject to the provision of such paragraph 6) and
Mortgagor shall complete and pay for any structure at any time in the process of
construction, renovation or repair on the Land. Mortgagor shall not initiate,
join in, acquiesce in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of the Mortgaged Property or any part
thereof. If under applicable zoning provisions the use of all or any portion of
the Mortgaged Property is or shall become a nonconforming use, Mortgagor will
not cause or permit such nonconforming use to be discontinued or abandoned
without the express written consent of Mortgagee.
9. Transfer or Encumbrance of the Mortgaged Property.
-------------------------------------------------
(a) Mortgagor acknowledges that Mortgagee has examined and relied on
the creditworthiness of Mortgagor and experience of Mortgagor in developing,
constructing, renovating, owning and operating properties such as the Mortgaged
Property in agreeing to make the Loan secured hereby, and that Mortgagee will
continue to rely on Mortgagor's ownership of the Mortgaged Property as a means
of maintaining the value of the Mortgaged Property as security for repayment of
the Debt. Mortgagor acknowledges that Mortgagee has a valid interest in
maintaining the value of the Mortgaged Property so as to ensure that, should
Mortgagor default in the repayment of the Debt, Mortgagee can recover the Debt
by a sale of the Mortgaged Property. Except as otherwise expressly provided in
the Credit Agreement, Mortgagor shall not, without the prior written consent of
Mortgagee, sell, convey, alien, mortgage, encumber, pledge or otherwise transfer
the Mortgaged Property or any part thereof, or permit the Mortgaged Property or
any part thereof to be sold, conveyed, aliened, mortgaged, encumbered, pledged
or otherwise transferred (any of the foregoing, a "Transfer"). A Transfer shall
--------
not be deemed to include any utility easements or reciprocal operating
agreements with adjoining property owners for the benefit of the Mortgaged
Property.
(b) Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Mortgagor's Transfer of the
Mortgaged Property without Mortgagee's consent or in contravention of the
provisions of the Credit Agreement.
10. Estoppel Certificates and No Default Affidavits.
-----------------------------------------------
(a) After request by either Mortgagor or Mortgagee, Mortgagor or
Mortgagee, as the case may be, shall within ten (10) days furnish the requesting
party with a statement, duly acknowledged and certified, setting forth (i) the
amount of the original principal amount of the Note, (ii) the unpaid principal
amount of the Note, (iii) the rate of interest of the Note, (iv) the date
installments of interest and/or principal were last paid, (v) any offsets or
defenses to the payment of the Debt, if any and (vi) that the Note and this
Mortgage are valid, legal and binding obligations and have not been modified or
if modified, giving the particulars of such modification.
-10-
<PAGE>
(b) Within tem (10) days after request by Mortgagee, Mortgagor will
request lessees under the Leases to furnish Mortgagee with estoppel certificates
as required by such lessees' respective Lease and Mortgagor will use diligent
efforts to obtain such estoppel certificates.
11. Changes in the Laws Regarding Taxation. If any law is enacted or
--------------------------------------
adopted or amended after the date of this Mortgage which deducts the Debt from
the value of the Mortgaged Property for the purpose of taxation or which imposes
a tax, either directly or indirectly, on the Debt or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any. In the event Mortgagee is advised by counsel chosen by it that
the payment of such tax or interest and penalties by Mortgagor would be unlawful
or taxable to Mortgagee or unenforceable or provide the basis for a defense of
usury, then in any such event, Mortgagee shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt immediately due
and payable.
12. No Credits on Account of the Debt. Mortgagor will not claim or demand
---------------------------------
or be entitled to any credit or credits on account of the Debt for any part of
the Taxes or Other Charges assessed against the Mortgaged Property, or any part
thereof, and no deduction shall otherwise be made or claimed from the assessed
value of the Mortgaged Property, or any part thereof, for real estate tax
purposes by reason of this Mortgage or the Debt. In the event such claim,
credit or deduction shall be required by law, Mortgagee shall have the option,
by written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
13. Documentary Stamps. If at any time the United States of America, the
------------------
State of ______________ or any subdivision thereof shall require revenue or
other stamps to be affixed to the Note or this Mortgage, or impose any other tax
or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
14. Usury Laws. This Mortgage and the Note are subject to the express
----------
condition that at no time shall Mortgagor be obligated or required to pay
interest on the Debt at a rate which could subject Mortgagee to either civil or
criminal liability as a result of being in excess of the maximum interest rate
which Mortgagor is permitted by law to contract or agree to pay. If by the
terms of this Mortgage or the Note, Mortgagor is at any time required or
obligated to pay interest on the Debt at a rate in excess of such maximum rate,
the rate of interest under the same shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all previous payments in excess of such maximum rate shall be deemed to
have been payments in reduction of the principal and not on account of the
interest due hereunder.
15. Security Agreement. Mortgagor hereby assigns and transfers to
------------------
Mortgagee and creates a security interest in all of Mortgagor's right, title and
interest in and to the consideration, in whatever form delivered, for the sale,
transfer or conveyance of Mortgagor's
-11-
<PAGE>
interest in the Leases, which security interest shall automatically terminate
upon satisfaction of the Debt.
16. Performance of Other Agreements. Mortgagor shall observe and perform
-------------------------------
each and every term to be observed or performed by Mortgagor pursuant to the
terms of any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property if the effect of the failure to observe or perform the same
would cause a Material Adverse Effect (as defined in the Credit Agreement).
17. Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and
-----------------
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, transfers and assurances as Mortgagee shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged,
assigned and hypothecated or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee,
or for carrying out the intention or facilitating the performance of the terms
of this Mortgage or for filing, registering or recording this Mortgage.
Mortgagor, on demand, will execute and deliver and hereby authorizes Mortgagee
to execute in the name of Mortgagor or without the signature of Mortgagor to the
extent Mortgagee may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Mortgagee in the Mortgaged Property. Mortgagor grants to Mortgagee
an irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Mortgagee
at law and in equity, including without limitation such rights and remedies
available to Mortgagee pursuant to this paragraph 17.
18. Trust Fund. Mortgagor shall receive the advances secured hereby and
----------
shall hold the right to receive the advances as a trust fund to be applied first
as required by the Credit Agreement before using any part of the total of the
same for any other purpose.
19. Recording of Mortgage, etc. Mortgagor forthwith upon the execution
--------------------------
and delivery of this Mortgage and thereafter, from time to time, will cause this
Mortgage, and any security instrument creating a lien or security interest or
evidencing the lien hereof upon the Mortgaged Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to protect the lien or security interest hereof upon, and
the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all federal, state, county
and municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property or any instrument of further assurance, except where prohibited by law
so to do. Mortgagor shall hold harmless and indemnify
-12-
<PAGE>
Mortgagee, its successors and assigns, against any liability incurred by reason
of the imposition of any tax on the making and recording of this Mortgage.
20. Events of Default. The Debt shall become immediately due and payable
-----------------
at the option of Mortgagee, without notice or demand, upon any one or more of
the following events ("Events of Default"):
-----------------
(a) if any of the Taxes or Other Charges is not paid when the same is
due and payable, subject to the provisions of paragraphs 4 and 5;
(b) if Mortgagor violates or does not comply with any of the
provisions of paragraphs 7, 9 or 15;
(c) if the Mortgaged Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real estate taxes and
assessments not then due and payable or Permitted Encumbrances and such lien
shall remain undischarged of record (by payment, bonding or otherwise) for a
period of sixty (60) calendar days after the filing of such lien;
(d) if Mortgagor fails to cure promptly any violations of laws or
ordinances affecting the Mortgaged Property and such failure continues for a
period of thirty (30) calendar days after Mortgagor's receipt of notice thereof;
or
(e) the occurrence of an Event of Default under the Credit Agreement.
21. Default Interest. Upon the occurrence of any Event of Default,
----------------
Mortgagor shall pay interest on the unpaid principal balance of the Note at the
Default Rate (as defined in the Note). The Default Rate shall be computed from
the occurrence of the Event of Default until the actual receipt and collection
of the Debt. This charge shall be added to the Debt, and shall be deemed
secured by this Mortgage. This clause, however, shall not be construed as an
agreement or privilege to extend the date of the payment of the Debt, nor as a
waiver of any other right or remedy accruing to Mortgagee by reason of the
occurrence of any Event of Default. If the Default Rate is above the maximum
rate permitted by applicable law, the Default Rate shall be the maximum rate
permitted by applicable law.
22. Right to Cure Defaults. Upon the occurrence of any Event of Default
----------------------
or if Mortgagor fails to make any payment or to do any act as herein provided
within any applicable notice or grace period, Mortgagee may, but without any
obligation to do so and without further notice to or demand on Mortgagor and
without releasing Mortgagor from any obligation hereunder, make or do the same
in such manner and to such extent as Mortgagee may deem necessary to protect the
security hereof. Mortgagee is authorized to enter upon the Mortgaged Property
for such purposes or appear in, defend, or bring any action or proceeding to
protect its interest in the Mortgaged Property or to foreclose this Mortgage or
collect the Debt, and the reasonable cost and expense thereof (including
reasonable attorneys' fees to the extent permitted by law and any appraisal
fees), with interest calculated at the Default Rate,
-13-
<PAGE>
shall constitute a portion of the Debt and shall be secured by this Mortgage and
the other Loan Documents and shall be due and payable to Mortgagee upon demand.
All such costs and expenses incurred by Mortgagee in remedying such Event of
Default or in appearing in, defending, or bringing any such action or proceeding
shall bear interest at the Default Rate, for the period after notice from
Mortgagee that such cost or expense was incurred to the date of payment of
Mortgagee.
23. Late Payment Charge. If any portion of the Debt is not paid within
-------------------
fifteen (15) calendar days after the date on which it is due, Mortgagor shall
pay to Mortgagee upon demand a late charge equal to the lesser of two percent
(2%) of such unpaid portion of the Debt or the maximum amount permitted by
applicable law, to defray the expense incurred by Mortgagee in handling and
processing such delinquent payment and to compensate Mortgagee for the loss of
the use of such delinquent payment, and such amount shall be secured by this
Mortgage.
24. Right of Entry. Mortgagee and its agents shall have the right to
--------------
enter and inspect the Mortgaged Property at all reasonable times.
25. Remedies.
--------
(a) Upon the occurrence of any Event of Default, Mortgagee may take
such action, without notice or demand, as it deems advisable to protect and
enforce its rights against Mortgagor and in and to the Mortgaged Property,
including, but not limited to, the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such order as Mortgagee
may determine, in its sole discretion, without impairing or otherwise affecting
the other rights and remedies of Mortgagee:
(i) declare the entire Debt to be immediately due and payable;
(ii) institute proceedings for the complete foreclosure of this
Mortgage, in which case the Mortgaged Property or any interest therein may
be sold for cash or upon credit in one or more parcels or in several
interests or portions and in any order or manner;
(iii) with or without entry, to the extent permitted and pursuant to
the procedures provided by applicable law, institute proceedings for the
partial foreclosure of this Mortgage for the portion of the Debt then due
and payable, subject to the continuing lien of this Mortgage for the
balance of the Debt not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any part
thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to power of
sale or otherwise, at one or more sales, as an entity or in parcels, at
such time and place, upon such terms and after such notice thereof as may
be required or permitted by law;
-14-
<PAGE>
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the Note or in the Credit Agreement;
(vi) recover judgment on the Note either before, during or after
any proceedings for the enforcement of this Mortgage;
(vii) apply for the appointment of a receiver of the Mortgaged
Property, without notice and without regard for the adequacy of the
security for the Debt and without regard for the solvency of the Mortgagor
or of any person, firm or other entity liable for the payment of the Debt;
(viii) enforce Mortgagee's interest in the Leases and Rents and enter
into or upon the Mortgaged Property, either personally or by its agents,
nominees or attorneys and dispossess Mortgagor and its agents and servants
therefrom, and thereupon Mortgagee may (A) use, operate, manage, control,
insure, maintain, repair, restore and otherwise deal with all and every
part of the Mortgaged Property; (B) make reasonable and necessary
alterations, additions, renewals, replacements and improvements to or on
the Mortgaged Property to restore same to good condition and working order;
(C) exercise all rights and powers of Mortgagor with respect to the
Mortgaged Property, whether in the name of Mortgagor or otherwise,
including, without limitation, the right to make, cancel, enforce or modify
Leases, obtain and evict tenants, and demand, sue for, collect and receive
all earnings, revenues, rents, issues, profits and other income of the
Mortgaged Property and every part thereof; and (D) apply the receipts from
the Mortgaged Property to the payment of the Debt, after deducting
therefrom all reasonable expenses (including reasonable attorneys' fees)
incurred in connection with the aforesaid operations and all amounts
necessary to pay the Taxes, assessments, insurance and Other Charges in
connection with the Mortgaged Property, as well as just and reasonable
compensation for the services of Mortgagee, its counsel, agents and
employees; or
(ix) pursue such other rights and remedies as may be available at
law and in equity.
In the event of a sale, by foreclosure or otherwise, of less than all of
the Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portion of the Mortgaged Property.
(b) The proceeds of any sale made under or by virtue of this
paragraph, together with any other sums which then may be held by Mortgagee
under this Mortgage, whether under the provisions of this paragraph or
otherwise, shall be applied by Mortgagee to the payment of the Debt in such
priority and proportion as Mortgagee in its discretion shall deem proper.
(c) To the extent permitted by applicable law, Mortgagee may
adjourn from time to time any sale by it to be made under or by virtue of this
Mortgage by announcement at
-15-
<PAGE>
the time and place appointed for such sale or for such adjourned sale or sales;
and, except as otherwise provided by any applicable provision of law, Mortgagee,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.
(d) Upon the completion of any sale or sales made by Mortgagee under
or by virtue of this paragraph, Mortgagee, or an officer of any court empowered
to do so, shall execute and deliver to the accepted purchaser or purchasers a
good and sufficient instrument, or good and sufficient instruments, conveying,
assigning and transferring all estate, right, title and interest in and to the
property and rights sold. Mortgagee is hereby irrevocably appointed the true and
lawful attorney of Mortgagor, in its name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the Mortgaged Property and
rights so sold and for that purpose Mortgagee may execute all necessary
instruments of conveyance, assignment and transfer, and may substitute one or
more persons with like power, Mortgagor hereby ratifying and confirming all that
its said attorney or such substitute or substitutes shall lawfully do by virtue
hereof. Any such sale or sales made under or by virtue of this paragraph shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Mortgagor in and to the properties
and rights so sold, and shall be a perpetual bar both at law and in equity
against Mortgagor and against any and all persons claiming or who may claim the
same, or any part thereof from, through or under Mortgagor.
(e) Upon any sale made under or by virtue of this paragraph,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Debt the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which Mortgagee
is authorized to deduct under this Mortgage.
(f) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
26. Reasonable Use and Occupancy. In addition to the rights which
----------------------------
Mortgagee may have herein, upon the occurrence of any Event of Default,
Mortgagee, at its option, may require Mortgagor to pay monthly in advance to
Mortgagee, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the Mortgaged
Property as may be occupied by Mortgagor or may require Mortgagor to vacate and
surrender possession of the Mortgaged Property to Mortgagee or to such receiver
and, in default thereof, Mortgagor may be evicted by summary proceedings or
otherwise.
27. Security Agreement. This Mortgage is both a real property mortgage
------------------
and a "security agreement" within the meaning of the Uniform Commercial Code.
The Mortgaged Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Mortgagor in
the Mortgaged Property. Mortgagor by
-16-
<PAGE>
executing and delivering this Mortgage has granted and hereby grants to
Mortgagee, as security for the Debt, a security interest in the Mortgaged
Property to the full extent that the Mortgaged Property may be subject to the
Uniform Commercial Code (said portion of the Mortgaged Property so subject to
the Uniform Commercial Code being called in this paragraph 27 the "Collateral").
----------
If an Event of Default shall occur, Mortgagee, in addition to any other rights
and remedies which it may have, shall have and may exercise immediately and
without demand, any and all rights and remedies granted to a secured party upon
default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing, the right to take possession of the Collateral or
any part thereof, and to take such other measures as Mortgagee may deem
necessary for the care, protection and preservation of the Collateral. Upon the
request or demand of Mortgagee, Mortgagor shall at its expense assemble the
Collateral and make it available to Mortgagee at a convenient place acceptable
to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses,
including legal expenses and reasonable attorneys' fees, incurred or paid by
Mortgagee in protecting the interest in the Collateral and in enforcing the
rights hereunder with respect to the Collateral. Any notice of sale, disposition
or other intended action by Mortgagee with respect to the Collateral sent to
Mortgagor in accordance with the provisions hereof at least ten (10) days prior
to such action, shall constitute commercially reasonable notice to Mortgagor.
The proceeds of any disposition of the Collateral, or any part thereof, may be
applied by Mortgagee to the payment of the Debt in such priority and proportions
as Mortgagee in its discretion shall deem proper.
28. Actions and Proceedings. Mortgagee has the right to appear in and
-----------------------
defend any action or proceeding brought with respect to the Mortgaged Property
and to bring any action or proceeding, in the name and on behalf of Mortgagor,
which Mortgagee, in its discretion, decides should be brought to protect their
interest in the Mortgaged Property. Mortgagee shall, at its option, be
subrogated to the lien of any mortgage or other security instrument discharged
in whole or in part by the Debt, and any such subrogation rights shall
constitute additional security for the payment of the Debt.
29. Waiver of Counterclaim. Mortgagor hereby waives the right to assert a
----------------------
counterclaim, other than a mandatory or compulsory counterclaim, in any action
or proceeding brought against it by Mortgagee.
30. Recovery of Sums Required to Be Paid. Mortgagee shall have the right
------------------------------------
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of
Mortgagee thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Mortgagor existing at the time such earlier action was
commenced.
31. Marshalling and Other Matters. Mortgagor hereby waives, to the extent
-----------------------------
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Mortgaged Property or any
part thereof or any interest therein. Further, Mortgagor, to the extent
permitted by law, hereby expressly waives any and all rights of
-17-
<PAGE>
redemption from sale under any order or decree of foreclosure of this Mortgage
on behalf of Mortgagor, and on behalf of each and every person acquiring any
interest in or title to the Mortgaged Property subsequent to the date of this
Mortgage and on behalf of all persons to the extent permitted by applicable law.
32. Hazardous Waste and Asbestos. Mortgagor hereby represents and
----------------------------
warrants to Mortgagee that, to the best of Mortgagor's knowledge, (a) the
Mortgaged Property is not in direct or indirect violation of any local, state,
federal or other governmental authority, statute, ordinance, code, order,
decree, law, rule or regulation pertaining to or imposing liability or standards
of conduct concerning environmental regulation, contamination or clean-up
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), the Resource Conservation
------
and Recovery Act, as amended ("RCRA"), and any state super-lien and
----
environmental clean-up statutes (collectively, "Environmental Laws"); (b) the
------------------
Mortgaged Property is not subject to any private or governmental lien or
judicial or administrative notice or action relating to hazardous and/or toxic,
dangerous and/or regulated, substances, wastes, materials, pollutants or
contaminants, petroleum, tremolite, anthlophylie or actinolite or
polychlorinated biphenyls (including, without limitation, any raw materials
which include hazardous constituents) and any other substances or materials
which are included under or regulated by Environmental Laws (collectively,
"Hazardous Materials"); (c) no Hazardous Materials are or have been, prior to
-------------------
Mortgagor's acquisition of the Mortgaged Property, discharged, generated,
treated, disposed of or stored on, incorporated in, or removed or transported
from the Mortgaged Property otherwise than in compliance with all Environmental
Laws and (d) there is no asbestos present in, and no underground storage tanks
exist on, any of the Mortgaged Property. So long as Mortgagor owns or is in
possession of the Mortgaged Property, Mortgagor shall keep or cause the
Mortgaged Property to be kept free from Hazardous Materials and in compliance
with all Environmental Laws, shall promptly notify Mortgagee if Mortgagor shall
become aware of any Hazardous Materials on the Mortgaged Property and/or if
Mortgagor shall become aware that the Mortgaged Property is in direct or
indirect violation of any Environmental Laws and Mortgagor shall remove such
Hazardous Materials and/or cure such violations, as applicable, as required by
law, promptly after Mortgagor becomes aware of same, at Mortgagor's sole
expense. Nothing herein shall prevent Mortgagor from recovering such expenses
from any other party that may be liable for such removal or cure. The term
"Hazardous Materials" shall specifically not include the emission, discharge,
generation, processing, storage or transportation of any hazardous substances or
hazardous materials (including, without limitation, cleaning materials and
solvents) pursuant to, and in accordance with, a valid federal or state permit,
license or order or otherwise in accordance with applicable Environmental Laws.
The obligations and liabilities of Mortgagor under this paragraph 32 shall
survive any termination, satisfaction, or assignment of this Mortgage, any
Transfer and/or any exercise by Mortgagee of any of its rights or remedies
hereunder, including but not limited to, the acquisition of the Mortgaged
Property by foreclosure or a conveyance in lieu of foreclosure.
-18-
<PAGE>
33. Handicapped Access.
------------------
(a) Mortgagor agrees that the Mortgaged Property shall at all times
comply to the extent applicable with the requirements of the Americans with
Disabilities Act of 1990, all state and local laws and ordinances related to
handicapped access and all rules, regulations, and orders issued pursuant
thereto including, without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively, "Access
------
Laws").
- ----
(b) Mortgagor agrees to give prompt notice to Mortgagee of the
receipt by Mortgagor of any complaints related to violations of any Access Laws
and of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws to the extent necessary to avoid the
imposition of any penalty or the interruption of the conduct of business at the
Mortgaged Property.
34. Indemnification. In addition to any other indemnifications provided
---------------
herein or in the Note, the Credit Agreement or the other Loan Documents,
Mortgagor shall protect, defend, indemnify and save harmless Mortgagee from and
against all liabilities, obligations, claims, demands, damages, penalties,
causes of action, losses, fines, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) imposed upon or incurred by
or asserted against Mortgagee, except to the extent resulting from Mortgagee's
gross negligence or wilful misconduct, by reason of (a) ownership of this
Mortgage or the Mortgaged Property or any interest therein; (b) the construction
or renovation of any Improvements; (c) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Mortgaged
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (d) any use, nonuse or
condition in, on or about the Mortgaged Property or any part thereof or on
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (e) any failure on the part of Mortgagor to perform or comply with any
of the terms of this Mortgage; (f) performance of any labor or services or the
furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof; and (g) any failure of the Mortgaged Property to
comply with any Access Laws. Any amounts payable to Mortgagee by reason of the
application of this paragraph 34 shall be secured by this Mortgage and shall
become immediately due and payable and shall bear interest at the Default Rate
from the date any payment is made by Mortgagee hereunder until such payment is
reimbursed by Mortgagor. The obligations and liabilities of Mortgagor under
this paragraph 34 shall survive any termination, satisfaction or assignment of
this Mortgage, any Transfer and/or any exercise by Mortgagee of any of its
rights and remedies hereunder, including but not limited to, the acquisition of
the Mortgaged Property by foreclosure or a conveyance in lieu of foreclosure.
35. Notices. Any notice, demand, statement, request or consent made
-------
hereunder shall be in writing to the other party hereto at its address set forth
below or at such other address as such party may designate by notice to the
other party hereto and shall be deemed given (i) on receipt, if mailed, by
certified or registered U.S. mail, return receipt requested, postage prepaid;
(ii) on receipt, if delivered, fee prepaid, to a national overnight delivery
service (such
-19-
<PAGE>
as Federal Express, Purolater Courier, U.P.S. Next Day Air); or (iii) when
delivered, if delivered by hand, as evidenced by a signed receipt:
To Mortgagor:
AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5352
Attention: Mr. Gerald Wilkins
Chief Financial Officer
Telephone: (770) 353-3280
with a courtesy copy to:
AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Atlanta, Georgia 30328-5352
Attention: Asset Management and Legal Department
Telephone: (770) 391-9500
To Mortgagee:
Banco Popular de Puerto Rico
7 West 51/st/ Street
New York, New York 10019
Attention: Ms. Karen Hamilton
Vice President
Telephone: (212) 445-1800
with a courtesy copy to:
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Brian F. Doran, Esq.
Telephone: (212) 586-4630
A "Business Day" is any day other than a Saturday or Sunday, or a day on which
banking and savings and loan institutions in the State of New York are
authorized or obligated by law or executive order to remain closed. Refusal to
accept delivery of any notice shall be deemed to be receipt of such notice.
-20-
<PAGE>
36. Authority. (a) Mortgagor (and the undersigned representative of
---------
Mortgagor, if any) has full power, authority and right to execute, deliver and
perform its obligations pursuant to this Mortgage, and to mortgage, give, grant,
bargain, sell, alien, enfeoff, convey, confirm, pledge, hypothecate and assign
the Mortgaged Property pursuant to the terms hereof and to keep and observe all
of the terms of this Mortgage on Mortgagor's part to be performed and (b)
Mortgagor represents and warrants that Mortgagor is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended and the related Treasury Department regulations, including temporary
regulations.
37. Waiver of Notice. Mortgagor shall not be entitled to any notices of
----------------
any nature whatsoever from Mortgagee except with respect to matters for which
this Mortgage or the Credit Agreement specifically and expressly provides for
the giving of notice by Mortgagee to Mortgagor and except with respect to
matters for which Mortgagee is required by applicable law to give notice, and
Mortgagor hereby expressly waives the right to receive any notice from Mortgagee
with respect to any matter for which this Mortgage does not specifically and
expressly provide for the giving of notice by Mortgagee to Mortgagor.
38. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage,
----------------------------
Mortgagee exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
39. Non-Waiver. The failure of Mortgagee to insist upon strict
----------
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce
any of the provisions hereof or of the Note or the Credit Agreement or the other
Loan Documents, (b) the release, regardless of consideration, of the whole or
any part of the Mortgaged Property, or of any person liable for the Debt or any
portion thereof or (c) any agreement or stipulation by Mortgagee extending the
time of payment or otherwise modifying or supplementing the terms of the Note,
the Credit Agreement, this Mortgage or the other Loan Documents. Mortgagee may
resort for the payment of the Debt to any other security held by Mortgagee in
such order and manner as Mortgagee, in its discretion, may elect. Mortgagee may
take action to recover the Debt, or any portion thereof, or to enforce any
covenant hereof without prejudice to the right of Mortgagee thereafter to
foreclose this Mortgage. The rights and remedies of Mortgagee under this
Mortgage shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Mortgagee shall be construed
as an election to proceed under any one provision herein to the exclusion of any
other provision. Mortgagee shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy now or
hereafter afforded at law or in equity.
-21-
<PAGE>
40. No Oral Change. This Mortgage, and any provisions hereof, may not be
--------------
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Mortgagor or Mortgagee, but only by
an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
41. Successors and Assigns. This Mortgage shall be binding upon and inure
----------------------
to the benefit of Mortgagor and Mortgagee and their respective heirs, personal
representatives, successors and assigns forever. Any assignment by Mortgagee of
its interest hereunder shall be subject to the provisions of Section 9.8 of the
Credit Agreement.
42. Inapplicable Provisions. If any term, covenant or condition of the
-----------------------
Note, the Credit Agreement or this Mortgage is held to be invalid, illegal or
unenforceable in any respect, the Note, the Credit Agreement and this Mortgage
shall be construed without such provision.
43. Headings, etc. The headings and captions of various paragraphs of
-------------
this Mortgage are for convenience of reference only and are not to be construed
as defining or limiting, in any way, the scope or intent of the provisions
hereof.
44. Governing Law. This Mortgage shall be governed by and construed in
-------------
accordance with the laws of the State of ___________ without regard to
principles of conflict of laws.
45. Definitions. Unless the context clearly indicates a contrary intent
-----------
or unless otherwise specifically provided herein, words used in this Mortgage
may be used interchangeably in singular or plural form and the word "Mortgagor"
shall mean "each Mortgagor and any subsequent owner or owners of the Mortgaged
Property or any part thereof or any interest therein," the word "Mortgagee"
shall mean "Mortgagee and any subsequent holder of the Note," the word "Note"
shall mean "the Note and any other evidence of indebtedness secured by this
Mortgage," the word "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "Mortgaged Property" shall
include any portion of the Mortgaged Property and any interest therein.
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms and the singular form of nouns
and pronouns shall include the plural and vice versa.
46. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
-----------------------
MORTGAGOR AND MORTGAGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON
THE LOAN EVIDENCED BY THE NOTE OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE NOTE, THE CREDIT AGREEMENT, THIS MORTGAGE OR ANY OF THE OTHER LOAN
DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
VERBAL OR WRITTEN) OR ACTION OF MORTGAGOR OR MORTGAGEE. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR
-22-
<PAGE>
MORTGAGEE'S MAKING OF THE LOAN SECURED BY THIS MORTGAGE AND THE OTHER LOAN
DOCUMENTS.
47. Assignment. Subject to Section 9.8 of the Credit Agreement, Mortgagee
----------
shall have the right, exercisable at any time and from time to time, to sell,
transfer or assign the Mortgage and the other Loan Documents, or grant
participations therein, or issue certificates or securities evidencing a
beneficial interest therein in a rated or unrated public offering or private
placement, and Mortgagee may forward to any purchaser, transferee, assignee,
servicer, participant, investor or credit rating agency rating such securities
(collectively, an "Investor") or prospective Investor all documents and
information in Mortgagee's possession with respect to Mortgagor, the Mortgaged
Property and the Loan Documents as such Investor or prospective Investor may
request.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage, intending to be
legally bound, the day and year first above written.
AFC ENTERPRISES, INC.,
a Minnesota corporation
By: _______________________________
Name:______________________________
Title:_____________________________
-23-
<PAGE>
STATE OF ________________ )
) ss.:
COUNTY OF ______________ )
On the ___ day of _________, 199__, before me personally came ______________, to
me known, who, being by me duly sworn, did depose and say that he has an address
at ________________________,that he is the _______________ of AFC Enterprises,
Inc., a Minnesota corporation, the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by consent of the
shareholders of said corporation.
_______________________________________
Notary Public
My commission expires:
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT E
---------
FORM OF ASSIGNMENT OF CONTACTS
------------------------------
ASSIGNMENT OF CONTRACTS, LICENSES,
PERMITS AND AGREEMENTS
This ASSIGNMENT OF CONTRACTS, LICENSES, PERMITS AND AGREEMENTS (the
"Assignment"), dated as of the ___ day of July, 1997 by and between AFC
ENTERPRISES, INC., a Minnesota corporation, having an office at Six Concourse
Parkway, Suite 1700, Atlanta, Georgia 30328-5352 ("Assignor") and BANCO POPULAR
DE PUERTO RICO, having an office at 7 West 51/st/ Street, New York, New York
10019 ("Assignee"). All capitalized terms appearing herein and not defined
herein shall have the meanings set forth in that certain Credit Agreement, dated
as of the date hereof, between Assignor and Assignee (the "Credit Agreement").
RECITALS
--------
A. [Assignor is the actual, record and beneficial owner of the real
property more particularly described in Schedule A attached hereto and by this
----------
reference made a part hereof (the "Land"), together with the improvements
located thereon (the "Improvements"; the Land and the Improvements,
collectively, the "Premises")./Assignor is the actual and beneficial owner of
the leasehold interest in the real property more particularly described in
Schedule A attached hereto and by this reference made a part hereof (the
- ----------
"Property"), together with a leasehold interest in the improvements located
thereon (the "Improvements"; the Property and the Improvements, collectively,
the "Premises") pursuant to that certain lease dated __________, 199__ (the
"Lease") between ___________, as landlord, and Assignor, as tenant.]
B. Assignee has agreed to make a loan to Assignor in the maximum
principal amount of $_________ (the "Loan") to, among other things, finance
Assignor's acquisition of the Premises and construction of the Improvements.
C. The Loan will be evidenced by the Note and secured by, among other
things, the Mortgage.
D. Assignee is the owner and holder of the Note and the Mortgage.
E. Assignor will derive substantial benefit from the Loan.
F. Assignor may, from time to time, enter into written agreements
relating to or pertaining to services to the Premises or the management,
operation, sale, leasing, construction or renovation of the Premises
(hereinafter, the aforesaid agreements are collectively referred to as the
"Agreements").
<PAGE>
G. To induce Assignee to make the Loan to Assignor, and as a precondition
thereof, Assignee requires that Assignor assign to Assignee all of its right,
title and interest in and to the Agreements as additional security for the Note
and the Mortgage on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, receipt of which is
hereby acknowledged, Assignor agrees as follows:
1. For the purpose set forth below and subject to the terms of this
Assignment, Assignor hereby assigns and transfers to Assignee, to the extent the
same are assignable, all of Assignor's rights, privileges, and interests under,
in and to (i) the Agreements, (ii) any existing or future licenses, operating
agreements or certificates Assignor may enter into with or receive from any
Governmental Authority (the "Licenses"), and (iii) any existing or future
permits, approvals or agreements Assignor may enter into with or receive from
any Governmental Authority (the "Permits"). Assignor agrees that it will timely
perform all of its obligations with respect to the Licenses and Permits and that
it will use its best efforts to keep the Licenses and Permits in full force and
effect to the extent such Licenses and Permits are required in connection with
the ownership, use, operation or occupancy of the Premises.
2. This Assignment is given for the purpose of further securing the
performance by Assignor of all of its obligations to Assignee under the Note,
the Credit Agreement, the Mortgage and the other Loan Documents executed by
Borrower to secure the Note to the extent of the outstanding principal balance
of the Note and all accrued interest thereon and all costs and expenses incurred
in connection with said Note, the Mortgage and the Premises, and accordingly,
upon the payment in full of all such indebtedness evidenced by the Note, and
satisfaction of all of Assignor's other obligations to Assignee under the Note
and the Mortgage, this Assignment shall automatically become null and void;
provided, however, that Assignee shall execute and deliver to Assignor such
documents as may be reasonably requested by Assignor to evidence such
termination. Further, upon satisfaction of the Mortgage securing the Note, this
Assignment shall automatically become null and void.
3. Prior to the earlier to occur of: (i) performance in full of the
Agreements by Assignor or (ii) Assignee's acquisition of title to the Premises,
by foreclosure or otherwise, Assignor agrees that it will timely perform all of
its obligations under the Agreements in accordance with the terms of the
Agreements unless Assignor shall then be contesting the same in good faith and
by appropriate proceedings.
4. For the purposes and subject to the terms set forth herein, this
Assignment is an absolute, unconditional and presently effective assignment from
Assignor to Assignee of all of Assignor's rights under, in and to the
Agreements, the Licenses and the Permits. Notwithstanding the foregoing, prior
to any Event of Default by Assignor under the Note, the Credit Agreement, the
Mortgage or any other Loan Document, Assignor shall, subject to the
2
<PAGE>
terms and conditions of this Assignment, have the right to use, employ and
enforce its rights under the Agreements, the Licenses and the Permits.
5. Upon the occurrence and during the continuance of any Event of Default
by Assignor under the Note, the Credit Agreement, the Mortgage or any other Loan
Document, Assignee shall be entitled to exercise all or any of its remedies
under the Note, the Credit Agreement, the Mortgage or under this Assignment, or
as may otherwise be available to Assignee at law or in equity, in such order as
Assignee may elect.
6. Notwithstanding any legal presumption to the contrary, it is not the
intent that Assignee shall be obligated by reason of acceptance of this
Assignment to perform any obligation of Assignor under the Agreements, the
Licenses or the Permits, and Assignor hereby agrees to indemnify Assignee and
save it harmless from and against any loss, liability or damage in connection
with any claim arising out of the said Agreements, the Licenses, the Permits or
this Assignment which arise or accrue during the period of Assignor's ownership
of the Premises and prior to the time, if any, that Assignee becomes a
mortgagee-in-possession, except for Assignee's gross negligence or willful
misconduct. However, Assignee may, at its option, and without releasing Assignor
from any obligation hereunder, discharge any obligation which Assignor fails to
discharge within any applicable cure period under said Agreements, Licenses or
Permits, including, without limitation, defending any legal action unless
Assignor shall then be contesting the same in good faith and by appropriate
proceedings, and Assignor agrees to pay immediately upon demand all reasonable
sums expended by Assignee in connection therewith, including reasonable counsel
fees, together with interest thereon at the Default Rate (as defined in the
Note), and the same shall be added to the indebtedness evidenced by the Note and
secured by the Mortgage.
7. Assignor hereby represents and warrants to Assignee that:
(a) Assignor has not executed any prior assignment of any of its
rights under the Agreements, the Licenses or the Permits, except to Assignee
pursuant to this Assignment.
(b) To the best of Assignor's knowledge, the Agreements now existing
are in full force and effect and unmodified, and there are no defaults, or
events which with the giving of notice or passage of time, or both, would
constitute a default under any Agreement except as heretofore disclosed to
Assignee;
(c) To the best of Assignor's knowledge, Assignor's interest in the
Agreements is not subject to any claims, setoffs, encumbrances or deductions;
(d) To the best of Assignor's knowledge, all material covenants,
conditions and agreements have been performed as required by the Agreements by
all parties thereto, except those which are not due to be performed until after
the date of this Assignment; and
3
<PAGE>
(e) To the best of Assignor's knowledge, the Licenses and Permits now
existing are in full force and effect and have not been rescinded or terminated.
8. This Assignment shall be binding upon Assignor and its successors and
assigns, including any subsequent owner of the Premises and shall inure to the
benefit of Assignee and its successors and assigns.
9. All notices or demands hereunder shall be in accordance with the
provisions of Section 9.2 of the Credit Agreement.
10. This Assignment shall be construed, interpreted, and enforced
according to the laws of the State of New York without regard to principles of
conflict of laws.
11. No term or condition of this Assignment may be waived, changed,
terminated, or modified orally, by course of conduct or in any manner other than
by an agreement in writing signed by the party against whom enforcement is
sought.
IN WITNESS WHEREOF, Assignor has duly executed this Assignment the day and
year first above written.
AFC ENTERPRISES, INC.,
a Minnesota corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
4
<PAGE>
SCHEDULE A
----------
[LEGAL DESCRIPTION]
5
<PAGE>
EXHIBIT F
FORM OF ENVIRONMENTAL INDEMNITY AGREEMENT
ENVIRONMENTAL INDEMNITY AGREEMENT
---------------------------------
THIS ENVIRONMENTAL INDEMNITY AGREEMENT ("Agreement") dated as of the __ day
of ________, 199__, made by AFC ENTERPRISES, INC., a Minnesota corporation
having an office at Six Concourse Parkway, Suite 1700, Atlanta, Georgia 30328-
5352 (the "Indemnitor"), for the benefit of BANCO POPULAR DE PUERTO RICO, having
offices at 7 West 51/st/ Street, New York, New York 10019 ("Lender"). All
capitalized terms appearing herein and not defined herein shall have the
meanings set forth in the Credit Agreement, dated as of the date hereof, between
Indemnitor and Lender (the "Credit Agreement").
R E C I T A L S
- - - - - - - -
A. [Indemnitor is the actual, record and beneficial owner of the real
property more particularly described in Schedule A attached hereto and by this
----------
reference made a part hereof (the "Land"), together with the improvements
located thereon (the ("Improvements"); the Land and the Improvements,
collectively, the ("Premises")./Indemnitor is the actual and beneficial owner of
the leasehold interest in the real property more particularly described in
Schedule A attached hereto and by this reference made a part hereof (the
- ----------
("Property"), together with a leasehold interest in the improvements located
thereon (the ("Improvements"); the Property and the Improvements, collectively,
the ("Premises") pursuant to that certain lease dated _________, 199__ (the
("Lease") between __________, as landlord, and Indemnitor, as tenant.]
B. Lender has agreed to make a loan to Indemnitor in the maximum
principal amount of $_________ (the "Loan") to, among other things, finance
Indemnitor's acquisition of the Premises and construction of the Improvements.
C. The Loan will be evidenced by the Note and secured by, among other
things, the Mortgage.
D. To induce Lender to make the Loan and to accept the Note and Mortgage,
Indemnitor has agreed to execute and deliver this Agreement, which Agreement is
to be executed by Indemnitor and to be binding upon Indemnitor and its
successors and assigns.
E. Lender has refused to make the Loan or accept the Note and Mortgage
unless this Agreement is executed by Indemnitor and delivered to Lender.
NOW, THEREFORE, in consideration of the Loan, and for other good and
valuable consideration, the receipt whereof is hereby acknowledged, Indemnitor,
for itself, its
<PAGE>
successors and assigns, hereby covenants and agrees with Lender for the benefit
of Lender, its indorsees, successors and assigns, as follows:
1. Guarantee. Indemnitor unconditionally guarantees to Lender (i) the
---------
prompt payment, when due, of all "Claims and Costs" (as defined in paragraph
2(a) of this Agreement) and (ii) the timely performance of all of the
obligations of Indemnitor under this Agreement. All of the obligations
guaranteed or undertaken by Indemnitor in clauses (i) and (ii) of this paragraph
1 are hereinafter collectively referred to as the "Obligations".
2. Indemnity. (a) Indemnitor unconditionally agrees to indemnify and
---------
hold harmless Lender, its directors, officers, employees, agents, counsel,
successors and assigns from and against any and all losses, claims, damages,
penalties, liabilities, costs and expenses (including reasonable attorneys' fees
and court costs), fines, injuries, penalties, response costs (including the cost
of any required or necessary investigation, testing, monitoring, repair,
cleanup, detoxification, preparation of any closure or other required plans, or
other removal, response or remedial action at or relating to the Premises)
(collectively, the "Claims and Costs"), with respect to, as a direct or
indirect result of, or arising out of any of the following: (i) any law,
ordinance or regulation, lawsuit (brought or threatened), settlement, agreement,
consent order or judgment, injunction, restraining order, or requirement of any
insurer of the Premises or any portion thereof, relating to the generation,
presence, management, disposal, release (or threatened release), escape,
seepage, leakage or clean-up of any Hazardous Materials (as hereinafter defined)
at, on, in, from or under all or a portion of the Premises or any other real
property owned by Indemnitor in violation of any applicable Environmental Law
(as hereinafter defined); (ii) the migration of Hazardous Materials from the
Premises to any other property or onto the Premises from any property or area
adjacent to the Premises or any other real property owned by Indemnitor in
violation of any applicable Environmental Law; (iii) the past treatment,
disposal or storage of Hazardous Materials or the transportation of Hazardous
Materials onto or from the Premises or any other real property owned by
Indemnitor in violation of any applicable Environmental Law; or (iv) the
incorporation, whether prior or future, of any Hazardous Materials into the
Premises in violation of any applicable Environmental Law, except to the extent
that any of the foregoing are caused by Lender or Lender's designee after Lender
or Lender's designee has taken possession of or acquired title to the Premises
by foreclosure or other means.
(b) For the purpose of this Agreement, the term "Hazardous Materials"
shall include, but not be limited to, (i) any substances defined as "hazardous
substances," "pollutants," "contaminants," "hazardous materials," "hazardous
wastes," or "hazardous or toxic substances" or related materials as now or
hereafter defined in any applicable federal, state or local law, regulation,
ordinance or directive (collectively, "Environmental Laws"), including but not
limited to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. ' 9601, et seq.; the Hazardous Materials Transportation Act, 49
------
U.S.C. ' 1801, et seq.; the Toxic Substances Control Act, 15 U.S.C. ' 2601, et
-- --- --
seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. ' 9601,
- ---
et seq.; the Clean Water Act, 33 U.S.C. ' 1251 et seq.; the Clean Air Act, 42
- -- --- -- ---
U.S.C. ' 7412 et seq.; [local environmental laws to be
-- ---
2
<PAGE>
added]; as any such acts may be amended, modified or supplemented; (ii) those
substances listed or otherwise identified in the regulations adopted and
publications issued, as may be amended, modified or supplemented, pursuant to
any of the above referenced statutes; (iii) lead-based or lead-containing paint;
and (iv) any friable asbestos, airborne asbestos, or any substance or material
containing asbestos. The term "Hazardous Materials" shall specifically not
include the emission, discharge, generation, processing, storage or
transportation of any hazardous substances or hazardous materials (including,
without limitation, cleaning materials and solvents) pursuant to, and in
accordance with, a valid federal or state permit, license or order or otherwise
in accordance with applicable Environmental Laws.
3. Required Action of Indemnitor. Indemnitor shall comply with any law,
-----------------------------
ordinance, regulation, settlement, agreement, consent order, decree, judgment,
injunction or directive, affecting the Premises, or any requirement of any
insurer of the Premises or any portion thereof, and shall timely perform, or
cause to be performed, any investigation, testing, monitoring, repair, cleanup,
detoxification, preparation of any closure or other required plans, or other
removal, response or remedial action relating to (i) the presence, management,
disposal, release or threatened release, escape, seepage or leakage of any
Hazardous Materials at, on, in, from or under all or a portion of the Premises
or any other real property owned by Borrower in violation of Environmental Laws;
(ii) the migration of Hazardous Materials from the Premises to any other
property, or onto the Premises from any property or area adjacent to the
Premises in violation of Environmental Laws; (iii) the generation,
transportation, storage or disposal of Hazardous Materials onto or from the
Premises in violation of Environmental Laws; or (iv) the incorporation, whether
prior or future, of any Hazardous Materials into the Premises in violation of
Environmental Laws.
4. Representations, Warranties and Covenants. Indemnitor hereby
-----------------------------------------
represents, warrants and covenants as follows:
(a) Indemnitor is a corporation duly organized and validly existing
under the laws of Minnesota, is fully authorized to do business in the State of
[jurisdiction where Premises are located], and has full power and authority to
consummate the transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by Indemnitor
and constitutes the valid and binding obligations of Indemnitor and is
enforceable against Indemnitor in accordance with its terms, subject to any
limitations under applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors= rights generally and by
general equitable principles.
(c) The consummation of the transactions contemplated hereby and the
performance by Indemnitor of its obligations under this Agreement will not
result in any breach of, give rise to a lien under, or constitute a default
under, any mortgage, deed of trust, lease, bank loan or credit agreement,
partnership agreement, corporate charter, by-laws or other agreement or
instrument to which Indemnitor is a party or by which it may be bound or
affected.
3
<PAGE>
(d) Indemnitor will promptly comply with all conditions of this
Agreement. Indemnitor will promptly (upon transmittal or receipt) deliver to
Lender copies of all notices and correspondence with respect to: (i) this
Agreement and (ii) any matter for which notice is required under Section 6.7 of
the Credit Agreement.
(e) Indemnitor agrees to pay on written demand all expenses
(including reasonable legal services of every kind and cost of any insurance,
any payment of taxes or other charges) of, or incidental to, or in any way
relating to the enforcement or protection of the rights of Lender hereunder.
(f) Indemnitor is deriving or expects to derive a financial or other
advantage from each and every Obligation incurred by Indemnitor to Lender.
5. Defaults. The following shall constitute a default hereunder (each,
--------
an "Event of Default"):
(a) If Indemnitor shall fail to timely perform, or cause to be timely
performed, any Obligation and such failure is not cured by Indemnitor within
thirty (30) days of written notice of such failure, provided that if such
failure is not curable within such thirty (30) day period, then Indemnitor shall
have such time as is reasonably required to cure same, provided (x) Indemnitor
promptly commences the cure within such thirty (30) day period, (y) thereafter
Indemnitor diligently attempts to cure such default, and (z) Lender, in its
reasonable judgment, determines that a cure may be effectuated during such
additional period;
(b) If Indemnitor shall fail to comply with any of the covenants made
by it in this Agreement, or if at any time any representation or warranty made
by Indemnitor to Lender in this Agreement or in any certificate or statement
delivered in connection herewith shall be false or misleading to an extent
deemed by Lender, in its reasonable judgment, to be material and such failure is
not cured by Indemnitor within thirty (30) days of written notice of such
failure, provided that if such failure is not curable within such thirty (30)
day period, then Indemnitor shall have such time as is reasonably required to
cure same, provided (x) Indemnitor promptly commences the cure within such
thirty (30) day period, (y) thereafter Indemnitor diligently attempts to cure
such default, and (z) Lender, in its reasonable judgment, determines that a cure
may be effectuated during such additional period; or
(c) If at any time Indemnitor shall revoke or attempt in bad faith to
revoke, disavow, contest, commence any action or raise any defense against its
obligations hereunder.
6. Remedies. Upon the occurrence of an Event of Default hereunder, in
--------
addition to any other remedy provided for under this Agreement or at law or in
equity. Indemnitor hereby authorized Lender, in Lender=s sole discretion, at
any time:
(a) At any time, or from time to time, without notice to Indemnitor
or to any other person, any such notice being hereby expressly waived,
immediately to set off and appropriate and apply any and all deposits (general
or special) at any time held by or owing to
4
<PAGE>
Lender, if any, which are given to secure the obligations and liabilities of
Indemnitor hereunder to or for the credit or the account of Indemnitor against
and on account of the obligations and liabilities of Indemnitor hereunder;
(b) To foreclose nonjudicially or judicially against any real or
personal property security it holds for the Obligations or any part thereof, or
exercise any other remedy against Indemnitor or any security; and
(c) To exercise all other rights and remedies provided under the
Mortgage, the Credit Agreement and the other Loan Documents.
7. Equitable Relief; Specific Performance. Indemnitor acknowledges and
--------------------------------------
agrees that it may be impossible to measure accurately the damages to Lender
resulting from a breach of Indemnitor's covenant to satisfy the Obligations and
that such a breach will cause irreparable injury to Lender and that Lender may
not have an adequate remedy at law in respect of such breach and, as a
consequence, agrees that such covenant shall be specifically enforceable against
Indemnitor and hereby waives and agrees not to assert any defense against an
action for specific performance of such covenant. This clause shall not
prejudice Lender's rights to assert any and all claims for damages incurred as a
result of Indemnitor's default hereunder, and Lender may, before, during, or
after any foreclosure of the Mortgage, hold Indemnitor liable for any deficiency
arising from Indemnitor's default hereunder and for all losses and damages
sustained and expenses incurred by reason of Indemnitor failing to satisfy the
Obligations.
8. Waiver of Election of Remedies. Indemnitor waives any right to
------------------------------
require or compel Lender to (a) proceed against or exhaust any security for the
Obligations; or (b) pursue any other remedy in Lender's power whatsoever; and
failure of Lender to do any of the foregoing shall not exonerate, release or
discharge Indemnitor from its absolute, unconditional and independent
liabilities to Lender hereunder. Indemnitor hereby waives any and all legal
requirements that Lender shall institute any action or proceedings at law or in
equity in respect of the Loan or any other Loan Document or resort to or seek to
realize upon the security held by Lender, as a condition precedent to bringing
an action against Indemnitor upon this Agreement.
9. Right of Separate Actions. Lender may bring and prosecute a separate
-------------------------
action against Indemnitor to enforce its liabilities hereunder, whether or not
any action is brought against any other person and whether or not any other
person is joined in any such action or actions. Nothing shall prohibit Lender
from exercising its rights against Indemnitor, any security for the Obligations,
and any other person simultaneously, jointly and/or severally.
10. Waiver of Rights of Subrogation. Indemnitor hereby irrevocably waives
-------------------------------
any rights to be subrogated to the rights of Lender with respect to the
Obligations. No failure on the part of Lender to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender
5
<PAGE>
of any right, remedy or power hereunder preclude any other or future
exercise of any other right, remedy or power.
11. Waiver of Notice, Consent, Etc. (a) This Agreement shall be
-------------------------------
construed as a continuing, absolute and unconditional indemnity.
(b) Indemnitor hereby waives notice of acceptance of this Agreement
by Lender and of presentment, demand, protest, notice of protest and of
dishonor, notices of default (except as otherwise expressly provided herein) and
all other notices relative to this Agreement of every kind and description now
or hereafter provided by any other agreement between Indemnitor and Lender or
any statute or rule of law.
(c) Indemnitor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations or of the reliance by Lender upon
this Agreement. Said Obligations, and each of them, shall conclusively be
deemed to have been created, contracted, or incurred in reliance upon this
Agreement and all dealings between Indemnitor and Lender shall likewise be
conclusively presumed to have been made or consummated in reliance upon this
Agreement.
(d) Indemnitor hereby agrees that the terms, covenants and provisions
contained in the Note, the Credit Agreement, the Mortgage or in any other Loan
Document may be altered, extended, modified, waived, released or canceled by
Lender, and Indemnitor agrees that this Agreement and its liability hereunder
shall be in no way affected, diminished or released by any such alteration,
extension, modification, release, waiver or cancellation.
12. Waiver of Priority of Collateral. Indemnitor hereby agrees that, in
--------------------------------
the event that any of its property is or may be hypothecated as security for any
of its obligations under any other Loan Document, any right of Indemnitor to
have such other property first applied to the discharge of such obligations is
hereby irrevocably waived by Indemnitor. Indemnitor hereby expressly recognizes
that any of its property which is or may be hereafter hypothecated pursuant to
the Mortgage is security for such obligations and is not security for this
Agreement.
13. No Discharge; Remedies Cumulative. Indemnitor shall not be
---------------------------------
discharged, released or exonerated, in any way, from its absolute, unconditional
and independent liabilities hereunder, even though any rights or defenses which
Indemnitor may have against Lender or others may be destroyed, diminished or
otherwise affected by:
(a) Any declaration by Lender of a default in respect of any of the
Obligations;
(b) The exercise by Lender of any rights or remedies against
Indemnitor or any other person under any other Loan Document;
6
<PAGE>
(c) The failure of Lender to exercise any rights or remedies against
Indemnitor or any other person under any other Loan Document;
(d) The sale or enforcement of, or realization upon (through judicial
foreclosure, power of sale or any other means) any security for any of the
Obligations, even though (i) recourse may not thereafter be had against
Indemnitor under any other Loan Document for any deficiency, or (ii) Lender
fails to pursue any such recourse which might otherwise be available, whether by
way of deficiency judgment following judicial foreclosure or otherwise; and
no such action by Lender will release or limit the liability of Indemnitor to
Lender. All rights and remedies of Lender hereunder or under any of the Loan
Documents shall be cumulative and may be exercised singularly or concurrently
against the party to whom enforcement is sought. The rights of Lender under
this Agreement are in addition to and not in diminution of the rights of Lender
under any other Loan Document.
14. Survival. Each and every of the terms, covenants and conditions of
--------
this Agreement shall survive the repayment of Indemnitor's obligations under the
Loan Documents, and Indemnitor shall not be released by any act or thing which
might, but for this provision, be deemed a legal or equitable discharge of a
surety, or by reason of any waiver, extension, modification, forbearance or
delay or other act or omission of Lender or its failure to proceed promptly or
otherwise, or by reason of any action taken or omitted or circumstance which may
or might vary the risk or affect the rights or remedies of Indemnitor or by
reason of any further dealings between Indemnitor and Lender, whether relating
to the Loan or otherwise, and Indemnitor hereby expressly waives and surrenders
any defenses to its liability hereunder based upon any of the foregoing acts,
omissions, things or agreements or waivers of Lender; it being the purpose and
intent of the parties hereto that the obligations of Indemnitor hereunder shall
survive the repayment of Indemnitor's obligations under the Loan Documents and
are absolute and unconditional under any and all circumstances.
15. Notices. Any notice, demand, statement, request or consent made
-------
hereunder shall be in accordance with and as provided in Section 9.2 of the
Credit Agreement.
16. Entire Agreement. This Agreement represents the entire agreement
----------------
between Indemnitor and Lender with respect to the matters referred to herein,
and no waiver or modification hereof or thereof shall be effective unless in
writing and signed by Lender and Indemnitor.
17. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE CONSTRUED, ENFORCED, AND INTERPRETED ACCORDING TO THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN AND PERFORMED IN
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. UNLESS
THE TEXT OTHERWISE REQUIRES, ALL TERMS USED HEREIN SHALL HAVE THE MEANING
SPECIFIED IN THE UNIFORM COMMERCIAL CODE
7
<PAGE>
AS IN EFFECT IN THE STATES OF NEW YORK AND __________ AT THE DATE HEREOF.
18. Successors and Assigns. This Agreement shall be binding upon
----------------------
Indemnitor and upon its successors and assigns and shall inure to the benefit of
Lender and its indorsees, successors and assigns.
19. Time of the Essence. Time shall be of the essence with regard to the
-------------------
performance by Indemnitor of its obligations under this Agreement.
20. Waiver of Trial by Jury. To the extent permitted by law, Lender and
-----------------------
Indemnitor shall and hereby do waive trial by jury in any action, proceeding or
counterclaim brought by any of the parties hereto against the other on any
matters arising out of or in any way connected to the Loan, this Agreement or
any of the other Loan Documents.
IN WITNESS WHEREOF, this Agreement has been executed by the undersigned as
of the date first above written.
AFC ENTERPRISES, INC.,
a Minnesota corporation
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
SCHEDULE A
LEGAL DESCRIPTION
9
<PAGE>
EXHIBIT G
---------
FORM OF BORROWING CERTIFICATE
-----------------------------
BORROWING CERTIFICATE
AFC ENTERPRISES, INC.
_________________, being a Responsible Officer of AFC Enterprises, Inc., a
Minnesota corporation (the "Borrower"), hereby certifies pursuant to Section
5.1(u) of that certain Credit Agreement dated as of June ____, 1997 (the "Credit
Agreement") between the Borrower and Banco Popular de Puerto Rico, as follows
(all capitalized terms appearing herein shall be as defined in the Credit
Agreement):
1. At the time of and immediately after giving effect to any Loan to be
made on the date hereof, no Default or Event of Default has occurred
and is continuing;
2. All of the representations and warranties contained in Section 4 of
the Credit Agreement are true and correct in all material respects as
of the date hereof;
3. Borrower has substantially complied with all covenants and conditions
required to be complied by it under the Credit Agreement; and
4. The Equity Contribution required to be made by Borrower as of the date
hereof has been made, or will be made concurrently with the making of
the Loan, by Borrower.
IN WITNESS WHEREOF, the undersigned has executed this Borrowing Certificate
as of the __ day of __________, 199__.
____________________________
Name:_______________________
Title:______________________
<PAGE>
EXHIBIT H
---------
(KEY TERM AND CONDITIONS OF
STANDARD FRANCHISEE LOANS)
Lender: Banco Popular.
- ------
Borrower: Qualified AFC Franchisees approved by the Bank.
- --------
Loan Amount: Up to $10,000,000.00 to any one borrower, with a minimum loan
- -----------
amount of $50,000.00.
Purpose: To purchase Completed Store(s).
- -------
Term: (A) If Completed Store is a leasehold, up to ten (10) years.
- ----
(B) If Completed Store is acquired in fee, up to twenty (20)
years.
Interest Rate: (A) If Completed Store is a leasehold:
- -------------
For first year of loan, interest would be based on the
Prime Rate. Thereafter, interest would be based on (1)
Prime Rate + 1.25% or (2) Applicable Treasury Rate + 250
basis points fixed at closing.
(B) If Completed Store is acquired in fee:
For first year of loan, interest would be based on the
Prime Rate. Thereafter, interest would be based on (1)
Prime Rate + 1.75% or (2) Applicable Treasury Rate + 300
basis points fixed at closing.
Fixed interest rate will be available for no more than a
seven (7) year period.
Payment of Principal
- --------------------
and Interest: Payment of interest only during the first 6 months of the
- ------------
Loan. Thereafter, principal and interest would be paid
based on (1) an up to 10-year amortization schedule with
respect to loans secured by a leasehold interest, and (2)
and up to 20-year amortization schedule with respect to
loans secured by a fee interest.
1
<PAGE>
Collateral: First fee or leasehold mortgage on the Completed Store,
- ----------
together with a first priority security interest in all
furniture,fixtures and equipment.
Guarantee: Shareholders/partners/members/principles of borrower to
- ---------
provide guarantee of payment and performance.
Equity Contribution: 20% of purchase price.
- -------------------
Fees: Commitment fee of 50 basis points. Borrower would pay
- ----
Bank's legal fees and cost of title, appraisal
environmental updates and recording charges.
Additional Documentation: (1) AFC franchise agreement.
- ------------------------
(2) Remarketing Agreement satisfactory to AFC,
borrower and Bank.
(3) Lease of Completed Store (if any) with landlord
consent to mortgage/assignment.
(4) Year-end financial statements.
(5) Pro-forma income and cash flow statements.
(6) Personal financial statements and tax returns of
Qualified AFC Franchisee and its
members/partners/ shareholders/principals.
(7) Any other due diligence requirements as
determined by Bank.
Loan Covenants: (1) Maintain cash flow coverage ratio of 1.20:1.
- --------------
(A) Cash flow coverage to be defined as cash flow
before debt service divided by debt service; (B)
cash flow before debt service to be defined as
annual store operating income plus depreciation,
amortization and interest expense; and (C) debt
service to be defined as total required annual
principle and interest expense.
(2) Compliance with terms of AFC franchise agreement and
Completed Store lease (if any).
(3) Other customary terms and conditions applicable to
loans of this type, which will be set forth in the
Facility One loan documents.
Miscellaneous: New York law to govern loan documents other than
- -------------
mortgage, which shall be governed by law of state
in which Completed Store is located.
2
<PAGE>
EXHIBIT I
---------
(KEY TERM AND CONDITIONS OF
POPULAR PLUS FRANCHISEE LOANS)
Lender: Banco Popular.
- ------
Borrower: Qualified AFC Franchisees participating in AFC Plus
- --------
Program and approved by the Bank.
Loan Amount: Up to $1,000,000.00 to any one borrower, with a minimum
- -----------
loan amount of $50,000.00.
Purpose: To purchase Completed Store(s).
- -------
Term: (A) If Completed Store is a leasehold, up to ten (10)
- ----
years
(B) If Completed Store is acquired in fee, up to twenty
(20) years.
Interest Rate: (A) If Completed Store is a leasehold:
- -------------
For first year of loan, interest would be based on the
Prime Rate. If loan term is 7 years or less, interest
after first year would be based on (1) Prime Rate + 2.00%
or (2) Applicable Treasury Rate + 375 basis points. If
loan term is more than 7 years, interest after first year
would be based on (1) Prime Rate + 2.50% or (2) Applicable
Treasury Rate + 400 basis points.
(B) If Completed Store is acquired in fee:
For first year of loan, interest would be based on the
Prime Rate. Thereafter, interest would be based on (1)
Prime Rate + 2.50% or (2) Applicable Treasury Rate + 425
basis points.
Fixed interest rate will be available for no more than a
seven (7) year period.
Payment of Principal
- --------------------
and Interest: Payment of interest only during the first 6 months of the
- ------------
Loan. Thereafter, principal and interest would be paid
based on (1) an up to 10-year amortization schedule with
respect to loans secured by a leasehold interest and
having a term of 7 years or less, (2) an up to 10-year
amortization schedule with respect to loans secured by a
leasehold
1
<PAGE>
interest and having a term of 7 years or more, and (3) an
up to 20-year amortization schedule with respect to loans
secured by a fee interest.
Collateral: First fee or leasehold mortgage on the Completed Store,
together with a first priority security interest in
all furniture, fixtures and equipment.
Guarantee: Shareholders/partners/members/principals of borrower to
- --------- provide guarantee of payment and performance. AFC to
provide guarantee during years 1 and 2 of loan in an
amount equal to difference between amount of loan and 20%
equity contribution.
Equity Contribution: 5% of purchase price.
- -------------------
Fees: Commitment fee of 50 basis points. Borrower would pay
- ---- Bank's legal fees and costs of title, appraisal,
environmental updates and recording charges.
Additional Documentation: (1) AFC franchise agreement.
- ------------------------
(2) Remarketing Agreement satisfactory to AFC,
borrower and Bank.
(3) Lease of Completed Store (if any) with landlord
consent to mortgage/assignment.
(4) Year-end financial statements.
(5) Pro-forma income and cash flow statements.
(6) Personal financial statements and tax returns of
Qualified AFC Franchisee and its
members/partners/shareholders/principals
(7) Any other due diligence requirements determined
by Bank.
Loan Covenants: (4) Maintain cash flow coverage ratio of 1.10:1.
- --------------
(A) Cash flow coverage to be defined as cash flow before
debt service divided by debt service; (B) cash flow
before debt service to be defined as annual store
operating income plus depreciation, amortization and
interest expense; and (C) debt service to be defined
as total required annual principal and interest
expense.
(5) Compliance with terms of AFC franchise agreement and
Completed Store lease (if any).
(6) Other customary terms and conditions applicable to
loans of this type, which will be set forth in the
Facility One loan documents.
2
<PAGE>
Miscellaneous: New York law to govern loan documents other than mortgage,
- ------------- which shall be governed by law of state in which Completed
Store is located.
3
<PAGE>
Exhibit 10.70
Exhibit J
---------
Description of Borrower's
-------------------------
"Plus" Program
--------------
(Cover)
AN A-PLUS OPPORTUNITY...
YOUR OPPORTUNITY TO SUCCEED
AFC ENTERPRISES NEW AGE LOGO
(Inside Copy)
MAKING THE GRADE
To be the Franchisor of Choice(TM) -- the top franchise partner in the world.
That's one of the primary goals of AFC Enterprises and our brands, Churchs
Chicken, Popeyes Chicken and Biscuits, and Chesapeake Bagel Bakery. We want to
build a whole network of independent, fast-growing, forward-thinking,
well-positioned companies throughout America and literally the world. And one
of the key ways we're doing that is through PLUS - Programs Launched Universally
for Success.
- ---------------------------------------------------------------------
AFC PLUS Brochure - PRA/Draft #2 - June 19, 1997
Page 1
<PAGE>
PLUS is our effort to eliminate ownership barriers and bring ambitious,
talented, women and minority franchisees into restaurant systems than already
span 21 countries with more than 2,500 locations. It's our way of developing
business in a New Age of Opportunity.
CHURCHS CHICKEN (logo form)
Churchs is a fast food pioneer with a southern fried flavor that makes it a
leader in QSR sales growth.
POPEYES CHICKEN & BISCUITS (logo form)
Popeyes has a New Orleans taste that translates into some of the highest average
sales in the industry.
CHESAPEAKE BAGEL BAKERY (logo form)
Chesapeake is the world's largest, made-from-scratch bagel bakery.
- --------------------------------------------------------------------------
AFC PLUS Brochure - PRA/Draft #2 - June 19, 1997
Page 2
<PAGE>
DIVERSE INTERESTS, COMMON GOALS
When you join AFC, you join one of the most diverse restaurant systems in the
world. In fact, nearly half of our franchisees are minorities or women. And
we're using every means at our disposal to ensure that we maintain and maximize
our diversity. For example, we're:
. Tapping government incentives for development in
Empowerment Zones, Enterprise Communities and
Champion Cities
. Matching investors with experienced restaurant
operators to create new opportunities through Equity
Partnerships
. Targeting inner cities where we can make a
difference and a profit
. Creating programs that also create jobs in the heart
of diverse communities
A PLACE WHERE EXPERIENCE COUNTS
Every year, AFC welcomes a limited number of new PLUS franchisees. If you're a
talented individual with at least
- ------------------------------------------------------------------------
AFC PLUS Brochure - PRA/Draft #2 - June 19, 1997
Page 3
<PAGE>
3 years of restaurant management experience and a sound financial standing, and
you qualify, AFC and its brands will lower the initial development and franchise
fees.
PLUS REQUIREMENTS
Restaurant A minimum of
management 3 years
experience
Liquid assets At least
$50,000
Net worth Between 150,000
and $250,000
Development fee $3,000
Franchise fee $7,000
Royalty and Standard for
Advertising fees the brand
FINDING THE FINANCING TO MAKE IT WORK
There's money out there for those with good skills and good credit, and AFC can
help guide you through this financial maze. We're constantly pursuing new
avenues and better ideas. One of our best ideas was a special partnership with
Banco Popular, one of the fairest and most future-minded financial institutions
in the world. Through them, as a PLUS franchisee, you may also qualify for a
loan of as much as $1 million or 95% of your initial investment.
- -----------------------------------------------------------------------
AFC PLUS Brochure - PRA/Draft #2 - June 19, 1997
Page 4
<PAGE>
PIONEERING ON-CAMPUS PARTNERSHIPS
Our multifaceted Creative Management Incentive Program creates opportunities for
students, communities, suppliers and especially, potential franchisees.
One part of the program puts college students on the fast tract to ownership.
Working with several Historically Black Universities and Colleges, we're
developing a college curriculum for restaurant management and franchise
ownership. Real world experience is added through internships. When students
enrolled in the program graduate, they're guaranteed a job as a restaurant
manager, which is simply the next step in our long-term ownership development
----
program. By 2001, we expect to have 250 to 500 students well on their way to
becoming franchisees.
Another side to this program puts restaurants on college campuses where they not
only serve the student population, they also serve as living classrooms for
students enrolled in the Creative Management Incentive Program. That creates
unique ownership opportunities for franchisees who want to
- ---------------------------------------------------------------------------
AFC PLUS Brochure - PRA/Draft #2 - June 19, 1997
Page 5
<PAGE>
combine good business with good citizenship and help develop the future business
owners who will follow us.
SPEARHEADING RURAL DEVELOPMENT
Through innovative agreements with the Rural Business Service of the U.S.
Department of Agriculture and with the Alabama Rural Development Corporation,
we're also targeting low-income rural communities for aggressive growth
opportunities. By joining one of our brands, and developing within one of the
designated counties, you may qualify for a government loan guarantee through the
RBS.
ALL THIS - AND THE SUPPORT TO SUCCEED
As part of our effort to become The Franchisor of Choice(TM), all our brands
always provide vital support services such as:
. Real Estate and Development - We're with you every
step of the way, from selecting the right site to
building out the space - including space in
- -------------------------------------------------------------------------
AFC PLUS Brochure - PRA/Draft #2 - June 19, 1997
Page 6
<PAGE>
innovative locations such as convenience stores,
malls, airports and colleges.
. Training - In preparation for your grand opening, we
offer expensive hands-on training. Then we follow
up with the ongoing support you need.
. Operational Support - From restaurant procedures to
technology, we provide the knowledge and experience
to help your business thrive.
. Marketing - Our marketing arsenals include
aggressive strategies for everything from special
promotions to TV commercials to POP -- all designed
to drive customers through your doors.
If you're ready to build a future - and that future includes your own restaurant
business as well as a place in the community -- have we got a deal for you! To
find out more about your opportunities, call Leon J. Oldham, Director of PLUS
Programs at 770-353-3188 or contact AFC Enterprises Franchise Services at
1-800-848-8248, extension 25.
- --------------------------------------------------------------------------------
AFC PLUS Brochure - PRA/Draft #2 - June 19, 1997
Page 7
<PAGE>
(Sample Quote)
"Not only is it the best package out there, the PLUS program gave me a chance to
realize my dreams all that much sooner."
Geneva Love
New owner of a in and a PLUS franchisee/
-------- ---------
(Sample Quote)
"The PLUS program is just one more reason why I wanted to be an AFC franchisee.
I know a winner when I see one - and AFC is a winner."
Hank Aaron
National hero, National League Baseball home-run king and franchisee of more
than 5 Churchs restaurants.
- --------------------------------------------------------------------------------
AFC PLUS Brochure - PRA/Draft #2 - June 19, 1997
Page 8
<PAGE>
DISCLAIMER: THE INCLUSION OF THIS FORM OF COMMITMENT IS FOR REFERENCE
- ----------
PURPOSES ONLY. THE INCLUSION OF THIS FORM AS AN EXHIBIT SHALL IN
NO EVENT BE DEEMED TO CONSTITUTE AN OBLIGATION ON THE PART OF
BANCO POPULAR TO ISSUE A COMMITMENT OR COMMITMENTS.
EXHIBIT K-1
-----------
FORM OF FRANCHISEE LOAN COMMITMENT
----------------------------------
________ ___, 199__
_______________________
_______________________
_______________________
Attention: _________________
_________________
Re: Banco Popular de Puerto Rico's
$______________ Term
Loan to
------------------------------
Dear ______________:
Banco Popular de Puerto Rico (the "Bank") is pleased to advise you
----
that it is prepared to make available a term loan facility in the maximum
principal amount of $___________ (the "Loan") to ____________________, a
----
____________________________ ("Borrower"). The proceeds of the Loan shall be
--------
used to finance the acquisition of the Premises (as hereinafter defined).
This Commitment Letter is subject to the following terms and
conditions:
1. Borrower. The Borrower shall be a _______________ which shall be
--------
wholly-owned and controlled by ____________. The specific structure and
ownership of Borrower and its organizational documents shall be subject to the
approval of the Bank prior to
<PAGE>
____________________
___________ ____, 199__
Page 2
the closing of the Loan and, once approved, the same may not be changed without
the express written consent of the Bank. At all times while the Loan is
outstanding, __________ shall own not less than ________________ percent (___%)
of the ownership interest in Borrower and shall at all times be solely
responsible for the day-to-day management and control of Borrower.
2. Loan Documents. The Loan shall be evidenced by a note as
--------------
hereinafter described and evidenced, governed, guarantied and secured by such
other documents as the Bank or its counsel, McConnell Valdes LLP, may require
(collectively, the "Loan Documents"). More particularly, the Bank's commitment
--------------
hereunder is subject to the negotiation, execution and delivery prior to _______
___, 199__ of definitive documentation with respect to the Loan satisfactory in
form and substance to the Bank and its counsel. Such documentation shall
contain the terms and conditions set forth herein and such other indemnities,
covenants, representations and warranties, events of default, conditions
precedent, security arrangements and other terms and conditions as shall be
satisfactory in all respects to the Bank. The terms and conditions of the
Bank's commitment hereunder and of the Loan Documents are not limited to the
terms and conditions set forth herein, and matters that are not covered by the
express provisions of this Commitment Letter are, in all respects, subject to
the approval of the Bank.
3. The Mortgage. The Loan shall be secured in part by a [first
------------
fee/first leasehold] mortgage (the "Mortgage") encumbering Borrower's
--------
[fee/leasehold] interests in the parcel of land having the following
address:___________________________________ (the "Premises").
--------
The term "Improvements" shall mean the improvements presently
existing or hereafter constructed or renovated on the Premises, which
Improvements shall consist of a [Church's(R) /Popeye's(R) ] franchise stores.
4. Additional Security. The Loan shall be further secured by (a) an
-------------------
assignment of, and a good and valid first lien on and security interest in, any
and all leases, contracts of sale and other agreements and rights relative to
the Premises, and any and all other agreements and rights relative to the
construction, renovation, equipping, management, maintenance, ownership, leasing
or operation of the Premises, whether already executed or existing or to be
executed or acquired in the future; (b) without limiting the foregoing, a good
and valid first lien on and security interest in any and all building materials,
furnishings, fixtures, inventory, equipment, accounts, general intangibles and
other personal property (whether now owned or leased by Borrower), including,
without limitation, permits, licenses, contracts, and all other contract rights
with respect to the Premises, and proceeds of all of the foregoing, in each
case, whether now owned or existing or hereafter acquired or arising; (c) the
naming of the Bank as an additional insured/loss payee on any and all property,
casualty
<PAGE>
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___________ ____, 199__
Page 3
and liability insurance policies procured by the Borrower in connection with the
Premises; and (d) such other items, consistent with this Commitment Letter, as
the Bank may reasonably require.
5. The Note. The Loan shall be evidenced by a note (the "Note") in
-------- ----
the principal amount of the Loan. The Note shall mature ___________ (___)
months from the closing date (the "Maturity Date"). The Note shall constitute a
-------------
full recourse obligation of the Borrower.
6. Payment of Principal and Interest under the Note.
------------------------------------------------
(a) The outstanding principal amount of the Note shall bear
interest, calculated on the basis of a three hundred-sixty (360) day year for
the actual number of days elapsed, as follows:
(i) during the first twelve (12) months of the Loan (the
"Initial Period"), at a floating rate per annum equal to the Prime
--------------
Rate (as hereinafter defined) in effect from time to time;
(ii) during the period commencing on [the 1st anniversary of
the closing date] and ending on [the Maturity Datedate preceding
7th anniversary of the closing date] (the "Second Period"), either
-------------
(A) at a floating rate per annum equal to the Prime Rate in effect
from time to time plus ____ basis points, or (B) at a fixed rate per
annum equal to ____ basis points in excess of the yield on United
States Treasury notes having a maturity closest to the Maturity Date
as in effect on the closing date based on the rate published on such
date in The Wall Street Journal;
-----------------------
[(iii) during the period commencing on [the 7th anniversary of
the closing date] and ending on the Maturity Date (the "Third
-----
Period"), at a _______ rate per annum equal to __________; and
(iv) upon the occurrence and during the continuance of any
default under the Loan Documents, including, without limitation, the
failure to pay any amount when due under the Loan Documents at
maturity or otherwise, the Borrower shall pay interest on the
outstanding principal amount of the Loan, and, to the fullest extent
permitted by law, on the amount of any interest, fee or other amount
payable under the Loan Documents that is not paid when due, at a rate
per annum equal to five hundred (500) basis points above the rate per
annum then in effect with respect to the Loan pursuant to clauses (i),
(ii) and (iii) above;
<PAGE>
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___________ ____, 199__
Page 4
provided, however, that the Loan Documents will contain provisions providing
- -------- -------
that the Bank does not intend to charge interest, including, without limitation,
upon default, at an rate that is usurious under applicable law and setting forth
mechanisms for preventing the application of a usurious interest rate to any
amounts payable with respect to the Loan.
(b) The "Prime Rate" is the prime commercial lending rate of the
----------
Bank as publicly announced (or published internally) by the Bank to be in effect
from time to time, or, if the actual cost to the Bank of its overnight federal
funds borrowings exceeds the announced or published prime rate, the overnight
federal funds rate. The Prime Rate is not the lowest rate charged by the Bank
for commercial or other types of loans, it being understood that the Prime Rate
is only one of the bases for computing interest on loans made by the Bank, and
that, by basing interest on the Prime Rate, the Bank has not committed to charge
and the Borrower has not in any way bargained for interest based on a lower or
the lowest rate at which the Bank may now or in the future make loans to other
borrowers. Any interest rate based on the Prime Rate shall be adjusted on and as
of the effective date of any change in the Prime Rate.
(c) In addition to the payment of interest on the Note at the
interest rates described above, commencing on the first day of the month
occurring six (6) months after the closing date (prior to which Borrower shall
be required to make monthly payments only of interest, such payments to be made
in arrears on the first day of each month), the Note will provide for monthly
payments to be paid by Borrower to be applied to the amortization of the
principal amount of the Note. The amount of each such monthly payment shall be
calculated at closing based on a ____ year amortization schedule.
(d) Commencing on the first day of the month occurring six (6)
months after the closing date, payments of principal and interest on the Note
shall be made in consecutive monthly payments on the first day of each month
applied first to interest at the interest rates described above and then to
amortization of the principal amount, with the entire unpaid principal balance
and all accrued and unpaid interest thereon due on the Maturity Date.
(e) The Note will provided that the principal balance may be
prepaid at any time upon giving the Bank not less than sixty (60) days prior
written notice. At the time of any prepayment prior to the Maturity Date
(whether by voluntary prepayment, involuntary prepayment following acceleration,
or otherwise), Borrower shall pay to the Bank an additional prepayment
consideration calculated as follows: [if Prime Rate in effect at time of
prepayment - (i) three percent (3%) of the principal amount being prepaid, if
prepayment occurs prior to the date preceding the fourth (4th) anniversary of
the closing date; (ii) two percent (2%) of the principal amount being prepaid,
if prepayment occurs at any time on or after the fourth (4th) anniversary of
the closing date and prior to the day preceding the seventh (7th) anniversary
of the closing date; and (iii) one percent (1%) of the principal amount being
<PAGE>
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___________ ____, 199__
Page 5
prepaid, if prepayment occurs at any time on or after the seventh (7th)
anniversary of the closing date and prior to the Maturity Date]/if Treasury Rate
in effect at time of prepayment - (i) the present value as of the date of
prepayment of the remaining scheduled payments of principal and interest
(including any balloon payment) determined by discounting such payments at the
"Monthly Equivalent Treasury Note Rate" (hereinafter defined) less (ii) the
amount of principal being prepaid, provided such difference shall not be less
than zero. The Monthly Equivalent Treasury Note Rate for purposes of this
provision shall be the rate which when compounded monthly results in a yield
that is equivalent to the yield on the U.S. Treasury Note plus ______ percent
(__%) which is compounded semi-annually, having a maturity date closest to the
Maturity Date. In no event shall the prepayment consideration be less than one
percent (1%) of the then outstanding principal balance.
Any prepayment, in whole or in part, of the principal balance of the
Note shall be accompanied by all accrued interest with respect to the principal
amount being prepaid, shall be applied to the installments thereof in inverse
order of maturity and may not be reborrowed.
7. Equity. At or prior to closing, Borrower shall provide the Bank
------
with evidence acceptable to the Bank that Borrower has expended, or will have
expended as of the closing, not less than ___ percent (___%) of the cost of the
acquisition of the Premises (the "Equity Contribution"). The Bank shall have no
-------------------
obligation to lend hereunder unless and until Borrower shall have made the
Equity Contribution.
8. Guarantee. A guarantee of payment and performance, in form and
---------
substance acceptable to the Bank (the "Guarantee"), jointly and severally and
---------
unconditionally guaranteeing (i) the timely payment of all principal and
interest under the Note, and all fees, expenses and other charges due the Bank
under the Loan Documents, and (ii) the due and punctual performance of all
covenants and agreements under the Loan Documents, including, without
limitation, the timely, lien-free construction and renovation of the
Improvements, shall be executed by _________ and __________ (collectively, the
"Guarantor").
---------
9. Purpose. The purpose of the Loan is to enable Borrower to
-------
acquire the Premises [pursuant to the contract of sale, dated ________, between
Franchisor (hereinafter defined), as seller, and Borrower, as purchaser (the
"Contract of Sale")][/acquire a leasehold interest in the Premises pursuant to
----------------
the Lease (hereinafter defined).] Not later than thirty (30) days prior to
closing, Borrower shall deliver to the Bank, for the Bank=s review and approval,
a copy of the [Contract of Sale/Lease]. [At closing, the Borrower shall also
provide the Bank with copies of the deed conveying title to the Premises to
Borrower, together with copies of any other transfer documents.] The Premises,
on the closing date, may not be subject to any tenancies, contracts of sale,
leasing options or rights in any third parties. The Mortgage will prohibit any
other encumbrance whether junior or senior and shall provide that the Loan will
<PAGE>
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___________ ____, 199__
Page 6
become due on any sale or further encumbrances of the Premises or upon any
change in the ownership of the Borrower not otherwise permitted under the Loan
Documents.
[10. The Lease. Borrower has advised the Bank that Borrower is
---------
leasing the Premises under and pursuant to the lease dated _________, 199__
between Franchisor, as landlord, and Borrower, as tenant (the "Lease"). As
-----
stated above, the Lease shall be subject to the review and approval of the Bank
and, as of the closing date, there shall be no default under the Lease and
Borrower shall be in possession of the Premises pursuant to the Lease. The Loan
Documents shall provide that the Lease may not be amended, modified, assigned,
terminated or surrendered without the Bank=s prior written consent.]
[Prior to closing, Borrower shall provide the Bank with all written
consents, recognition agreements, estoppel certificates and subordination of
liens from the lessor under the Lease necessary or requested by the Bank to
permit the Bank to exercise its rights and remedies with respect to the
Premises.]
11. The Franchise Agreement. Not less than ten (10) days prior to
-----------------------
the closing date, Borrower shall deliver to the Bank for the Bank's review and
approval the executed franchise agreement (the "Franchise Agreement") between
-------------------
AFC Enterprises, Inc. ("Franchisor") and Borrower, pursuant to which Borrower
----------
shall be permitted to operate a [Church's(R)/Popeye's(R)] franchise store at the
Premises. Borrower shall also provide the Bank with copies of the Franchisor's
offering circular and other materials provided to Borrower by Franchisor with
respect to the Franchise Agreement. Prior to closing, Borrower shall cause
Franchisor to execute and deliver to the Bank the agreement in the form of
Exhibit A annexed hereto (the "Franchisor Agreement") which shall provide the
- --------- --------------------
Bank with certain rights and remedies with respect to the Franchise Agreement.
[To be included in Popular Plus loan commitments only - In addition to the
foregoing, at or prior to closing, Borrower shall cause Franchisor to execute
and deliver to the Bank the form of guarantee annexed hereto as Exhibit B (the
"Franchisor Guarantee").]
--------------------
12. Appraisal. The Bank shall have no obligation to lend hereunder
---------
until the Bank has received a MAI appraisal of the Premises in all respects
acceptable to the Bank (the "Appraisal").
---------
13. Loan Documents. As provided above, the Note and the other Loan
--------------
Documents will be prepared at the Borrowers' expense by the Bank's counsel,
McConnell Valdes LLP, and said documents will contain such terms as the Bank or
its counsel may deem appropriate. Such documents will contain conditions,
provisions and requirements set forth below and other conditions, provisions and
requirements reasonably consistent with this
<PAGE>
____________________
___________ ____, 199__
Page 7
Commitment Letter that are not set forth herein. Such conditions, provisions and
requirements shall include, but shall not be limited to, the following:
(a) The Loan Documents will require Borrower to provide to the
Bank (i) within sixty (60) days after the end of each second (2nd) and fourth
(4th) fiscal quarter of Borrower, semi-annual, internally prepared financial
statements of Borrower acceptable to the Bank and certified by a financial
officer acceptable to the Bank as having been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied, subject
----
to year-end audit adjustments; (ii) within ninety (90) days after the end of
each fiscal year, (x) annual financial statements of the Borrower acceptable to
Bank, prepared in accordance with GAAP consistently applied and audited by a
independent accounting firm acceptable to the Bank and (y) a certificate,
executed by a financial officer acceptable to the Bank, as to the absence of
defaults and events of default under the Loan Documents [the Lease] or the
Franchise Agreement; (iii) within fifteen (15) days after filing, but in no
event later than April 30 of each year, copies of Borrower's federal tax returns
(together with any extensions filed) and (iv) promptly after any request
therefor, all other financial or other information relating to Borrower as may
be reasonably requested by the Bank from time to time;
(b) Guarantor will be required to provide the Bank with (i)
annual updated financial statements within thirty (30) days after the end of
each calendar year and (ii) copies of federal tax returns (together with any
extension filed) within fifteen (15) days after the filing of same, but in no
event later than April 30 of each year;
(c) Borrower shall provide the Bank with prompt written notice
of material events and condition affecting the Borrower, Guarantor or the
Premises, including, without limitation, notice of (i) any pending or threatened
litigation, (ii) the commencement of any proceedings or investigations by any
governmental or regulatory agency, in either case affecting the Borrower,
Guarantor or the Premises, (iii) the occurrence of any default or event of
default under the Loan Documents [the Lease] or the Franchise Agreement, and
(iv) certain ERISA-related events, including, without limitation, the occurrence
of reportable events under ERISA and plan terminations;
(d) Borrower shall maintain a minimum cash flow coverage ratio
of ______ for each fiscal year. The "cash flow service coverage ratio" shall be
calculated annually and shall be defined as:
Cash Flow Before Debt Service
-----------------------------
Debt Service
<PAGE>
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___________ ____, 199__
Page 8
"Cash Flow Before Debt Service" shall be defined in the Loan
-----------------------------
Documents as annual operating income of the Premises plus depreciation,
amortization and interest expense. "Debt Service" shall be defined as the total
------------
required principal and interest expense under the Note.
(e) Any and all debt incurred by Borrower to its shareholders,
officers, partners, members and/or affiliates shall be incurred only with the
Bank's prior written consent and, in any event, shall be expressly subordinated
to the Loan on terms acceptable to the Bank;
(f) Borrower or Guarantor shall not incur any additional
indebtedness without the Bank's prior written consent, other than (i) unsecured
indebtedness constituting trade debt and (ii) other indebtedness incurred in the
ordinary course of business in connection with the ownership and operation of
the Premises;
(g) The Loan Documents will provide that Borrower shall deposit
on a monthly basis, simultaneously with the payment of interest and/or principal
under the Note, an amount equal to one-twelfth (1/12th) of all real estate taxes
and assessments ("Real Estate Taxes") with respect to the Premises (the "Tax
----------------- ---
Escrow"). The Tax Escrow shall be subject to adjustment by the Bank from time
- ------
to time so that the amount therein shall be sufficient to pay Real Estate Taxes
when due plus two (2) months' installments of the Tax Escrow;
(h) The Loan Documents will contain, but not be limited to, the
following events of default, as well as other events of defaults typical in
loans of this type: failures to make payments when due under the Loan
Documents, incorrectness of representations and warranties, failures to perform
or observe covenants and agreements in the Loan Documents, cross-defaults to
other indebtedness of Borrower or Guarantor, unsatisfied, unstayed judgments in
excess of $_________ and not covered by insurance, failure of the Loan Documents
to create first priority liens on the Premises, Guarantor shall for any reason
cease to own not less than one hundred percent (100%) of the equity interests in
Borrower, and certain ERISA-related events;
(i) The Loan Documents will restrict the ability of Borrower and
Guarantor to (i) make loans and other investments, including, without
limitation, loans or advances to members, partners, shareholders, officers or
affiliates, (ii) make distributions or other payments to its members, partners,
shareholders, officers or affiliates, (iii) create, incur or suffer to exist
liens on its assets or properties, (iv) merge or consolidate with any other
person, (v) sell, lease, transfer or otherwise dispose of any of its assets or
properties, (vi) change the nature of its business, (vii) make changes in
accounting policies or reporting practices, (viii) amend, cancel or terminate
material contracts, including, without limitation, any franchise agreements or
other contracts and agreements relating to the Premises, (ix) enter
<PAGE>
____________________
___________ ____, 199__
Page 9
into partnerships, (x) engage in other transactions with affiliates and (xi)
make or incur capital expenditures;
(j) The Loan Documents will require Borrower to (i) comply with
all applicable laws, including, without limitation, all federal and state laws
(including, without limitation, all environmental and employment-related laws),
(ii) pay and discharge taxes and charges when due, (iii) maintain its existence,
rights, licenses and properties, (iv) provide the Bank and its representatives
with reasonable visitation rights, (v) keep proper books and records, (vi)
maintain a fiscal year end of December 31 and (vii) perform and observe the
terms of all material contracts, agreements and leases; and
(k) Except as otherwise expressly provided in the Loan
Documents, and without limiting the foregoing in any way, there shall be no
sale, assignment, transfer (including, without limitation, leases), encumbrance
(junior, senior or pari passu), hypothecation or other disposition of or lien on
the Premises, in each case above without the prior written consent of the Bank.
14. Title Policy. The Borrower shall, at its expense, provide the
------------
Bank with a mortgagee title insurance policy which shall insure the Mortgage as
first lien on [Borrower's leasehold interest in] the Premises. Said mortgagee
policy may contain no exceptions other than those approved in writing by the
Bank prior to closing and must provide such affirmative insurance as the Bank
may reasonably require.
15. Environmental Report. Not less than ten (10) days prior to
--------------------
closing, the Borrower shall obtain, at the Borrower's expense, and deliver to
the Bank, a Phase I environmental site assessment (the "Phase I Report") with
--------------
regard to the Premises satisfactory to the Bank in all respects. The Phase I
Report must describe the site history of the Premises (including, without
limitation, past and present use and identification of past and present owners
of the Premises and adjacent sites), environmental compliance, chemical testing
and environmental and toxic materials reports with regard to the Premises
satisfactory to the Bank in all respects. The Phase I Report shall be prepared
by an environmental consulting firm in all respects acceptable to the Bank and
must contain conclusions in all respects satisfactory to the Bank as to whether
(a) any hazardous wastes, toxic substances or asbestos-containing materials are
located at the Premises, and (b) whether the Premises presently complies with
all environmental laws and regulations. The Bank will also require a continuing
joint and several guarantee and indemnity satisfactory to it in all respects
from the Borrower and Guarantor against any cost, loss or liability incurred by
the Bank as a result of hazardous or toxic materials, asbestos or other
environmental problems, or any laws or regulations relating thereto, and
unconditionally guaranteeing to the Bank the prompt and timely compliance with
all environmental laws, orders, regulations and requirements.
<PAGE>
____________________
___________ ____, 199__
Page 10
16. Additional Conditions. The Bank's obligations hereunder are also
---------------------
subject to the following additional terms and conditions:
(a) Approval by the Bank of all items, documents and information
heretofore or hereafter delivered to the Bank, as provided in this Commitment
Letter or otherwise, and, as applicable, verification of the accuracy thereof,
including, without limitation, approval by the Bank and its counsel of all
definitive Loan Documents and all closing documentation related thereto;
(b) Submission of satisfactory financial statements and other
financial information with regard to Borrower and Guarantor;
(c) Receipt by the Bank of evidence that the Premises comply
with all applicable zoning, environmental, fire and building codes together with
copies of all required operating licenses and other permits in connection with
the operation of the Premises;
(d) Receipt and approval by the Bank of a survey of the
Premises, showing the locations of all improvements thereon;
(e) The Bank shall receive such proof as it deems necessary to
establish that all taxes payable with respect to the Premises, including,
without limitation, Real Estate Taxes, have been paid;
(f) Receipt by the Bank of satisfactory judgment searches on the
Borrower and Guarantor showing no outstanding judgments or claims;
(g) Receipt by the Bank of the Franchisor Agreement;
(h) Receipt by the Bank of a flood hazard certification stating
that the Premises is not located in an area designated as a flood hazard area
pursuant to the National Flood Insurance Program;
(i) The Bank shall receive a favorable opinion of Borrower's and
Guarantor's counsel with respect to the organizational status of the Borrower,
the Loan, the security therefor, the enforceability of the Loan Documents, and
such other matters (including, without limitation, compliance with, and, as
applicable, perfection of security interests under, the laws of the United
States of America and the state in which the Premises are located) as the Bank
may reasonably request, in each case above in all respects acceptable to the
Bank;
(j) All representations and warranties of Borrower and Guarantor
contained in the Loan Documents shall be true and correct in all material
respects prior to, and
<PAGE>
____________________
___________ ____, 199__
Page 11
after giving effect to, the funding of the Loan and there shall be no pending
investigations or proceedings against or affecting the Borrower, Guarantor or
the Premises;
(k) Borrower shall, at its expense, provide the Bank with
evidence of such fire, casualty, liability, business interruption, flood and
other insurance as the Bank may reasonably require in such amounts and on such
other terms as the Bank deems reasonably necessary, and such insurance must name
the Bank as loss payee and an additional insured and remain in full force and
affect during the term of the Loan ;
(l) The Bank and its counsel shall have completed a due
diligence review of the Premises, Borrower and Guarantor, and shall be satisfied
in all respects with the scope and substantive results (legal, business and
other) of such due diligence review; and
(m) There shall have been no material adverse change in the
financial condition, performance or operations of Borrower since _____________.
17. Representations and Warranties. Borrower hereby represents and
------------------------------
warrants and covenant that:
(1) all information that has been or is hereafter made available
to the Bank by Borrower or any of its representatives in connection with
the transactions contemplated hereby is and will be complete and correct in
all material respects and does not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made; and
(2) all financial projections that have been or are hereafter
prepared by Borrower or any of its representatives and made available to
the Bank have been or will be prepared in good faith based upon reasonable
assumptions.
Borrower hereby agrees to supplement the information and projections referred to
in clauses (1) and (2) above from time to time until the closing of the Loan so
that the representations and warranties in the preceding sentence remain correct
and further agree that the Bank may use and rely on such information and
projections without independent verification thereof.
18. Termination of Commitment. The Bank shall have the right to
-------------------------
terminate this Commitment Letter without any further obligation on the part of
the Bank upon the occurrence of any of the following prior to the closing of the
Loan: (i) the failure of Borrower or Guarantor to observe and perform each and
every one of the terms, covenants, promises and agreements to be performed by it
under this Commitment Letter or under any other documents or agreements
pertaining to the Loan, (ii) the failure or inability of the Borrower or
<PAGE>
____________________
___________ ____, 199__
Page 12
Guarantor to satisfy on a continuing basis any requirement of the Bank hereunder
with respect to the Loan or the Loan Documents, (iii) the attempted assignment
or transfer of this Commitment Letter, (iv) any change in the structure or
ownership of Borrower or any material adverse change in the structure, ownership
or financial condition of Borrower since the dates of the most recent financial
statements provided to the Bank, (v) material loss or damage to the Premises or
any other material adverse change in the financial condition, operations or
prospects with respect to the Premises, (vi) nonpayment of any fees or expenses
payable by Borrower under this Commitment Letter, (vii) a determination by the
Bank that any documents or items required to be delivered by the Borrower
hereunder are unsatisfactory, (viii) the filing by or against Borrower or
Guarantor of a petition in bankruptcy or the appointment of a receiver or
trustee for, or the making of an assignment for the benefit of creditors by,
Borrower or Guarantor, (ix) any statement, representation or warranty,
including, without limitation, those contained in Paragraph 17 above, made by or
on behalf of Borrower in the application for the Loan or in this Commitment
Letter or otherwise in connection with the commitment or the transactions
contemplated hereby shall have been false or misleading when made, or Borrower
shall fail to comply with its agreements contained in Paragraph 17 above or (x)
the failure to satisfy all of the terms and conditions of this Commitment Letter
and the Loan Documents and to close the Loan for any reason whatsoever on or
before ________.
19. Expenses and Indemnity. (a) Whether or not the Loan closes or
----------------------
this Commitment Letter is terminated for any reason, the Borrower and Guarantor
shall be jointly and severally obligated to pay all costs, fees and expenses
incurred by the Bank (whether incurred prior to or after closing and, in the
event the closing occurs, whether incurred prior to or after any default under
the Loan Documents), including, without limitation, the reasonable fees and
expenses of the Bank's counsel, the cost of title searches, title insurance,
survey charges, appraisal fees, recording charges and taxes and such other
expenses as may be incurred by the Bank in connection with this Commitment
Letter or the Bank's funding, administration or collection of the Loan.
(b) In consideration of issuing this Commitment Letter, Borrower
shall be deemed to have agreed to pay the Bank, and the Bank shall be deemed to
have earned, a commitment fee equal to one-half of one percent (.50%) of the
amount of the Loan (the "Commitment Fee"). Fifty percent (50%) of the Commitment
--------------
Fee shall be due and payable upon the acceptance of this Commitment Letter by
Borrower and the remainder shall be due and payable by Borrower at closing.
(c) Upon the acceptance of this Commitment Letter, Borrower shall pay
to the Bank the sum of $__________ to be applied by the Bank to fees and
expenses incurred in connection with obtaining the appraisal and the Phase I
Report with respect to the Premises and the Bank's counsel fees. The aforesaid
sum shall not represent a limitation or "cap" on Borrower's obligation to pay
all fees and expenses incurred by the Bank in connection with the
<PAGE>
____________________
___________ ____, 199__
Page 13
appraisal and the Phase I Report and all other fees and expenses incurred by the
Bank in connection with this Commitment Letter. Any amount remaining after
payment of the fees and expenses incurred in connection with the appraisal and
the Phase I Report and the Bank's counsel fees shall be applied to payment of
the other fees and expenses required to be paid by Borrower under this
Commitment Letter.
(d) Borrower further agrees to indemnify and hold harmless the Bank
and each director, officer, employee, affiliate and agent thereof (each, an
"indemnified person") against, and to reimburse each indemnified person, upon
------------------
its demand, for, any losses, claims, damages, liabilities or other expenses
("Losses") to which such indemnified person may become subject insofar as such
------
Losses arise out of or in any way relate to or result from this Commitment
Letter or the financing contemplated hereby, including, without limitation,
Losses consisting of legal or other expenses incurred in connection with
investigating, defending or participating in any legal proceeding relating to
any of the foregoing (whether or not such indemnified person is a party
thereto); provided that the foregoing will not apply to any Losses to the extent
--------
that they are found by a final decision of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of such
indemnified person. Borrower's obligations under this paragraph shall remain
effective whether or not definitive financing documentation is executed and
notwithstanding any termination of this Commitment Letter. Neither the Bank nor
any other indemnified person shall be responsible or liable to Borrower or any
other person or entity for consequential damages that may be alleged as a result
of this Commitment Letter or the financing contemplated hereby.
20. Non-Transferability by Borrower. Borrower may not assign or
-------------------------------
transfer this Commitment Letter.
21. Assignment by Bank. The Loan Documents will provide that Bank
------------------
shall have the right, exercisable at any time and from time to time, to sell,
transfer or assign the Note and the other Loan Documents and any security
therefor, or grant participations therein, or issue certificates or securities
evidencing a beneficial interest therein in a rated or unrated public offering
or private placement, and the Bank may forward to any purchaser, transferee,
assignee, servicer, participant, investor or credit rating agency rating such
securities (collectively, an "Investor") or prospective Investor all documents
--------
and information in the Bank's possession with respect to the Borrower,
Guarantor, the Premises, and the Loan Documents as such Investor or prospective
Investor may request.
22. Integration; Amendments and Waivers. By executing this
-----------------------------------
Commitment Letter, Borrower acknowledges (i) that this Commitment Letter is the
only agreement between Borrower and the Bank with respect to the Loan and sets
forth the entire understanding of the parties with respect thereto and (ii) that
there are no other understandings, oral or written,
<PAGE>
____________________
___________ ____, 199__
Page 14
with the Bank with respect to the Loan or the subject matter hereof. This
Commitment Letter may not be changed or waived except pursuant to a writing
signed by each of the parties hereto and any purported oral waiver or amendment
hereof shall be of no force and effect.
23. Governing Law. This Commitment Letter shall be governed by New
-------------
York law.
Kindly signify your acceptance of this Commitment Letter and your
agreement with the terms and conditions set forth herein by executing the
enclosed copy of this Commitment Letter in the space provided and returning the
same, together with the payment of fifty percent (50%) of the Commitment Fee
together with $_______ representing a portion of the Bank's fees and expenses
- -------------
due pursuant to Paragraph 19 to the Bank by not later than 5:00 p.m. on
_________, 199__. Time is of the essence with respect to all obligations of the
Borrower under this Commitment Letter, including, without limitation, in
connection with this Paragraph and Paragraph 19 above.
This Commitment Letter shall not be binding upon the Bank until received and
accepted in the office of the Bank in New York, New York. You shall thereafter
be obligated to borrow in accordance with this Commitment Letter.
We look forward to working with you on this project.
Very truly yours,
BANCO POPULAR DE PUERTO RICO
By:_________________________
Name:_______________________
Title:______________________
The terms and conditions of this
Commitment Letter are hereby agreed
to and accepted this ___ day of ________, 199__
________________________________
By:___________________________
<PAGE>
____________________
___________ ____, 199__
Page 15
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT K-2(A)
FORM OF FRANCHISEE NOTE
-----------------------
NOTE
----
$____________ (U.S.) _______ ___, 199__
FOR VALUE RECEIVED, _________________________________________, a
___________________________ having an office at __________________________
("MAKER") promises to pay to the order of BANCO POPULAR DE PUERTO RICO, having
an office at 7 West 51/st/ Street, New York, New York 10019 (hereinafter
referred to as "PAYEE"), or at such place as the holder hereof may from time to
time designate in writing, the principal sum of
__________________________________ DOLLARS ($__________) or so much thereof as
may be outstanding (THE "PRINCIPAL AMOUNT") in lawful money of the United States
of America with interest on the Principal Amount outstanding from time to time
to be computed from the date the funds are advanced by Payee at the Applicable
Interest Rate (hereinafter defined) as provided herein. Defined terms used in
this Note shall have the meanings ascribed thereto in paragraph 1 hereof.
1. DEFINITIONS. The following terms shall have the following meanings:
"APPLICABLE INTEREST
RATE" (i) During the Initial Period, the Initial Period
Interest Rate,
(ii) during the Second Period, the Second Period
Interest Rate, [and (iii) during the Third Period, the
Third Period Interest Rate.]
"APPLICABLE TREASURY
RATE" The Treasury Rate plus ______ basis points.
"FIRST PERIODIC
AMORTIZATION DATE" [First day of month occurring six (6) months after
closing date.]
"FIRST PERIODIC
INTEREST DATE" [First day of first month after closing date].
"INITIAL PERIOD" The period commencing on the date of this Note and
ending on [date preceding first (1/st/) anniversary of
closing date].
"INITIAL PERIOD INTEREST
RATE" A per annum rate equal to the Prime Rate in effect
from time to time.
"LOAN DOCUMENTS" As defined in the Mortgage.
<PAGE>
"MATURITY DATE" ____________.
"MORTGAGE" The Mortgage, Security Agreement and Assignment of
Leases and Rents, dated as of the date hereof, made by
Maker, as mortgagor, to Payee, as mortgagee, as the
same may be amended or supplemented from time to time.
"PERIODIC AMORTIZATION
AMOUNT" $__________.
"PERIODIC AMORTIZATION
DATE" The first (1st) day of each calendar month occurring
after the First Periodic Amortization Date and prior
to the Maturity Date.
"PERIODIC AMORTIZATION
PAYMENT" A periodic payment of a portion of the Principal
Amount equal to the Periodic Amortization Amount.
"PERIODIC INTEREST DATE" The first (1st) day of each calendar month occurring
after the First Periodic Interest Date and prior to
the Maturity Date.
"PRIME RATE" The prime commercial lending rate of Payee as publicly
announced (or published internally) by Payee to be in
effect from time to time, or, if the actual cost to
Payee of its overnight federal funds borrowings
exceeds the announced or published prime rate, the
overnight federal funds rate. The Prime Rate is not
the lowest rate charged by Payee for commercial or
other types of loans, it being understood that the
Prime Rate is only one of the bases for computing
interest on loans made by Payee and that, by basing
interest on the Prime Rate, Payee has not committed to
charge and Maker has not in any way bargained for
interest based on a lower or the lowest rate at which
Payee may now or in the future make loans to other
borrowers. Any interest rate based on the Prime Rate
shall be adjusted on and as of the effective date of
any change in the Prime Rate.
"PRINCIPAL AMOUNT" _______________ Dollars ($__________(U.S.)) or so much
thereof as may be outstanding from time to time.
"SECOND PERIOD" The period commencing on (first (1/st/) anniversary of
closing date) and ending on [(the Maturing Date/date
preceding 7/th/ anniversary of closing date)].
-2-
<PAGE>
"SECOND PERIOD
INTEREST RATE" [To be elected by Maker as of closing date] Either (i)
a floating per annum rate equal to the Prime Rate plus
____ basis points, or (ii) a fixed per annum rate
equal to the Applicable Treasury Rate. The Second
Period Interest Rate shall remain in effect for the
entire Second Period.
["THIRD PERIOD" The period commencing on [the 7/th/ anniversary of the
closing date] and ending on the Maturity Date.]
["THIRD PERIOD
INTEREST RATE" ________________.]
"TREASURY RATE" The yield on United States Treasury notes having a
maturity closest to the Maturity Date as in effect on
the date of this Note based on the rate published on
such date in The Wall Street Journal.
-----------------------
2. INTEREST RATE. During the entire period of this Note occurring prior
to maturity (whether such maturity occurs by acceleration or otherwise), this
Note shall bear interest commencing on the date hereof at the Applicable
Interest Rate.
3. INTEREST PAYMENTS. Maker agrees to pay interest from the date hereof
on the Principal Amount at a rate per annum equal to the Applicable Interest
Rate by periodic payments of interest in arrears commencing on the First
Periodic Interest Date and continuing on each Periodic Interest Date thereafter
until the entire Principal Amount is paid. Interest shall also be due on the
Maturity Date at the Applicable Interest Rate for the period from the Periodic
Interest Date immediately preceding the Maturity Date up to and including the
Maturity Date. Interest shall be calculated on the basis of a 360-day year for
the actual number of days involved. After maturity, the Principal Amount and
accrued interest thereon, shall, at Lender's option, be payable on demand.
4. PRINCIPAL PAYMENTS. In addition to the payment of interest hereunder,
Maker agrees to pay the Principal Amount now or hereafter owing under this Note
prior to the Maturity Date by making Periodic Amortization Payments that are due
and payable during the term of this Note commencing on the First Periodic
Amortization Date, and thereafter on each succeeding Periodic Amortization Date,
and the entire unpaid Principal Amount, and all accrued and unpaid interest
thereon, shall be due and payable on the Maturity Date.
5. EVENTS OF DEFAULT; ATTORNEY'S FEES. The whole of the principal sum of
this Note, together with all interest accrued and unpaid thereon and all other
sums due under this Note and the other Loan Documents (all such sums hereinafter
collectively referred to as the "Debt") shall without notice become immediately
----
due and payable at the option of Payee if any
-3-
<PAGE>
payment required in this Note is not paid within five (5) days of the date when
due or on the happening of any other default, after the expiration of any
applicable notice and grace periods, herein or under the terms of the Mortgage
or any other Loan Document (hereinafter collectively an "Event of Default"). All
----------------
of the terms, covenants and conditions contained in the Mortgage and the other
Loan Documents are hereby made a part of this Note to the same extent and with
the same force as if they were fully set forth herein. In the event that it
should become necessary to employ counsel to collect the Debt or to protect or
foreclose the security hereof, Maker also agrees to pay reasonable attorney's
fees for the services of such counsel whether or not suit is brought.
6. PREPAYMENT. (a) The Note may be prepaid in whole or in part, together
with interest on the amount being prepaid up to the date of such payment and, in
the case of prepayment in full, all others amounts due and payable by Maker
under this Note, the Mortgage and the other Loan Documents, at any time upon
giving Payee not less than sixty (60) days prior written notice, provided that,
at the time of such prepayment (whether by voluntary prepayment, involuntary
prepayment following acceleration, or otherwise), Maker shall pay to Payee an
additional prepayment consideration [IF PRIME RATE IN EFFECT AT TIME OF PAYOFF -
equal to (i) three percent (3%) of the Principal Amount being prepaid, if
prepayment occurs prior to [1st four years of Loan term], (ii) two percent (2%)
of the Principal Amount being prepaid, if prepayment occurs prior to [period
between 4/th/ anniversary of closing and date preceding 7/th/ anniversary of
closing], and (iii) one percent (1%) of the Principal Amount being prepaid, if
prepayment occurs at any time on or after [7/th/ anniversary of closing date and
prior to Maturity Date]/IF APPLICABLE TREASURY RATE IN EFFECT AT TIME OF PAYOFF-
calculated as follows: (i) the present value as of the date of prepayment of the
remaining scheduled payments of principal and interest (including any ballon
payment) determined by discounting such payments at the "Monthly Equivalent
Treasury Note Rate" (hereinafter defined) less (ii) the amount of principal
being prepaid, provided such difference shall not be less than zero. The Monthly
Equivalent Treasury Note Rate for purposes of this provision shall be the rate
which when compounded monthly results in a yield that is equivalent to the yield
on the U.S. Treasury Note plus ___ percent (__%) which is compounded semi-
annually, having a maturity date closest to the Maturity Date. In no event shall
the prepayment consideration be less than one percent (1%) of the then
outstanding Principal Amount.]
(b) Any prepayment of the Principal Amount, whether in whole or in part,
shall be accompanied by payment of all accrued interest on the Principal Amount
being prepaid and shall be applied to installments of the Periodic Amortization
Payments in inverse order of maturity. Sums prepaid shall not be readvanced by
Payee.
7. DEFAULT RATE. Maker does hereby agree that upon the occurrence of an
Event of Default or upon the failure of Maker to pay the Debt in full on the
Maturity Date, Payee shall be entitled to receive and Maker shall pay interest
on the entire unpaid principal sum from the date of an Event of Default at the
rate (the "Default Rate") equal to the Applicable Interest Rate then in effect
------------
plus five hundred (500) basis points. Interest shall accrue hereunder at the
Default Rate from the occurrence of the Event of Default until the actual
-4-
<PAGE>
receipt and collection of the Debt. This charge shall be added to the Debt, and
shall be deemed secured by the Mortgage. This clause, however, shall not be
construed as an agreement or privilege to extend the date of the payment of the
Debt, nor as a waiver of any other right or remedy accruing to Payee by reason
of the occurrence of any Event of Default. In the event the Default Rate is
above the maximum rate permitted by applicable law, the Default Rate shall be
the maximum rate permitted by applicable law.
8. LOAN DOCUMENTS. This Note is secured by the Mortgage and the other
Loan Documents. Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Payee" and "Maker" shall include their
----- -----
respective successors, assigns, heirs, executors and administrators.
9. NO USURY. This Note is subject to the express condition that at no
time shall Maker be obligated or required to pay interest on the Debt at a rate
which could subject Payee to either civil or criminal liability as a result of
being in excess of the maximum interest rate which Maker is permitted by
applicable law to contract or agree to pay. If by the terms of this Note, Maker
is at any time required or obligated to pay interest on the Debt at a rate in
excess of such maximum rate, the rate of interest due under this Note shall be
deemed to be immediately reduced to such maximum rate and all previous payments
in excess of the maximum rate shall be deemed to have been payments in reduction
of principal and not on account of the interest due hereunder.
10. LATE CHARGE. If any sum payable under this Note is not paid within
fifteen (15) days after the date on which it is due, Maker shall pay to Payee
upon demand an amount equal to the lesser of two percent (2%) of such unpaid sum
or the maximum amount permitted by applicable law to defray the expenses
incurred by Payee in handling and processing such delinquent payment and to
compensate Payee for the loss of the use of such delinquent payment and such
amount shall be secured by the Mortgage and the other Loan Documents.
11. NO ORAL MODIFICATIONS. This Note may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Maker or Payee, but only by an agreement in writing signed by
the party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
12. WAIVER. Maker and all others who are or who may become liable for the
payment of all or any part of the Debt do hereby severally waive presentment and
demand for payment, notice of dishonor, protest, notice of protest, and non-
payment, and notice of intent to accelerate the maturity hereof (and of such
acceleration). No release of any security for the Debt or extension of time for
payment of this Note or any installment hereof, and no alteration, amendment or
waiver of any provision of this Note, the Mortgage or the other Loan Documents
made by agreement between Payee and any other person or party shall release,
modify, amend, waive, extend, change, discharge, terminate or affect the
liability of Maker, and any other who may become liable for the payment of all
or any part of the Debt, under this Note, the Mortgage or the other Loan
Documents.
-5-
<PAGE>
13. AUTHORITY OF MAKER. Maker (and the undersigned representative of
Maker, if any) represents that Maker has full power, authority and legal right
to execute, deliver and perform its obligations pursuant to this Note, the
Mortgage and the other Loan Documents and that this Note, the Mortgage and the
other Loan Documents constitute valid and binding obligations of Maker.
14. GOVERNING LAW. This Note shall be governed and construed in accordance
with the laws of the State of New York without regard to principles of conflict
of laws.
15. NOTICES. Any notice, demand, statement, request or consent made
hereunder shall be in writing to the other party hereto at its address set forth
below or at such other address as such party may designate by notice to the
other party hereto and shall be deemed given (i) on receipt, if mailed, by
certified or registered U.S. mail, return receipt requested, postage prepaid;
(ii) on receipt, if delivered, fee prepaid, to a national overnight delivery
service (such as Federal Express, Purolater Courier, U.P.S. Next Day Air); (iii)
when delivered, if delivered by hand, as evidenced by a signed receipt; or (iv)
the date of transmission of notice sent by telecopier or facsimile machine (with
a copy thereof sent in accordance with clause (ii) above) provided notice was
transmitted on a Business Day (hereinafter defined) otherwise notice shall be
deemed given on the next Business Day:
To Maker:
___________________
___________________
___________________
Attention:_________
Telephone: ( )__-__
Telecopy: ( )__-__
With a courtesy copy to:
___________________
___________________
___________________
Attention:_________
Telephone: ( )__-__
Telecopy: ( )__-__
To Payee:
Banco Popular de Puerto Rico
7 West 51/st/ Street
New York, New York 10019
Attention: Mr. Agustin Mas
Vice President
Telephone: (212) 445-1800
Telecopy: (212) 586-3537
-6-
<PAGE>
With a courtesy copy to:
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Brian F. Doran, Esq.
Telephone: (212) 586-4630
Telecopy: (212) 586-4815
A "Business Day" is any day other than a Saturday or Sunday, or a day on which
------------
banking and savings and loan institutions in the State of New York are
authorized or obligated by law or executive order to remain closed. Refusal to
accept delivery of any notice shall be deemed to be receipt of such notice.
16. MISCELLANEOUS. (a) The rights and remedies of Payee as provided in
this Note, the Mortgage or in the other Loan Documents shall be cumulative and
concurrent; may be pursued separately, successively, or together at the sole
discretion of Payee, may be exercised as often as occasion for their exercise
shall arise; and in no event shall the failure to exercise any such right or
remedy be construed as a waiver or release of it.
(b) If any provision of this Note is held to be invalid or
unenforceable by a court of competent jurisdiction, the other provisions of this
Note shall remain in full force and effect.
(c) Any failure by Payee to insist upon strict performance by Maker
of any of the provisions of this Note, the Mortgage or the other Loan Documents
shall not be deemed to be a waiver of any of the terms or provisions of this
Note, the Mortgage or the other Loan Documents, and Payee shall have the right
thereafter to insist upon strict performance by Maker of any and all of them.
(d) All times, wherever stated herein, shall be of the essence of
this Note.
17. ASSIGNMENT BY PAYEE. Payee shall have the right, exercisable at any
time and from time to time, to sell, transfer or assign this Note, the Mortgage
and the other Loan Documents, or grant participations therein, or issue
certificates or securities evidencing a beneficial interest therein in a rated
or unrated public offering or private placement, and Payee may forward to any
purchaser, transferee, assignee, servicer, participant, investor or credit
rating agency rating such securities (collectively, an "Investor") or
--------
prospective Investor all documents and information in Payee's possession with
respect to Maker, the Mortgaged Property (as defined in the Mortgage) and the
Loan Documents as such Investor or prospective Investor may request.
18. WAIVER OF TRIAL BY JURY. MAKER AND PAYEE HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED ON
-7-
<PAGE>
THE LOAN EVIDENCED BY THIS NOTE OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE, THE MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF
MAKER OR PAYEE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR PAYEE'S MAKING OF
THE LOAN SECURED BY THE MORTGAGE AND THE OTHER LOAN DOCUMENTS.
IN WITNESS WHEREOF, Maker has duly executed this Note, intending to be
legally bound, the day and year first above written.
_______________________________,
a ___________________________
By:____________________________
Name:__________________________
Title:_________________________
-8-
<PAGE>
EXHIBIT K-2(B)
--------------
FORM OF FRANCHISEE OWNED PROPERTY MORTGAGE
------------------------------------------
MORTGAGE, SECURITY AGREEMENT AND
ASSIGNMENT OF LEASES AND RENTS
BY AND BETWEEN
_____________________
_____________________
__________
_______________________
("MORTGAGOR")
AND
BANCO POPULAR DE PUERTO RICO
7 WEST 51ST STREET
NEW YORK, NEW YORK 10019
("MORTGAGEE")
DATED AS OF _________, 199__
LOCATION OF PREMISES:
RECORDING REQUESTED BY AND
WHEN RECORDED - RETURN TO:
Brian F. Doran, Esq.
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
<PAGE>
THIS MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS (the
"Mortgage"), made as of the __ day of _____, 199_, by _______________________, a
--------
__________________, having an office at ____________
_________________________________________________ ("Mortgagor") and BANCO
---------
POPULAR DE PUERTO RICO, having offices at 7 West 51st Street, New York, New
York 10019 ("Mortgagee").
---------
W I T N E S S E T H:
- - - - - - - - - -
To secure the payment of an indebtedness in the principal sum of
________________________________ DOLLARS ($___________), lawful money of the
United States of America, to be paid with interest according to a certain note
dated the date hereof made by Mortgagor to Mortgagee (the note together with all
extensions, renewals or modifications thereof being hereinafter collectively
called the "Note") (said indebtedness, interest and all other sums due hereunder
----
and under the Note being collectively called the "Debt"), Mortgagor has
----
mortgaged, given, granted, bargained, sold, aliened, conveyed, confirmed,
pledged, assigned, and hypothecated and by these presents does hereby mortgage,
give, grant, bargain, sell, alien, convey, confirm, pledge, assign and
hypothecate unto Mortgagee the real property described in Exhibit A attached
---------
hereto (the "Land") and the buildings, structures, fixtures, additions,
----
enlargements, extensions, modifications, repairs, replacements and improvements,
now or hereafter located thereon (the "Improvements");
------------
TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Land and the Improvements together with the following
property, rights, interests and estates being hereinafter described are
collectively referred to herein as the "Mortgaged Property"):
------------------
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to the Land
or the Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or proposed,
in front of or adjoining the Land, to the center line thereof and all the
estates, rights, titles, interests, dower and rights of dower, curtesy and
rights of curtesy, property, possession, claim and demand whatsoever, both at
law and in equity, of Mortgagor of, in and to the Land and the Improvements and
every part and parcel thereof, with the appurtenances thereto;
(b) all machinery, equipment, fixtures, furniture, equipment, cooking
supplies, stoves, refrigerators, dishes, glassware, utensils and inventories and
other property of every kind and nature, whether tangible or intangible,
whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an
interest, now or hereafter located upon the Land or the Improvements, or
appurtenant thereto, and usable in connection with the present or future
<PAGE>
operation and occupancy of the Land or the Improvements and all building
equipment, materials and supplies and construction equipment, materials and
supplies of any nature whatsoever owned by Mortgagor, or in which Mortgagor has
or shall have an interest, now or hereafter located upon the Land or the
Improvements, or appurtenant thereto, or usable in connection with the present
or future construction, renovation, operation, enjoyment and occupancy of the
Land or the Improvement (hereinafter collectively called the "Equipment"),
---------
including the proceeds of any sale or transfer of the foregoing, and the right,
title and interest of Mortgagor in and to any of the Equipment which may be
subject to any security interests, as defined in the Uniform Commercial Code, as
adopted and enacted by the State of ______________ (the "Uniform Commercial
------------------
Code") superior in lien to the lien of this Mortgage;
----
(c) all awards or payments, including interest thereon, which may
heretofore or hereafter be made with respect to the Mortgaged Property, whether
from the exercise of eminent domain or condemnation (including but not limited
to any transfer made in lieu of or in anticipation of the exercise of said
rights), or for a change of grade, or for any other injury to or decrease in the
value of the Mortgaged Property;
(d) all leases and other agreements affecting the use, enjoyment or
occupancy of the Land or the Improvements heretofore or hereafter entered into
by Mortgagor (collectively, the "Leases") and all income, rents, issues, profits
------
and revenues from the Land or Improvements (collectively, the "Rents") and all
-----
proceeds from the sale, surrender, termination or other disposition of the
Leases and the right to receive and apply the Rents to the payment of the Debt;
(e) all proceeds of and any unearned premiums on any insurance
policies covering the Mortgaged Property, including, without limitation, the
right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Mortgaged Property; and
(f) the right, in the name and on behalf of Mortgagor, to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to commence any action or proceeding to protect the interest of
Mortgagee in the Mortgaged Property.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto
and to the use and benefit of Mortgagee, and the successors and assigns of
Mortgagee, forever.
AND Mortgagor represents and warrants to and covenants and agrees with Mortgagee
as follows:
1. Payment of Debt and Incorporation of Covenants, Conditions and
--------------------------------------------------------------
Agreements. Mortgagor will pay the Debt at the time and in the manner provided
- ----------
in the Note and in this
-2-
<PAGE>
Mortgage. All the covenants, conditions and agreements contained in (a) the Note
and (b) all and any of the documents other than the Note or this Mortgage now or
hereafter executed by Mortgagor and/or others and by or in favor of Mortgagee,
which wholly or partially secure or guaranty payment of the Note (collectively,
the "Loan Documents"), are hereby made a part of this Mortgage to the same
--------------
extent and with the same force as if fully set forth herein.
2. Warranty of Title. Mortgagor warrants that it has good title to the
-----------------
Mortgaged Property and has the right to mortgage, give, grant, bargain, sell,
alien, convey, confirm, pledge, assign and hypothecate the same and that
Mortgagor possesses an unencumbered fee estate in the Land and the Improvements
and that it owns the Mortgaged Property free and clear of all liens,
encumbrances and charges whatsoever except for those exceptions shown in the
title insurance policy insuring the lien of this Mortgage. Mortgagor shall
forever warrant, defend and preserve such title and the validity and priority of
the lien of this Mortgage and shall forever warrant and defend the same to
Mortgagee against the claims of all persons whomsoever.
3. Insurance.
---------
(a) Mortgagor, at its sole cost and expense, will keep the Mortgaged
Property insured during the entire term of this Mortgage for the mutual benefit
of Mortgagor and Mortgagee against loss or damage by fire and against loss or
damage by other risks and hazards covered by a standard extended coverage
insurance policy including, but not limited to, riot and civil commotion,
vandalism, malicious mischief, burglary and theft. Such insurance shall be in
an amount (i) equal to one hundred percent (100%) of the then replacement cost
of the Improvements and the Equipment, without deduction for physical
depreciation and (ii) such that the insurer would not deem Mortgagor a co-
insurer under said policies. The policies of insurance carried in accordance
with this paragraph shall be paid annually in advance and shall contain the
"Replacement Cost Endorsement" with a waiver of depreciation.
(b) Mortgagor, at its sole cost and expense, for the mutual benefit
of Mortgagor and Mortgagee, shall also obtain and maintain during the entire
term of this Mortgage the following policies of insurance:
(i) Flood insurance if any part of the Mortgaged Property is located
in an area identified by the Federal Emergency Management Agency as an area
having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968 (and any successor
act thereto) in an amount at least equal to the outstanding principal
amount of the Note or the maximum limit of coverage available with respect
to the Improvements and Equipment under said Act, whichever is less.
(ii) Comprehensive public liability insurance, including broad form
property damage, blanket contractual and personal injuries (including death
resulting therefrom)
-3-
<PAGE>
coverages in an amount not less than $1,000,000 per occurrence and
$10,000,000 in the aggregate.
(iii) Business interruption insurance in an amount equal to the
aggregate annual amount of all income from, and revenues and rents payable
with respect to, the Mortgaged Property, such business interruption
insurance to cover losses for a period of at least twelve (12) months after
the date of the fire or casualty in question.
(iv) During the course of any construction, renovation or equipping
of the Improvements, builder's completed value risk insurance against "all
risks of physical loss", including collapse and transit coverage, with
deductibles reasonably satisfactory to Mortgagee, in non-reporting form,
covering the total value of work performed and equipment, supplies and
materials furnished. Such policy of insurance shall contain the "permission
to occupy upon completion of work or occupancy" endorsement and a waiver of
co-insurance or an agreed amount endorsement.
(v) Such other insurance as may from time to time be reasonably
required by Mortgagee in order to protect its interests.
(c) All policies of insurance (the "Policies") required pursuant to
--------
this paragraph 3 shall be issued by an insurer having an A.M. Best rating of A:V
or better and satisfactory to Mortgagee, (ii) shall contain the standard New
York mortgagee non-contribution clause naming Mortgagee as the person to which
all payments made by such insurance company shall be paid, (iii) shall be
maintained throughout the term of this Mortgage without cost to Mortgagee, (iv)
original certificates, or copies thereof, certified to be true and correct,
shall be delivered to Mortgagee, (v) shall contain such provisions as Mortgagee
deems reasonably necessary or desirable to protect its interest including,
without limitation, endorsements providing that neither Mortgagor, Mortgagee nor
any other party shall be a co-insurer under said Policies and that Mortgagee
shall receive at least thirty (30) days prior written notice of any modification
or cancellation, and (vi) shall be satisfactory in form and substance to
Mortgagee and shall be approved by Mortgagee as to amounts, form, risk coverage,
deductibles, loss payees and insureds. All such premiums for such Policies (the
"Insurance Premiums") shall be paid by Mortgagor making payment when due
------------------
directly to the carrier. Not later than thirty (30) days prior to the expiration
date of each of the Policies, Mortgagor will deliver to Mortgagee satisfactory
evidence of the renewal of each Policy.
(d) If the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty, Mortgagor shall give prompt written
notice thereof to Mortgagee. Sums paid to Mortgagee by an insurer, after
deduction of Mortgagee's reasonable costs and expenses of collection (after such
deduction, the " Insurance Proceeds"), shall be retained and (i) applied by
------------------
Mortgagee toward payment of the Debt in such priority and proportions as
Mortgagee in its discretion shall deem proper (any such application for
repayment to be without any prepayment consideration, except that if any Event
of Default (hereinafter defined), or an event that with notice and/or the
passage of time, or both, would constitute an Event of Default, has occurred,
then such application shall be subject to the
-4-
<PAGE>
prepayment consideration computed in accordance with the Note) or, (ii) if the
conditions set forth in paragraph 3(f) of this Mortgage are satisfied, as
determined by Mortgagee in its sole discretion, paid to Mortgagor for the
restoration and repair of the Mortgaged Property in accordance with paragraph
3(e) of this Mortgage in whole or in such lesser amount as is necessary to pay
for the costs of such restoration and repair.
(e) If the Insurance Proceeds are held by Mortgagee to reimburse
Mortgagor for the cost of restoration and repair of the Mortgaged Property, (i)
the Mortgaged Property shall be substantially restored to the equivalent of its
condition prior to such casualty or to such other condition as Mortgagee may
approve in writing, (ii) such restoration and repair shall be done in compliance
with all applicable laws, rules and regulations, and (iii) all reasonable costs
and expenses incurred by Mortgagee in connection with making the Insurance
Proceeds available for such restoration and repair including, without
limitation, counsel fees and inspecting engineers' fees incurred by Mortgagee,
shall be paid by Mortgagor. Mortgagee may, at Mortgagee's option, condition
disbursement of said proceeds on Mortgagee's approval of such plans and
specifications of an architect reasonably satisfactory to Mortgagee,
contractor's cost estimates, architect's certificates, waivers of liens, sworn
statements of mechanics and material men and such other evidence of costs,
percentage completion of construction, application of payments, and satisfaction
of liens as Mortgagee may reasonably require. If the Insurance Proceeds are
applied to the payment of the Debt, any such application of proceeds to
principal shall not extend or postpone the maturity date of the Note or change
the amount or the due date of any installment payment under the Note. Any
surplus Insurance Proceeds, after payment of the Debt, shall be paid to
Mortgagor. If the Mortgaged Property is sold pursuant to paragraph 28 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
insurance policies and unearned premiums thereon and in and to the Insurance
Proceeds resulting from any damage to the Mortgaged Property prior to such sale
or acquisition.
(f) Mortgagee shall not exercise Mortgagee's option to apply
Insurance Proceeds to the payment of the sums secured by this Mortgage if all
the following conditions are met, as determined by Mortgagee in its sole
discretion: (i) no Event of Default is then continuing under this Mortgage, the
Note or any other Loan Document; (ii) Mortgagee determines that there will be
sufficient funds (whether consisting of Insurance Proceeds and/or other sums
made available by Mortgagor for restoration) to restore and repair the Mortgaged
Property to the condition required under paragraph 3(e) above; (iii) the
Franchise Agreement (hereinafter defined) shall not have been terminated as a
result of such damage or destruction and the Franchise Agreement shall continue
in full force and effect notwithstanding such damage or destruction; (iv)
Mortgagee determines that the income of the Mortgaged Property, after
restoration and repair of the Mortgaged Property to the condition required under
paragraph 3(e) above, will be sufficient to meet all operating costs and other
expenses, payments for reserves and loan repayment obligations relating to the
Mortgaged Property; (v) Mortgagee determines that restoration and repair of the
Mortgaged Property to the condition required under paragraph 3(e) above will be
completed within the greater of (A) three (3) months or (B) the period of time
covered by the business interruption insurance, if any, then in effect from
-5-
<PAGE>
the date of the loss or casualty to the Mortgaged Property; and (vi) Mortgagee
shall have received evidence reasonably satisfactory to it that during the
period of restoration and repair of the Mortgaged Property to the condition
required under subparagraph 3(e) above, the sum of (A) income derived from the
Mortgaged Property, as reasonably determined by Mortgagee, plus (B) proceeds of
business interruption insurance, if any, to be paid, plus (C) amounts that
Mortgagor demonstrates to Mortgagee's reasonable satisfaction will be made
available by Mortgagor from other sources during such period will equal or
exceed the sum of (D) expenses in connection with the operation of the Mortgaged
Property and (E) the debt service under the Note.
4. Payment of Taxes, etc.
---------------------
(a) All taxes, assessments and water and sewer rents, now or
hereafter levied or assessed or imposed against the Mortgaged Property or any
part thereof (the "Taxes"") shall be paid when due in the manner provided in
-----
paragraph 5 of this Mortgage. Mortgagor shall pay all ground rents, maintenance
charges, other governmental impositions, and other charges, including without
limitation vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Mortgaged Property, now or hereafter levied or
assessed or imposed against the Mortgaged Property or any part thereof (the
"Other Charges") as the same become due and payable. Mortgagor will deliver to
-------------
Mortgagee, promptly upon Mortgagee's request, tax certificates or receipted tax
bills issued by the relevant taxing authority or other evidence satisfactory to
Mortgagee that the Taxes and Other Charges have been so paid or are not then
delinquent. Mortgagor shall not suffer and shall promptly cause to be paid or
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Mortgaged Property, and shall promptly pay for all utility services
provided to the Mortgaged Property. Mortgagor shall furnish to Mortgagee or its
designee receipts for the payment of Taxes and Other Charges prior to the date
the same shall become delinquent.
(b) Mortgagor, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any of
the Taxes or Other Charges, provided that (i) Mortgagor is not in default under
the Note, this Mortgage or any other Loan Document, (ii) such proceeding shall
be permitted under and be conducted in accordance with the provisions of any
other instrument to which Mortgagor is subject and shall not constitute a
default thereunder, (iii) neither the Mortgaged Property nor any part thereof or
interest therein will be in danger of being sold, forfeited, terminated,
cancelled or lost, (iv) Mortgagor shall have paid the Taxes under protest or set
aside adequate reserves for the payment of the Taxes or Other Charges, together
with all interest and penalties thereon and (v) Mortgagor shall have furnished
such security as may be required in the proceeding, or as may be requested by
Mortgagee to insure the payment of any such Taxes or Other Charges, together
with all interest and penalties thereon.
(c) Upon demand by Mortgagee, Mortgagor, at Mortgagor's sole cost and
expense, shall contest any increase in any assessment for the Mortgaged Property
with respect to Taxes or Other Charges or seek a reduction in such assessment in
the event of a casualty,
-6-
<PAGE>
condemnation or other event which could result in a reduction of the assessment
with respect to Taxes or Other Charges for the Mortgaged Property by
instituting, or causing to be instituted, a proceeding to reduce such
assessment, conducted in accordance with the recognized procedure therefore (a
"Tax Appeal"). If, after demand by Mortgagee, Mortgagor shall fail to commence a
----------
Tax Appeal, Mortgagee shall be entitled, at its option, to commence, appear in
and prosecute any Tax Appeal either in its own name or in the name of Mortgagor,
for which Mortgagee is hereby appointed as attorney-in-fact for Mortgagor, which
appointment, being for security and coupled with an interest, is irrevocable. If
no Event of Default under this Mortgage or any other Loan Document shall have
occurred and be continuing, Mortgagor shall be entitled to participate with
Mortgagee in the settlement or compromise of any claim in connection with any
such Tax Appeal. Upon the occurrence of an Event of Default and the continuance
thereof, Mortgagee shall be entitled to make any compromise or settlement in
connection with any such Tax Appeal without the participation of Mortgagor. All
such refunds, compensation, awards, damages, rights of action and proceeds
awarded to Mortgagor, less the reasonable costs and expenses incurred by
Mortgagor in prosecuting such Tax Appeal (the "Refund Proceeds") are hereby
---------------
assigned to Mortgagee as additional security for the payment of Taxes and Other
Charges as they become due. Upon the occurrence of an Event of Default and the
continuance thereof, Mortgagee shall be entitled to apply the Refund Proceeds to
the repayment of the Debt in such order and in such amount as Mortgagee may
determine. If there are any excess Refund Proceeds after repayment of the Debt,
Mortgagee shall pay such excess Refund Proceeds to Mortgagor.
5. Escrow Fund. (a) Mortgagor shall, on the first day of each calendar
-----------
month, pay to Mortgagee one--twelfth (1/12th) of an amount which would be
sufficient to pay the Taxes payable, or estimated by Mortgagee to be payable,
during the next twelve (12) months and also provide for an additional reserve
equal to one-sixth (1/6th) of the Taxes payable (said amounts being hereinafter
called the "Tax Escrow Fund.")
---------------
(b) The Tax Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Note, shall be added together and shall be paid as
an aggregate sum by Mortgagor to Mortgagee. Mortgagor hereby pledges to
Mortgagee any and all monies now or hereafter deposited in the Tax Escrow Fund
as additional security for the payment of the Debt. Mortgagee will apply the Tax
Escrow Fund to payments of Taxes to be made by Mortgagor pursuant to paragraph 4
hereof. If the amount of the Tax Escrow Fund shall exceed the amounts due for
Taxes pursuant to paragraph 4 hereof, Mortgagee shall, in its discretion, return
any excess to Mortgagor or credit such excess against future payments to be made
to the Tax Escrow Fund. In allocating such excess, Mortgagee may deal with the
person shown on the records of Mortgagee to be the owner of the Mortgaged
Property. If the balance in the Tax Escrow Fund on the first day of the month
which is one full month prior to the due date of any Taxes is not sufficient to
pay the Taxes, Mortgagor shall pay to Mortgagee, upon demand, an amount which
Mortgagee shall estimate as sufficient to make up the deficiency. Upon the
occurrence of an Event of Default, Mortgagee may apply any sums then present in
the Tax Escrow Fund to the payment of the following items in any order in its
sole discretion:
(i) Taxes and Other Charges;
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<PAGE>
(ii) Interest on the unpaid principal balance of the Note;
(iii) Amortization of the unpaid principal balance of the Note; or
(iv) All other sums payable pursuant to the Note, this Mortgage and
the other Loan Documents, including without limitation, advances made by
Mortgagee pursuant to the terms of this Mortgage.
(c) Until expended or applied as above provided, any amounts in the
Tax Escrow Fund shall constitute additional security for the Debt. The Tax
Escrow Fund shall not constitute a trust fund and may be commingled with other
monies held by Mortgagee. No earnings or interest on the Tax Escrow Fund shall
be paid to Mortgagor, unless applicable law requires interest on the Tax Escrow
Fund to be paid to Mortgagor. Any such required interest shall be deposited in
the Tax Escrow Fund as additional security for the payment of the Debt.
6. Condemnation.
------------
(a) Mortgagor shall promptly give Mortgagee written notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Mortgagee copies of any and all papers served in
connection with such proceedings. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Mortgagor shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note, this Mortgage and the other Loan
Documents and the Debt shall not be reduced until any award or payment therefor
shall have been actually received after expenses of collection and applied by
Mortgagee to the discharge of the Debt. Mortgagee shall not be limited to the
interest paid on the award by the condemning authority but shall be entitled to
receive out of the award interest at the rate or rates provided herein and in
the Note. Mortgagor shall cause the award or payment made in any condemnation or
eminent domain proceeding, which is payable to Mortgagor, to be paid directly to
Mortgagee. Sums paid to Mortgagee for such condemnation or action of eminent
domain, after deduction of Mortgagee's reasonable costs and expenses of
collection (after such deduction, the "Condemnation Proceeds"), shall be
---------------------
retained and (i) applied by Mortgagee toward payment of the Debt in such
priority and proportions as Mortgagee in its discretion shall deem proper (any
such application for repayment to be without any prepayment consideration,
except that if any Event of Default, or an event that with notice and/or the
passage of time, or both, would constitute an Event of Default, has occurred,
then such application shall be subject to the prepayment consideration computed
in accordance with the Note), or (ii) if the conditions set forth in paragraph
6(c) of this Mortgage are satisfied, as determined by Mortgagee in its sole
discretion, paid to Mortgagor for the restoration and repair of the Mortgaged
Property in accordance with paragraph 6(b) of this Mortgage in whole or in such
lesser amount as is necessary to pay for the costs of such restoration and
repair. If the Mortgaged Property is sold pursuant to paragraph 28 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
-8-
<PAGE>
Condemnation Proceeds resulting from any condemnation or eminent domain
proceeding of the Mortgaged Property prior to such sale or acquisition.
(b) If the Condemnation Proceeds are held by Mortgagee to reimburse
Mortgagor for the cost of restoration and repair of the Mortgaged Property, (i)
the Mortgaged Property shall be substantially restored to the equivalent of its
condition prior to such condemnation or to such other condition as Mortgagee may
approve in writing, (ii) such restoration and repair shall be done in compliance
with all applicable laws, rules and regulations, and (iii) all reasonable costs
and expenses incurred by Mortgagee in connection with making the Condemnation
Proceeds available for such restoration and repair including, without
limitation, counsel fees and inspecting engineers' fees incurred by Mortgagee,
shall be paid by Mortgagor. Mortgagee may, at Mortgagee's option, condition
disbursement of said proceeds on Mortgagee's approval of such plans and
specifications of an architect reasonably satisfactory to Mortgagee,
contractor's cost estimates, architect's certificates, waivers of liens, sworn
statements of mechanics and material men and such other evidence of costs,
percentage completion of construction, application of payments, and satisfaction
of liens as Mortgagee may reasonably require. If the Condemnation Proceeds are
applied to the payment of the Debt, any such application of proceeds to
principal shall not extend or postpone the maturity date of the Note or change
the amount or the due date of any installment payment under the Note. Any
surplus Condemnation Proceeds, after payment of the Debt, shall be paid to
Mortgagor. If the Mortgaged Property is sold pursuant to paragraph 28 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
Condemnation Proceeds resulting from any condemnation or eminent domain
proceeding of the Mortgaged Property prior to such sale or acquisition.
(c) Mortgagee shall not exercise Mortgagee's option to apply
Condemnation Proceeds to the payment of the sums secured by this Mortgage if all
the following conditions are met, as determined by Mortgagee in its sole
discretion: (i) no Event of Default is then continuing under this Mortgage, the
Note or any other Loan Document; (ii) Mortgagee determines that there will be
sufficient funds (whether consisting of Condemnation Proceeds and/or other sums
made available by Mortgagor for restoration) to restore and repair the Mortgaged
Property to the condition required under paragraph 6(b) above; (iii) the
Franchise Agreement shall not have been terminated as a result of such
condemnation or eminent domain proceeding and the Franchise Agreement shall
continue in full force and effect notwithstanding such condemnation or eminent
domain proceeding; (iv) Mortgagee determines that the income of the Mortgaged
Property, after restoration and repair of the Mortgaged Property to the
condition required under paragraph 6(b) above, will be sufficient to meet all
operating costs and other expenses, payments for reserves and loan repayment
obligations relating to the Mortgaged Property; (v) Mortgagee determines that
restoration and repair of the Mortgaged Property to the condition required under
paragraph 6(b) above will be completed within the greater of (A) three (3)
months or (B) the period of time covered by the business interruption insurance,
if any, then in effect from the date of the loss or casualty to the Mortgaged
Property; and (vi) Mortgagee shall have received evidence reasonably
satisfactory to it that during the period of restoration and repair of the
Mortgaged Property to the condition required
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<PAGE>
under subparagraph 6(b) above, the sum of (A) income derived from the Mortgaged
Property, as reasonably determined by Mortgagee, plus (B) proceeds of business
interruption insurance, if any, to be paid, plus (C) amounts that Mortgagor
demonstrates to Mortgagee's reasonable satisfaction will be made available by
Mortgagor from other sources during such period will equal or exceed the sum of
(D) expenses in connection with the operation of the Mortgaged Property and (E)
the debt service under the Note.
7. Leases and Rents.
----------------
(a) Mortgagor does hereby absolutely and unconditionally assign to
Mortgagee its right, title and interest in all current and future Leases and
Rents, it being intended by Mortgagor that this assignment constitutes a
present, absolute assignment and not an assignment for additional security only.
Such assignment to Mortgagee shall not be construed to bind Mortgagee to the
performance of any of the covenants, conditions or provisions contained in any
such Lease or otherwise to impose any obligation upon Mortgagee. Mortgagor
agrees to execute and deliver to Mortgagee such additional instruments, in form
and substance reasonably satisfactory to Mortgagee, as may hereafter be
requested by Mortgagee to further evidence and confirm such assignment.
Nevertheless, subject to the terms of this paragraph 7, Mortgagee grants to
Mortgagor a revocable license to operate and manage the Mortgaged Property and
to collect the Rents. Mortgagor shall hold the Rents, or a portion thereof
sufficient to discharge all current sums due on the Debt, in trust for the
benefit of Mortgagee for use in the payment of such sums. Upon an Event of
Default, the license granted to Mortgagor herein shall be automatically revoked
and Mortgagee shall immediately be entitled to possession of all Rents, whether
or not Mortgagee enters upon or takes control of the Mortgaged Property.
Mortgagee is hereby granted and assigned by Mortgagor the right, at its option,
upon the revocation of the license granted herein to enter upon the Mortgaged
Property in person, by agent or by court-appointed receiver to collect the
Rents. Any Rents collected after the revocation of the license herein granted
may be applied toward payment of the Debt in such priority and proportion as
Mortgagee in its discretion shall deem proper.
(b) Upon request, Mortgagor shall furnish Mortgagee with copies of
all Leases and all amendments or modifications of any Lease. All Leases shall
provide that each such Lease is subordinate to this Mortgage and that the lessee
agrees to attorn to Mortgagee. Mortgagor (i) shall observe and perform all the
obligations imposed upon the lessor under the Leases and shall not do or permit
to be done anything to impair the value of the Leases as security for the Debt;
(ii) shall upon request by Mortgagee, send Mortgagee copies of all notices of
default sent or received by Mortgagee under the Leases; (iii) shall enforce all
of the terms, covenants and conditions contained in the Leases on the part of
the lessee thereunder to be observed or performed; (iv) shall not collect any of
the Rents more than one (1) month in advance (except with respect to collection
of the final month's rent as security); (v) shall not execute any other
assignment of lessor's interest in the Leases or the Rents; and (vi) shall
execute and deliver at the request of Mortgagee all such further assurances,
confirmations and assignments in connection with the Mortgaged Property as
Mortgagee shall from time to time require.
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<PAGE>
(c) Mortgagor shall not, without the prior written consent of
Mortgagee (i) amend or modify any Lease, (ii) execute a new Lease, (iii) permit
use of the demised premises under any Lease for use or uses other than quick
service restaurant use; or (iv) terminate, cancel or accept a surrender of any
Lease.
8. Maintenance of Mortgaged Property. Mortgagor shall cause the Mortgaged
---------------------------------
Property to be maintained in a good and safe condition and repair. The
Improvements and the Equipment shall not be removed, demolished or materially
altered (except for normal replacement of the Equipment) without the written
consent of Mortgagee. Mortgagor shall promptly comply with all laws, orders and
ordinances affecting the Mortgaged Property and the use thereof. Mortgagor shall
promptly repair, replace or rebuild any part of the Mortgaged Property that (i)
is damaged or destroyed by any casualty (subject to the provisions of paragraph
3 hereof), (ii) becomes damaged, worn or dilapidated, or (iii) is affected by
any proceeding of the character referred to in paragraph 6 hereof (subject to
the provision of such paragraph 6) and Mortgagor shall complete and pay for any
structure at any time in the process of construction, renovation or repair on
the Land. Mortgagor shall not initiate, join in, acquiesce in, or consent to any
change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Mortgaged Property or any part thereof. If under applicable zoning provisions
the use of all or any portion of the Mortgaged Property is or shall become a
nonconforming use, Mortgagor will not cause or permit such nonconforming use to
be discontinued or abandoned without the express written consent of Mortgagee.
9. Transfer or Encumbrance of the Mortgaged Property.
-------------------------------------------------
(a) Mortgagor acknowledges that Mortgagee has examined and relied on
the creditworthiness of Mortgagor and experience of Mortgagor in owning and
operating properties such as the Mortgaged Property in agreeing to make the Loan
secured hereby, and that Mortgagee will continue to rely on Mortgagor's
ownership of the Mortgaged Property as a means of maintaining the value of the
Mortgaged Property as security for repayment of the Debt. Mortgagor acknowledges
that Mortgagee has a valid interest in maintaining the value of the Mortgaged
Property so as to ensure that, should Mortgagor default in the repayment of the
Debt, Mortgagee can recover the Debt by a sale of the Mortgaged Property.
Mortgagor shall not, without the prior written consent of Mortgagee, sell,
convey, alien, lease, mortgage, encumber, pledge or otherwise transfer the
Mortgaged Property or any part thereof, or permit the Mortgaged Property or any
part thereof to be sold, conveyed, aliened, leased, mortgaged, encumbered,
pledged or otherwise transferred (any of the foregoing, a "Transfer").
--------
(b) A Transfer of the Mortgaged Property within the meaning of this
paragraph 9 shall be deemed to include:
(i) an installment sales agreement wherein Mortgagor agrees to sell
the Mortgaged Property or any part thereof for a price to be paid in
installments;
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<PAGE>
(ii) an agreement by Mortgagor selling, leasing, assigning or
otherwise transferring all or a substantial part of the Mortgaged Property,
or a sale, assignment or other transfer of, or the grant of a security
interest in, Mortgagor's right, title and interest in and to any Leases or
any Rents; and
(iii) any voluntary or involuntary Transfer of a Control Individual's
(hereinafter defined) Controlling Interests (hereinafter defined) or any
voluntary or involuntary event whereby a Control Individual's Controlling
Interests are diluted or his or her Control over Mortgagor is otherwise
diminished.
(c) Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Mortgagor's Transfer of the
Mortgaged Property without Mortgagee's consent; this provision shall apply to
every Transfer of the Mortgaged Property regardless of whether voluntary or not,
or whether or not Mortgagee has consented to any previous Transfer of the
Mortgaged Property.
(d) For purposes of this paragraph 9, the following terms shall have
the following meanings: "Control" when used with respect to Mortgagor means the
power to direct the respective management and policies of Mortgagor, directly or
indirectly, whether through the ownership of voting securities, membership
interests, partnership interests or any other beneficial interest, by contract
or otherwise, whether acting alone or with others, but an individual does not
have "Control" if he or she has only the right to take those actions that a
limited partner may take without participating in the business of a limited
partnership, as set forth in Article ______ of the Uniform Limited Partnership
Law of the State of __________, the terms "Controlling" and "Controlled" shall
have the meanings correlative to the foregoing; "Control Individual" shall mean
any one of ______________ or ________________; "Controlling Interests" shall
mean those beneficial interests or contract rights in or with respect to the
Mortgagor (or any entity that has a direct or indirect beneficial interest in
Mortgagor) that give a Control Individual his or her Control over Mortgagor;
"Non-controlling Interests" shall mean any beneficial interests in Mortgagor (or
any entity that has a direct or indirect beneficial interest in the Mortgagor)
that are not Controlling Interests and shall include, without limitation,
limited partnership interests.
10. Estoppel Certificates and No Default Affidavits.
-----------------------------------------------
(a) After request by Mortgagee, Mortgagor shall within ten (10) days
furnish Mortgagee with a statement, duly acknowledged and certified, setting
forth (i) the amount of the original principal amount of the Note, (ii) the
unpaid principal amount of the Note, (iii) the rate of interest of the Note,
(iv) the date installments of interest and/or principal were last paid, (v) any
offsets or defenses to the payment of the Debt, if any and (vi) that the Note
and this Mortgage are valid, legal and binding obligations and have not been
modified or if modified, giving the particulars of such modification.
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<PAGE>
(b) Within ten (10) days after request by Mortgagee, Mortgagor will
request lessees under the Leases to furnish Mortgagee with estoppel certificates
as required by such lessees' respective Lease and Mortgagor will use diligent
efforts to obtain such estoppel certificates.
11. Changes in the Laws Regarding Taxation. If any law is enacted or
--------------------------------------
adopted or amended after the date of this Mortgage which deducts the Debt from
the value of the Mortgaged Property for the purpose of taxation or which imposes
a tax, either directly or indirectly, on the Debt or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any. In the event Mortgagee is advised by counsel chosen by it that
the payment of such tax or interest and penalties by Mortgagor would be unlawful
or taxable to Mortgagee or unenforceable or provide the basis for a defense of
usury, then in any such event, Mortgagee shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt immediately due
and payable.
12. No Credits on Account of the Debt. Mortgagor will not claim or demand
---------------------------------
or be entitled to any credit or credits on account of the Debt for any part of
the Taxes or Other Charges assessed against the Mortgaged Property, or any part
thereof, and no deduction shall otherwise be made or claimed from the assessed
value of the Mortgaged Property, or any part thereof, for real estate tax
purposes by reason of this Mortgage or the Debt. In the event such claim, credit
or deduction shall be required by law, Mortgagee shall have the option, by
written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
13. Documentary Stamps. If at any time the United States of America, the
------------------
State of ______________ or any subdivision thereof shall require revenue or
other stamps to be affixed to the Note or this Mortgage, or impose any other tax
or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
14. Usury Laws. This Mortgage and the Note are subject to the express
----------
condition that at no time shall Mortgagor be obligated or required to pay
interest on the Debt at a rate which could subject Mortgagee to either civil or
criminal liability as a result of being in excess of the maximum interest rate
which Mortgagor is permitted by law to contract or agree to pay. If by the terms
of this Mortgage or the Note, Mortgagor is at any time required or obligated to
pay interest on the Debt at a rate in excess of such maximum rate, the rate of
interest under the same shall be deemed to be immediately reduced to such
maximum rate and the interest payable shall be computed at such maximum rate and
all previous payments in excess of such maximum rate shall be deemed to have
been payments in reduction of the principal and not on account of the interest
due hereunder.
15. Performance of Franchise Agreement and Leases; Security Agreement
-----------------------------------------------------------------
(a) Mortgagor will duly comply with the terms and conditions of the
franchise agreement, dated ____________, 199__, between AFC Enterprises, Inc.,
as franchisor, and mortgagor, as franchisee (the "Franchise Agreement") and will
-------------------
faithfully perform all of its
-13-
<PAGE>
obligations under the Franchise Agreement and promptly cure any default by it
under any of the provisions thereof. Mortgagor shall promptly send to Mortgagee
a true and correct copy of any notice, report, certificate or other
communication that Mortgagor is obligated to deliver under the Franchise
Agreement.
(b) Mortgagor will comply with the terms and provisions of the Leases
and will faithfully perform all of its obligations under the Leases and promptly
cure any default by it under any of the provisions thereof. Mortgagor shall
promptly send to Mortgagee a true and correct copy of any notice, report,
certificate or other communication that Mortgagor is obligated to deliver in
connection with any Lease.
(c) Mortgagor hereby assigns and transfers to Mortgagee and creates a
security interest in all of Mortgagor's right, title and interest in and to the
consideration, in whatever form delivered, for the sale, transfer or conveyance
of Mortgagor's interest in the Franchise Agreement and the Leases.
16. Performance of Other Agreements. Mortgagor shall observe and perform
-------------------------------
each and every term to be observed or performed by Mortgagor pursuant to the
terms of any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property.
17. Books and Records; Financial Statements; Financial Covenants.
------------------------------------------------------------
(a) Mortgagor shall keep adequate books and records of account in
accordance with generally accepted accounting principles consistently applied
and shall furnish to Mortgagee (i) within sixty (60) days after the end of each
second (2/nd/) and fourth (4/th/) fiscal quarter of Mortgagor, semiannual
internally-prepared financial statements, certified by the chief financial
officer of Mortgagor; (ii) within ninety (90) days after the end of each fiscal
year of Mortgagor, (x) annual internally-prepared financial statements,
certified by the chief financial officer of Mortgagor, and (y) a certificate,
executed by a financial officer of Mortgagor acceptable to Mortgagee, as to the
absence of any default or Event of Default hereunder or under any other Loan
Document or under the Franchise Agreement; (iii) copies of Mortgagor's federal
tax returns (together with any extension filed) within fifteen (15) days after
filing of same but in no event later than April 30 of each year; (x) and (iv)
such other financial information with respect to Mortgagor, Guarantor
(hereinafter defined) or the Mortgaged Property at may be reasonably requested
by Mortgagee from time to time.
(b) Mortgagor shall cause each of ______________ and ____________
(collectively, "Guarantor") to furnish to Mortgagee (i) within thirty (30) days
---------
after the end of each calendar year, updated annual financial statements in form
similar to that previously provided to Mortgagee; (ii) copies of their federal
tax returns (together with any extensions filed) within fifteen (15) days after
filing of same but in no event later than April 30 of each year; and (iii) such
other financial information with respect to Guarantor as may be reasonably
requested by Mortgagee from time to time.
-14-
<PAGE>
(c) Mortgagor shall promptly provide Mortgagee with written notice of
any pending or threatened litigation against Mortgagor or any Guarantor or the
commencement of any proceedings or investigations by any governmental or
regulatory agency involving Mortgagor or any Guarantor.
(d) Mortgagor shall maintain a Minimum Cash Flow Coverage Ratio of
not less than ______ for each fiscal year of Mortgagor. The term "Minimum Cash
------------
Flow Coverage Ratio" shall be calculated annually and shall mean:
- -------------------
Cash Flow Before Debt Service
-----------------------------
Debt Service
For purposes of this paragraph 17(d), "Cash Flow Before Debt Service"
-----------------------------
shall mean annual operating income of the Mortgaged Property plus depreciation,
amortization and interest expense. "Debt Service" shall mean the total required
------------
annual principal and interest payments under the Note.
(e) Any and all debt incurred by Mortgagor to its shareholders,
officers, partners, members and/or affiliates shall be incurred only with
Mortgagee's prior written consent and Mortgagor shall cause any such debt
approved by Mortgagee to be expressly subordinated to the Debt.
(f) At any time while all or any portion of the Debt remains
outstanding, Mortgagor shall not, directly or indirectly, convey, transfer or
assign any property or asset of any nature, whether real property, personal
property or mixed, tangible or intangible, or any interest therein, without the
prior written consent of Mortgagee, and any such conveyance, transfer or
assignment shall occur solely in the ordinary course of Mortgagor's business.
(g) At any time while all or any portion of the Debt remains
outstanding, Mortgagor shall not, directly or indirectly, (i) make any loans to
any partners, shareholders, officers, members or affiliates of Mortgagor, nor
guarantee any indebtedness of any such party without the prior written consent
of Mortgagee; or (ii) make any advances or distributions to Mortgagor or any
partners, shareholders, officers, members or affiliates of Mortgagor.
(h) At any time while all or any portion of the Debt remains
outstanding, Mortgagor shall not enter into any additional Indebtedness
(hereinafter defined) nor guarantee any additional Indebtedness, without the
prior written consent of Mortgagee, other than (i) unsecured Indebtedness
constituting trade debt and (ii) other Indebtedness incurred in the ordinary
course of business in connection with the ownership, management and operation of
the Mortgaged Property.
18. Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and
-----------------
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, transfers and assurances as Mortgagee shall, from time to time,
require, for the better assuring, conveying, assigning, transferring, and
confirming unto Mortgagee the property and rights hereby mortgaged, given,
-15-
<PAGE>
granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged,
assigned and hypothecated or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee,
or for carrying out the intention or facilitating the performance of the terms
of this Mortgage or for filing, registering or recording this Mortgage.
Mortgagor, on demand, will execute and deliver and hereby authorizes Mortgagee
to execute in the name of Mortgagor or without the signature of Mortgagor to the
extent Mortgagee may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Mortgagee in the Mortgaged Property. Mortgagor grants to Mortgagee
an irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Mortgagee
at law and in equity, including without limitation such rights and remedies
available to Mortgagee pursuant to this paragraph 18.
19. Trust Fund. Mortgagor shall receive the advances secured hereby and
----------
shall hold the right to receive the advances as a trust fund to be applied first
for the purpose of paying the cost of any improvement and shall apply the
advances first to the payment of the cost of any such improvement on the
Mortgaged Property before using any part of the total of the same for any other
purpose.
20. Recording of Mortgage, etc. Mortgagor forthwith upon the execution and
--------------------------
delivery of this Mortgage and thereafter, from time to time, will cause this
Mortgage, and any security instrument creating a lien or security interest or
evidencing the lien hereof upon the Mortgaged Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to protect the lien or security interest hereof upon, and
the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all federal, state, county
and municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property or any instrument of further assurance, except where prohibited by law
so to do. Mortgagor shall hold harmless and indemnify Mortgagee, its successors
and assigns, against any liability incurred by reason of the imposition of any
tax on the making and recording of this Mortgage.
21. Prepayment. The Debt may be prepaid subject to the terms of paragraph
----------
___ of the Note.
22. Events of Default. The Debt shall become immediately due and payable
-----------------
at the option of Mortgagee, without notice or demand, upon any one or more of
the following events ("Events of Default"):
-----------------
(a) if any portion of the Debt is not paid within five (5) days after
the same is due;
-16-
<PAGE>
(b) if any of the Taxes or Other Charges is not paid when the same is
due and payable, subject to the provisions of paragraphs 4 and 5;
(c) if the Policies are not kept in full force and effect, or if the
Policies are not delivered to Mortgagee upon request;
(d) if Mortgagor violates or does not comply with any of the
provisions of paragraphs 7, 9, 15, 17(c), 17(d), 17(e), 17(f), 17(g) or 17(h);
(e) if a default under the Franchise Agreement shall continue beyond
any applicable notice or grace period, or if the Franchise Agreement shall be
modified, amended, terminated, surrendered or assigned without the prior written
consent of Mortgagee;
(f) if a default by Mortgagor under any Lease shall continue beyond
any applicable notice or grace period, or if any Lease shall be modified,
amended, terminated, surrendered or assigned by Mortgagor, without the prior
written consent of Mortgagee;
(g) if the Mortgaged Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real estate taxes and
assessments not then due and payable and such lien shall remain undischarged of
record (by payment, bonding or otherwise) for a period of thirty (30) calendar
days after the filing of such lien;
(h) if Mortgagor fails to cure promptly any violations of laws or
ordinances affecting the Mortgaged Property and such failure continues for a
period of thirty (30) calendar days after Mortgagor's receipt of notice thereof;
(i) if any representation or warranty of Mortgagor or any Guarantor,
made herein or in the Environmental Indemnity Agreement, dated as of the date
hereof, made by Mortgagor and Guarantor, jointly and severally, for the benefit
of Mortgagee (the "Environmental Indemnity Agreement"), or by any Guarantor in
---------------------------------
the Guarantee of Payment and Performance, dated as of the date hereof, made by
Guarantor for the benefit of Mortgagee (the "Guarantee"), or in any certificate,
---------
report, financial statement or other instrument or document furnished to
Mortgagee by Mortgagor or any Guarantor shall have been false or misleading in
any material respect when made;
(j) if Mortgagor or any Guarantor shall make an assignment for the
benefit of creditors or if Mortgagor or any Guarantor shall generally not be
paying its debts as they become due;
(k) if a receiver, liquidator or trustee of Mortgagor or any
Guarantor shall be appointed or if Mortgagor or any Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced
in by, Mortgagor or any Guarantor or if any proceeding for the dissolution or
liquidation of
-17-
<PAGE>
Mortgagor or any Guarantor shall be instituted; however, if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by
Mortgagor or any Guarantor, upon the same not being discharged, stayed or
dismissed within sixty (60) days;
(l) If Mortgagor or any Guarantor shall be in default (beyond any
applicable grace period) in the payment of any amount of any Indebtedness
(hereinafter defined) other than the Debt; or if Mortgagor or any Guarantor
shall default (beyond any applicable grace period) in the performance of any
agreement under which such Indebtedness is created or evidenced, if the effect
of such default is to cause, or permit the holder of such Indebtedness to cause,
such Indebtedness to become due prior to its stated maturity. The term
"Indebtedness" shall mean, as at any date (i) all indebtedness of Mortgagor or
------------
any Guarantor for borrowed money or for the deferred purchase price of property
or services (except such indebtedness the existence of which is being contested
by Mortgagor or any Guarantor in good faith and by appropriate action); (ii) all
obligations of Mortgagor or any Guarantor evidenced by bonds, debentures, notes
or other similar instruments; (iii) all obligations under leases which shall
have been or should be, in accordance with generally accepted accounting
principles consistently applied, recorded as capital leases of which Mortgagor
or any Guarantor is liable as lessee (except such obligations the existence of
which is being contested by Mortgagor or any Guarantor in good faith and by
appropriate action); (iv) any Guaranteed Indebtedness (hereinafter defined); and
(v) any other indebtedness required to be recorded as indebtedness on the
financial statements of Mortgagor or any Guarantor in accordance with generally
accepted accounting principles consistently applied. The term "Guaranteed
----------
Indebtedness" shall mean any indebtedness which is guaranteed directly or
- ------------
indirectly in any manner by Mortgagor or any Guarantor, or in effect guaranteed
directly or indirectly in any manner by Mortgagor or any Guarantor;
(m) (i) if Mortgagor or any Control Individual shall engage in any
"prohibited transaction" (as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended from time to time ("ERISA") or Section
-----
4975 of the Internal Revenue Code of 1986, as amended from time to time (the
"Code") involving any employee benefit plan covered by ERISA (a "Plan"), (ii)
---- ----
any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall occur with respect to any Plan or any lien in favor
of the Pension Benefit Guaranty Corporation ("PBGC") or a Plan shall arise on
----
the assets of Mortgagor or any Control Individual, or (iii) a "reportable event"
(as defined in Section 4043(b) of ERISA) shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Plan, which reportable event or
commencement of proceedings or appointment of a trustee is, in the reasonable
opinion of Mortgagee, likely to result in the termination of such Plan for
purposes of Title IV of ERISA;
(n) if one or more judgments or decrees shall be entered against
Mortgagor or any Guarantor involving an aggregate liability (not paid or fully
covered by insurance) of $____________ or more, and any such judgment or decree
shall not have been vacated, discharged, stayed or bonded pending appeal within
thirty (30) days from the entry thereof;
-18-
<PAGE>
(o) Mortgagor shall be in default beyond any applicable notice and
cure period under any other term, covenant or condition of the Note, this
Mortgage or any of the other Loan Documents; or
(p) if at any time while this Mortgage is of record _____________ and
____________ shall fail to own in the aggregate one hundred percent (100%) of
the ownership interests in Mortgagor or shall cease to have sole responsibility
for the day-to-day management and Control of Mortgagor.
23. Default Interest. Upon the occurrence of any Event of Default,
----------------
Mortgagor shall pay interest on the unpaid principal balance of the Note at the
Default Rate (as defined in the Note). The Default Rate shall be computed from
the occurrence of the Event of Default until the actual receipt and collection
of the Debt. This charge shall be added to the Debt, and shall be deemed secured
by this Mortgage. This clause, however, shall not be construed as an agreement
or privilege to extend the date of the payment of the Debt, nor as a waiver of
any other right or remedy accruing to Mortgagee by reason of the occurrence of
any Event of Default. If the Default Rate is above the maximum rate permitted by
applicable law, the Default Rate shall be the maximum rate permitted by
applicable law.
24. Right to Cure Defaults. Upon the occurrence of any Event of Default or
----------------------
if Mortgagor fails to make any payment or to do any act as herein provided,
Mortgagee may, but without any obligation to do so and without notice to or
demand on Mortgagor and without releasing Mortgagor from any obligation
hereunder, make or do the same in such manner and to such extent as Mortgagee
may deem necessary to protect the security hereof. Mortgagee is authorized to
enter upon the Mortgaged Property for such purposes or appear in, defend, or
bring any action or proceeding to protect its interest in the Mortgaged Property
or to foreclose this Mortgage or collect the Debt, and the reasonable cost and
expense thereof (including reasonable attorneys' fees to the extent permitted by
law and any appraisal fees), with interest calculated at the Default Rate, shall
constitute a portion of the Debt and shall be secured by this Mortgage and the
other Loan Documents and shall be due and payable to Mortgagee upon demand. All
such costs and expenses incurred by Mortgagee in remedying such Event of Default
or in appearing in, defending, or bringing any such action or proceeding shall
bear interest at the Default Rate, for the period after notice from Mortgagee
that such cost or expense was incurred to the date of payment of Mortgagee.
25. Late Payment Charge. If any portion of the Debt is not paid within
-------------------
fifteen (15) calendar days after the date on which it is due, Mortgagor shall
pay to Mortgagee upon demand a late charge equal to the lesser of two percent
(2%) of such unpaid portion of the Debt or the maximum amount permitted by
applicable law, to defray the expense incurred by Mortgagee in handling and
processing such delinquent payment and to compensate Mortgagee for the loss of
the use of such delinquent payment, and such amount shall be secured by this
Mortgage.
26. Prepayment After Event of Default. If following the occurrence of any
---------------------------------
Event of Default, Mortgagor shall tender payment of an amount sufficient to
satisfy the Debt at any
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<PAGE>
time prior to a sale of the Mortgaged Property either through foreclosure or the
exercise of other remedies available to Mortgagee under this Mortgage, such
tender by Mortgagor shall be deemed to be a voluntary prepayment under the Note
and this Mortgage in the amount tendered, and Mortgagor shall, in addition to
the entire Debt, also pay to Mortgagee the applicable prepayment consideration
specified in paragraph ___ of the Note.
27. Right of Entry. Mortgagee and its agents shall have the right to enter
--------------
and inspect the Mortgaged Property at all reasonable times.
28. Remedies.
--------
(a) Upon the occurrence of any Event of Default, Mortgagee may take
such action, without notice or demand, as it deems advisable to protect and
enforce its rights against Mortgagor and in and to the Mortgaged Property,
including, but not limited to, the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such order as Mortgagee
may determine, in its sole discretion, without impairing or otherwise affecting
the other rights and remedies of Mortgagee:
(i) declare the entire Debt to be immediately due and payable;
(ii) institute proceedings for the complete foreclosure of this
Mortgage, in which case the Mortgaged Property or any interest therein may
be sold for cash or upon credit in one or more parcels or in several
interests or portions and in any order or manner;
(iii) with or without entry, to the extent permitted and pursuant to
the procedures provided by applicable law, institute proceedings for the
partial foreclosure of this Mortgage for the portion of the Debt then due
and payable, subject to the continuing lien of this Mortgage for the
balance of the Debt not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any part
thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to power of
sale or otherwise, at one or more sales, as an entity or in parcels, at
such time and place, upon such terms and after such notice thereof as may
be required or permitted by law;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the Note;
(vi) recover judgment on the Note either before, during or after any
proceedings for the enforcement of this Mortgage;
(vii) apply for the appointment of a receiver of the Mortgaged
Property, without notice and without regard for the adequacy of the
security for the Debt and without regard for the solvency of the Mortgagor
or of any person, firm or other entity liable for the payment of the Debt;
-20-
<PAGE>
(viii) enforce Mortgagee's interest in the Leases and Rents and enter
into or upon the Mortgaged Property, either personally or by its agents,
nominees or attorneys and dispossess Mortgagor and its agents and servants
therefrom, and thereupon Mortgagee may (A) use, operate, manage, control,
insure, maintain, repair, restore and otherwise deal with all and every
part of the Mortgaged Property and conduct the business thereat; (B) make
alterations, additions, renewals, replacements and improvements to or on
the Mortgaged Property; (C) exercise all rights and powers of Mortgagor
with respect to the Mortgaged Property, whether in the name of Mortgagor or
otherwise, including, without limitation, the right to make, cancel,
enforce or modify Leases, obtain and evict tenants, and demand, sue for,
collect and receive all earnings, revenues, rents, issues, profits and
other income of the Mortgaged Property and every part thereof; and (D)
apply the receipts from the Mortgaged Property to the payment of the Debt,
after deducting therefrom all reasonable expenses (including reasonable
attorneys' fees) incurred in connection with the aforesaid operations and
all amounts necessary to pay the Taxes, assessments, insurance and Other
Charges in connection with the Mortgaged Property, as well as just and
reasonable compensation for the services of Mortgagee, its counsel, agents
and employees; or
(ix) pursue such other rights and remedies as may be available at
law and in equity.
In the event of a sale, by foreclosure or otherwise, of less than all of
the Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portion of the Mortgaged Property.
(b) The proceeds of any sale made under or by virtue of this
paragraph, together with any other sums which then may be held by Mortgagee
under this Mortgage, whether under the provisions of this paragraph or
otherwise, shall be applied by Mortgagee to the payment of the Debt in such
priority and proportion as Mortgagee in its discretion shall deem proper.
(c) To the extent permitted by applicable law, Mortgagee may
adjourn from time to time any sale by it to be made under or by virtue of this
Mortgage by announcement at the time and place appointed for such sale or for
such adjourned sale or sales; and, except as otherwise provided by any
applicable provision of law, Mortgagee, without further notice or publication,
may make such sale at the time and place to which the same shall be so
adjourned.
(d) Upon the completion of any sale or sales made by Mortgagee
under or by virtue of this paragraph, Mortgagee, or an officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or
purchasers a good and sufficient instrument, or good and sufficient instruments,
conveying, assigning and transferring all estate, right, title and interest in
and to the property and rights sold. Mortgagee is hereby irrevocably appointed
the true and lawful attorney of Mortgagor, in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the Mortgaged
Property and rights so
-21-
<PAGE>
sold and for that purpose Mortgagee may execute all necessary instruments of
conveyance, assignment and transfer, and may substitute one or more persons with
like power, Mortgagor hereby ratifying and confirming all that its said attorney
or such substitute or substitutes shall lawfully do by virtue hereof. Any such
sale or sales made under or by virtue of this paragraph shall operate to divest
all the estate, right, title, interest, claim and demand whatsoever, whether at
law or in equity, of Mortgagor in and to the properties and rights so sold, and
shall be a perpetual bar both at law and in equity against Mortgagor and against
any and all persons claiming or who may claim the same, or any part thereof
from, through or under Mortgagor.
(e) Upon any sale made under or by virtue of this paragraph,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Debt the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which Mortgagee
is authorized to deduct under this Mortgage.
(f) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
29. Reasonable Use and Occupancy. In addition to the rights which
----------------------------
Mortgagee may have herein, upon the occurrence of any Event of Default,
Mortgagee, at its option, may require Mortgagor to pay monthly in advance to
Mortgagee, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the Mortgaged
Property as may be occupied by Mortgagor or may require Mortgagor to vacate and
surrender possession of the Mortgaged Property to Mortgagee or to such receiver
and, in default thereof, Mortgagor may be evicted by summary proceedings or
otherwise.
30. Security Agreement. This Mortgage is both a real property mortgage and
------------------
a "security agreement" within the meaning of the Uniform Commercial Code. The
Mortgaged Property includes both real and personal property and all other rights
and interests, whether tangible or intangible in nature, of Mortgagor in the
Mortgaged Property. Mortgagor by executing and delivering this Mortgage has
granted and hereby grants to Mortgagee, as security for the Debt, a security
interest in the Mortgaged Property to the full extent that the Mortgaged
Property may be subject to the Uniform Commercial Code (said portion of the
Mortgaged Property so subject to the Uniform Commercial Code being called in
this paragraph 30 the "Collateral"). If an Event of Default shall occur,
----------
Mortgagee, in addition to any other rights and remedies which it may have, shall
have and may exercise immediately and without demand, any and all rights and
remedies granted to a secured party upon default under the Uniform Commercial
Code, including, without limiting the generality of the foregoing, the right to
take possession of the Collateral or any part thereof, and to take such other
measures as Mortgagee may deem necessary for the care, protection and
preservation of the Collateral. Upon the request or demand of Mortgagee,
Mortgagor shall at its expense assemble the
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<PAGE>
Collateral and make it available to Mortgagee at a convenient place acceptable
to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses,
including legal expenses and reasonable attorneys' fees, incurred or paid by
Mortgagee in protecting the interest in the Collateral and in enforcing the
rights hereunder with respect to the Collateral. Any notice of sale, disposition
or other intended action by Mortgagee with respect to the Collateral sent to
Mortgagor in accordance with the provisions hereof at least ten (10) days prior
to such action, shall constitute commercially reasonable notice to Mortgagor.
The proceeds of any disposition of the Collateral, or any part thereof, may be
applied by Mortgagee to the payment of the Debt in such priority and proportions
as Mortgagee in its discretion shall deem proper.
31. Actions and Proceedings. Mortgagee has the right to appear in and
-----------------------
defend any action or proceeding brought with respect to the Mortgaged Property
and to bring any action or proceeding, in the name and on behalf of Mortgagor,
which Mortgagee, in its discretion, decides should be brought to protect their
interest in the Mortgaged Property. Mortgagee shall, at its option, be
surrogated to the lien of any mortgage or other security instrument discharged
in whole or in part by the Debt, and any such subrogation rights shall
constitute additional security for the payment of the Debt.
32. Waiver of Counterclaim. Mortgagor hereby waives the right to assert a
----------------------
counterclaim, other than a mandatory or compulsory counterclaim, in any action
or proceeding brought against it by Mortgagee.
33. Recovery of Sums Required to Be Paid. Mortgagee shall have the right
------------------------------------
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of
Mortgagee thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Mortgagor existing at the time such earlier action was
commenced.
34. Marshalling and Other Matters. Mortgagor hereby waives, to the extent
-----------------------------
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Mortgaged Property or any
part thereof or any interest therein. Further, Mortgagor, to the extent
permitted by law, hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
35. Hazardous Waste and Asbestos. Mortgagor hereby represents and warrants
----------------------------
to Mortgagee that (a) the Mortgaged Property is not in direct or indirect
violation of any local, state, federal or other governmental authority, statute,
ordinance, code, order, decree, law, rule or regulation pertaining to or
imposing liability or standards of conduct concerning environmental regulation,
contamination or clean-up including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended
-23-
<PAGE>
("CERCLA"), the Resource Conservation and Recovery Act, as amended ("RCRA"), and
------ ----
any state super-lien and environmental clean-up statutes (collectively,
"Environmental Laws"); (b) the Mortgaged Property is not subject to any private
------------------
or governmental lien or judicial or administrative notice or action relating to
hazardous and/or toxic, dangerous and/or regulated, substances, wastes,
materials, pollutants or contaminants, petroleum, tremolite, anthlophylie or
actinolite or polychlorinated biphenyls (including, without limitation, any raw
materials which include hazardous constituents) and any other substances or
materials which are included under or regulated by Environmental Laws
(collectively, "Hazardous Materials"); (c) no Hazardous Materials are or have
-------------------
been, prior to Mortgagor's acquisition of the Mortgaged Property, discharged,
generated, treated, disposed of or stored on, incorporated in, or removed or
transported from the Mortgaged Property otherwise than in compliance with all
Environmental Laws and (d) there is no asbestos present in, and no underground
storage tanks exist on, any of the Mortgaged Property. So long as Mortgagor owns
or is in possession of the Mortgaged Property, Mortgagor shall keep or cause the
Mortgaged Property to be kept free from Hazardous Materials and in compliance
with all Environmental Laws, shall promptly notify Mortgagee if Mortgagor shall
become aware of any Hazardous Materials on the Mortgaged Property and/or if
Mortgagor shall become aware that the Mortgaged Property is in direct or
indirect violation of any Environmental Laws and Mortgagor shall remove such
Hazardous Materials and/or cure such violations, as applicable, as required by
law, promptly after Mortgagor becomes aware of same, at Mortgagor's sole
expense. Nothing herein shall prevent Mortgagor from recovering such expenses
from any other party that may be liable for such removal or cure. The
obligations and liabilities of Mortgagor under this paragraph 35 shall survive
any termination, satisfaction, or assignment of this Mortgage, any Transfer
and/or any exercise by Mortgagee of any of its rights or remedies hereunder,
including but not limited to, the acquisition of the Mortgaged Property by
foreclosure or a conveyance in lieu of foreclosure.
36. Handicapped Access.
------------------
(a) Mortgagor agrees that the Mortgaged Property shall at all times
comply to the extent applicable with the requirements of the Americans with
Disabilities Act of 1990, all state and local laws and ordinances related to
handicapped access and all rules, regulations, and orders issued pursuant
thereto including, without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively, "Access
------
Laws").
- ----
(b) Mortgagor agrees to give prompt notice to Mortgagee of the
receipt by Mortgagor of any complaints related to violations of any Access Laws
and of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
37. Indemnification. In addition to any other indemnifications provided
---------------
herein or in the Note or the other Loan Documents, Mortgagor shall protect,
defend, indemnify and save harmless Mortgagee from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including, without limitation,
-24-
<PAGE>
reasonable attorneys' fees and expenses) imposed upon or incurred by or asserted
against Mortgagee, except to the extent resulting from Mortgagee's gross
negligence or wilful misconduct, by reason of (a) ownership of this Mortgage or
the Mortgaged Property or any interest therein; (b) the construction or
renovation of any Improvements; (c) any accident, injury to or death of persons
or loss of or damage to property occurring in, on or about the Mortgaged
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (d) any use, nonuse or
condition in, on or about the Mortgaged Property or any part thereof or on
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (e) any failure on the part of Mortgagor to perform or comply with any
of the terms of this Mortgage; (f) performance of any labor or services or the
furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof; (g) the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release, or threatened release of any
Hazardous Materials on, from, or affecting the Mortgaged Property or any other
property; (h) any personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to such Hazardous Materials; (i)
any lawsuit brought or threatened, settlement reached, or government order
relating to such Hazardous Materials; (j) any violation of the Environmental
Laws, which are based upon or in any way related to such Hazardous Materials
including, without limitation, the costs and expenses of any remedial action,
attorney and consultant fees, investigation and laboratory fees, court costs and
litigation expenses; and (k) any failure of the Mortgaged Property to comply
with any Access Laws. Any amounts payable to Mortgagee by reason of the
application of this paragraph 37 shall be secured by this Mortgage and shall
become immediately due and payable and shall bear interest at the Default Rate
from the date any payment is made by Mortgagee hereunder until such payment is
reimbursed by Mortgagor. The obligations and liabilities of Mortgagor under this
paragraph 37 shall survive any termination, satisfaction or assignment of this
Mortgage, any Transfer and/or any exercise by Mortgagee of any of its rights and
remedies hereunder, including but not limited to, the acquisition of the
Mortgaged Property by foreclosure or a conveyance in lieu of foreclosure.
38. Notices. Any notice, demand, statement, request or consent made
-------
hereunder shall be in writing to the other party hereto at its address set forth
below or at such other address as such party may designate by notice to the
other party hereto and shall be deemed given (i) on receipt, if mailed, by
certified or registered U.S. mail, return receipt requested, postage prepaid;
(ii) on receipt, if delivered, fee prepaid, to a national overnight delivery
service (such as Federal Express, Purolater Courier, U.P.S. Next Day Air); or
(iii) when delivered, if delivered by hand, as evidenced by a signed receipt:
To Mortgagor:
____________________________
____________________________
____________________________
Attention:__________________
Telephone: (____) __________
-25-
<PAGE>
with a courtesy copy to:
____________________________
____________________________
____________________________
Attention: _________________
Telephone: (___) ___________
To Mortgagee:
Banco Popular de Puerto Rico
7 West 51/st/ Street
New York, New York 10019
Attention: Mr. Agustin Mas
Vice President
Telephone: (212) 445-1800
with a courtesy copy to:
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Brian F. Doran, Esq.
Telephone: (212) 586-4630
A "Business Day" is any day other than a Saturday or Sunday, or a day on which
banking and savings and loan institutions in the State of New York are
authorized or obligated by law or executive order to remain closed. Refusal to
accept delivery of any notice shall be deemed to be receipt of such notice.
39. Authority. (a) Mortgagor (and the undersigned representative of
---------
Mortgagor, if any) has full power, authority and right to execute, deliver and
perform its obligations pursuant to this Mortgage, and to mortgage, give, grant,
bargain, sell, alien, enfeoff, convey, confirm, pledge, hypothecate and assign
the Mortgaged Property pursuant to the terms hereof and to keep and observe all
of the terms of this Mortgage on Mortgagor's part to be performed and (b)
Mortgagor represents and warrants that Mortgagor is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended and the related Treasury Department regulations, including temporary
regulations.
40. Waiver of Notice. Mortgagor shall not be entitled to any notices of
----------------
any nature whatsoever from Mortgagee except with respect to matters for which
this Mortgage specifically and expressly provides for the giving of notice by
Mortgagee to Mortgagor and except with respect to matters for which Mortgagee is
required by applicable law to give notice, and Mortgagor hereby expressly waives
the right to receive any notice from Mortgagee
-26-
<PAGE>
with respect to any matter for which this Mortgage does not specifically and
expressly provide for the giving of notice by Mortgagee to Mortgagor.
41. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage,
----------------------------
Mortgagee exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
42. Non-Waiver. The failure of Mortgagee to insist upon strict performance
----------
of any term hereof shall not be deemed to be a waiver of any term of this
Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations hereunder
by reason of (a) the failure of Mortgagee to comply with any request of
Mortgagor to take any action to foreclose this Mortgage or otherwise enforce any
of the provisions hereof or of the Note or the other Loan Documents, (b) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Debt or any portion thereof or (c) any
agreement or stipulation by Mortgagee extending the time of payment or otherwise
modifying or supplementing the terms of the Note, this Mortgage or the other
Loan Documents. Mortgagee may resort for the payment of the Debt to any other
security held by Mortgagee in such order and manner as Mortgagee, in its
discretion, may elect. Mortgagee may take action to recover the Debt, or any
portion thereof, or to enforce any covenant hereof without prejudice to the
right of Mortgagee thereafter to foreclose this Mortgage. The rights and
remedies of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No act
of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not be
limited exclusively to the rights and remedies herein stated but shall be
entitled to every right and remedy now or hereafter afforded at law or in
equity.
43. No Oral Change. This Mortgage, and any provisions hereof, may not be
--------------
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Mortgagor or Mortgagee, but only by
an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
44. Successors and Assigns. This Mortgage shall be binding upon and inure
----------------------
to the benefit of Mortgagor and Mortgagee and their respective heirs, personal
representatives, successors and assigns forever.
45. Inapplicable Provisions. If any term, covenant or condition of the
-----------------------
Note or this Mortgage is held to be invalid, illegal or unenforceable in any
respect, the Note and this Mortgage shall be construed without such provision.
-27-
<PAGE>
46. Headings, etc. The headings and captions of various paragraphs of this
-------------
Mortgage are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.
47. Governing Law. This Mortgage shall be governed by and construed in
-------------
accordance with the laws of the State of ___________ without regard to
principles of conflict of laws.
48. Definitions. Unless the context clearly indicates a contrary intent or
-----------
unless otherwise specifically provided herein, words used in this Mortgage may
be used interchangeably in singular or plural form and the word "Mortgagor"
shall mean "each Mortgagor and any subsequent owner or owners of the Mortgaged
Property or any part thereof or any interest therein," the word "Mortgagee"
shall mean "Mortgagee and any subsequent holder of the Note," the word "Note"
shall mean "the Note and any other evidence of indebtedness secured by this
Mortgage," the word "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "Mortgaged Property" shall
include any portion of the Mortgaged Property and any interest therein. Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms and the singular form of nouns
and pronouns shall include the plural and vice versa.
49. Waiver of Trial by Jury. MORTGAGOR AND MORTGAGEE HEREBY KNOWINGLY,
-----------------------
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON THE LOAN EVIDENCED BY THE NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THE NOTE, THIS MORTGAGE OR ANY OF THE OTHER
LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
VERBAL OR WRITTEN) OR ACTION OF MORTGAGOR OR MORTGAGEE. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR MORTGAGEE'S MAKING OF THE LOAN SECURED BY THIS MORTGAGE
AND THE OTHER LOAN DOCUMENTS.
50. Assignment. Mortgagee shall have the right, exercisable at any time
----------
and from time to time, to sell, transfer or assign the Mortgage and the other
Loan Documents, or grant participations therein, or issue certificates or
securities evidencing a beneficial interest therein in a rated or unrated public
offering or private placement, and Mortgagee may forward to any purchaser,
transferee, assignee, servicer, participant, investor or credit rating agency
rating such securities (collectively, an "Investor") or prospective Investor all
--------
documents and information in Mortgagee's possession with respect to Mortgagor,
the Mortgaged Property and the Loan Documents as such Investor or prospective
Investor may request.
-28-
<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage, intending to be
legally bound, the day and year first above written.
__________________________________,
a _____________________________
By: _______________________________
Name:______________________________
Title:_____________________________
-29-
<PAGE>
(ACKNOWLEDGMENT)
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT K-2(C)
--------------
FORM OF FRANCHISEE LEASED PROPERTY MORTGAGE
-------------------------------------------
LEASEHOLD MORTGAGE, SECURITY AGREEMENT AND
ASSIGNMENT OF LEASES AND RENTS
BY AND BETWEEN
_____________________
_____________________
__________
_______________________
("MORTGAGOR")
AND
BANCO POPULAR DE PUERTO RICO
7 WEST 51/ST/ STREET
NEW YORK, NEW YORK 10019
("MORTGAGEE")
DATED AS OF _________, 199__
LOCATION OF PREMISES:
RECORDING REQUESTED BY AND
WHEN RECORDED - RETURN TO:
Brian F. Doran, Esq.
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
<PAGE>
THIS LEASEHOLD MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES
AND RENTS (the "Mortgage"), made as of the __ day of _____, 199_, by
--------
__________________________, a __________________, having an office at
____________ _________________________________________________ ("Mortgagor") and
---------
BANCO POPULAR DE PUERTO RICO, having offices at 7 West 51/st/ Street, New York,
New York 10019 ("Mortgagee").
---------
W I T N E S S E T H:
- - - - - - - - - -
To secure the payment of an indebtedness in the principal sum of
________________________________ DOLLARS ($___________), lawful money of the
United States of America, to be paid with interest according to a certain note
dated the date hereof made by Mortgagor to Mortgagee (the note together with all
extensions, renewals or modifications thereof being hereinafter collectively
called the "Note") (said indebtedness, interest and all other sums due hereunder
----
and under the Note being collectively called the "Debt"), Mortgagor has
----
mortgaged, given, granted, bargained, sold, aliened, conveyed, confirmed,
pledged, assigned, and hypothecated and by these presents does hereby mortgage,
give, grant, bargain, sell, alien, convey, confirm, pledge, assign and
hypothecate unto Mortgagee all right, title, interest and estate of Mortgagor
now owned, or hereafter acquired, in and to the following property, rights,
interests and estates (such property, rights, interests and estates being
hereinafter described are collectively referred to herein as the "Mortgaged
---------
Property"):
- --------
(a) that certain lease dated _________, 199__, between _________, as
landlord, and Mortgagor, as tenant (the "Lease") affecting the real property
-----
described in Exhibit A attached hereto (the "Property"), and the leasehold
--------- --------
estate created thereby (and all other interests of Mortgagor presently owned or
hereafter acquired in the Property) and all modifications, renewals or
extensions of the Lease and all rights of Mortgagor to renew or extend the term
of the Lease and all of Mortgagor's right, title and interest in and to the
Property;
(b) all machinery, equipment, fixtures, furniture, equipment, cooking
supplies, stoves, refrigerators, dishes, glassware, utensils and inventories and
other property of every kind and nature, whether tangible or intangible,
whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an
interest, now or hereafter located upon the Property, or appurtenant thereto,
and usable in connection with the present or future operation and occupancy of
the Property and all building equipment, materials and supplies and construction
equipment, materials and supplies of any nature whatsoever owned by Mortgagor,
or in which Mortgagor has or shall have an interest, now or hereafter located
upon the Property, or appurtenant thereto, or usable in connection with the
present or future construction, renovation, operation, enjoyment and occupancy
of the Property (hereinafter collectively called the "Equipment"), including the
---------
proceeds of any sale or transfer of the foregoing, and the right, title and
interest of Mortgagor in and to any of the Equipment which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the
<PAGE>
State of ______________ (the "Uniform Commercial Code") superior in lien to the
-----------------------
lien of this Mortgage;
(c) all subleases and other agreements affecting the use, enjoyment
or occupancy of the Land or the Improvements (hereinafter defined) heretofore or
hereafter entered into by Mortgagor (collectively, the "Subleases") and all
---------
income, rents, issues, profits and revenues from the Property (collectively, the
"Rents") and all proceeds from the sale, surrender, termination or other
-----
disposition of the Subleases and the right to receive and apply the Rents to the
payment of the Debt;
(d) all proceeds of and any unearned premiums on any insurance
policies covering the Mortgaged Property, including, without limitation, the
right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Mortgaged Property; and
(e) the right, in the name and on behalf of Mortgagor, to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to commence any action or proceeding to protect the interest of
Mortgagee in the Mortgaged Property.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto
and to the use and benefit of Mortgagee, and the successors and assigns of
Mortgagee, forever.
AND Mortgagor represents and warrants to and covenants and agrees with Mortgagee
as follows:
1. PAYMENT OF DEBT AND INCORPORATION OF COVENANTS, CONDITIONS AND
--------------------------------------------------------------
AGREEMENTS. Mortgagor will pay the Debt at the time and in the manner provided
- ----------
in the Note and in this Mortgage. All the covenants, conditions and agreements
contained in (a) the Note and (b) all and any of the documents other than the
Note or this Mortgage now or hereafter executed by Mortgagor and/or others and
by or in favor of Mortgagee, which wholly or partially secure or guaranty
payment of the Note (collectively, the "Loan Documents"), are hereby made a part
--------------
of this Mortgage to the same extent and with the same force as if fully set
forth herein.
2. THE LEASE. The Lease is in full force and effect and has not been
---------
modified, amended or altered as of the date hereof and there are no defaults by
any party thereto.
3. WARRANTY OF TITLE. Mortgagor warrants that it has good title to the
-----------------
leasehold estate created by the Lease and a good and marketable interest in such
leasehold, and that Mortgagor owns the Equipment, in each case free and clear of
liens, claims and encumbrances.
-2-
<PAGE>
4. Insurance.
---------
(a) Mortgagor, at its sole cost and expense, will keep the Mortgaged
Property insured during the entire term of this Mortgage for the mutual benefit
of Mortgagor and Mortgagee against loss or damage by fire and against loss or
damage by other risks and hazards covered by a standard extended coverage
insurance policy including, but not limited to, riot and civil commotion,
vandalism, malicious mischief, burglary and theft. Such insurance shall be in an
amount (i) equal to one hundred percent (100%) of the then replacement cost of
the buildings, structures, fixtures and improvements now or hereafter located on
the Property (collectively, the "Improvements") and the Equipment, without
------------
deduction for physical depreciation and (ii) such that the insurer would not
deem Mortgagor a co-insurer under said policies. The policies of insurance
carried in accordance with this paragraph shall be paid annually in advance and
shall contain the "Replacement Cost Endorsement" with a waiver of depreciation.
(b) Mortgagor, at its sole cost and expense, for the mutual benefit
of Mortgagor and Mortgagee, shall also obtain and maintain during the entire
term of this Mortgage the following policies of insurance:
(i) Flood insurance if any part of the Mortgaged Property is located
in an area identified by the Federal Emergency Management Agency as an area
having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968 (and any successor
act thereto) in an amount at least equal to the outstanding principal
amount of the Note or the maximum limit of coverage available with respect
to the Improvements and Equipment under said Act, whichever is less.
(ii) Comprehensive public liability insurance, including broad form
property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages in an amount not less than $1,000,000 per
occurrence and $10,000,000 in the aggregate.
(iii) Business interruption insurance in an amount equal to the
aggregate annual amount of all income from, and revenues and rents payable
with respect to, the Mortgaged Property, such business interruption
insurance to cover losses for a period of at least twelve (12) months after
the date of the fire or casualty in question.
(iv) During the course of any construction, renovation or equipping
of the Improvements, builder's completed value risk insurance against "all
risks of physical loss", including collapse and transit coverage, with
deductibles reasonably satisfactory to Mortgagee, in non-reporting form,
covering the total value of work performed and equipment, supplies and
materials furnished. Such policy of insurance shall contain the "permission
to occupy upon completion of work or occupancy" endorsement and a waiver of
co-insurance or an agreed amount endorsement.
-3-
<PAGE>
(v) Such other insurance as may from time to time be reasonably
required by Mortgagee in order to protect its interests.
(c) All policies of insurance (the "Policies") required pursuant to
--------
this paragraph 4 shall be issued by an insurer having an A.M. Best rating of A:V
or better and satisfactory to Mortgagee, (ii) shall contain the standard New
York mortgagee non-contribution clause naming Mortgagee as the person to which
all payments made by such insurance company shall be paid, (iii) shall be
maintained throughout the term of this Mortgage without cost to Mortgagee, (iv)
original certificates, or copies thereof, certified to be true and correct,
shall be delivered to Mortgagee, (v) shall contain such provisions as Mortgagee
deems reasonably necessary or desirable to protect its interest including,
without limitation, endorsements providing that neither Mortgagor, Mortgagee nor
any other party shall be a co-insurer under said Policies and that Mortgagee
shall receive at least thirty (30) days prior written notice of any modification
or cancellation, and (vi) shall be satisfactory in form and substance to
Mortgagee and shall be approved by Mortgagee as to amounts, form, risk coverage,
deductibles, loss payees and insureds. All such premiums for such Policies (the
"Insurance Premiums") shall be paid by Mortgagor making payment when due
------------------
directly to the carrier. Not later than thirty (30) days prior to the expiration
date of each of the Policies, Mortgagor will deliver to Mortgagee satisfactory
evidence of the renewal of each Policy.
(d) If the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty, Mortgagor shall give prompt written
notice thereof to Mortgagee. Sums paid to Mortgagee by an insurer, after
deduction of Mortgagee's reasonable costs and expenses of collection (after such
deduction, the "Insurance Proceeds"), shall be retained and (i) applied by
------------------
Mortgagee toward payment of the Debt in such priority and proportions as
Mortgagee in its discretion shall deem proper (any such application for
repayment to be without any prepayment consideration, except that if any Event
of Default (hereinafter defined), or an event that with notice and/or the
passage of time, or both, would constitute an Event of Default, has occurred,
then such application shall be subject to the prepayment consideration computed
in accordance with the Note) or, (ii) if the conditions set forth in paragraph
4(f) of this Mortgage are satisfied, as determined by Mortgagee in its sole
discretion, paid to Mortgagor for the restoration and repair of the Mortgaged
Property in accordance with paragraph 4(e) of this Mortgage in whole or in such
lesser amount as is necessary to pay for the costs of such restoration and
repair.
(e) If the Insurance Proceeds are held by Mortgagee to reimburse
Mortgagor for the cost of restoration and repair of the Mortgaged Property, (i)
the Mortgaged Property shall be substantially restored to the equivalent of its
condition prior to such casualty or to such other condition as Mortgagee may
approve in writing, (ii) such restoration and repair shall be done in compliance
with all applicable laws, rules and regulations, and (iii) all reasonable costs
and expenses incurred by Mortgagee in connection with making the Insurance
Proceeds available for such restoration and repair including, without
limitation, counsel fees and inspecting engineers' fees incurred by Mortgagee,
shall be paid by Mortgagor. Mortgagee may, at Mortgagee's option, condition
disbursement of said proceeds on Mortgagee's approval
-4-
<PAGE>
of such plans and specifications of an architect reasonably satisfactory to
Mortgagee, contractor's cost estimates, architect's certificates, waivers of
liens, sworn statements of mechanics and material men and such other evidence of
costs, percentage completion of construction, application of payments, and
satisfaction of liens as Mortgagee may reasonably require. If the Insurance
Proceeds are applied to the payment of the Debt, any such application of
proceeds to principal shall not extend or postpone the maturity date of the Note
or change the amount or the due date of any installment payment under the Note.
Any surplus Insurance Proceeds, after payment of the Debt, shall be paid to
Mortgagor. If the Mortgaged Property is sold pursuant to paragraph 29 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
insurance policies and unearned premiums thereon and in and to the Insurance
Proceeds resulting from any damage to the Mortgaged Property prior to such sale
or acquisition.
(f) Mortgagee shall not exercise Mortgagee's option to apply
Insurance Proceeds to the payment of the sums secured by this Mortgage if all
the following conditions are met, as determined by Mortgagee in its sole
discretion: (i) no Event of Default is then continuing under this Mortgage, the
Note or any other Loan Document; (ii) Mortgagee determines that there will be
sufficient funds (whether consisting of Insurance Proceeds and/or other sums
made available by Mortgagor for restoration) to restore and repair the Mortgaged
Property to the condition required under paragraph 4(e) above; (iii) the
Franchise Agreement (hereinafter defined) shall not have been terminated as a
result of such damage or destruction and the Franchise Agreement shall continue
in full force and effect notwithstanding such damage or destruction; (iv)
Mortgagee determines that the income of the Mortgaged Property, after
restoration and repair of the Mortgaged Property to the condition required under
paragraph 4(e) above, will be sufficient to meet all operating costs and other
expenses, payments for reserves and loan repayment obligations relating to the
Mortgaged Property; (v) Mortgagee determines that restoration and repair of the
Mortgaged Property to the condition required under paragraph 4(e) above will be
completed within the greater of (A) three (3) months or (B) the period of time
covered by the business interruption insurance, if any, then in effect from the
date of the loss or casualty to the Mortgaged Property; and (vi) Mortgagee shall
have received evidence reasonably satisfactory to it that during the period of
restoration and repair of the Mortgaged Property to the condition required under
subparagraph 4(e) above, the sum of (A) income derived from the Mortgaged
Property, as reasonably determined by Mortgagee, plus (B) proceeds of business
interruption insurance, if any, to be paid, plus (C) amounts that Mortgagor
demonstrates to Mortgagee's reasonable satisfaction will be made available by
Mortgagor from other sources during such period will equal or exceed the sum of
(D) expenses in connection with the operation of the Mortgaged Property and (E)
the debt service under the Note.
5. Payment of Taxes, etc.
---------------------
(a) All taxes, assessments and water and sewer rents, now or
hereafter levied or assessed or imposed against the Mortgaged Property or any
part thereof (the "Taxes"") shall be paid when due in the manner provided in
-----
paragraph 6 of this Mortgage. Mortgagor shall pay all ground rents, maintenance
charges, other governmental impositions, and other charges,
-5-
<PAGE>
including without limitation vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Mortgaged Property, now or
hereafter levied or assessed or imposed against the Mortgaged Property or any
part thereof (the "Other Charges") as the same become due and payable. Mortgagor
-------------
will deliver to Mortgagee, promptly upon Mortgagee's request, tax certificates
or receipted tax bills issued by the relevant taxing authority or other evidence
satisfactory to Mortgagee that the Taxes and Other Charges have been so paid or
are not then delinquent. Mortgagor shall not suffer and shall promptly cause to
be paid or discharged any lien or charge whatsoever which may be or become a
lien or charge against the Mortgaged Property, and shall promptly pay for all
utility services provided to the Mortgaged Property. Mortgagor shall furnish to
Mortgagee or its designee receipts for the payment of Taxes and Other Charges
prior to the date the same shall become delinquent.
(b) Mortgagor, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any of
the Taxes or Other Charges, provided that (i) Mortgagor is not in default under
the Note, this Mortgage or any other Loan Document, (ii) such proceeding shall
be permitted under and be conducted in accordance with the provisions of any
other instrument to which Mortgagor is subject and shall not constitute a
default thereunder, (iii) neither the Mortgaged Property nor any part thereof or
interest therein will be in danger of being sold, forfeited, terminated,
cancelled or lost, (iv) Mortgagor shall have paid the Taxes under protest or set
aside adequate reserves for the payment of the Taxes or Other Charges, together
with all interest and penalties thereon and (v) Mortgagor shall have furnished
such security as may be required in the proceeding, or as may be requested by
Mortgagee to insure the payment of any such Taxes or Other Charges, together
with all interest and penalties thereon.
(c) Upon demand by Mortgagee, Mortgagor, at Mortgagor's sole cost
and expense, shall contest any increase in any assessment for the Mortgaged
Property with respect to Taxes or Other Charges or seek a reduction in such
assessment in the event of a casualty, condemnation or other event which could
result in a reduction of the assessment with respect to Taxes or Other Charges
for the Mortgaged Property by instituting, or causing to be instituted, a
proceeding to reduce such assessment, conducted in accordance with the
recognized procedure therefore (a "Tax Appeal"). If, after demand by Mortgagee,
----------
Mortgagor shall fail to commence a Tax Appeal, Mortgagee shall be
entitled, at its option, to commence, appear in and prosecute any Tax Appeal
either in its own name or in the name of Mortgagor, for which Mortgagee is
hereby appointed as attorney-in-fact for Mortgagor, which appointment, being for
security and coupled with an interest, is irrevocable. If no Event of Default
under this Mortgage or any other Loan Document shall have occurred and be
continuing, Mortgagor shall be entitled to participate with Mortgagee in the
settlement or compromise of any claim in connection with any such Tax Appeal.
Upon the occurrence of an Event of Default and the continuance thereof,
Mortgagee shall be entitled to make any compromise or settlement in connection
with any such Tax Appeal without the participation of Mortgagor. All such
refunds, compensation, awards, damages, rights of action and proceeds awarded to
Mortgagor, less the reasonable costs and expenses incurred by Mortgagor in
prosecuting such Tax Appeal (the "Refund Proceeds") are hereby assigned to
---------------
Mortgagee as additional security for the
-6-
<PAGE>
payment of Taxes and Other Charges as they become due. Upon the occurrence of an
Event of Default and the continuance thereof, Mortgagee shall be entitled to
apply the Refund Proceeds to the repayment of the Debt in such order and in such
amount as Mortgagee may determine. If there are any excess Refund Proceeds after
repayment of the Debt, Mortgagee shall pay such excess Refund Proceeds to
Mortgagor.
6. Escrow Fund. (a) Mortgagor shall, on the first day of each calendar
-----------
month, pay to Mortgagee one--twelfth (1/12th) of an amount which would be
sufficient to pay the Taxes payable, or estimated by Mortgagee to be payable,
during the next twelve (12) months and also provide for an additional reserve
equal to one-sixth (1/6th) of the Taxes payable (said amounts being hereinafter
called the "Tax Escrow Fund.")
---------------
(b) The Tax Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Note, shall be added together and shall be paid as
an aggregate sum by Mortgagor to Mortgagee. Mortgagor hereby pledges to
Mortgagee any and all monies now or hereafter deposited in the Tax Escrow Fund
as additional security for the payment of the Debt. Mortgagee will apply the Tax
Escrow Fund to payments of Taxes to be made by Mortgagor pursuant to paragraph 5
hereof. If the amount of the Tax Escrow Fund shall exceed the amounts due for
Taxes pursuant to paragraph 5 hereof, Mortgagee shall, in its discretion, return
any excess to Mortgagor or credit such excess against future payments to be made
to the Tax Escrow Fund. In allocating such excess, Mortgagee may deal with the
person shown on the records of Mortgagee to be the owner of the Mortgaged
Property. If the balance in the Tax Escrow Fund on the first day of the month
which is one full month prior to the due date of any Taxes is not sufficient to
pay the Taxes, Mortgagor shall pay to Mortgagee, upon demand, an amount which
Mortgagee shall estimate as sufficient to make up the deficiency. Upon the
occurrence of an Event of Default, Mortgagee may apply any sums then present in
the Tax Escrow Fund to the payment of the following items in any order in its
sole discretion:
(i) Taxes and Other Charges;
(ii) Interest on the unpaid principal balance of the Note;
(iii) Amortization of the unpaid principal balance of the Note; or
(iv) All other sums payable pursuant to the Note, this Mortgage and
the other Loan Documents, including without limitation, advances made by
Mortgagee pursuant to the terms of this Mortgage.
(c) Until expended or applied as above provided, any amounts in the
Tax Escrow Fund shall constitute additional security for the Debt. The Tax
Escrow Fund shall not constitute a trust fund and may be commingled with other
monies held by Mortgagee. No earnings or interest on the Tax Escrow Fund shall
be paid to Mortgagor, unless applicable law requires interest on the Tax Escrow
Fund to be paid to Mortgagor. Any such required interest shall be deposited in
the Tax Escrow Fund as additional security for the payment of the Debt.
-7-
<PAGE>
7. Condemnation.
------------
(a) Mortgagor shall promptly give Mortgagee written notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Mortgagee copies of any and all papers served in
connection with such proceedings. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Mortgagor shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note, this Mortgage and the other Loan
Documents and the Debt shall not be reduced until any award or payment therefor
shall have been actually received after expenses of collection and applied by
Mortgagee to the discharge of the Debt. Mortgagee shall not be limited to the
interest paid on the award by the condemning authority but shall be entitled to
receive out of the award interest at the rate or rates provided herein and in
the Note. Mortgagor shall cause the award or payment made in any condemnation or
eminent domain proceeding, which is payable to Mortgagor, to be paid directly to
Mortgagee. Sums paid to Mortgagee for such condemnation or action of eminent
domain, after deduction of Mortgagee's reasonable costs and expenses of
collection (after such deduction, the "Condemnation Proceeds"), shall be
---------------------
retained and (i) applied by Mortgagee toward payment of the Debt in such
priority and proportions as Mortgagee in its discretion shall deem proper (any
such application for repayment to be without any prepayment consideration,
except that if any Event of Default, or an event that with notice and/or the
passage of time, or both, would constitute an Event of Default, has occurred,
then such application shall be subject to the prepayment consideration computed
in accordance with the Note), or (ii) if the conditions set forth in paragraph
7(c) of this Mortgage are satisfied, as determined by Mortgagee in its sole
discretion, paid to Mortgagor for the restoration and repair of the Mortgaged
Property in accordance with paragraph 7(b) of this Mortgage in whole or in such
lesser amount as is necessary to pay for the costs of such restoration and
repair. If the Mortgaged Property is sold pursuant to paragraph 29 of this
Mortgage or if Mortgagee acquires title to the Mortgaged Property, Mortgagee
shall have all of the right, title and interest of Mortgagor in and to any
Condemnation Proceeds resulting from any condemnation or eminent domain
proceeding of the Mortgaged Property prior to such sale or acquisition.
(b) If the Condemnation Proceeds are held by Mortgagee to reimburse
Mortgagor for the cost of restoration and repair of the Mortgaged Property, (i)
the Mortgaged Property shall be substantially restored to the equivalent of its
condition prior to such condemnation or to such other condition as Mortgagee may
approve in writing, (ii) such restoration and repair shall be done in compliance
with all applicable laws, rules and regulations, and (iii) all reasonable costs
and expenses incurred by Mortgagee in connection with making the Condemnation
Proceeds available for such restoration and repair including, without
limitation, counsel fees and inspecting engineers' fees incurred by Mortgagee,
shall be paid by Mortgagor. Mortgagee may, at Mortgagee's option, condition
disbursement of said proceeds on Mortgagee's approval of such plans and
specifications of an architect reasonably satisfactory to Mortgagee,
contractor's cost estimates, architect's certificates, waivers of liens, sworn
statements of mechanics and material men and such other evidence of costs,
percentage
-8-
<PAGE>
completion of construction, application of payments, and satisfaction of liens
as Mortgagee may reasonably require. If the Condemnation Proceeds are applied to
the payment of the Debt, any such application of proceeds to principal shall not
extend or postpone the maturity date of the Note or change the amount or the due
date of any installment payment under the Note. Any surplus Condemnation
Proceeds, after payment of the Debt, shall be paid to Mortgagor. If the
Mortgaged Property is sold pursuant to paragraph 29 of this Mortgage or if
Mortgagee acquires title to the Mortgaged Property, Mortgagee shall have all of
the right, title and interest of Mortgagor in and to any Condemnation Proceeds
resulting from any condemnation or eminent domain proceeding of the Mortgaged
Property prior to such sale or acquisition.
(c) Mortgagee shall not exercise Mortgagee's option to apply
Condemnation Proceeds to the payment of the sums secured by this Mortgage if all
the following conditions are met, as determined by Mortgagee in its sole
discretion: (i) no Event of Default is then continuing under this Mortgage, the
Note or any other Loan Document; (ii) Mortgagee determines that there will be
sufficient funds (whether consisting of Condemnation Proceeds and/or other sums
made available by Mortgagor for restoration) to restore and repair the Mortgaged
Property to the condition required under paragraph 7(b) above; (iii) the
Franchise Agreement shall not have been terminated as a result of such
condemnation or eminent domain proceeding and the Franchise Agreement shall
continue in full force and effect notwithstanding such condemnation or eminent
domain proceeding; (iv) Mortgagee determines that the income of the Mortgaged
Property, after restoration and repair of the Mortgaged Property to the
condition required under paragraph 7(b) above, will be sufficient to meet all
operating costs and other expenses, payments for reserves and loan repayment
obligations relating to the Mortgaged Property; (v) Mortgagee determines that
restoration and repair of the Mortgaged Property to the condition required under
paragraph 7(b) above will be completed within the greater of (A) three (3)
months or (B) the period of time covered by the business interruption insurance,
if any, then in effect from the date of the loss or casualty to the Mortgaged
Property; and (vi) Mortgagee shall have received evidence reasonably
satisfactory to it that during the period of restoration and repair of the
Mortgaged Property to the condition required under subparagraph 7(b) above, the
sum of (A) income derived from the Mortgaged Property, as reasonably determined
by Mortgagee, plus (B) proceeds of business interruption insurance, if any, to
be paid, plus (C) amounts that Mortgagor demonstrates to Mortgagee's reasonable
satisfaction will be made available by Mortgagor from other sources during such
period will equal or exceed the sum of (D) expenses in connection with the
operation of the Mortgaged Property and (E) the debt service under the Note.
-9-
<PAGE>
8. Subleases and Rents.
-------------------
(a) Mortgagor does hereby absolutely and unconditionally assign to
Mortgagee its right, title and interest in all current and future Subleases and
Rents, it being intended by Mortgagor that this assignment constitutes a
present, absolute assignment and not an assignment for additional security only.
Such assignment to Mortgagee shall not be construed to bind Mortgagee to the
performance of any of the covenants, conditions or provisions contained in any
such Sublease or otherwise to impose any obligation upon Mortgagee. Mortgagor
agrees to execute and deliver to Mortgagee such additional instruments, in form
and substance reasonably satisfactory to Mortgagee, as may hereafter be
requested by Mortgagee to further evidence and confirm such assignment.
Nevertheless, subject to the terms of this paragraph 8, Mortgagee grants to
Mortgagor a revocable license to operate and manage the Mortgaged Property and
to collect the Rents. Mortgagor shall hold the Rents, or a portion thereof
sufficient to discharge all current sums due on the Debt, in trust for the
benefit of Mortgagee for use in the payment of such sums. Upon an Event of
Default, the license granted to Mortgagor herein shall be automatically revoked
and Mortgagee shall immediately be entitled to possession of all Rents, whether
or not Mortgagee enters upon or takes control of the Mortgaged Property.
Mortgagee is hereby granted and assigned by Mortgagor the right, at its option,
upon the revocation of the license granted herein to enter upon the Mortgaged
Property in person, by agent or by court-appointed receiver to collect the
Rents. Any Rents collected after the revocation of the license herein granted
may be applied toward payment of the Debt in such priority and proportion as
Mortgagee in its discretion shall deem proper.
(b) Upon request, Mortgagor shall furnish Mortgagee with copies of
all Subleases and all amendments or modifications of any Sublease. All Subleases
shall provide that each such Sublease is subordinate to this Mortgage and that
the sublessee agrees to attorn to Mortgagee. Mortgagor (i) shall observe and
perform all the obligations imposed upon the sublessor under the Subleases and
shall not do or permit to be done anything to impair the value of the Subleases
as security for the Debt; (ii) shall upon request by Mortgagee, send Mortgagee
copies of all notices of default sent or received by Mortgagee under the
Subleases; (iii) shall enforce all of the terms, covenants and conditions
contained in the Subleases on the part of the sublessee thereunder to be
observed or performed; (iv) shall not collect any of the Rents more than one (1)
month in advance (except with respect to collection of the final month's rent as
security); (v) shall not execute any other assignment of sublessor's interest in
the Subleases or the Rents; and (vi) shall execute and deliver at the request of
Mortgagee all such further assurances, confirmations and assignments in
connection with the Mortgaged Property as Mortgagee shall from time to time
require.
(c) Mortgagor shall not, without the prior written consent of
Mortgagee (i) amend or modify any Sublease, (ii) execute a new Sublease, (iii)
permit use of the demised premises under any Sublease for use or uses other than
quick service restaurant use; or (iv) terminate, cancel or accept a surrender of
any Sublease.
9. Maintenance of Mortgaged Property. Mortgagor shall cause the Mortgaged
---------------------------------
Property to be maintained in a good and safe condition and repair. The
Improvements and the
-10-
<PAGE>
Equipment shall not be removed, demolished or materially altered (except for
normal replacement of the Equipment) without the written consent of Mortgagee.
Mortgagor shall promptly comply with all laws, orders and ordinances affecting
the Mortgaged Property and the use thereof. Mortgagor shall promptly repair,
replace or rebuild any part of the Mortgaged Property that (i) is damaged or
destroyed by any casualty (subject to the provisions of paragraph 4 hereof),
(ii) becomes damaged, worn or dilapidated, or (iii) is affected by any
proceeding of the character referred to in paragraph 7 hereof (subject to the
provision of such paragraph 7) and Mortgagor shall complete and pay for any
structure at any time in the process of construction, renovation or repair on
the Property. Mortgagor shall not initiate, join in, acquiesce in, or consent to
any change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Mortgaged Property or any part thereof. If under applicable zoning provisions
the use of all or any portion of the Mortgaged Property is or shall become a
nonconforming use, Mortgagor will not cause or permit such nonconforming use to
be discontinued or abandoned without the express written consent of Mortgagee.
10. Transfer or Encumbrance of the Mortgaged Property.
-------------------------------------------------
(a) Mortgagor acknowledges that Mortgagee has examined and relied on
the creditworthiness of Mortgagor and experience of Mortgagor in owning and
operating properties such as the Mortgaged Property in agreeing to make the Loan
secured hereby, and that Mortgagee will continue to rely on Mortgagor's
ownership of the Mortgaged Property as a means of maintaining the value of the
Mortgaged Property as security for repayment of the Debt. Mortgagor acknowledges
that Mortgagee has a valid interest in maintaining the value of the Mortgaged
Property so as to ensure that, should Mortgagor default in the repayment of the
Debt, Mortgagee can recover the Debt by a sale of the Mortgaged Property.
Mortgagor shall not, without the prior written consent of Mortgagee, sell,
convey, alien, lease, mortgage, encumber, pledge or otherwise transfer the
Mortgaged Property or any part thereof, or permit the Mortgaged Property or any
part thereof to be sold, conveyed, aliened, leased, mortgaged, encumbered,
pledged or otherwise transferred (any of the foregoing, a "Transfer").
--------
(b) A Transfer of the Mortgaged Property within the meaning of this
paragraph 10 shall be deemed to include:
(i) an installment sales agreement wherein Mortgagor agrees to sell
the Mortgaged Property or any part thereof for a price to be paid in
installments;
(ii) an agreement by Mortgagor selling, leasing, subleasing,
assigning or otherwise transferring all or a substantial part of the
Mortgaged Property, or a sale, assignment or other transfer of, or the
grant of a security interest in, Mortgagor's right, title and interest in
and to any Subleases or any Rents; and
(iii) any voluntary or involuntary Transfer of a Control Individual's
(hereinafter defined) Controlling Interests (hereinafter defined) or any
voluntary or involuntary
-11-
<PAGE>
event whereby a Control Individual's Controlling Interests are diluted or his
or her Control over Mortgagor is otherwise diminished.
(c) Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Mortgagor's Transfer of the
Mortgaged Property without Mortgagee's consent; this provision shall apply to
every Transfer of the Mortgaged Property regardless of whether voluntary or not,
or whether or not Mortgagee has consented to any previous Transfer of the
Mortgaged Property.
(b) For purposes of this paragraph 10, the following terms shall have
the following meanings: "Control" when used with respect to Mortgagor means the
power to direct the respective management and policies of Mortgagor, directly or
indirectly, whether through the ownership of voting securities, membership
interests, partnership interests or any other beneficial interest, by contract
or otherwise, whether acting alone or with others, but an individual does not
have "Control" if he or she has only the right to take those actions that a
limited partner may take without participating in the business of a limited
partnership, as set forth in Article ______ of the Uniform Limited Partnership
Law of the State of __________, the terms "Controlling" and "Controlled" shall
have the meanings correlative to the foregoing; "Control Individual" shall mean
any one of ______________ or ________________; "Controlling Interests" shall
mean those beneficial interests or contract rights in or with respect to the
Mortgagor (or any entity that has a direct or indirect beneficial interest in
Mortgagor) that give a Control Individual his or her Control over Mortgagor;
"Non-controlling Interests" shall mean any beneficial interests in Mortgagor (or
any entity that has a direct or indirect beneficial interest in the Mortgagor)
that are not Controlling Interests and shall include, without limitation,
limited partnership interests.
11. Estoppel Certificates and No Default Affidavits.
-----------------------------------------------
(a) After request by Mortgagee, Mortgagor shall within ten (10) days
furnish Mortgagee with a statement, duly acknowledged and certified, setting
forth (i) the amount of the original principal amount of the Note, (ii) the
unpaid principal amount of the Note, (iii) the rate of interest of the Note,
(iv) the date installments of interest and/or principal were last paid, (v) any
offsets or defenses to the payment of the Debt, if any and (vi) that the Note
and this Mortgage are valid, legal and binding obligations and have not been
modified or if modified, giving the particulars of such modification.
(b) Within ten (10) days after request by Mortgagee, Mortgagor will
request sublessees under the Subleases to furnish Mortgagee with estoppel
certificates as required by such sublessees' respective Sublease and Mortgagor
will use diligent efforts to obtain such estoppel certificates.
12. Changes in the Laws Regarding Taxation. If any law is enacted or
--------------------------------------
adopted or amended after the date of this Mortgage which deducts the Debt from
the value of the Mortgaged Property for the purpose of taxation or which imposes
a tax, either directly or
-12-
<PAGE>
indirectly, on the Debt or Mortgagee's interest in the Mortgaged Property,
Mortgagor will pay such tax, with interest and penalties thereon, if any. In the
event Mortgagee is advised by counsel chosen by it that the payment of such tax
or interest and penalties by Mortgagor would be unlawful or taxable to Mortgagee
or unenforceable or provide the basis for a defense of usury, then in any such
event, Mortgagee shall have the option, by written notice of not less than
ninety (90) days, to declare the Debt immediately due and payable.
13. No Credits on Account of the Debt. Mortgagor will not claim or demand
---------------------------------
or be entitled to any credit or credits on account of the Debt for any part of
the Taxes or Other Charges assessed against the Mortgaged Property, or any part
thereof, and no deduction shall otherwise be made or claimed from the assessed
value of the Mortgaged Property, or any part thereof, for real estate tax
purposes by reason of this Mortgage or the Debt. In the event such claim, credit
or deduction shall be required by law, Mortgagee shall have the option, by
written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
14. Documentary Stamps. If at any time the United States of America, the
------------------
State of ______________ or any subdivision thereof shall require revenue or
other stamps to be affixed to the Note or this Mortgage, or impose any other tax
or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
15. Usury Laws. This Mortgage and the Note are subject to the express
----------
condition that at no time shall Mortgagor be obligated or required to pay
interest on the Debt at a rate which could subject Mortgagee to either civil or
criminal liability as a result of being in excess of the maximum interest rate
which Mortgagor is permitted by law to contract or agree to pay. If by the
terms of this Mortgage or the Note, Mortgagor is at any time required or
obligated to pay interest on the Debt at a rate in excess of such maximum rate,
the rate of interest under the same shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all previous payments in excess of such maximum rate shall be deemed to
have been payments in reduction of the principal and not on account of the
interest due hereunder.
16. Performance of Franchise Agreement and Lease; Security Agreement
----------------------------------------------------------------
(a) Mortgagor will duly comply with the terms and conditions of the
franchise agreement, dated ____________, 199__, between AFC Enterprises, Inc.,
as franchisor, and mortgagor, as franchisee (the "Franchise Agreement") and will
-------------------
faithfully perform all of its obligations under the Franchise Agreement and
promptly cure any default by it under any of the provisions thereof. Mortgagor
shall promptly send to Mortgagee a true and correct copy of any notice, report,
certificate or other communication that Mortgagor is obligated to deliver under
the Franchise Agreement.
(b) Mortgagor will comply with the terms and provisions of the Lease
and will faithfully perform all of its obligations under the Lease and promptly
cure any default by it under any of the provisions thereof. Mortgagor shall
promptly send to Mortgagee a true and
-13-
<PAGE>
correct copy of any notice, report, certificate or other communication that
Mortgagor is obligated to deliver in connection with the Lease.
(c) Mortgagor hereby assigns and transfers to Mortgagee and creates a
security interest in all of Mortgagor's right, title and interest in and to the
consideration, in whatever form delivered, for the sale, transfer or conveyance
of Mortgagor's interest in the Franchise Agreement and the Lease.
17. Performance of Other Agreements. Mortgagor shall observe and perform
-------------------------------
each and every term to be observed or performed by Mortgagor pursuant to the
terms of any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property.
18. Books and Records; Financial Statements; Financial Covenants.
------------------------------------------------------------
(a) Mortgagor shall keep adequate books and records of account in
accordance with generally accepted accounting principles consistently applied
and shall furnish to Mortgagee (i) within sixty (60) days after the end of each
second (2/nd/) and fourth (4/th/) fiscal quarter of Mortgagor, semiannual
internally-prepared financial statements, certified by the chief financial
officer of Mortgagor; (ii) within ninety (90) days after the end of each fiscal
year of Mortgagor, (x) annual internally-prepared financial statements,
certified by the chief financial officer of Mortgagor, and (y) a certificate,
executed by a financial officer of Mortgagor acceptable to Mortgagee, as to the
absence of any default or Event of Default hereunder or under any other Loan
Document or under the Franchise Agreement; (iii) copies of Mortgagor's federal
tax returns (together with any extension filed) within fifteen (15) days after
filing of same but in no event later than April 30 of each year; (x) and (iv)
such other financial information with respect to Mortgagor, Guarantor
(hereinafter defined) or the Mortgaged Property at may be reasonably requested
by Mortgagee from time to time.
(b) Mortgagor shall cause each of ______________ and ____________
(collectively, "Guarantor") to furnish to Mortgagee (i) within thirty (30) days
---------
after the end of each calendar year, updated annual financial statements in form
similar to that previously provided to Mortgagee; (ii) copies of their federal
tax returns (together with any extensions filed) within fifteen (15) days after
filing of same but in no event later than April 30 of each year; and (iii) such
other financial information with respect to Guarantor as may be reasonably
requested by Mortgagee from time to time.
(c) Mortgagor shall promptly provide Mortgagee with written notice of
any pending or threatened litigation against Mortgagor or any Guarantor or the
commencement of any proceedings or investigations by any governmental or
regulatory agency involving Mortgagor or any Guarantor.
(d) Mortgagor shall maintain a Minimum Cash Flow Coverage Ratio of
not less than ______ for each fiscal year of Mortgagor. The term "Minimum Cash
------------
Flow Coverage Ratio" shall be calculated annually and shall mean:
- -------------------
-14-
<PAGE>
Cash Flow Before Debt Service
-----------------------------
Debt Service
For purposes of this paragraph 18(d), "Cash Flow Before Debt Service"shall
-----------------------------
mean annual operating income of the Mortgaged Property plus depreciation,
amortization and interest expense. "Debt Service" shall mean the total required
------------
annual principal and interest payments under the Note.
(e) Any and all debt incurred by Mortgagor to its shareholders, officers,
partners, members and/or affiliates shall be incurred only with Mortgagee's
prior written consent and Mortgagor shall cause any such debt approved by
Mortgagee to be expressly subordinated to the Debt.
(f) At any time while all or any portion of the Debt remains outstanding,
Mortgagor shall not, directly or indirectly, convey, transfer or assign any
property or asset of any nature, whether real property, personal property or
mixed, tangible or intangible, or any interest therein, without the prior
written consent of Mortgagee, and any such conveyance, transfer or assignment
shall occur solely in the ordinary course of Mortgagor's business.
(g) At any time while all or any portion of the Debt remains outstanding,
Mortgagor shall not, directly or indirectly, (i) make any loans to any partners,
shareholders, officers, members or affiliates of Mortgagor, nor guarantee any
indebtedness of any such party without the prior written consent of Mortgagee;
or (ii) make any advances or distributions to Mortgagor or any partners,
shareholders, officers, members or affiliates of Mortgagor.
(h) At any time while all or any portion of the Debt remains outstanding,
Mortgagor shall not enter into any additional Indebtedness (hereinafter defined)
nor guarantee any additional Indebtedness, without the prior written consent of
Mortgagee, other than (i) unsecured Indebtedness constituting trade debt and
(ii) other Indebtedness incurred in the ordinary course of business in
connection with the ownership, management and operation of the Mortgaged
Property.
19. Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and
------------------
without expense to Mortgagee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignment, transfers and assurances as Mortgagee shall, from time to time,
require, for the better assuring, conveying, assigning, transferring, and
confirming unto Mortgagee the property and rights hereby mortgaged, given,
granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged,
assigned and hypothecated or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee,
or for carrying out the intention or facilitating the performance of the terms
of this Mortgage or for filing, registering or recording this Mortgage.
Mortgagor, on demand, will execute and deliver and hereby authorizes Mortgagee
to execute in the name of Mortgagor or without the signature of Mortgagor to the
extent Mortgagee may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Mortgagee in the Mortgaged Property. Mortgagor grants to Mortgagee
an irrevocable power of attorney
-15-
<PAGE>
coupled with an interest for the purpose of exercising and perfecting any and
all rights and remedies available to Mortgagee at law and in equity, including
without limitation such rights and remedies available to Mortgagee pursuant to
this paragraph 19.
20. Trust Fund. Mortgagor shall receive the advances secured hereby and
----------
shall hold the right to receive the advances as a trust fund to be applied first
for the purpose of paying the cost of any improvement and shall apply the
advances first to the payment of the cost of any such improvement on the
Mortgaged Property before using any part of the total of the same for any other
purpose.
21. Recording of Mortgage, etc. Mortgagor forthwith upon the execution and
--------------------------
delivery of this Mortgage and thereafter, from time to time, will cause this
Mortgage, and any security instrument creating a lien or security interest or
evidencing the lien hereof upon the Mortgaged Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to protect the lien or security interest hereof upon, and
the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all federal, state, county
and municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property or any instrument of further assurance, except where prohibited by law
so to do. Mortgagor shall hold harmless and indemnify Mortgagee, its successors
and assigns, against any liability incurred by reason of the imposition of any
tax on the making and recording of this Mortgage.
22. Prepayment. The Debt may be prepaid subject to the terms of paragraph
----------
______ of the Note.
23. Events of Default. The Debt shall become immediately due and payable
-----------------
at the option of Mortgagee, without notice or demand, upon any one or more of
the following events ("Events of Default"):
-------------------
(a) if any portion of the Debt is not paid within five (5) days after
the same is due;
(b) if any of the Taxes or Other Charges is not paid when the same is
due and payable, subject to the provisions of paragraphs 5 and 6;
(c) if the Policies are not kept in full force and effect, or if the
Policies are not delivered to Mortgagee upon request;
(d) if Mortgagor violates or does not comply with any of the
provisions of paragraphs 8, 10, 16, 18(c), 18(d), 18(e), 18(f), 18(g) or 18(h);
-16-
<PAGE>
(e) if a default under the Franchise Agreement shall continue beyond
any applicable notice or grace period, or if the Franchise Agreement shall be
modified, amended, terminated, surrendered or assigned without the prior written
consent of Mortgagee;
(f) if a default by Mortgagor under the Lease shall continue beyond
any applicable notice or grace period, or if the Lease shall be modified or
amended, without the prior written consent of Mortgagee, or if the Lease shall
be terminated, surrendered or assigned;
(g) if a default by Mortgagor under any Sublease shall continue
beyond any applicable notice or grace period, or if any Sublease shall be
modified, amended, terminated, surrendered or assigned by Mortgagor, without the
prior written consent of Mortgagee;
(h) if the Mortgaged Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real estate taxes and
assessments not then due and payable and such lien shall remain undischarged of
record (by payment, bonding or otherwise) for a period of thirty (30) calendar
days after the filing of such lien;
(i) if Mortgagor fails to cure promptly any violations of laws or
ordinances affecting the Mortgaged Property and such failure continues for a
period of thirty (30) calendar days after Mortgagor's receipt of notice thereof;
(j) if any representation or warranty of Mortgagor or any Guarantor,
made herein or in the Environmental Indemnity Agreement, dated as of the date
hereof, made by Mortgagor and Guarantor, jointly and severally, for the benefit
of Mortgagee (the "Environmental Indemnity Agreement"), or by any Guarantor in
---------------------------------
the Guarantee of Payment and Performance, dated as of the date hereof, made by
Guarantor for the benefit of Mortgagee (the "Guarantee"), or in any certificate,
----------
report, financial statement or other instrument or document furnished to
Mortgagee by Mortgagor or any Guarantor shall have been false or misleading in
any material respect when made;
(k) if Mortgagor or any Guarantor shall make an assignment for the
benefit of creditors or if Mortgagor or any Guarantor shall generally not be
paying its debts as they become due;
(l) if a receiver, liquidator or trustee of Mortgagor or any
Guarantor shall be appointed or if Mortgagor or any Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced
in by, Mortgagor or any Guarantor or if any proceeding for the dissolution or
liquidation of Mortgagor or any Guarantor shall be instituted; however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Mortgagor or any Guarantor, upon the same not being discharged,
stayed or dismissed within sixty (60) days;
-17-
<PAGE>
(m) If Mortgagor or any Guarantor shall be in default (beyond any
applicable grace period) in the payment of any amount of any Indebtedness
(hereinafter defined) other than the Debt; or if Mortgagor or any Guarantor
shall default (beyond any applicable grace period) in the performance of any
agreement under which such Indebtedness is created or evidenced, if the effect
of such default is to cause, or permit the holder of such Indebtedness to cause,
such Indebtedness to become due prior to its stated maturity. The term
"Indebtedness" shall mean, as at any date (i) all indebtedness of Mortgagor or
- -------------
any Guarantor for borrowed money or for the deferred purchase price of property
or services (except such indebtedness the existence of which is being contested
by Mortgagor or any Guarantor in good faith and by appropriate action); (ii) all
obligations of Mortgagor or any Guarantor evidenced by bonds, debentures, notes
or other similar instruments; (iii) all obligations under leases which shall
have been or should be, in accordance with generally accepted accounting
principles consistently applied, recorded as capital leases of which Mortgagor
or any Guarantor is liable as lessee (except such obligations the existence of
which is being contested by Mortgagor or any Guarantor in good faith and by
appropriate action); (iv) any Guaranteed Indebtedness (hereinafter defined); and
(v) any other indebtedness required to be recorded as indebtedness on the
financial statements of Mortgagor or any Guarantor in accordance with generally
accepted accounting principles consistently applied. The term "Guaranteed
----------
Indebtedness" shall mean any indebtedness which is guaranteed directly or
- ------------
indirectly in any manner by Mortgagor or any Guarantor, or in effect guaranteed
directly or indirectly in any manner by Mortgagor or any Guarantor;
(n) (i) if Mortgagor or any Control Individual shall engage in any
"prohibited transaction" (as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended from time to time ("ERISA") or Section
-----
4975 of the Internal Revenue Code of 1986, as amended from time to time (the
"Code") involving any employee benefit plan covered by ERISA (a "Plan"), (ii)
---- ----
any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall occur with respect to any Plan or any lien in favor
of the Pension Benefit Guaranty Corporation ("PBGC") or a Plan shall arise on
----
the assets of Mortgagor or any Control Individual, or (iii) a "reportable event"
(as defined in Section 4043(b) of ERISA) shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Plan, which reportable event or
commencement of proceedings or appointment of a trustee is, in the reasonable
opinion of Mortgagee, likely to result in the termination of such Plan for
purposes of Title IV of ERISA;
(o) if one or more judgments or decrees shall be entered against
Mortgagor or any Guarantor involving an aggregate liability (not paid or fully
covered by insurance) of $____________ or more, and any such judgment or decree
shall not have been vacated, discharged, stayed or bonded pending appeal within
thirty (30) days from the entry thereof;
(p) Mortgagor shall be in default beyond any applicable notice and
cure period under any other term, covenant or condition of the Note, this
Mortgage or any of the other Loan Documents; or
-18-
<PAGE>
(q) if at any time while this Mortgage is of record _____________
and ____________ shall fail to own in the aggregate one hundred percent (100%)
of the ownership interests in Mortgagor or shall cease to have sole
responsibility for the day-to-day management and Control of Mortgagor.
24. Default Interest. Upon the occurrence of any Event of Default,
----------------
Mortgagor shall pay interest on the unpaid principal balance of the Note at the
Default Rate (as defined in the Note). The Default Rate shall be computed from
the occurrence of the Event of Default until the actual receipt and collection
of the Debt. This charge shall be added to the Debt, and shall be deemed secured
by this Mortgage. This clause, however, shall not be construed as an agreement
or privilege to extend the date of the payment of the Debt, nor as a waiver of
any other right or remedy accruing to Mortgagee by reason of the occurrence of
any Event of Default. If the Default Rate is above the maximum rate permitted by
applicable law, the Default Rate shall be the maximum rate permitted by
applicable law.
25. Right to Cure Defaults. Upon the occurrence of any Event of Default or
----------------------
if Mortgagor fails to make any payment or to do any act as herein provided,
Mortgagee may, but without any obligation to do so and without notice to or
demand on Mortgagor and without releasing Mortgagor from any obligation
hereunder, make or do the same in such manner and to such extent as Mortgagee
may deem necessary to protect the security hereof. Mortgagee is authorized to
enter upon the Mortgaged Property for such purposes or appear in, defend, or
bring any action or proceeding to protect its interest in the Mortgaged Property
or to foreclose this Mortgage or collect the Debt, and the reasonable cost and
expense thereof (including reasonable attorneys' fees to the extent permitted by
law and any appraisal fees), with interest calculated at the Default Rate, shall
constitute a portion of the Debt and shall be secured by this Mortgage and the
other Loan Documents and shall be due and payable to Mortgagee upon demand. All
such costs and expenses incurred by Mortgagee in remedying such Event of Default
or in appearing in, defending, or bringing any such action or proceeding shall
bear interest at the Default Rate, for the period after notice from Mortgagee
that such cost or expense was incurred to the date of payment of Mortgagee.
26. Late Payment Charge. If any portion of the Debt is not paid within
-------------------
fifteen (15) calendar days after the date on which it is due, Mortgagor shall
pay to Mortgagee upon demand a late charge equal to the lesser of two percent
(2%) of such unpaid portion of the Debt or the maximum amount permitted by
applicable law, to defray the expense incurred by Mortgagee in handling and
processing such delinquent payment and to compensate Mortgagee for the loss of
the use of such delinquent payment, and such amount shall be secured by this
Mortgage.
27. Prepayment After Event of Default. If following the occurrence of any
---------------------------------
Event of Default, Mortgagor shall tender payment of an amount sufficient to
satisfy the Debt at any time prior to a sale of the Mortgaged Property either
through foreclosure or the exercise of other remedies available to Mortgagee
under this Mortgage, such tender by Mortgagor shall be deemed to be a voluntary
prepayment under the Note and this Mortgage in the amount
-19-
<PAGE>
tendered, and Mortgagor shall, in addition to the entire Debt, also pay to
Mortgagee the applicable prepayment consideration specified in paragraph ___ of
the Note.
28. Right of Entry. Mortgagee and its agents shall have the right to enter
--------------
and inspect the Mortgaged Property at all reasonable times.
29. Remedies.
--------
(a) Upon the occurrence of any Event of Default, Mortgagee may take
such action, without notice or demand, as it deems advisable to protect and
enforce its rights against Mortgagor and in and to the Mortgaged Property,
including, but not limited to, the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such order as Mortgagee
may determine, in its sole discretion, without impairing or otherwise affecting
the other rights and remedies of Mortgagee:
(i) declare the entire Debt to be immediately due and payable;
(ii) institute proceedings for the complete foreclosure of this
Mortgage, in which case the Mortgaged Property or any interest therein may
be sold for cash or upon credit in one or more parcels or in several
interests or portions and in any order or manner;
(iii) with or without entry, to the extent permitted and pursuant to
the procedures provided by applicable law, institute proceedings for the
partial foreclosure of this Mortgage for the portion of the Debt then due
and payable, subject to the continuing lien of this Mortgage for the
balance of the Debt not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any part
thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to power of
sale or otherwise, at one or more sales, as an entity or in parcels, at
such time and place, upon such terms and after such notice thereof as may
be required or permitted by law;
(v) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein or in the Note;
(vi) recover judgment on the Note either before, during or after any
proceedings for the enforcement of this Mortgage;
(vii) apply for the appointment of a receiver of the Mortgaged
Property, without notice and without regard for the adequacy of the
security for the Debt and without regard for the solvency of the Mortgagor
or of any person, firm or other entity liable for the payment of the Debt;
(viii) enforce Mortgagee's interest in the Leases and Rents and enter
into or upon the Mortgaged Property, either personally or by its agents,
nominees or attorneys
-20-
<PAGE>
and dispossess Mortgagor and its agents and servants therefrom, and
thereupon Mortgagee may (A) use, operate, manage, control, insure,
maintain, repair, restore and otherwise deal with all and every part of the
Mortgaged Property and conduct the business thereat; (B) make alterations,
additions, renewals, replacements and improvements to or on the Mortgaged
Property; (C) exercise all rights and powers of Mortgagor with respect to
the Mortgaged Property, whether in the name of Mortgagor or otherwise,
including, without limitation, the right to make, cancel, enforce or modify
Leases, obtain and evict tenants, and demand, sue for, collect and receive
all earnings, revenues, rents, issues, profits and other income of the
Mortgaged Property and every part thereof; and (D) apply the receipts from
the Mortgaged Property to the payment of the Debt, after deducting
therefrom all reasonable expenses (including reasonable attorneys' fees)
incurred in connection with the aforesaid operations and all amounts
necessary to pay the Taxes, assessments, insurance and Other Charges in
connection with the Mortgaged Property, as well as just and reasonable
compensation for the services of Mortgagee, its counsel, agents and
employees; or
(ix) pursue such other rights and remedies as may be available at law
and in equity.
In the event of a sale, by foreclosure or otherwise, of less than all of
the Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portion of the Mortgaged Property.
(b) The proceeds of any sale made under or by virtue of this
paragraph, together with any other sums which then may be held by Mortgagee
under this Mortgage, whether under the provisions of this paragraph or
otherwise, shall be applied by Mortgagee to the payment of the Debt in such
priority and proportion as Mortgagee in its discretion shall deem proper.
(c) To the extent permitted by applicable law, Mortgagee may adjourn
from time to time any sale by it to be made under or by virtue of this Mortgage
by announcement at the time and place appointed for such sale or for such
adjourned sale or sales; and, except as otherwise provided by any applicable
provision of law, Mortgagee, without further notice or publication, may make
such sale at the time and place to which the same shall be so adjourned.
(d) Upon the completion of any sale or sales made by Mortgagee under
or by virtue of this paragraph, Mortgagee, or an officer of any court empowered
to do so, shall execute and deliver to the accepted purchaser or purchasers a
good and sufficient instrument, or good and sufficient instruments, conveying,
assigning and transferring all estate, right, title and interest in and to the
property and rights sold. Mortgagee is hereby irrevocably appointed the true and
lawful attorney of Mortgagor, in its name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the Mortgaged Property and
rights so sold and for that purpose Mortgagee may execute all necessary
instruments of conveyance, assignment and transfer, and may substitute one or
more persons with like power, Mortgagor hereby ratifying and confirming all that
its said attorney or such substitute or substitutes shall
-21-
<PAGE>
lawfully do by virtue hereof. Any such sale or sales made under or by virtue of
this paragraph shall operate to divest all the estate, right, title, interest,
claim and demand whatsoever, whether at law or in equity, of Mortgagor in and to
the properties and rights so sold, and shall be a perpetual bar both at law and
in equity against Mortgagor and against any and all persons claiming or who may
claim the same, or any part thereof from, through or under Mortgagor.
(e) Upon any sale made under or by virtue of this paragraph,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Debt the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which Mortgagee
is authorized to deduct under this Mortgage.
(f) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
30. Reasonable Use and Occupancy. In addition to the rights which
----------------------------
Mortgagee may have herein, upon the occurrence of any Event of Default,
Mortgagee, at its option, may require Mortgagor to pay monthly in advance to
Mortgagee, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the Mortgaged
Property as may be occupied by Mortgagor or may require Mortgagor to vacate and
surrender possession of the Mortgaged Property to Mortgagee or to such receiver
and, in default thereof, Mortgagor may be evicted by summary proceedings or
otherwise.
31. Security Agreement. This Mortgage is both a real property mortgage and
------------------
a "security agreement" within the meaning of the Uniform Commercial Code. The
Mortgaged Property includes both real and personal property and all other rights
and interests, whether tangible or intangible in nature, of Mortgagor in the
Mortgaged Property. Mortgagor by executing and delivering this Mortgage has
granted and hereby grants to Mortgagee, as security for the Debt, a security
interest in the Mortgaged Property to the full extent that the Mortgaged
Property may be subject to the Uniform Commercial Code (said portion of the
Mortgaged Property so subject to the Uniform Commercial Code being called in
this paragraph 30 the "Collateral"). If an Event of Default shall occur,
----------
Mortgagee, in addition to any other rights and remedies which it may have, shall
have and may exercise immediately and without demand, any and all rights and
remedies granted to a secured party upon default under the Uniform Commercial
Code, including, without limiting the generality of the foregoing, the right to
take possession of the Collateral or any part thereof, and to take such other
measures as Mortgagee may deem necessary for the care, protection and
preservation of the Collateral. Upon the request or demand of Mortgagee,
Mortgagor shall at its expense assemble the Collateral and make it available to
Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall pay to
Mortgagee on demand any and all expenses, including legal expenses and
reasonable attorneys' fees, incurred or paid by Mortgagee in protecting the
interest in the Collateral and in enforcing the rights hereunder with respect to
the Collateral. Any notice of
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<PAGE>
sale, disposition or other intended action by Mortgagee with respect to the
Collateral sent to Mortgagor in accordance with the provisions hereof at least
ten (10) days prior to such action, shall constitute commercially reasonable
notice to Mortgagor. The proceeds of any disposition of the Collateral, or any
part thereof, may be applied by Mortgagee to the payment of the Debt in such
priority and proportions as Mortgagee in its discretion shall deem proper.
32. Actions and Proceedings. Mortgagee has the right to appear in and
-----------------------
defend any action or proceeding brought with respect to the Mortgaged Property
and to bring any action or proceeding, in the name and on behalf of Mortgagor,
which Mortgagee, in its discretion, decides should be brought to protect their
interest in the Mortgaged Property. Mortgagee shall, at its option, be
surrogated to the lien of any mortgage or other security instrument discharged
in whole or in part by the Debt, and any such subrogation rights shall
constitute additional security for the payment of the Debt.
33. Waiver of Counterclaim. Mortgagor hereby waives the right to assert a
----------------------
counterclaim, other than a mandatory or compulsory counterclaim, in any action
or proceeding brought against it by Mortgagee.
34. Recovery of Sums Required to Be Paid. Mortgagee shall have the right
------------------------------------
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of
Mortgagee thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Mortgagor existing at the time such earlier action was
commenced.
35. Marshalling and Other Matters. Mortgagor hereby waives, to the extent
-----------------------------
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Mortgaged Property or any
part thereof or any interest therein. Further, Mortgagor, to the extent
permitted by law, hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage on behalf of
Mortgagor, and on behalf of each and every person acquiring any interest in or
title to the Mortgaged Property subsequent to the date of this Mortgage and on
behalf of all persons to the extent permitted by applicable law.
36. Hazardous Waste and Asbestos. Mortgagor hereby represents and warrants
----------------------------
to Mortgagee that (a) the Mortgaged Property is not in direct or indirect
violation of any local, state, federal or other governmental authority, statute,
ordinance, code, order, decree, law, rule or regulation pertaining to or
imposing liability or standards of conduct concerning environmental regulation,
contamination or clean-up including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
------
the Resource Conservation and Recovery Act, as amended ("RCRA"), and any state
----
super-lien and environmental clean-up statutes (collectively, "Environmental
-------------
Laws"); (b) the Mortgaged Property is not subject to any private or governmental
- ----
lien or judicial or administrative notice or action relating to hazardous and/or
toxic, dangerous and/or regulated,
-23-
<PAGE>
substances, wastes, materials, pollutants or contaminants, petroleum, tremolite,
anthlophylie or actinolite or polychlorinated biphenyls (including, without
limitation, any raw materials which include hazardous constituents) and any
other substances or materials which are included under or regulated by
Environmental Laws (collectively, "Hazardous Materials"); (c) no Hazardous
-------------------
Materials are or have been, prior to Mortgagor's acquisition of the Mortgaged
Property, discharged, generated, treated, disposed of or stored on, incorporated
in, or removed or transported from the Mortgaged Property otherwise than in
compliance with all Environmental Laws and (d) there is no asbestos present in,
and no underground storage tanks exist on, any of the Mortgaged Property. So
long as Mortgagor owns or is in possession of the Mortgaged Property, Mortgagor
shall keep or cause the Mortgaged Property to be kept free from Hazardous
Materials and in compliance with all Environmental Laws, shall promptly notify
Mortgagee if Mortgagor shall become aware of any Hazardous Materials on the
Mortgaged Property and/or if Mortgagor shall become aware that the Mortgaged
Property is in direct or indirect violation of any Environmental Laws and
Mortgagor shall remove such Hazardous Materials and/or cure such violations, as
applicable, as required by law, promptly after Mortgagor becomes aware of same,
at Mortgagor's sole expense. Nothing herein shall prevent Mortgagor from
recovering such expenses from any other party that may be liable for such
removal or cure. The obligations and liabilities of Mortgagor under this
paragraph 35 shall survive any termination, satisfaction, or assignment of this
Mortgage, any Transfer and/or any exercise by Mortgagee of any of its rights or
remedies hereunder, including but not limited to, the acquisition of the
Mortgaged Property by foreclosure or a conveyance in lieu of foreclosure.
37. Handicapped Access.
------------------
(a) Mortgagor agrees that the Mortgaged Property shall at all times
comply to the extent applicable with the requirements of the Americans with
Disabilities Act of 1990, all state and local laws and ordinances related to
handicapped access and all rules, regulations, and orders issued pursuant
thereto including, without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively, "Access
------
Laws").
- ----
(b) Mortgagor agrees to give prompt notice to Mortgagee of the
receipt by Mortgagor of any complaints related to violations of any Access Laws
and of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
38. Indemnification. In addition to any other indemnifications provided
---------------
herein or in the Note or the other Loan Documents, Mortgagor shall protect,
defend, indemnify and save harmless Mortgagee from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses) imposed upon or incurred by or asserted against Mortgagee,
except to the extent resulting from Mortgagee's gross negligence or wilful
misconduct, by reason of (a) ownership of this Mortgage or the Mortgaged
Property or any interest therein; (b) the construction or renovation of any
Improvements; (c) any accident,
-24-
<PAGE>
injury to or death of persons or loss of or damage to property occurring in, on
or about the Mortgaged Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(d) any use, nonuse or condition in, on or about the Mortgaged Property or any
part thereof or on adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (e) any failure on the part of Mortgagor to
perform or comply with any of the terms of this Mortgage; (f) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Mortgaged Property or any part thereof; (g) the presence,
disposal, escape, seepage, leakage, spillage, discharge, emission, release, or
threatened release of any Hazardous Materials on, from, or affecting the
Mortgaged Property or any other property; (h) any personal injury (including
wrongful death) or property damage (real or personal) arising out of or related
to such Hazardous Materials; (i) any lawsuit brought or threatened, settlement
reached, or government order relating to such Hazardous Materials; (j) any
violation of the Environmental Laws, which are based upon or in any way related
to such Hazardous Materials including, without limitation, the costs and
expenses of any remedial action, attorney and consultant fees, investigation and
laboratory fees, court costs and litigation expenses; and (k) any failure of the
Mortgaged Property to comply with any Access Laws. Any amounts payable to
Mortgagee by reason of the application of this paragraph 37 shall be secured by
this Mortgage and shall become immediately due and payable and shall bear
interest at the Default Rate from the date any payment is made by Mortgagee
hereunder until such payment is reimbursed by Mortgagor. The obligations and
liabilities of Mortgagor under this paragraph 37 shall survive any termination,
satisfaction or assignment of this Mortgage, any Transfer and/or any exercise by
Mortgagee of any of its rights and remedies hereunder, including but not limited
to, the acquisition of the Mortgaged Property by foreclosure or a conveyance in
lieu of foreclosure.
39. Notices. Any notice, demand, statement, request or consent made
-------
hereunder shall be in writing to the other party hereto at its address set forth
below or at such other address as such party may designate by notice to the
other party hereto and shall be deemed given (i) on receipt, if mailed, by
certified or registered U.S. mail, return receipt requested, postage prepaid;
(ii) on receipt, if delivered, fee prepaid, to a national overnight delivery
service (such as Federal Express, Purolater Courier, U.P.S. Next Day Air); or
(iii) when delivered, if delivered by hand, as evidenced by a signed receipt:
To Mortgagor:
__________________________
__________________________
__________________________
Attention:________________
Telephone: (____) ________
with a courtesy copy to:
__________________________
__________________________
__________________________
-25-
<PAGE>
Attention: _______________
Telephone: (___) _________
To Mortgagee:
Banco Popular de Puerto Rico
7 West 51/st/ Street
New York, New York 10019
Attention: Mr. Agustin Mas
Vice President
Telephone: (212) 445-1800
with a courtesy copy to:
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Brian F. Doran, Esq.
Telephone: (212) 586-4630
A "Business Day" is any day other than a Saturday or Sunday, or a day on which
banking and savings and loan institutions in the State of New York are
authorized or obligated by law or executive order to remain closed. Refusal to
accept delivery of any notice shall be deemed to be receipt of such notice.
40. Authority. (a) Mortgagor (and the undersigned representative of
---------
Mortgagor, if any) has full power, authority and right to execute, deliver and
perform its obligations pursuant to this Mortgage, and to mortgage, give, grant,
bargain, sell, alien, enfeoff, convey, confirm, pledge, hypothecate and assign
the Mortgaged Property pursuant to the terms hereof and to keep and observe all
of the terms of this Mortgage on Mortgagor's part to be performed and (b)
Mortgagor represents and warrants that Mortgagor is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended and the related Treasury Department regulations, including temporary
regulations.
41. Waiver of Notice. Mortgagor shall not be entitled to any notices of
----------------
any nature whatsoever from Mortgagee except with respect to matters for which
this Mortgage specifically and expressly provides for the giving of notice by
Mortgagee to Mortgagor and except with respect to matters for which Mortgagee is
required by applicable law to give notice, and Mortgagor hereby expressly waives
the right to receive any notice from Mortgagee with respect to any matter for
which this Mortgage does not specifically and expressly provide for the giving
of notice by Mortgagee to Mortgagor.
42. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage,
----------------------------
Mortgagee exercises any right given to it to approve or disapprove, or any
arrangement or term is to be
-26-
<PAGE>
satisfactory to Mortgagee, the decision of Mortgagee to approve or disapprove or
to decide that arrangements or terms are satisfactory or not satisfactory shall
be in the sole discretion of Mortgagee and shall be final and conclusive, except
as may be otherwise expressly and specifically provided herein.
43. Non-Waiver. The failure of Mortgagee to insist upon strict performance
----------
of any term hereof shall not be deemed to be a waiver of any term of this
Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations hereunder
by reason of (a) the failure of Mortgagee to comply with any request of
Mortgagor to take any action to foreclose this Mortgage or otherwise enforce any
of the provisions hereof or of the Note or the other Loan Documents, (b) the
release, regardless of consideration, of the whole or any part of the Mortgaged
Property, or of any person liable for the Debt or any portion thereof or (c) any
agreement or stipulation by Mortgagee extending the time of payment or otherwise
modifying or supplementing the terms of the Note, this Mortgage or the other
Loan Documents. Mortgagee may resort for the payment of the Debt to any other
security held by Mortgagee in such order and manner as Mortgagee, in its
discretion, may elect. Mortgagee may take action to recover the Debt, or any
portion thereof, or to enforce any covenant hereof without prejudice to the
right of Mortgagee thereafter to foreclose this Mortgage. The rights and
remedies of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No act
of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not be
limited exclusively to the rights and remedies herein stated but shall be
entitled to every right and remedy now or hereafter afforded at law or in
equity.
44. No Oral Change. This Mortgage, and any provisions hereof, may not be
--------------
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Mortgagor or Mortgagee, but only by
an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
45. Successors and Assigns. This Mortgage shall be binding upon and inure
----------------------
to the benefit of Mortgagor and Mortgagee and their respective heirs, personal
representatives, successors and assigns forever.
46. Inapplicable Provisions. If any term, covenant or condition of the
-----------------------
Note or this Mortgage is held to be invalid, illegal or unenforceable in any
respect, the Note and this Mortgage shall be construed without such provision.
47. Headings, etc. The headings and captions of various paragraphs of this
-------------
Mortgage are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.
48. Governing Law. This Mortgage shall be governed by and construed in
-------------
accordance with the laws of the State of ___________ without regard to
principles of conflict of laws.
-27-
<PAGE>
49. Definitions. Unless the context clearly indicates a contrary intent or
-----------
unless otherwise specifically provided herein, words used in this Mortgage may
be used interchangeably in singular or plural form and the word "Mortgagor"
shall mean "each Mortgagor and any subsequent owner or owners of the Mortgaged
Property or any part thereof or any interest therein," the word "Mortgagee"
shall mean "Mortgagee and any subsequent holder of the Note," the word "Note"
shall mean "the Note and any other evidence of indebtedness secured by this
Mortgage," the word "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "Mortgaged Property" shall
include any portion of the Mortgaged Property and any interest therein. Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms and the singular form of nouns
and pronouns shall include the plural and vice versa.
50. Waiver of Trial by Jury. MORTGAGOR AND MORTGAGEE HEREBY KNOWINGLY,
-----------------------
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON THE LOAN EVIDENCED BY THE NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THE NOTE, THIS MORTGAGE OR ANY OF THE OTHER
LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
VERBAL OR WRITTEN) OR ACTION OF MORTGAGOR OR MORTGAGEE. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR MORTGAGEE'S MAKING OF THE LOAN SECURED BY THIS MORTGAGE
AND THE OTHER LOAN DOCUMENTS.
51. Assignment. Mortgagee shall have the right, exercisable at any time
----------
and from time to time, to sell, transfer or assign the Mortgage and the other
Loan Documents, or grant participations therein, or issue certificates or
securities evidencing a beneficial interest therein in a rated or unrated public
offering or private placement, and Mortgagee may forward to any purchaser,
transferee, assignee, servicer, participant, investor or credit rating agency
rating such securities (collectively, an "Investor") or prospective Investor all
--------
documents and information in Mortgagee's possession with respect to Mortgagor,
the Mortgaged Property and the Loan Documents as such Investor or prospective
Investor may request.
-28-
<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage, intending to be
legally bound, the day and year first above written.
_________________________________,
a ____________________________
By: _____________________________
Name:____________________________
Title:___________________________
-29-
<PAGE>
(ACKNOWLEDGMENT)
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT K-2(d)
FORM OF FRANCHISEE ASSIGNMENT OF CONTRACTS,
LICENSES, PERMITS AND AGREEMENTS
--------------------------------
ASSIGNMENT OF CONTRACTS, LICENSES,
PERMITS AND AGREEMENTS
This ASSIGNMENT OF CONTRACTS, LICENSES, PERMITS AND AGREEMENTS (the
"Assignment"), dated as of the ___ day of ______, 199__ by and between
__________________, a _____________________, having an office at
__________________________________________ ("Assignor") and BANCO POPULAR DE
PUERTO RICO, having an office at 7 West 51st Street, New York, New York 10019
("Assignee"). All capitalized terms appearing herein and not defined herein
shall have the meanings set forth in that certain Mortgage, Security Agreement
and Assignment of Leases and Rents, dated as of the date hereof, made by
Assignor to Assignee (the "Mortgage").
RECITALS
--------
A. [Assignor is the actual, record and beneficial owner of the real
property more particularly described in Schedule A attached hereto and by this
----------
reference made a part hereof (the "Land"), together with the improvements
located thereon (the "Improvements"; the Land and the Improvements,
collectively, the "Premises")./Assignor is the actual, record and beneficial
owner of the leasehold interest in the real property more particularly described
in Schedule A attached hereto and by this reference made a part hereof (the
----------
"Property"), together with the improvements located thereon (the "Improvements";
the Property and the Improvements, collectively, the "Premises") pursuant to
that certain lease dated __________, 199__ (the "Lease") between ___________, as
landlord, and Assignor, as tenant.]
B. Assignee has agreed to make a loan to Assignor in the maximum
principal amount of $_________ (the "Loan") to, among other things, finance
Assignor's acquisition of the Premises.
C. The Loan will be evidenced by the Note and secured by, among other
things, the Mortgage.
D. Assignee is the owner and holder of the Note and the Mortgage.
E. Assignor will derive substantial benefit from the Loan.
F. Assignor may, from time to time, enter into written agreements
relating to or pertaining to services to the Premises or the management,
operation, sale, leasing, construction
<PAGE>
or renovation of the Premises (hereinafter, the aforesaid agreements are
collectively referred to as the "Agreements").
G. To induce Assignee to make the Loan to Assignor, and as a precondition
thereof, Assignee requires that Assignor assign to Assignee all of its right,
title and interest in and to the Agreements as additional security for the Note
and the Mortgage on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, receipt of which is
hereby acknowledged, Assignor agrees as follows:
1. For the purpose set forth below and subject to the terms of this
Assignment, Assignor hereby assigns and transfers to Assignee, to the extent the
same are assignable, all of Assignor's rights, privileges, and interests under,
in and to (i) the Agreements, (ii) any existing or future licenses, operating
agreements or certificates Assignor may enter into with or receive from any
Governmental Authority (the "Licenses"), and (iii) any existing or future
permits, approvals or agreements Assignor may enter into with or receive from
any Governmental Authority (the "Permits"). Assignor agrees that it will timely
perform all of its obligations with respect to the Licenses and Permits and that
it will use its best efforts to keep the Licenses and Permits in full force and
effect to the extent such Licenses and Permits are required in connection with
the ownership, use, operation or occupancy of the Premises.
2. This Assignment is given for the purpose of further securing the
performance by Assignor of all of its obligations to Assignee under the Note,
the Mortgage and the other Loan Documents, and accordingly, upon the payment in
full of all indebtedness evidenced by the Note, and satisfaction of all of
Assignor's other obligations to Assignee under the Note, the Mortgage and the
other Loan Documents, this Assignment shall automatically become null and void;
provided, however, that Assignee shall execute and deliver to Assignor such
documents as may be reasonably requested by Assignor to evidence such
termination.
3. Prior to the earlier to occur of: (i) performance in full of the
Agreements by Assignor or (ii) Assignee's acquisition of title to the Premises,
by foreclosure or otherwise, Assignor agrees that it will timely perform all of
its obligations under the Agreements in accordance with the terms of the
Agreements unless Assignor shall then be contesting the same in good faith and
by appropriate proceedings.
4. For the purposes and subject to the terms set forth herein, this
Assignment is an absolute, unconditional and presently effective assignment from
Assignor to Assignee of all of Assignor's rights under, in and to the
Agreements, the Licenses and the Permits. Notwithstanding the foregoing, prior
to any Event of Default by Assignor under the Note, the Mortgage or any other
Loan Document, Assignor shall, subject to the terms and conditions of this
Assignment, have the right to use, employ and enforce its rights under the
Agreements, the Licenses and the Permits.
2
<PAGE>
5. Upon the occurrence and during the continuance of any Event of Default
by Assignor under the Note, the Mortgage or any other Loan Document, Assignee
shall be entitled to exercise all or any of its remedies under the Note, the
Mortgage or under this Assignment, or as may otherwise be available to Assignee
at law or in equity, in such order as Assignee may elect.
6. Notwithstanding any legal presumption to the contrary, it is not the
intent that Assignee shall be obligated by reason of acceptance of this
Assignment to perform any obligation of Assignor under the Agreements, the
Licenses or the Permits, and Assignor hereby agrees to indemnify Assignee and
save it harmless from and against any loss, liability or damage in connection
with any claim arising out of the said Agreements, the Licenses, the Permits or
this Assignment which arise or accrue during the period of Assignor's ownership
of the Premises and prior to the time, if any, that Assignee becomes a
mortgagee-in-possession, except for Assignee's gross negligence or willful
misconduct. However, Assignee may, at its option, and without releasing Assignor
from any obligation hereunder, discharge any obligation which Assignor fails to
discharge within any applicable cure period under said Agreements, Licenses or
Permits, including, without limitation, defending any legal action unless
Assignor shall then be contesting the same in good faith and by appropriate
proceedings, and Assignor agrees to pay immediately upon demand all reasonable
sums expended by Assignee in connection therewith, including reasonable counsel
fees, together with interest thereon at the Default Rate (as defined in the
Note), and the same shall be added to the indebtedness evidenced by the Note and
secured by the Mortgage.
7. Assignor hereby represents and warrants to Assignee that:
(a) Assignor has not executed any prior assignment of any of its
rights under the Agreements, the Licenses or the Permits, except to Assignee
pursuant to this Assignment.
(b) The Agreements now existing are in full force and effect and
unmodified, and there are no defaults, or events which with the giving of notice
or passage of time, or both, would constitute a default under any Agreement
except as heretofore disclosed to Assignee;
(c) Assignor's interest in the Agreements is not subject to any
claims, setoffs, encumbrances or deductions;
(d) All covenants, conditions and agreements have been performed as
required by the Agreements by all parties thereto, except those which are not
due to be performed until after the date of this Assignment; and
(e) The Licenses and Permits now existing are in full force and
effect and have not been rescinded or terminated.
3
<PAGE>
8. This Assignment shall be binding upon Assignor and its successors and
assigns, including any subsequent owner of the Premises and shall inure to the
benefit of Assignee and its successors and assigns.
9. All notices or demands hereunder shall be in accordance with the
provisions of Section ___ of the Mortgage.
10. This Assignment shall be construed, interpreted, and enforced
according to the laws of the State of New York without regard to principles of
conflict of laws.
11. No term or condition of this Assignment may be waived, changed,
terminated, or modified orally, by course of conduct or in any manner other than
by an agreement in writing signed by the party against whom enforcement is
sought.
IN WITNESS WHEREOF, Assignor has duly executed this Assignment the day and
year first above written.
__________________________,
a_________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
4
<PAGE>
SCHEDULE A
----------
[LEGAL DESCRIPTION]
5
<PAGE>
EXHIBIT K-2(E)
FORM OF FRANCHISEE GUARANTEE OF PAYMENT
AND PERFORMANCE
------------------------------------
GUARANTEE OF PAYMENT AND PERFORMANCE
------------------------------------
THIS GUARANTEE OF PAYMENT AND PERFORMANCE ("Guarantee") dated as of the ___
---------
day of ______, 199_, made jointly and severally by _______________________ AND
____________________, (collectively, the "Guarantor") for the benefit of BANCO
---------
POPULAR DE PUERTO RICO, having offices at 7 West 51/st/ Street, New York, New
York 10019 ("Lender"). All capitalized terms appearing herein and not defined
------
herein shall have the meanings set forth in the Mortgage, Security Agreement and
Assignment of Leases and Rents, dated as of the date hereof (the "Mortgage"),
--------
made by _____________________ ("Borrower") in favor of Lender.
--------
R E C I T A L S
- - - - - - - -
A. [Borrower is the actual, record and beneficial owner of the real
property more particularly described in Schedule A attached hereto and by this
----------
reference made a part hereof (the "Land"), together with the improvements
----
located thereon (the "Improvements"; the Land and the Improvements,
------------
collectively, the "Premises")./Borrower is the actual, record and beneficial
--------
owner of the leasehold interest in the real property more particularly described
in Schedule A attached hereto and by this reference made a part hereof (the
----------
"Property"), together with the improvements located thereon (the
--------
"Improvements"; the Property and the Improvements, collectively, the "Premises")
------------ --------
pursuant to that certain lease dated _________, 199_ (the "Lease") between
-----
__________, as landlord, and Borrower, as tenant.]
B. Borrower has requested that Lender make a loan to Borrower in the
maximum principal amount of $_____________ (the "Loan") to, among other things,
----
finance Borrower's acquisition of the Premises.
C. The Loan will be evidenced by the Note and secured by, among other
things, the Mortgage.
D. The Guarantors are the sole [shareholders/partners/members of
Borrower] [and own in the aggregate one hundred percent (100%) of the ownership
interests in Borrower] and will benefit materially from the granting of the Loan
by Lender to Borrower.
E. To induce Lender to make the Loan and accept the Note and the
Mortgage, each Guarantor has agreed to execute and deliver this Guarantee, which
Guarantee is to be binding
<PAGE>
upon each Guarantor, and their respective heirs, personal representatives,
successors and assigns.
F. Lender has refused to make the Loan or accept the Note and the
Mortgage unless this Guarantee is executed by each Guarantor and delivered to
Lender.
NOW, THEREFORE, in consideration of the Loan, and for other good and
valuable consideration, the receipt whereof is hereby acknowledged, each
Guarantor, for [himself/herself], [his/her] heirs, personal representatives,
successors and assigns, hereby covenants and agrees with Lender for the benefit
of Lender, its indorsees, successors and assigns, as follows:
1. Guarantee. Each Guarantor unconditionally and irrevocably guarantees
---------
to Lender (A) the prompt, absolute and unconditional payment of (i) the
principal sum evidenced by the Note which may be outstanding from time to time,
(ii) interest on the outstanding principal sum evidenced by the Note, whether
such interest accrues at the Applicable Interest Rate or at the Default Rate (as
such terms are defined in the Note) and whether such interest accrues prior to
or after the Maturity Date (as defined in the Note), (iii) late charges,
prepayment fees and premiums, and interest accruing on the Note after any
petition under the applicable federal bankruptcy laws, as the same shall become
due and payable under the Note; and (iv) all fees, charges and expenses now or
hereafter due to Lender under the Note, the Mortgages or any other Loan
Document, including, without limitation, any and all costs and expenses incurred
by Lender in connection with the collection and enforcement of the Note, the
Mortgage or any other Loan Document, including, without limitation, all
attorney's fees and expenses, investigative costs and all court costs, whether
or not suit is filed thereon, or whether at maturity or by acceleration; and (B)
the prompt and punctual performance of all covenants and agreements of Borrower
under the Note, the Mortgage and the other Loan Documents; irrespective of the
validity, regularity or enforceability of the Note or such obligations, or any
instrument evidencing any of the obligations, or of any collateral therefor or
of the existence of such collateral. All of the obligations guaranteed or
undertaken by Guarantor in this Section 1 are hereinafter referred to as the
"Obligations".
-----------
2. Representations, Warranties and Covenants. Each Guarantor hereby
-----------------------------------------
represents, warrants and covenants each as to himself as follows:
(a) Each Guarantor is of legal age and under no legal disability.
(b) This Guarantee has been duly executed and delivered by each
Guarantor and constitutes the valid and binding obligations of each Guarantor
and is enforceable against each Guarantor in accordance with its terms.
-2-
<PAGE>
(c) The consummation of the transactions contemplated hereby and the
performance by Guarantor of his obligations under this Guarantee will not result
in any breach of, give rise to a lien under, or constitute a default under, any
mortgage, deed of trust, lease, bank loan or credit agreement, partnership
agreement, corporate charter, by-laws or other agreement or instrument to which
any Guarantor is a party or by which he may be bound or affected.
(d) Each Guarantor will promptly comply with all conditions of this
Guarantee. Each Guarantor will promptly (upon transmittal or receipt) deliver to
Lender copies of all notices and correspondence with respect to: (i) this
Guarantee, (ii) any material adverse change in the financial condition of any
Guarantor, (iii) Lender's security and (iv) any violation or potential violation
of any approval, authorization, or permit issued in regard to the Premises. Each
Guarantor will promptly and fully respond to any inquiry of Lender made with
respect to any of the matters described in the preceding sentence and will
permit Lender, upon Lender's written request, to participate in any inquiry,
hearing or meeting with regard to any of the foregoing.
(e) Each Guarantor agrees to pay on written demand all expenses
(including reasonable legal services of every kind and cost of any insurance,
any payment of taxes or other charges) of, or incidental to, or in any way
relating to the enforcement or protection of the rights of Lender hereunder.
(f) Each Guarantor hereby acknowledges receipt and approval of the
Note, the Mortgage and the other Loan Documents.
(g) Each Guarantor is deriving or expects to derive a financial or
other advantage from each and every Obligation incurred by Borrower to Lender.
(h) Each Guarantor shall provide to Lender (i) within thirty (30)
days after the end of each calendar year, updated annual financial statements in
form similar to that previously provided to Lender; (ii) copies of federal tax
returns (together with any extension filed) within fifteen (15) days after
filing of same but in no event later than April 30 of each year; and (iii) such
other financial information relating to Guarantor as may be reasonably requested
from time to time by Lender.
(i) Each Guarantor shall promptly provide Lender with written notice
of any pending or threatened litigation involving claims against any Guarantor
or the commencement of any proceedings or investigations by any governmental or
regulatory agency with respect to any Guarantor.
-3-
<PAGE>
(j) Each Guarantor shall not incur any indebtedness, nor guarantee
any indebtedness (other than pursuant to this Guarantee), without the prior
written consent of Lender.
(k) Each Guarantor shall not transfer, sell or assign any real or
personal property without the prior written consent of Lender, and any transfer,
sale or assignment shall occur only in the ordinary course of such Guarantor's
business.
(l) [Additional financial covenants].
3. Defaults. The following shall constitute a default hereunder (each,
--------
an "Event of Default"):
----------------
(a) If any Guarantor shall fail to timely perform, or cause to be
timely performed, any Obligation and such failure is not cured by Guarantor
within ten (10) days of written notice of such failure;
(b) If any Guarantor shall fail to comply with any of the covenants
made by it in this Guarantee, or if at any time any representation or warranty
made by any Guarantor to Lender in this Guarantee or in any certificate or
statement delivered in connection herewith shall be false or misleading to an
extent deemed by Lender, in its reasonable judgment, to be material and such
failure is not cured by Guarantor within ten (10) days of written notice of such
failure, provided that if such failure is not curable within such ten (10) day
period, then Guarantor shall have such time as is reasonably required to cure
same, provided (x) Guarantor promptly commences the cure within such ten (10)
day period, (y) thereafter Guarantor diligently attempts to cure such default,
and (z) Lender, in its reasonable judgment, determines that a cure may be
effectuated during such additional period; or
(c) If at any time any Guarantor shall revoke or attempt to revoke,
disavow, contest, commence any action or raise any defense against her
obligations hereunder.
4. Lien on Personal Property. To secure the liabilities of Guarantor
-------------------------
under this Guarantee, each Guarantor hereby grants to Lender a security interest
in and a lien upon any personal property of each Guarantor or in which any
Guarantor may have an interest, which is now or may at any time hereafter come
into the lawful possession or control of Lender, or of any third party acting on
behalf of Lender, whether for the express purpose of being used by Lender for
collateral security or for safekeeping or for any other or different purpose,
including such personal property as may be in transit by mail or carrier for any
purpose or covered or affected by any documents in Lender's possession or
control, or in the possession or control of any third party acting on its behalf
(such property and interests in property, referred to collectively as the
"Collateral").
----------
-4-
<PAGE>
5. Remedies. Upon the occurrence of a default hereunder, in addition to
--------
any other remedy provided for under this Guarantee or at law or in equity, each
Guarantor hereby authorizes Lender, in Lender's sole discretion, at any time:
(a) To appropriate and apply upon any of the liabilities of Guarantor
hereunder any of the Collateral;
(b) At any time, or from time to time, without notice to Guarantor or
to any other person, any such notice being hereby expressly waived, immediately
to set off and appropriate and apply any and all deposits (general or special)
at any time held by or owing to Lender, if any, which are given to secure the
obligations and liabilities of Guarantor hereunder to or for the credit or the
account of Guarantor against and on account of the obligations and liabilities
of Guarantor hereunder;
(c) To foreclose nonjudicially or judicially against any real or
personal property security it holds for the Obligations or any part thereof, or
exercise any other remedy against Guarantor or any security; and
(d) To exercise all other rights and remedies of a secured party
under the Uniform Commercial Code as in effect in New York and [jurisdiction in
which Premises is located], and, without limiting the generality of the
foregoing, Lender may immediately, without demand of performance and without
advertisement, all of which are hereby expressly waived, and upon ten (10) days'
prior written notice to Guarantor, sell at public or private sale, grant options
to purchase or otherwise realize upon in the State of New York or the State of
[jurisdiction in which Premises is located], the whole or from time to time any
part of the Collateral upon which Lender shall have a security interest and lien
as aforesaid, and after deducting from the proceeds of sale or other disposition
of the Collateral all expenses (including all reasonable expenses for legal
services of every kind and other expenses as set forth below) shall apply the
residue of such proceeds toward the payment of any of the liabilities of
Guarantor hereunder in such order as Lender shall elect, Guarantor remaining
liable for any deficiency remaining unpaid after such application. If notice of
any sale or other disposition is required by law to be given, each Guarantor
hereby agrees that a notice sent in accordance with this Guarantee at least ten
(10) calendar days before the time of any intended public sale or of the time
after which any private sale or other disposition of the said collateral is to
be made, shall be reasonable notice of such sale or other disposition. At any
such sale or other disposition, Lender may itself purchase the whole or any part
of the Collateral sold, free from any right of redemption on the part of any
Guarantor, which right is hereby waived and released.
6. Waiver of Election of Remedies. Each Guarantor waives any right to
------------------------------
require or compel Lender to (a) proceed against or exhaust any security for the
Obligations; or (b) pursue any other remedy in Lender's power whatsoever; and
failure of Lender to do any of the
-5-
<PAGE>
foregoing shall not exonerate, release or discharge any Guarantor from his
absolute, unconditional and independent liabilities to Lender hereunder. Each
Guarantor hereby waives any and all legal requirements that Lender shall
institute any action or proceedings at law or in equity in respect of the Loan
or any other Loan Document or resort to or seek to realize upon the security
held by Lender, as a condition precedent to bringing an action against Guarantor
upon this Guarantee.
7. Right of Separate Actions. Lender may bring and prosecute a separate
-------------------------
action against Guarantor to enforce its liabilities hereunder, whether or not
any action is brought against any other person and whether or not any other
person is joined in any such action or actions. Nothing shall prohibit Lender
from exercising its rights against Guarantor, any security for the Obligations,
and any other person simultaneously, jointly and/or severally.
8. Waiver of Rights of Subrogation. Each Guarantor hereby irrevocably
-------------------------------
waives any rights to be subrogated to the rights of Lender with respect to the
Obligations. No failure on the part of Lender to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of any right, remedy
or power hereunder preclude any other or future exercise of any other right,
remedy or power.
9. Waiver of Notice, Consent, Etc. (a) This Guarantee shall be
-------------------------------
construed as a continuing, absolute and unconditional guarantee of payment and
performance.
(a) Each Guarantor hereby waives notice of acceptance of this
Guarantee by Lender and of presentment, demand, protest, notice of protest and
of dishonor, notices of default (except as otherwise expressly provided herein)
and all other notices relative to this Guarantee of every kind and description
now or hereafter provided by any agreement between Borrower and Lender or any
statute or rule of law.
(b) Each Guarantor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations or of the reliance by
Lender upon this Guarantee. Said Obligations, and each of them, shall
conclusively be deemed to have been created, contracted, or incurred in reliance
upon this Guarantee and all dealings between Borrower and Lender shall likewise
be conclusively presumed to have been made or consummated in reliance upon this
Guarantee.
(c) Each Guarantor hereby agrees that the terms, covenants and
provisions contained in the Note, the Mortgage or in any other Loan Document may
be altered, extended, modified, waived, released or canceled by Lender, and each
Guarantor agrees that this Guarantee and his liability hereunder shall be in no
way affected, diminished or released by any such alteration, extension,
modification, release, waiver or cancellation.
-6-
<PAGE>
10. Waiver of Priority of Collateral. Each Guarantor hereby agrees that,
--------------------------------
in the event that any of his property is or may be hypothecated with other
property of Borrower, as security for any obligations of Borrower under any
other Loan Document, any right of Guarantor to have such other property of
Borrower first applied to the discharge of such obligations is hereby
irrevocably waived by each Guarantor. Each Guarantor hereby expressly
recognizes that any of his property which is or may be hereafter hypothecated
pursuant to the Mortgage is security for such obligations and is not security
for this Guarantee.
11. No Discharge; Remedies Cumulative. No Guarantor shall be discharged,
---------------------------------
released or exonerated, in any way, from his absolute, unconditional and
independent liabilities hereunder, even though any rights or defenses which any
Guarantor may have against Lender or others may be destroyed, diminished or
otherwise affected by:
(a) Any declaration by Lender of a default in respect of any of the
Obligations;
(b) The exercise by Lender of any rights or remedies against Borrower
or any other person under any other Loan Document;
(c) The failure of Lender to exercise any rights or remedies against
Borrower or any other person under any other Loan Document;
(d) The sale or enforcement of, or realization upon (through judicial
foreclosure, power of sale or any other means) any security for any of the
Obligations, even though (i) recourse may not thereafter be had against Borrower
under any other Loan Document for any deficiency, or (ii) Lender fails to pursue
any such recourse which might otherwise be available, whether by way of
deficiency judgment following judicial foreclosure or otherwise; and
no such action by Lender will release or limit the liability of Guarantor to
Lender. All rights and remedies of Lender hereunder or under any of the Loan
Documents shall be cumulative and may be exercised singularly or concurrently
against the party to whom enforcement is sought. The rights of Lender under
this Guarantee are in addition to and not in diminution of the rights of Lender
under any other Loan Document.
12. Continuing Guarantee. Until all obligations of Borrower to Lender are
--------------------
fulfilled to the satisfaction of Lender and each and every of the terms,
covenants and conditions of this Guarantee are fully performed and Lender fully
repaid, Guarantor shall not be released by any act or thing which might, but for
this provision, be deemed a legal or equitable discharge of a surety, or by
reason of any waiver, extension, modification, forbearance or delay or other act
or omission of Lender or its failure to proceed promptly or otherwise, or by
reason of any action taken or omitted or circumstance which may or might vary
the risk or affect the rights
-7-
<PAGE>
or remedies of Guarantor or by reason of any further dealings between Borrower
and Lender, whether relating to the Loan or otherwise, and each Guarantor hereby
expressly waives and surrenders any defenses to its liability hereunder based
upon any of the foregoing acts, omissions, things or agreements or waivers of
Lender; it being the purpose and intent of the parties hereto that the
obligations of each Guarantor hereunder are absolute and unconditional under any
and all circumstances.
13. Notices. Any notice, demand, statement, request or consent made
-------
hereunder shall be in writing to the other party hereto at its address set forth
below or at such other address as such party may designate by notice to the
other party hereto and shall be deemed given (i) on receipt, if mailed, by
certified or registered U.S. mail, return receipt requested, postage prepaid;
(ii) on receipt, if delivered, fee prepaid, to a national overnight delivery
service (such as Federal Express, Purolater Courier, U.P.S. Next Day Air); or
(iii) when delivered, if delivered by hand, as evidenced by a signed receipt:
To Guarantor:
_____________________
_____________________
_____________________
and
______________________
______________________
______________________
With a courtesy copy to:
______________________
______________________
______________________
To Lender:
Banco Popular de Puerto Rico
7 West 51/st/ Street
New York, New York 10019
Attention: Mr. Agustin Mas
Vice President
-8-
<PAGE>
With a courtesy copy to:
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Brian F. Doran, Esq.
A "Business Day" is any day other than a Saturday or Sunday, or a day on which
------------
banking and savings and loan institutions in the State of New York are
authorized or obligated by law or executive order to remain closed. Refusal to
accept delivery of any notice shall be deemed to be receipt of such notice.
14. Entire Agreement. This Guarantee represents the entire agreement
----------------
between Guarantor and Lender with respect to the matters referred to herein, and
no waiver or modification hereof or thereof shall be effective unless in writing
and signed by Lender and Guarantor.
15. GOVERNING LAW. THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE CONSTRUED, ENFORCED, AND INTERPRETED ACCORDING TO THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN AND PERFORMED IN
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. UNLESS
THE TEXT OTHERWISE REQUIRES, ALL TERMS USED HEREIN SHALL HAVE THE MEANING
SPECIFIED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATES OF NEW YORK
AND _____________ AT THE DATE HEREOF.
16. Successors and Assigns. This Guarantee shall be binding upon each
----------------------
Guarantor and upon their respective heirs, personal representatives, successors
and assigns and shall inure to the benefit of Lender and its indorsees,
successors and assigns.
17. Joint and Several. The representations, warranties, covenants and
-----------------
other obligations of Guarantor hereunder are made and undertaken jointly and
severally by each of the Guarantors.
18. Time of the Essence. Time shall be of the essence with regard to the
-------------------
performance by each Guarantor of his obligations under this Guarantee.
19. Waiver of Trial by Jury. Lender and each Guarantor shall and hereby
-----------------------
do waive trial by jury in any action, proceeding or counterclaim brought by any
of the parties hereto
-9-
<PAGE>
against the other on any matters arising out of or in any way connected to the
Loan, this Guarantee or any of the other Loan Documents.
20. Counterparts. This Guarantee may be executed in several counterparts,
------------
each of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, this Guarantee has been executed by the undersigned as
of the date first above written.
_______________________________
_______________________________
-10-
<PAGE>
EXHIBIT K-2(F)
FORM OF FRANCHISEE ENVIRONMENTAL INDEMNITY AGREEMENT
----------------------------------------------------
ENVIRONMENTAL INDEMNITY AGREEMENT
---------------------------------
THIS ENVIRONMENTAL INDEMNITY AGREEMENT ("Agreement") dated as of the __ day
of ________, 199__, made by ____________________________, a
_____________________ having an office at ______________________________________
(the "Borrower") and ________________, an individual having an address at
______________ (the "Individual Indemnitor"; Borrower and the Individual
Indemnitor(s) are sometime hereinafter collectively referred to as the
"Indemnitor"), for the benefit of BANCO POPULAR DE PUERTO RICO, having offices
at 7 West 51/st/ Street, New York, New York 10019 ("Lender"). All capitalized
terms appearing herein and not defined herein shall have the meanings set forth
in the Mortgage, Security Agreement and Assignment of Leases and Rents, dated as
of the date hereof, made by Borrower in favor of Lender (the "Mortgage").
R E C I T A L S
- - - - - - - -
A. [Borrower is the actual, record and beneficial owner of the real
property more particularly described in Schedule A attached hereto and by this
----------
reference made a part hereof (the "Land"), together with the improvements
located thereon (the "Improvements"; the Land and the Improvements,
collectively, the "Premises")./Borrower is the actual, record and beneficial
owner of the leasehold interest in the real property more particularly described
in Schedule A attached hereto and by this reference made a part hereof (the
----------
"Property"), together with the improvements located thereon (the "Improvements";
the Property and the Improvements, collectively, the "Premises") pursuant to
that certain lease dated _________, 199__ (the "Lease") between __________, as
landlord, and Borrower, as tenant.]
B. Lender has agreed to make a loan to Borrower in the maximum principal
amount of $_________ ( the "Loan") to, among other things, finance Borrower's
acquisition of the Premises.
C. The Loan will be evidenced by the Note and secured by, among other
things, the Mortgage.
D. The Individual Indemnitor(s) is/are the sole [shareholder(s)/
partner(s)/member(s)] of Borrower [and own in the aggregate one hundred percent
(100%) of the ownership interests in Borrower] and each Indemnitor will benefit
materially from the granting of the Loan by Lender to Borrower.
E. To induce Lender to make the Loan and to accept the Note and Mortgage,
each Indemnitor has agreed to execute and deliver this Agreement, which
Agreement is to be
<PAGE>
executed by each Indemnitor and to be binding upon each Indemnitor and its
respective heirs, personal representatives, successors and assigns.
F. Lender has refused to make the Loan or accept the Note and Mortgage
unless this Agreement is executed by each Indemnitor and delivered to Lender.
NOW, THEREFORE, in consideration of the Loan, and for other good and
valuable consideration, the receipt whereof is hereby acknowledged, each
Indemnitor, for itself or himself/herself, and its respective heirs, personal
representatives, successors and assigns, hereby covenants and agrees with Lender
for the benefit of Lender, its indorsees, successors and assigns, as follows:
1. Guarantee. Each Indemnitor unconditionally guarantees to Lender
---------
(i) the prompt payment, when due, of all "Claims and Costs" (as defined in
paragraph 2(a) of this Agreement) and (ii) the timely performance of all of the
obligations of Indemnitor under this Agreement. All of the obligations
guaranteed or undertaken by each Indemnitor in clauses (i) and (ii) of this
paragraph 1 are hereinafter collectively referred to as the "Obligations".
2. Indemnity. (a) Each Indemnitor unconditionally agrees to
---------
indemnify and hold harmless Lender, its directors, officers, employees, agents,
counsel, successors and assigns from and against any and all losses, claims,
damages, penalties, liabilities, costs and expenses (including reasonable
attorneys' fees and court costs), fines, injuries, penalties, response costs
(including the cost of any required or necessary investigation, testing,
monitoring, repair, cleanup, detoxification, preparation of any closure or other
required plans, or other removal, response or remedial action at or relating to
the Premises) (collectively, the "Claims and Costs"), with respect to, as a
direct or indirect result of, or arising out of any of the following: (i) any
law, ordinance or regulation, lawsuit (brought or threatened), settlement,
agreement, consent order or judgment, injunction, restraining order, or
requirement of any insurer of the Premises or any portion thereof, relating to
the generation, presence, management, disposal, release (or threatened release),
escape, seepage, leakage or clean-up of any Hazardous Materials (as hereinafter
defined) at, on, in, from or under all or a portion of the Premises or any other
real property owned by Borrower in violation of any applicable Environmental Law
(as hereinafter defined); (ii) the migration of Hazardous Materials from the
Premises to any other property or onto the Premises from any property or area
adjacent to the Premises or any other real property owned by Borrower in
violation of any applicable Environmental Law; (iii) the past treatment,
disposal or storage of Hazardous Materials or the transportation of Hazardous
Materials onto or from the Premises or any other real property owned by
Indemnitor in violation of any applicable Environmental Law; or (iv) the
incorporation, whether prior or future, of any Hazardous Materials into the
Premises in violation of any applicable Environmental Law, except to the extent
that any of the foregoing are caused by Lender or Lender's designee after Lender
or Lender's designee has taken possession of or acquired title to the Premises
by foreclosure or other means.
(b) For the purpose of this Agreement, the term "Hazardous Materials"
shall include, but not be limited to, (i) any substances defined as "hazardous
substances," "pollutants,"
2
<PAGE>
"contaminants," "hazardous materials," "hazardous wastes," or "hazardous or
toxic substances" or related materials as now or hereafter defined in any
applicable federal, state or local law, regulation, ordinance or directive
(collectively, "Environmental Laws"), including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
(S) 9601, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (S)
------
1801, et seq.; the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et seq.;
------ ------
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. (S) 9601, et
--
seq.; the Clean Water Act, 33 U.S.C. (S) 1251 et seq.; the Clean Air Act, 42
- --- ------
U.S.C. (S) 7412 et seq.; [local environmental laws to be added]; as any such
------
acts may be amended, modified or supplemented; (ii) those substances listed or
otherwise identified in the regulations adopted and publications issued, as may
be amended, modified or supplemented, pursuant to any of the above referenced
statutes; (iii) lead-based or lead-containing paint; and (iv) any friable
asbestos, airborne asbestos, or any substance or material containing asbestos.
The term "Hazardous Materials" shall specifically not include the emission,
discharge, generation, processing, storage or transportation of any hazardous
substances or hazardous materials pursuant to, and in accordance with, a valid
federal or state permit, license or order or otherwise in accordance with
applicable Environmental Laws.
3. Required Action of Each Indemnitor. Each Indemnitor shall comply
----------------------------------
with any law, ordinance, regulation, settlement, agreement, consent order,
decree, judgment, injunction or directive, affecting the Premises, or any
requirement of any insurer of the Premises or any portion thereof, and shall
timely perform, or cause to be performed, any investigation, testing,
monitoring, repair, cleanup, detoxification, preparation of any closure or other
required plans, or other removal, response or remedial action relating to (i)
the presence, management, disposal, release or threatened release, escape,
seepage or leakage of any Hazardous Materials at, on, in, from or under all or a
portion of the Premises or any other real property owned by Borrower in
violation of Environmental Laws; (ii) the migration of Hazardous Materials from
the Premises to any other property, or onto the Premises from any property or
area adjacent to the Premises or any other real property owned by Borrower in
violation of Environmental Laws; (iii) the generation, transportation, storage
or disposal of Hazardous Materials onto or from the Premises or any other real
property owned by Borrower in violation of Environmental Laws; or (iv) the
incorporation, whether prior or future, of any Hazardous Materials into the
Premises in violation of Environmental Laws.
4. Representations, Warranties and Covenants. Each Indemnitor hereby
-----------------------------------------
represents, warrants and covenants each as to himself/herself or itself as
follows:
(a) Indemnitor is a corporation duly organized and validly
existing under the laws of ___________, is fully authorized to do business in
the State of [jurisdiction where Premises is located], and has full power and
authority to consummate the transactions contemplated hereby.
(b) [Each of] the Individual Indemnitor[s] is of legal age and
under no legal disability.
3
<PAGE>
(c) This Agreement has been duly executed and delivered by each
Indemnitor and constitutes the valid and binding obligations of each Indemnitor
and is enforceable against each Indemnitor in accordance with its terms.
(d) The consummation of the transactions contemplated hereby and
the performance by each Indemnitor of its obligations under this Agreement will
not result in any breach of, give rise to a lien under, or constitute a default
under, any mortgage, deed of trust, lease, bank loan or credit agreement,
partnership agreement, corporate charter, by-laws or other agreement or
instrument to which any Indemnitor is a party or by which it may be bound or
affected.
(e) Each Indemnitor will promptly comply with all conditions of
this Agreement. Indemnitor will promptly (upon transmittal or receipt) deliver
to Lender copies of all notices and correspondence with respect to: (i) this
Agreement, (ii) any material adverse change in the financial condition of any
Indemnitor, (iii) Lender's security and (iv) any violation or potential
violation of any approval, authorization, or permit issued in regard to the
Premises. Each Indemnitor will promptly and fully respond to any inquiry of
Lender made with respect to any of the matters described in the preceding
sentence and will permit Lender, upon Lender's written request, to participate
in any inquiry, hearing or meeting with regard to any of the foregoing.
(f) Each Indemnitor agrees to pay on written demand all expenses
(including reasonable legal services of every kind and cost of any insurance,
any payment of taxes or other charges) of, or incidental to, or in any way
relating to the enforcement or protection of the rights of Lender hereunder.
(g) Each Indemnitor is deriving or expects to derive a financial
or other advantage from each and every Obligation incurred by Indemnitor to
Lender.
(h) Each Indemnitor acknowledges receipt and approval of the
Note, the Mortgage and the other Loan Documents.
5. Defaults. The following shall constitute a default hereunder
--------
(each, an "Event of Default"):
(a) If any Indemnitor shall fail to timely perform, or cause to
be timely performed, any Obligation and such failure is not cured by Indemnitor
within ten (10) days of written notice of such failure, provided that if such
failure is not curable within such ten (10) day period, then Indemnitor shall
have such time as is reasonably required to cure same, provided (x) Indemnitor
promptly commences the cure within such ten (10) day period, (y) thereafter
Indemnitor diligently attempts to cure such default, and (z) Lender, in its
reasonable judgment, determines that a cure may be effectuated during such
additional period;
(b) If any Indemnitor shall fail to comply with any of the
covenants made by it in this Agreement, or if at any time any representation or
warranty made by any
4
<PAGE>
Indemnitor to Lender in this Agreement or in any certificate or statement
delivered in connection herewith shall be false or misleading to an extent
deemed by Lender, in its reasonable judgment, to be material and such failure is
not cured by Indemnitor within ten (10) days of written notice of such failure,
provided that if such failure is not curable within such ten (10) day period,
then Indemnitor shall have such time as is reasonably required to cure same,
provided (x) Indemnitor promptly commences the cure within such ten (10) day
period, (y) thereafter Indemnitor diligently attempts to cure such default, and
(z) Lender, in its reasonable judgment, determines that a cure may be
effectuated during such additional period; or
(c) If at any time any Indemnitor shall revoke or attempt to
revoke, disavow, contest, commence any action or raise any defense against its
obligations hereunder .
6. Lien on Personal Property. To secure the liabilities of
-------------------------
Indemnitor under this Agreement, each Indemnitor hereby grants to Lender a
security interest in and a lien upon any personal property of Indemnitor or in
which any Indemnitor may have an interest, which is now or may at any time
hereafter come into the lawful possession or control of Lender, or of any third
party acting on behalf of Lender, whether for the express purpose of being used
by Lender for collateral security or for safekeeping or for any other or
different purpose, including such personal property as may be in transit by mail
or carrier for any purpose or covered or affected by any documents in Lender's
possession or control, or in the possession or control of any third party acting
on its behalf (such property and interests in property, referred to collectively
as the "Collateral").
7 Remedies. Upon the occurrence of a default hereunder, in addition
--------
to any other remedy provided for under this Agreement or at law or in equity,
each Indemnitor hereby authorizes Lender, in Lender's sole discretion, at any
time:
(a) To appropriate and apply upon any of the liabilities of
Indemnitor hereunder any of the Collateral;
(b) At any time, or from time to time, without notice to
Indemnitor or to any other person, any such notice being hereby expressly
waived, immediately to set off and appropriate and apply any and all deposits
(general or special) at any time held by or owing to Lender, if any, which are
given to secure the obligations and liabilities of Indemnitor hereunder to or
for the credit or the account of Indemnitor against and on account of the
obligations and liabilities of Indemnitor hereunder;
(c) To foreclose nonjudicially or judicially against any real or
personal property security it holds for the Obligations or any part thereof, or
exercise any other remedy against Indemnitor or any security; and
(d) To exercise all other rights and remedies of a secured party
under the Uniform Commercial Code as in effect in New York and [jurisdiction
where Premises is located] and, without limiting the generality of the
foregoing, Lender may immediately,
5
<PAGE>
without demand of performance and without advertisement, all of which are hereby
expressly waived, and upon ten (10) days' prior written notice to Indemnitor,
sell at public or private sale, grant options to purchase or otherwise realize
upon in the States of New York and ______________, the whole or from time to
time any part of the Collateral upon which Lender shall have a security interest
and lien as aforesaid, and after deducting from the proceeds of sale or other
disposition of the Collateral all expenses (including all reasonable expenses
for legal services of every kind and other expenses as set forth below) shall
apply the residue of such proceeds toward the payment of any of the liabilities
of Indemnitor hereunder in such order as Lender shall elect, each Indemnitor
remaining liable for any deficiency remaining unpaid after such application. If
notice of any sale or other disposition is required by law to be given, each
Indemnitor hereby agrees that a notice sent in accordance with this Agreement at
least ten (10) calendar days before the time of any intended public sale or of
the time after which any private sale or other disposition of the said
collateral is to be made, shall be reasonable notice of such sale or other
disposition. At any such sale or other disposition, Lender may itself purchase
the whole or any part of the Collateral sold, free from any right of redemption
on the part of any Indemnitor, which right is hereby waived and released.
8. Equitable Relief; Specific Performance. Each Indemnitor acknowledges
--------------------------------------
and agrees that it may be impossible to measure accurately the damages to Lender
resulting from a breach of Indemnitor's covenant to satisfy the Obligations and
that such a breach will cause irreparable injury to Lender and that Lender may
not have an adequate remedy at law in respect of such breach and, as a
consequence, agrees that such covenant shall be specifically enforceable against
each Indemnitor and hereby waives and agrees not to assert any defense against
an action for specific performance of such covenant. This clause shall not
prejudice Lender's rights to assert any and all claims for damages incurred as a
result of Indemnitor's default hereunder, and Lender may, before, during, or
after any foreclosure of the Mortgage, hold each Indemnitor jointly and
severally liable for any deficiency arising from Indemnitor's default hereunder
and for all losses and damages sustained and expenses incurred by reason of
Indemnitor failing to satisfy the Obligations.
9. Waiver of Election of Remedies. Each Indemnitor waives any right to
------------------------------
require or compel Lender to (a) proceed against or exhaust any security for the
Obligations; or (b) pursue any other remedy in Lender's power whatsoever; and
failure of Lender to do any of the foregoing shall not exonerate, release or
discharge any Indemnitor from its absolute, unconditional and independent
liabilities to Lender hereunder. Each Indemnitor hereby waives any and all
legal requirements that Lender shall institute any action or proceedings at law
or in equity in respect of the Loan or any other Loan Document or resort to or
seek to realize upon the security held by Lender, as a condition precedent to
bringing an action against Indemnitor upon this Agreement.
10. Right of Separate Actions. Each Lender may bring and prosecute a
-------------------------
separate action against Indemnitor to enforce its liabilities hereunder, whether
or not any action is brought against any other person and whether or not any
other person is joined in any such action or actions. Nothing shall prohibit
Lender from exercising its rights against Indemnitor, any security for the
Obligations, and any other person simultaneously, jointly and/or severally.
6
<PAGE>
11. Waiver of Rights of Subrogation. Each Indemnitor hereby irrevocably
-------------------------------
waives any rights to be subrogated to the rights of Lender with respect to the
Obligations. No failure on the part of Lender to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of any right, remedy
or power hereunder preclude any other or future exercise of any other right,
remedy or power.
12. Waiver of Notice, Consent, Etc. (a) This Agreement shall be
-------------------------------
construed as a continuing, absolute and unconditional indemnity.
(b) Each Indemnitor hereby waives notice of acceptance of this
Agreement by Lender and of presentment, demand, protest, notice of protest and
of dishonor, notices of default (except as otherwise expressly provided herein)
and all other notices relative to this Agreement of every kind and description
now or hereafter provided by any other agreement between Indemnitor and Lender
or any statute or rule of law.
(c) Each Indemnitor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations or of the reliance by
Lender upon this Agreement. Said Obligations, and each of them, shall
conclusively be deemed to have been created, contracted, or incurred in reliance
upon this Agreement and all dealings between Borrower and Lender shall likewise
be conclusively presumed to have been made or consummated in reliance upon this
Agreement.
(d) Each Indemnitor hereby agrees that the terms, covenants and
provisions contained in the Note, the Mortgage or in any other Loan Document may
be altered, extended, modified, waived, released or canceled by Lender, and each
Indemnitor agrees that this Agreement and its liability hereunder shall be in no
way affected, diminished or released by any such alteration, extension,
modification, release, waiver or cancellation.
13. Waiver of Priority of Collateral. Each Indemnitor hereby agrees that,
--------------------------------
in the event that any of its property is or may be hypothecated with other
property of Borrower, as security for any obligations of Borrower under any
other Loan Document, any right of Indemnitor to have such other property first
applied to the discharge of such obligations is hereby irrevocably waived by
each Indemnitor. Each Indemnitor hereby expressly recognizes that any of its
property which is or may be hereafter hypothecated pursuant to the Mortgage is
security for such obligations and is not security for this Agreement.
14. No Discharge; Remedies Cumulative. No Indemnitor shall be discharged,
---------------------------------
released or exonerated, in any way, from its absolute, unconditional and
independent liabilities hereunder, even though any rights or defenses which any
Indemnitor may have against Lender or others may be destroyed, diminished or
otherwise affected by:
(a) Any declaration by Lender of a default in respect of any of the
Obligations;
7
<PAGE>
(b) The exercise by Lender of any rights or remedies against Borrower
or any other person under any other Loan Document;
(c) The failure of Lender to exercise any rights or remedies against
Borrower or any other person under any other Loan Document;
(d) The sale or enforcement of, or realization upon (through judicial
foreclosure, power of sale or any other means) any security for any of the
Obligations, even though (i) recourse may not thereafter be had against Borrower
under any other Loan Document for any deficiency, or (ii) Lender fails to pursue
any such recourse which might otherwise be available, whether by way of
deficiency judgment following judicial foreclosure or otherwise; and
no such action by Lender will release or limit the liability of each Indemnitor
to Lender. All rights and remedies of Lender hereunder or under any of the Loan
Documents shall be cumulative and may be exercised singularly or concurrently
against the party to whom enforcement is sought. The rights of Lender under
this Agreement are in addition to and not in diminution of the rights of Lender
under any other Loan Document.
15. Survival. Each and every of the terms, covenants and conditions of
--------
this Agreement shall survive the repayment of Borrower's obligations under the
Loan Documents, and no Indemnitor shall be released by any act or thing which
might, but for this provision, be deemed a legal or equitable discharge of a
surety, or by reason of any waiver, extension, modification, forbearance or
delay or other act or omission of Lender or its failure to proceed promptly or
otherwise, or by reason of any action taken or omitted or circumstance which may
or might vary the risk or affect the rights or remedies of Indemnitor or by
reason of any further dealings between Borrower and Lender, whether relating to
the Loan or otherwise, and each Indemnitor hereby expressly waives and
surrenders any defenses to its liability hereunder based upon any of the
foregoing acts, omissions, things or agreements or waivers of Lender; it being
the purpose and intent of the parties hereto that the obligations of Indemnitor
hereunder shall survive the repayment of Borrower's obligations under the Loan
Documents and are absolute and unconditional under any and all circumstances.
16. Notices. Any notice, demand, statement, request or consent made
-------
hereunder shall be in writing to the other party hereto at its address set forth
below or at such other address as such party may designate by notice to the
other party hereto and shall be deemed given (i) on receipt, if mailed, by
certified or registered U.S. mail, return receipt requested, postage prepaid;
(ii) on receipt, if delivered, fee prepaid, to a national overnight delivery
service (such as Federal Express, Purolater Courier, U.P.S. Next Day Air); or
(iii) when delivered, if delivered by hand, as evidenced by a signed receipt:
8
<PAGE>
To Indemnitor:
___________________________
___________________________
_________________________
_________________________
Attention:_________________
and
__________________________
__________________________
__________________________
Attention:__________________
With a courtesy copy to:
___________________________
___________________________
___________________________
___________________________
Attention: __________________
To Lender:
Banco Popular de Puerto Rico
7 West 51/st/ Street
New York, New York 10019
Attention: Mr. Agustin Mas
Vice President
With a courtesy copy to:
McConnell Valdes LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Brian F. Doran, Esq.
A "Business Day" is any day other than a Saturday or Sunday, or a day on which
------------
banking and savings and loan institutions in the State of New York are
authorized or obligated by law or executive order to remain closed. Refusal to
accept delivery of any notice shall be deemed to be receipt of such notice.
17. Entire Agreement. This Agreement represents the entire agreement
----------------
between Indemnitor and Lender with respect to the matters referred to herein,
and no waiver or
9
<PAGE>
modification hereof or thereof shall be effective unless in writing and signed
by Lender and Indemnitor.
18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE CONSTRUED, ENFORCED, AND INTERPRETED ACCORDING TO THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN AND PERFORMED IN
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. UNLESS
THE TEXT OTHERWISE REQUIRES, ALL TERMS USED HEREIN SHALL HAVE THE MEANING
SPECIFIED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATES OF NEW YORK
AND __________ AT THE DATE HEREOF.
19. Successors and Assigns. This Agreement shall be binding upon each
----------------------
Indemnitor and upon their respective heirs, personal representatives, successors
and assigns and shall inure to the benefit of Lender and its indorsees,
successors and assigns.
20. Joint and Several. The representations, warranties, covenants and
-----------------
other obligations of Indemnitor hereunder are made and undertaken jointly and
severally by each of the Indemnitors.
21. Time of the Essence. Time shall be of the essence with regard to the
-------------------
performance by each Indemnitor of its obligations under this Agreement.
22. Waiver of Trial by Jury. Lender and each Indemnitor shall and hereby
-----------------------
do waive trial by jury in any action, proceeding or counterclaim brought by any
of the parties hereto against the other on any matters arising out of or in any
way connected to the Loan, this Agreement or any of the other Loan Documents.
23. Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the undersigned as
of the date first above written.
________________________________,
a ______________________________
By:_____________________________
Name:__________________________
Title:___________________________
________________________________
________________________________
10
<PAGE>
SCHEDULE A
LEGAL DESCRIPTION
<PAGE>
SCHEDULE 1
----------
EXISTING CREDIT FACILITY
------------------------
FINANCIAL COVENANTS
-------------------
Note: Capitalized terms appearing herein shall have the meanings ascribed to
- ----
such terms in the Appendix of Defined Terms annexed hereto. To the
extent not so defined in the Appendix, capitalized terms shall have
the meanings ascribed in Section 1.1 of the Agreement.
A. MINIMUM CASH INTEREST COVERAGE. Borrower shall not permit the ratio
------------------------------
(the "CASH INTEREST COVERAGE RATIO") of (i) Consolidated EBITDA to
----------------------------
(ii) Consolidated Cash Interest Expense for any four-fiscal quarter
period ending as of the dates set forth below to be less than the
correlative ratio indicated:
<TABLE>
<CAPTION>
======================================
FISCAL MINIMUM
QUARTER CASH INTEREST
ENDING COVERAGE
RATIO
--------------------------------------
<S> <C>
--------------------------------------
09/07/97 2.25:1.00
--------------------------------------
12/28/97 2.25:1.00
--------------------------------------
03/22/98 2.25:1.00
--------------------------------------
06/14/98 2.25:1.00
--------------------------------------
09/06/98 2.25:1.00
--------------------------------------
12/27/98 2.25:1.00
--------------------------------------
03/21/99 2.50:1.00
--------------------------------------
06/13/99 2.50:1.00
--------------------------------------
09/05/99 2.50:1.00
--------------------------------------
12/26/99 2.50:1.00
--------------------------------------
03/19/00 2.75:1.00
--------------------------------------
06/11/00 2.75:1.00
--------------------------------------
09/03/00 2.75:1.00
--------------------------------------
12/31/00 2.75:1.00
--------------------------------------
03/25/01 3.00:1.00
--------------------------------------
06/17/01 3.00:1.00
--------------------------------------
09/09/01 3.00:1.00
--------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
--------------------------------------
12/30/01 3.00:1.00
--------------------------------------
03/24/02 3.00:1.00
--------------------------------------
06/16/02 3.00:1.00
--------------------------------------
</TABLE>
B. MAXIMUM LEVERAGE RATIO. Borrower shall not permit the ratio (the
"(LEVERAGE RATIO") of (i) Consolidated Total Debt as of the dates set
--------------
forth below to (ii) Consolidated EBITDA for the four-fiscal quarter period
ending on such date to exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
======================================
FISCAL MINIMUM
QUARTER LEVERAGE
ENDING RATIO
--------------------------------------
<S> <C>
--------------------------------------
09/07/97 4.00:1.00
--------------------------------------
12/28/97 4.00:1.00
--------------------------------------
03/22/98 4.00:1.00
--------------------------------------
06/14/98 4.00:1.00
--------------------------------------
09/06/98 4.00:1.00
--------------------------------------
12/27/98 4.00:1.00
--------------------------------------
03/21/99 3.75:1.00
--------------------------------------
06/13/99 3.75:1.00
--------------------------------------
09/05/99 3.75:1.00
--------------------------------------
12/26/99 3.75:1.00
--------------------------------------
03/19/00 3.75:1.00
--------------------------------------
06/11/00 3.75:1.00
--------------------------------------
09/03/00 3.75:1.00
--------------------------------------
12/31/00 3.75:1.00
--------------------------------------
03/25/01 3.50:1.00
--------------------------------------
06/17/01 3.50:1.00
--------------------------------------
09/09/01 3.50:1.00
--------------------------------------
12/30/01 3.50:1.00
--------------------------------------
03/24/02 3.50:1.00
--------------------------------------
06/16/02 3.50:1.00
======================================
</TABLE>
2
<PAGE>
C. MINIMUM FIXED CHARGE COVERAGE RATIO. Borrower shall not permit the ratio
(the ("FIXED CHARGE COVERAGE RATIO") of (i) Consolidated EBITDA to (ii)
---------------------------
Consolidated Fixed Charges for any four-fiscal quarter period ending on the
dates set forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
======================================
FISCAL MINIMUM
QUARTER FIXED CHARGE
ENDING COVERAGE
--------------------------------------
<S> <C>
--------------------------------------
09/07/97 1.20:1.00
--------------------------------------
12/28/97 1.20:1.00
--------------------------------------
03/22/98 1.25:1.00
--------------------------------------
06/14/98 1.25:1.00
--------------------------------------
09/06/98 1.25:1.00
--------------------------------------
12/27/98 1.25:1.00
--------------------------------------
03/21/99 1.30:1.00
--------------------------------------
06/13/99 1.30:1.00
--------------------------------------
09/05/99 1.30:1.00
--------------------------------------
12/26/99 1.30:1.00
--------------------------------------
03/19/00 1.35:1.00
--------------------------------------
06/11/00 1.35:1.00
--------------------------------------
09/03/00 1.35:1.00
--------------------------------------
12/31/00 1.35:1.00
--------------------------------------
03/25/01 1.40:1.00
--------------------------------------
06/17/01 1.40:1.00
--------------------------------------
09/09/01 1.40:1.00
--------------------------------------
12/30/01 1.40:1.00
--------------------------------------
03/24/02 1.40:1.00
--------------------------------------
06/16/02 1.40:1.00
======================================
</TABLE>
D. CAPITAL EXPENDITURES.
1. CONSOLIDATED CAPITAL EXPENDITURES. Except as set forth in
subparagraph 2 of this Paragraph D, Borrower shall not, and shall not
permit its Subsidiaries to,
3
<PAGE>
make or incur Consolidated Capital Expenditures, in any fiscal year or
period indicated below, in an aggregate amount in excess of the
corresponding amount (the ("MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES
-----------------------------------------
AMOUNT") set forth in the chart below opposite such fiscal year or
------
period; provided that with respect to the Maximum Consolidated Capital
--------
Expenditure Amount for any fiscal year or period, at Borrower=s option
such amount may be increased (a) by a portion (not to exceed 20%) of
the Maximum Consolidated Capital Expenditure amount for the
immediately preceding fiscal year which was not utilized during such
preceding fiscal year, and (b) by a portion (not to exceed 15%) of the
amount of Maximum Consolidated Capital Expenditure Amount for the
immediately succeeding year (which, to the extent of such increase
shall reduce the amount of the Maximum Consolidated Capital
Expenditure Amount for such succeeding year), provided that in no
--------
event shall the aggregate amount of the increases to the Maximum
Consolidated Capital Expenditure Amount pursuant to the foregoing
clauses (a) and (b) in any fiscal year or period exceed $10,000,000;
provided further that the Maximum Consolidated Capital Expenditure
-------- -------
Amount for each fiscal year set forth below shall be increased by the
amount of Consolidated Excess Cash flow for the immediately preceding
fiscal year not required to be used to prepay Loans pursuant to
subsection 2.4B(iii)(f) of the Existing Credit Facility Loan
Agreement.
<TABLE>
<CAPTION>
==============================================
MAXIMUM CONSOLIDATED
FISCAL CAPITAL EXPENDITURES
YEAR/PERIOD AMOUNT
----------------------------------------------
<S> <C>
5/21/97 to end
of 1997 fiscal year $40,000,000
----------------------------------------------
1998 $35,000,000
----------------------------------------------
1999 $35,000,000
----------------------------------------------
2000 $35,000,000
----------------------------------------------
2001 $35,000,000
----------------------------------------------
2002 $35,000,000
----------------------------------------------
</TABLE>
; provided that each of the Maximum Consolidated Capital Expenditure Amounts
--------
provided for above shall be increased by an aggregate amount equal to 15% of the
purchase price paid by Company in connection with any Permitted Acquisition;
provided further that such aggregate amount shall be allocated pro rata among
- -------- -------
the remaining periods set forth above after the consummation of the Permitted
Acquisition.
2. In addition to the foregoing, Borrower may make Consolidated Capital
Expenditures (i) in connection with Permitted Acquisitions, (ii) with the
proceeds
4
<PAGE>
of Specified Asset Sales and (iii) committed to be made prior to May
21, 1997 but made after May 21, 1997, and such Consolidated Capital
Expenditures made pursuant to this Paragraph (D)(2) shall not be
included for the purposes of calculating the Maximum Consolidated
Capital Expenditures set forth in Paragraph (D)(1).
E. SALES AND LEASE-BACKS. Borrower shall not, and shall not permit any of its
---------------------
Subsidiaries to, directly or indirectly, become or remain liable as lessee
or as a guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any property (whether real, personal
or mixed), whether now owned or hereafter acquired, (i) which Borrower or
any of its Subsidiaries has sold or transferred or is to sell or transfer
to any other Person (other than Borrower or any of its Subsidiaries) or
(ii) which Borrower or any of its Subsidiaries intends to use for
substantially the same purpose as any other property which has been or is
to be sold or transferred by Borrower or any of its Subsidiaries to any
Person (other than Borrower or any of its Subsidiaries) in connection with
such lease; provided that the foregoing shall not apply with respect to
--------
(i) any sale leaseback transaction consummated prior to May 21, 1997 and
(ii)any property acquired after May 21, 1997; provided that (y) the sale
--------
of such property constitutes a Specified Asset Sale and (z) the aggregate
sale price paid to Borrower with respect to all sales or transfers of such
property shall not exceed $15,000,000.
F. SALE OR DISCOUNT OF RECEIVABLES. Borrower shall not, and shall not permit
-------------------------------
any of its Subsidiaries to, directly or indirectly, sell with recourse, or
discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable.
G. DISPOSAL OF SUBSIDIARY STOCK. Except for any sale of any Regulatory Shares
----------------------------
or 100% of the capital stock or other equity Securities of any of its
Subsidiaries in compliance with the provisions of subsection 7.7(iv) of the
Existing Credit Facility Loan Agreement, Borrower shall not:
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify
directors if required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its
Subsidiaries (including such Subsidiary), except to Borrower,
another Subsidiary of Borrower, or to qualify directors if
required by applicable law.
H. AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS. Borrower
-------------------------------------------------------------
shall not, and shall not permit any of its Subsidiaries to, amend or
otherwise change the terms of the Unsecured Subordinated Note Indenture or
the Unsecured Subordinated Notes, or make any payment consistent with an
amendment thereof or change thereto, if the effect of such amendment or
change is to increase the interest rate on the Unsecured Subordinated
Notes, change (to earlier dates) any dates upon which payments of principal
or interest are due thereon, change any event of default or condition to an
event of default
5
<PAGE>
(other than to eliminate any such event of default), change the redemption,
prepayment or defeasance provisions thereof, change the subordination
provisions thereof (or of any guaranty thereof), or if the effect of such
amendment or change, together with all other amendments or changes made, is
to increase materially the obligations of the obligor thereunder or to
confer any additional rights on the holders of the Unsecured Subordinated
Notes (or a trustee or other representative on their behalf) which would be
adverse to Borrower or Lenders (as defined in the Existing Credit Facility
Loan Agreement). Borrower shall not designate any Indebtedness as
ADesignated Senior Indebtedness@ under the terms of the Unsecured Note
Indenture without the prior written consent of Administrative Agent and
Requisite Lenders (as defined in the Existing Credit Facility Loan
Agreement).
6
<PAGE>
APPENDIX OF DEFINED TERMS
APPEARING IN SCHEDULE 1
-----------------------
"ADMINISTRATIVE AGENT" means Canadian Imperial Bank of Commerce (acting
through its New York Agency) in its capacity as administrative agent for Lenders
and also means and includes any successor Administrative Agent appointed
pursuant to Subsection 9.5.A of the Existing Credit Facility Loan Agreement.
"ASSET SALE" means the sale by Borrower or any of its Subsidiaries to any
Person of (i) any of the stock of any of Borrower's Subsidiaries, (ii)
substantially all of the assets of any division or line of business of Borrower
or any of its Subsidiaries, or (iii) any other assets (whether tangible or
intangible) of Borrower or any of its Subsidiaries outside of the ordinary
course of business excluding tangible personal property that in the reasonable
judgment of Borrower, has become uneconomic, obsolete or worn out and which is
disposed of in the ordinary course of business; and (iii) any other such assets
to the extent that the aggregate amount of sales of such assets during any
fiscal year is equal to or less than $1,000,000.
"CAPITAL LEASE", as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of (i)
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Borrower and its Subsidiaries)
by Borrower and its Subsidiaries during that period that, in conformity with
GAAP, are included in "additions" to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Borrower and its
Subsidiaries plus (ii) to the extent not covered by clause (i) of this
----
definition, the aggregate of all expenditures by Borrower and its Subsidiaries
during that period to acquire (by purchase or otherwise) (a) the business,
property or fixed assets of any Person, or (b) stock or other evidence of
beneficial ownership of any Person to the extent the purchase price of such
stock or other evidence of beneficial ownership of such Person is appropriately
allocated to property, plant, or equipment in accordance with GAAP; provided,
--------
however, Consolidated Capital Expenditures shall not include expenditures made
- -------
from the proceeds of any insurance or condemnation payments (or payments made in
lieu of condemnation) received by Borrower and its Subsidiaries and used to
repair or replace the damaged property with respect to which such proceeds were
received.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period, Consolidated
Interest Expense for such period excluding, however, any interest expense not
--------- -------
payable in cash (including amortization of discount and amortization of debt
issuance costs).
<PAGE>
"CONSOLIDATED CURRENT ASSETS" means, as at any date of determination, the
total assets of Borrower and its Subsidiaries on a consolidated basis which may
properly be classified as current assets in conformity with GAAP excluding cash
and cash equivalents.
"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of determination,
the total liabilities of Borrower and its Subsidiaries on a consolidated basis
which may properly be classified as current liabilities in conformity with GAAP
excluding, however, the current portion of long-term Indebtedness.
"CONSOLIDATED EBITDA" means, for any period, the sum of the amounts for
such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense,
(iii) provisions for taxes based on income, (iv) total depreciation expense, (v)
total amortization expense, (vi) other non-cash items reducing Consolidated Net
Income (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash expenditures in any future period) and (vii) to
the extent deducted in determining Consolidated Net Income fees, expenses and
similar transaction costs paid in connection with Permitted Acquisitions less
----
(viii) other non-cash items increasing Consolidated Net Income, all of the
foregoing as determined on a consolidated basis for Borrower and its
Subsidiaries in conformity with GAAP.
"CONSOLIDATED EXCESS CASH FLOW" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for such
period of (a) Consolidated EBITDA and (b) the Consolidated Working Capital
Adjustment minus (ii) the sum, without duplication, of the amounts for such
-----
period of (a) voluntary, mandatory and scheduled repayments of Consolidated
Total Debt (excluding repayments of revolving loans except to the extent the
revolving loan commitments are permanently reduced in connection with such
repayments and mandatory repayments of the loans made pursuant to subsection
2.4B.(iii) of the Existing Credit Facility Loan Agreement), (b) Consolidated
Capital Expenditures (net of any proceeds of any related financings with respect
to such expenditures or equity contributions applied to finance such
expenditures), (c) Consolidated Cash Interest Expense, (d) provisions for
current taxes based on income of Borrower and its Subsidiaries and payable in
cash with respect to such period, (e) to the extent not included in Consolidated
Capital Expenditures, payments made in connection with Permitted Acquisitions
(net of any proceeds of any related financing with respect to such expenditures
or equity contributions applied to finance such expenditures) and (f) to the
extent not otherwise deducted in calculating Consolidated Net Income or included
in Consolidated Capital Expenditures, payments made under Permitted Earnout
Agreements.
"CONSOLIDATED FIXED CHARGES" means, for any period, an amount equal to the
sum of the amounts for such period of (i) scheduled repayments of principal of
all Indebtedness (as reduced as a result of prepayments pursuant to subsection
2.4B of the Existing Credit Facility Loan Agreement in the case of Indebtedness
thereunder), (ii) Consolidated Cash Interest Expense, (iii) Capital Expenditures
for repair or maintenance of property, plant or equipment (net of related
financings) and (iv) the portion of taxes based on income actually paid in cash
(excluding taxes
2
<PAGE>
on extraordinary gains) all as determined for Borrower and its Subsidiaries on a
consolidated basis in conformity with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, (i) total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP) and capitalized interest including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance and net costs under Interest Rate Agreements,
but excluding that portion attributable to (a) amortization expense associated
with the Transaction Costs, (b) the write-off of unamortized deferred financing
costs taken by Borrower in connection with the refinancings of Borrower and its
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of Borrower and its Subsidiaries, and (c) any amounts referred to
in subsection 2.3 of the Existing Credit Facility Loan Agreement payable to
Arranging Agent, Syndication Agent, Administrative Agent or Lenders (as such
terms are defined in the Existing Credit Facility Loan Agreement) on or before
May 21, 1997, minus (ii) total interest income of Borrower and its Subsidiaries
-----
on a consolidated basis.
"CONSOLIDATED MAINTENANCE CAPITAL EXPENDITURES" means, for any period, the
aggregate amount of all Consolidated Capital Expenditures actually paid by
Borrower and its Subsidiaries during that period for repair or maintenance of
property, plant or equipment.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or loss)
of Borrower and its Subsidiaries on a consolidated basis for such period taken
as a single accounting period determined in conformity with GAAP; provided that
--------
there shall be excluded (i) the income (or loss) of any Person (other than a
Subsidiary of Borrower) in which any other Person (other than Borrower or any of
its Subsidiaries) has an equity or similar interest, except to the extent of the
amount of dividends or other distributions actually paid to Borrower or any of
its Subsidiaries by such Person during such period, (ii) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of Borrower or is
merged into or consolidated with Borrower or any of its Subsidiaries or that
Person's assets are acquired by Borrower or any of its Subsidiaries, (iii) the
income of any Subsidiary of Borrower to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary (other than such restriction contained
in documents governing Indebtedness of such Subsidiary permitted under the
Existing Credit Facility Loan Agreement), (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any Plan, and (v) (to
the extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Borrower and its
Subsidiaries, less an amount equal to the cash balances of Borrower and its
----
Subsidiaries (net of any overdraft balances), determined on a consolidated basis
in accordance with GAAP.
3
<PAGE>
"CONSOLIDATED WORKING CAPITAL" means, as at any date of determination, the
amount (which may be a negative number) obtained by subtracting Consolidated
Current Liabilities from Consolidated Current Assets.
"CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any fiscal year, the
amount (which may be a negative number) obtained by subtracting (i) Consolidated
Working Capital as of the end of such fiscal year from (ii) Consolidated Working
Capital as of the beginning of such fiscal year.
"FAR WEST DIVISION" means the cooking and restaurant kitchen equipment
manufacturing division of Borrower.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect Borrower or any of its Subsidiaries against
fluctuations in interest rates.
"OPERATING LEASE" means, as applied to any Person, any lease (including
without limitation, leases that may be terminated by the lessee at any time) of
any property (whether real, personal or mixed) that is not a Capital Lease other
than any such lease under which that Person is the lessor.
"PERMITTED ACQUISITIONS" means the acquisition (whether by means of equity
or asset purchase acquisition) by Borrower or its Subsidiaries, of a business or
a series of related businesses; provided that (i) the businesses acquired are
--------
suitable for franchising; (ii) with respect to any such acquisition financed
with the proceeds of Acquisition Loans (as defined in the Existing Credit
Facility Loan Agreement) after giving effect to such acquisition, Borrower and
its Subsidiaries shall be in compliance, on a Pro Forma Basis, with the
financial covenants as required under subsection 7.6E of the Existing Credit
Facility Loan Agreement; and (iii) concurrently with such acquisition the
Administrative Agent, on behalf of Lenders, shall be granted a first priority
security interest in the businesses and assets acquired (to the extent available
under applicable law).
"PERMITTED EARNOUT AGREEMENTS" shall mean (x) the agreements set forth
in Schedule 1.1D of the Existing Credit Facility Loan Agreement and (y) any
-------------
other agreement by Borrower or one of its Subsidiaries to pay the seller or
sellers of any Person or assets acquired in accordance with the provisions of
subsection 7.7(vi) of the Existing Credit Facility Loan Agreement at any time
following the consummation of such acquisition by reference to the financial
performance of the assets acquired; provided that the aggregate amount of all
--------
such payments which may be owed under such agreements contemplated by this
clause (y) at any time shall not exceed $10,000,000.
"REGULATORY SHARES" means, with respect to any Person, shares of such
Person required to be issued as qualifying shares to directors or persons
similarly situated or shares issued to
4
<PAGE>
Persons other than Borrower or a Wholly Owned Subsidiary of Borrower in response
to regulatory requirements of foreign jurisdictions pursuant to a resolution of
the Board of Directors of such Person, so long as such shares do not exceed one
percent of the total outstanding shares of equity such Person and any owners of
such shares irrevocably covenant with Borrower to remit to Borrower or waive any
dividends or distributions paid or payable in respect of such shares.
"SECURITIES" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities"" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SPECIFIED ASSET SALES" means Asset Sales with respect to (i) sale-
leaseback transactions completed within one year following the acquisition of
the subject asset; (ii) sales, leases or transfers of restaurant properties to
franchisees pursuant to Borrower's "turnkey"" development programs, (iii) sales,
leases or transfers of franchises and related assets and properties repossessed
or reacquired by Borrower from franchisees and subsequently resold to new
franchisees all in the ordinary course of business, (iv) sales or dispositions
of restaurant-related properties and assets that are no longer in operation and
are surplus to Borrower's needs in the ordinary course of business in an amount
not in excess of $5,000,000 in any twelve month period, (v) exchanges of
properties or assets for other properties or assets (other than cash or cash
equivalents) that (1) are useful in the business of Borrower and its
Subsidiaries as then being conducted and (2) have a fair market value at least
equal to the fair market value of the assets or properties being exchanged (as
evidenced by a resolution of the directors of Borrower in the case of
transactions having a fair market value in excess of $1,000,000) in the ordinary
course of business, (vi) the Far West Division and (vii) sales of restaurant
related properties in connection with a market relocation program.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than 50% of the total voting power of shares of stock or other ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
"TRANSACTION COSTS" means the call premiums, fees, costs and expenses
payable by Borrower pursuant to the Existing Credit Facility Loan Agreement and
other fees, costs and expenses payable by Borrower in connection with (i) the
Refinancings (as defined in the Existing
5
<PAGE>
Credit Facility Loan Agreement), (ii) the issuance of the Unsecured Subordinated
Notes and (iii) the execution and delivery of the Existing Credit Facility Loan
Agreement and related documents.
"UNSECURED SUBORDINATED NOTE INDENTURE" means the indenture pursuant to
which the Unsecured Subordinated Notes were issued as of May 21, 1997, as such
indenture may be amended from time to time to the extent permitted under
Subsection 7.15 of the Existing Credit Facility Loan Agreement.
"UNSECURED SUBORDINATED NOTES" means the $175,000,000 aggregate principal
amount of Borrower's 10-1/4% senior subordinated notes due 2007 issued pursuant
to the Unsecured Subordinated Note Indenture.
"WHOLLY OWNED SUBSIDIARY" means, with respect to any Person, a Subsidiary
of such Person all of the outstanding capital stock or other ownership interests
of which (other than Regulatory Shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
6
<PAGE>
SCHEDULE 2
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INSURANCE REQUIREMENTS
(a) Borrower, at its sole cost and expense, will keep the Properties
insured during the entire term of this Agreement for the mutual benefit of
Borrower and Lender against loss or damage by fire and against loss or damage
by other risks and hazards covered by a standard extended coverage insurance
policy including, but not limited to, riot and civil commotion, vandalism,
malicious mischief, burglary and theft. Such insurance shall be in an amount
(i) equal to one hundred percent (100%) of the then replacement cost of the
Stores and the furniture, fixtures, equipment and other personal property
contained therein (the "Equipment"), without deduction for physical depreciation
---------
and (ii) such that the insurer would not deem Borrower a co-insurer under said
policies. The policies of insurance carried in accordance with this paragraph
shall be paid annually in advance and shall contain the "Replacement Cost
Endorsement" with a waiver of depreciation.
(b) Borrower, at its sole cost and expense, for the mutual benefit of
Borrower and Lender, shall also obtain and maintain during the entire term of
this Agreement the following policies of insurance:
(i) Flood insurance on a per-Store basis if any part of the
Properties is located in an area identified by the Federal Emergency
Management Agency as an area having special flood hazards and in which
flood insurance has been made available under the National Flood Insurance
Act of 1968 (and any successor act thereto) in an amount at least equal to
the outstanding principal amount of the Loans advanced under this Agreement
with respect to such Property or the maximum limit of coverage available
with respect to the Stores and Equipment under said Act, whichever is less.
(ii) Comprehensive public liability insurance, including broad form
property damage, blanket contractual and personal injuries (including death
resulting there from) coverages in an amount not less than $1,000,000 per
occurrence and $10,000,000 in the aggregate on a per-Store basis.
(iii) During the course of any construction, renovation or equipping
of the Stores, builder's completed value risk insurance against "all risks
of physical loss", including collapse and transit coverage, with
deductibles reasonably satisfactory to Lender, in non-reporting form,
covering the total value of work performed and equipment, supplies and
materials furnished. Such policy of insurance shall contain the "permission
to occupy upon completion of work or occupancy" endorsement and a waiver of
co-insurance or an agreed amount endorsement.
(iv) Such other insurance as may from time to time be required under
the laws of the various states in which the Properties are located.
1
<PAGE>
(c) All policies of insurance (the "Policies") required pursuant to this
--------
Schedule shall be issued by an insurer having an A.M. Best rating of A:V or
better and satisfactory to Lender, (ii) shall contain the standard New York
mortgagee non-contribution clause naming Lender as the person to which all
payments made by such insurance company shall be paid, (iii) shall be maintained
throughout the term of this Agreement without cost to Lender, (iv) original
certificates, or copies thereof, certified to be true and correct, shall be
delivered to Lender, (v) shall contain such provisions as Lender deems
reasonably necessary or desirable to protect its interest including, without
limitation, endorsements providing that neither Borrower, Lender nor any other
party shall be a co-insurer under said Policies and that Lender shall receive at
least thirty (30) days prior written notice of any modification or cancellation,
and (vi) shall be satisfactory in form and substance to Lender and shall be
approved by Lender as to amounts, form, risk coverage, deductibles, loss payees
and insureds. All such premiums for such Policies (the "Insurance Premiums")
-----------------
shall be paid by Borrower making payment when due directly to the carrier. Not
later than thirty (30) days prior to the expiration date of each of the
Policies, Borrower will deliver to Lender satisfactory evidence of the renewal
of each Policy.
2
<PAGE>
SCHEDULE 3
----------
LITIGATION
NONE.
<PAGE>
SCHEDULE 4
----------
ACQUISITIONS AND DISPOSITIONS
SINCE 12/19/96
1. Sale of 100 Church's(R) restaurants in eight markets: Indianapolis
(12), Chicago (29), St. Louis (21), Richmond (4), Detroit (19), Dayton
(5), Columbus (3), Cleveland (7) to Atlanta Franchise Development
Corporation.
2. Sale of 47 Church's(R) restaurants in California to Best Hospitality
Corporation.
3. Acquisition of Chesapeake Bagel Bakery, the third largest bagel
restaurant system.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE 36 WEEK PERIOD ENDED 9-7-97 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1997
<PERIOD-END> SEP-07-1997
<CASH> 40,619
<SECURITIES> 0
<RECEIVABLES> 17,759
<ALLOWANCES> 4,747
<INVENTORY> 3,666
<CURRENT-ASSETS> 56,619
<PP&E> 286,346
<DEPRECIATION> 85,605
<TOTAL-ASSETS> 380,538
<CURRENT-LIABILITIES> 65,276
<BONDS> 244,897
0
0
<COMMON> 344
<OTHER-SE> 44,799
<TOTAL-LIABILITY-AND-EQUITY> 380,538
<SALES> 284,573
<TOTAL-REVENUES> 339,679
<CGS> 92,791
<TOTAL-COSTS> 311,680
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,244
<INTEREST-EXPENSE> 12,974
<INCOME-PRETAX> 15,025
<INCOME-TAX> 6,021
<INCOME-CONTINUING> 9,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,004
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
